The Pros and Cons of Mediation - A Random Survey
By Robert M. Shafton
Slightly abridged and edited from the format first published by the
Los Angeles Daily Journal,November 8, 2000. Reprinted with permission.
Are we in a new era of super-communication or has the transition often given us no communication? We have pagers, e-mail, voice-mail, next day guaranteed mail delivery, palm pilots and fax. So where are we lax? The computers or the people? Why are people so frustrated? Unanswered messages and being put on interminable hold stress one’s patience to the breaking point. How can this sense of abandonment not breed an environment of hostility and conflict? Are our relationships constantly in need of a mediator or perhaps a therapist?
Problems in the Arbitration Field
To indicate the changing Alternative Dispute Resolution ("ADR") environment in which we live, one must merely note the total revamping of the Kaiser Permanente system, after the decision in Engalla v. Permanente Medical Group, Inc., 15 Cal. 4th 951 (1997). There had been numerous complaints about the old system based upon the lack of independence of certain arbitrators and the slow handling of claims. A new system became effective in the spring of 1999 and the first annual report issued by the Office of the Independent Administrator has indicated the following: Patients are assigned cases 16 times faster than in the past. The old program required 674 days before assignment to an arbitrator and the new program averages 43 days. Under the old program it took an average of 863 days to the first day of hearing and under the new program it takes 213 days to the last day of hearing. There are currently 323 independent neutrals on the panel and there are more being recruited.
The Future of Arbitration and Mediation
Is Kaiser the tip of the iceberg ? What lies ahead for contractually mandated arbitration? The Supreme Court of the United States has several ADR cases in its October (2000) term. One of the most important is Larketta Randolph v. Green Tree Financial Corp., 178 F.3d 1149 (1999); 120 S.Ct. 1552 (2000). The Court has granted cert. in this case which involves an arbitration clause in a mobile home mortgage contract. The mortgage provided for binding arbitration and allegedly did not properly disclose certain insurance charges and also did not state who should pay for the costs of arbitration, including filing fees and arbitrator’s fees. Ms. Randolph chose to file a class action complaint against Green Tree Financial (presently known as Conseco Finance Corp.) and the overriding issue is whether or not she must arbitrate rather than litigate.
Green Tree, together with the earlier case of Engalla v. Permanente, suggest a focus on whether the Courts, the Bar and the public are ready to rely more on mediation and less on contractually mandated arbitration. The 20th Century saw the rise of arbitration as an alternative to litigation. Many scholars and attorneys believe the 21st Century will see exponential growth in mediation, including the use of Internet Mediation
Popularity of Mediation
The American Arbitration Association had 3,575 mediations filed nationally in 1999. This was a 17.5% increase over 1998. On an overall basis, it is estimated that there are over 100,000 private ADR cases pending in California and that a growing percentage of these cases opt for mediation.
The National Law Journal reported in an article on November 15, 1999 that 58% of those litigators responding to a survey believed that mediation is a more satisfactory process than either arbitration or litigation. Eighty one percent of the corporate respondents said that they had saved substantial legal fees by using ADR, particularly mediation.
Is this a macro-change or "business as usual"? Many believe that mediation involves a shift in legal thinking and that "litigation as usual" cannot be the foundation stone if we are to have a solution fashioned by the parties themselves. No one will argue that society is moving at macro speed. Time Magazine reported on May 22, 2000 that it took thirty-seven years for the radio to get into fifty million homes; the Web got there in four years!
Responses of Mediators and Attorneys
In asking ourselves "what does this mean to us," it may be instructive to read the responses of active mediators and attorneys who have utilized the mediation process.
The first question is whether the mere scheduling of a mediation might cause the case to move forward toward settlement. (The Middle East peace talks, pushed so hard by President Clinton and other world leaders, may or may not be a proof-text for this concept.) Geetha Ravindra, the director of the Department of Dispute Resolution Services for the Supreme Court of Virginia, responded in the affirmative. "When the mediation is scheduled, the case file is opened and things begin to happen." Richard P. Byrne, Judge of the Superior Court (Retired) also responded positively on the condition that "both parties are interested in having the mediation. Court ordered mediations, where one party is adamant, are less productive."
The second question involved the use of a provider organization, such as JAMS or the American Arbitration Association, as compared to independent case administration. William T. Bisset, managing partner of the Los Angeles office of Hughes, Hubbard and Reed stated: "Selecting a mediator appears to require no provider organization since there are many well- known mediators and the process is not binding. Accordingly, it is often better to let the other side choose the mediator," as distinguished from the selection process in arbitration. Edward Dauer, former Dean of the University of Denver School of Law is more interested in the independence of the mediator than he is in "independent administration." He states that "independence of the mediator is absolutely essential to a fair process, to avoid the ‘repeat player’ problem that arose in the Engalla case".
