A flexible protocol for pre-suit and early stage mediation in business disputes

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Jerome F. Rock

In my experience as a neutral in business, technology and construction industry disputes, I’ve come to appreciate the effectiveness of Pre-Suit and Early Stage mediation. As a former business executive, I understand the value of minimizing disruption to business operations. If a dispute arises out of a business transaction, typically the parties have already negotiated many terms of the initial deal. However, their ability to negotiate a resolution to the dispute may be thwarted. There is strong incentive to try one last effort to avoid litigation, particularly when they sense the other party may share the desire. Clients want to be the “alternative” in the dispute resolution process to maintain control of their problem. The principals are all in, even if they’re not entirely clear of the details of their commitment.

But most business disputes also have a layer of legal rights and responsibilities that must be acknowledged, and if not managed in proper proportions, can overwhelm and undermine the process.

Dealing with lawyers in Pre-Suit and Early Stage disputes is as important as dealing with their clients. The lawyers’ instinct is they don’t want to lose control in an undefined process with vague rules and may be cautious and reserved. Pre-Suit mediation doesn’t have any “Rules” that are the stock in trade of the litigation attorney, and Early stage mediation puts the “Rules” on hold pending the mediation process. Mediation Procedures are published by ADR service organizations, such as the American Arbitration Association and the International Institute for Conflict Prevention and Resolution (CPR), but these procedures are open ended and of limited utility to lawyers. Lawyers have clients to “protect”, but there is uncertainty as to how to exercise that responsivity in these early stages. Sometimes lawyers experience an unstated, but underlying anxiety, about abdicating responsibility in a yet undefined process. 

As a result, the mediator’s initiative in suggesting options, or flexible or creative arrangements is often met with caution. Without the commitment or at least acquiescence of the lawyers, the creative process is stalled, frustrated, or undermined. 

If the mediator is experienced, many of the lawyers’ concerns can be anticipated and addressed during an introductory telephone call, discussing the legal issues, the status of discovery, exploring settlement positions as well as preferences on mediation summaries or briefs.  Retainer letters and mediation agreements may provide additional administrative instructions, and collectively, these guidelines supplement the Lawyers’ own “Rules”. 

I’ve used strategies and techniques based largely on cooperative negotiating theory to bring the parties back to a comfortable position. I’ve organized these productive techniques into a cohesive structure, I refer to as my Protocol for Pre-Suit and Early Stage disputes.

Attorneys are comfortable with protocols.  Many judges issue courtroom protocols. My Protocol is intended to provide advance instruction to attorneys and principals of what I consider an integrated set of Best Practices for a complex business dispute at Pre-Suit or Early Stage mediation. This Protocol is only a suggestion.  

At the earliest inquiry, I refer parties to my website where the Protocol is explained in detailed stages, and supplemented with sample agreements, forms, FAQs and case studies. I’m flexible, and eager to solicit contributions to further customize the approach to suit the needs of the parties at all stages. 

I. The Pre-Hearing  Conference

My standard approach, whenever practical, involves an in-person Pre-Hearing conference with each side, well in advance of the formal hearing. I must understand the details of the dispute as well as the broader commercial environment of the parties to develop their confidence in my leadership in the search for mutually acceptable conditions necessary to achieve settlement. 

I summarize the results of the Pre-Hearing Conferences while carefully respecting confidential information. My objective is to present my understanding of each party’s position in such a way that they are encouraged to understand the logic and rationale of the other, or at least respect the position, without necessarily acquiescing.

II. Addressing Information and Document Requirements

During the Pre-Hearing conferences I’m in a position to understand the nature and scope of information and document exchange and will solicit the cooperation of counsel to coordinate this exchange. I also suggest procedures for following up on any document exchange, assigning responsibilities and establishing suggested time schedules for the exchange. I proactively identify key information available from third parties and suggest ways the parties can cooperate in making this information available. The following actions are illustrative of the creative and proactive approach possible:

• To remove the time pressure of discovery cut off schedules for early stage disputes where litigation is pending, the scheduling order and status of discovery must be considered. The mediator can take the initiative to contact the Judge’s Case Manager or clerk to extend schedules so the attorneys, if necessary, will have sufficient opportunity to complete formal discovery activities.  

• In Pre-Suit disputes, the mediator’s suggestions for document exchange often reflects the level of cooperation expressed by the parties during the Pre-Hearing Conferences.  The mediator should be prepared to vary the level of formality of document exchange practices. Voluminous document requests or electronically stored information may require further management efforts by the mediator.  ESI issues at the pre-suit stage may present an opportunity for the parties to cooperate using a jointly retained technical expert.