The next question involved the issue of whether or not ADR is a "deal point" that should be discussed with the client at the time of the drafting of an agreement as well as after the dispute arises. With few modifications, everyone agrees that ADR is something that should be discussed with the client. John Horn, founder of ADR International, Inc. responded that "ADR should be discussed when drafting a contract. After a dispute arises, the ADR clause, if properly drafted, is a legal procedural insurance policy." He added that the key is to discuss all of the alternatives to resolving the dispute with the client. This of course assumes that legal counsel be " well versed in the subtleties to accurately portray the features and benefits of ADR."
William Bisset states that "ADR should be a critical deal point that requires counsel to have the requisite expertise and warrants extensive discussion with a client to weigh the alternatives." Lester E. Olson, Judge of the Superior Court (Retired) responded that ADR should be discussed in the drafting process but that he had questions about contractually mandated mediation. He stated that "after the dispute has developed, all sides can agree to mediation or other forms of ADR without compulsion. Compulsion under the contract can be misused."
Geetha Ravindra stated that a new comment to the Virginia Rules of Professional Responsibility requires that counsel consider the advantages and disadvantages of ADR with his or her client in each and every case. The new ethics rule is leading to increased discussion with clients about ADR.
Is mediation worthwhile or does it merely add to the cost of litigation? In other words, should one prefer a final, binding determination under arbitration as opposed to mediation which might be considered as further settlement negotiations? David D. Laufer, assistant general counsel of Toyota Motor Sales U.S.A., Inc. says that "we have used mediation over the years in attempts both to avoid litigation and to avoid trial once litigation has commenced". In some matters Toyota has used the services of a retired federal judge. In most cases the parties have selected the mediator based on their own knowledge of the individual.
Paul Malingagio of Sheppard, Mullin, Richter & Hampton states: "Certainly mediation is an additional cost component to litigation. However once the litigation has commenced, and the parties have solidified their understanding of each other’s positions, it can be a cost-effective way to resolve the litigation without spending additional money on detailed discovery and trial. It is essential that the mediator expend the time and energy to understand the strength, weakness and risk of each party’s respective position."
Lester Olson states "mediation is clearly and positively worthwhile. I am constantly leaving mediation conferences without a full settlement, and then learn later that the case settled due to discussions held at the mediation conference."
Ross R. Hart, a full-time arbitrator and mediator through the American Arbitration Association responded: "Timing is everything in the scheduling of the mediation. People have to be involved enough in the dispute to have sufficient information to make intelligent decisions, yet not so far along that they have placed themselves into a position where the case cannot be settled and must be tried.
It is not only the state court system that has been focusing on ADR; the federal system has also "bitten the bullet ". In The Journal of Appellate Practice and Process, Vol. 1, No. 2, 1999 (Publisher: University of Arkansas School of Law), Mori Irvine (Circuit Mediator for the 11th Judicial Circuit, Atlanta Georgia) states: "Nearly 95% of all federal civil cases settle before trial, leaving less than five percent of civil cases to be appealed." The article proceeds to analyze the ADR processes in the federal district courts, and particularly in the federal courts of appeal. Most of the federal circuits now have an active mediation process after appeal. Much to the surprise of some early critics of the program, the parties and counsel have found good reasons to proceed with mediation. These include risk analysis, limitation of expense and a desire for a quick and certain conclusion.
Does this mean that mediation is the only viable option and that litigation and arbitration are dead? Clearly not. The operative word is ALTERNATIVE.
Although mediation has tremendous advantages, that does not mean that there are no drawbacks. Some argue that mediation entails time and money spent on a non-binding process. Others maintain that many of the more popular mediators have costly cancellation clauses in their retainer agreements to protect them from frivolous, last minute cancellations. Still others state that larger cases get more attention in a private system than smaller cases obtain in a public system.
Certain truths of life help to answer some of these arguments. First, not every conflict has a guaranteed and completely happy ending. Second, striving for excellence in the ADR system is an attainable goal. Striving for perfection is a clear recipe for frustration.
Finally, paraphrasing Ecclesiastes: "for everything there is a season". There is an appropriate time to litigate, to arbitrate and to mediate. Hopefully, the wise person will have the patience and the intelligence to seek the appropriate process.
Robert M. Shafton, of counsel to Stroock & Stroock & Lavan and a full-time, independent arbitrator and mediator, has served on panels for the American Arbitration Association, CPR Institute for Dispute Resolution and Duke University Private Adjudication Center.