• If information from non-parties is important, the mediator will seek cooperation from the parties and suggest expedited ways to obtain the information without subpoenas.

• If calculations or summaries of financial information are provided, the mediator will explore the assumptions that may be underlying the calculations and encourage open discussion on the impact of assumptions on the conclusions.

• The mediator may request the parties prepare new materials, such as spreadsheets, tabulations, timelines or summaries.

• If technical or complex issues are pivotal to resolution, the mediator may suggest the parties jointly retain an expert that can provide objective information.

• If a party has retained a consultant or expert, the mediator will explore ways the consultant’s contribution can be shared for purpose of improving the other party’s understanding, without undermining the role of the consultant should the dispute not be settled.

III. Joint Working Session– Understanding Positions

The mediator prepares periodic summaries highlighting the achievements during document and information exchange, perhaps identifying further information needs, as well as listing issues requiring further effort, and suggesting responsibilities and schedules. 

The mediator will have a sense of the readiness of the parties to engage in negotiation and settlement discussions. In some instances, the stage is set for a productive formal hearing, and the next task is scheduling the meeting. In other cases, positions remain at extremes and the mediator is aware of barriers to settlement that require each side to advance their understanding of the other’s positions. 

The mediator is prepared to continue with the “Joint Working Session,” designed for information exchange and discussion in a conference room setting among technical or project staffs for both parties. 

The mediator prepares an Agenda for the Joint Working Session identifying the necessary participants, setting forth the issues to be addressed.  There is no pressure to make final decisions, but the parties are encouraged to engage in candid, constructive dialogue. The mediator keeps the Joint Working Session on task, when necessary challenging positions to focus the issues. 

The following are illustrative suggestions:

• A sample data set representative of the class or type of each claim (such as delay claims, contract extra work, unforeseen conditions, etc.) is provided by one party in advance of the Joint Working Session. Documents, exhibits and supporting materials are included, along with disclosure of all calculations and assumptions. The opposing party analyzed the materials and presented their rebuttal of the conclusions presented in the sample data set at the Joint Working Session. The resulting technical discussion altered the negotiating positions of the parties. 

• One party submitted a binder summarizing a number of discrete claims for money damages with narrative explanation supported by relevant documents. Project staff from the opposing party engaged in productive discussions, resulting in establishing dollar brackets for each party’s position on each of the separate claims.

• One party retained a consultant to perform a technical analysis on the cause of failure of an assembly line structural assembly. The parties agreed to terms under which the consultant would participate at the Joint Working Session to explain the method of investigation and analysis “For Mediation Purposes Only”.

• A Joint Working Session involving a dispute between an owner, architect and a defaulting contractor focused on remediation options, resulting in recommendations on a Scope of Work, quality oversight and conditions for acceptance of work. 

• The Agenda included arrangements for conference calls with non-parties that had firsthand information and knowledge important to the dispute.

• A site visit by the staffs of both parties, immediately followed by the Joint Working Session.

The Mediator concludes the session with a Summary, noting progress on settlement of issues. The mediator may recommend adjourning the Joint Working Session if further investigation, analysis or dialogue with the parties is necessary.

IV Executive Session, Negotiation and Settlement

The Executive Session is reserved tor the executives or other decision makers, who complete the negotiation and compromise having the benefit of the extensive technical interaction from the Joint Working Session.
 
Conclusion

Pre-Suit and Early Stage Mediation empower the parties with flexible and creative approaches to voluntarily resolve their dispute. This flexibility can at times result in paralysis: there are too many options, without the roadmap of how the dots could be connected. The greatest challenge is to the leadership of the mediator. The purpose of this Protocol is to outline a step-by-step path parties can rely on to guide their mediation journey. 

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Jerome F. Rock is an attorney, engineer, and former business executive who limits his practice as a mediator and arbitrator for business, technology, automotive supplier, and construction industry disputes. He is on the panel of civil mediators for the Wayne, Oakland, Macomb, and Washtenaw County Circuit Courts, and the roster of approved ADR Neutrals for the Business Court for the Third and Sixteenth Judicial Circuits. Rock is a member of the Professional Resolution Experts of Michigan (PREMi) and is the Chapter Author for Settlement & Negotiation for ICLE’s Michigan Civil Procedure. His website is www.JeromeRockLaw.com.

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