Business Mediation: An Overview And Practical Tips

Business mediation is a confidential, voluntary process in which a neutral third party helps companies negotiate a resolution to a commercial dispute without going to trial. Because working with a mediator is very different from litigating in the courtroom, it is important to understand how commercial mediation works, when it makes sense for your dispute, and what the keys are to a successful mediation.

Key takeaways:

• The mediator facilitates settlement but cannot impose a binding decision. Litigation always remains an option.
• Mediation is typically faster, less costly, and more private than courtroom litigation.
• Success often comes down to selecting the right mediator and committing to the process.

What is Business Mediation?

Business mediation, also known as commercial mediation, is a form of alternative dispute resolution. In mediation, a neutral third party is called on to help negotiate differences between the parties’ positions to lead to the settlement of all or some of the issues in dispute. Unlike a judge or jury, the mediator’s role is to help the parties find common ground rather than make a binding decision regarding the dispute. A good mediator will often speak to each party individually, explain to each party what he or she views as the strengths and weaknesses of each party’s case, and suggest creative ways to bridge the parties’ differences. Importantly, in mediation, neither party is obligated to accept the mediator’s recommendation or to resolve the dispute. Litigation always remains an option.

Mediation also differs from litigation in other key ways. While court documents and courtroom proceedings are often public, the mediation process is confidential. In addition, settlement discussions in mediation are generally protected under Rule 408 of the Federal Rules of Evidence and applicable mediation privilege rules, such as the New Jersey Uniform Mediation Act, which limit the use of mediation communications in court.

Mediation should also be distinguished from arbitration. While a neutral third party is also appointed to resolve the business dispute in arbitration, an arbitrator will render a decision on the merits of the dispute. That decision is generally final and only subject to appeal under very limited circumstances. Because the arbitrator will render a decision on the merits, the arbitration process tends to be more formal than mediation; nonetheless, it still offers many advantages over litigation, including a faster, less costly resolution.

How Does Commercial Mediation Work?

Mediation is generally voluntary, meaning that the parties are not required to participate. Nonetheless, in complex commercial cases, judges will often urge the parties to first attempt to settle the case via mediation. Even when mediation is court-ordered, the parties typically still select the mediator and the format, determine the issues to be mediated, and decide how much time to devote to mediation.

Although mediation is a flexible process, it often follows similar steps. First, the parties (and their counsel) meet with the mediator to discuss the dispute and determine how the mediation will proceed. On the first day of mediation, each side will sometimes deliver an opening statement, which summarizes their version of the dispute and outlines their desired outcome. The parties may also provide the mediator and the other side with information that supports their position.

The next step of commercial mediation is to work with the mediator to negotiate a resolution. The mediator will encourage open dialogue between the parties, often highlighting areas of common ground and potential solutions. The mediator will then generally meet with each party individually to assess their position, address their concerns, and offer suggestions. This is typically followed by another joint session with both sides.

Should the parties reach an agreement, the mediator will work with them and their attorneys to draft a settlement agreement. After all relevant signatures are obtained, the agreement may be implemented. In some cases, it must also be filed with the court.

If the parties can’t reach a resolution, they can agree to another mediation session or discontinue mediation. In either case, both parties must agree. Finally, even when mediation is not successful at fully resolving the case, it can often narrow the issues that remain in dispute and that require court resolution.

Why Should I Consider Business Mediation?

Mediation offers several advantages over litigation. Below are some to consider:

• Less Time and Money: Like other alternative dispute mechanisms, mediation is almost always less costly and time-consuming than going to trial. This is particularly true for complex cases involving complicated issues and/or multiple parties.
• Confidentiality: No one wants their company’s “dirty laundry” to be aired in a public courtroom or for something they say to come back to haunt them. Mediation allows the parties to maintain the confidentiality of the proceedings and encourages the parties to be candid with both the mediator and each other.
• Reduced Risk: Putting your fate in the hands of a judge or jury is always a gamble. In complex commercial cases, the parties risk that the decision-maker will not fully grasp the claims/defenses they have raised and will award a verdict much higher or lower than warranted. Mediation allows the parties to have greater control over the outcome.
• Informality: Compared to the courtroom, mediation is fairly informal. During mediation, the parties and their counsel typically have the opportunity to meet privately with the mediator. During these sessions, you can clarify issues and answer questions that the mediator may have about your positions. In addition, you can often get a good sense of which arguments the mediator is having difficulty accepting and which he or she feels are persuasive.
• Preservation of Business Relationships: Litigation can be contentious and often destroys the strongest business relationships. Mediation can preserve those relationships by encouraging the parties to work together to find a mutually beneficial resolution.
• Flexibility: Unlike turning a case over to a jury, mediation also allows the parties to maintain control over the ultimate resolution. Unlike a judge, who is bound by statute and case law, a mediator is empowered to propose creative solutions tailored to the unique facts of the case.
• High Rate of Success: While mediation is not binding upon the parties, a strong majority of mediated commercial claims ultimately settle. Even when mediation is not successful at fully resolving the case, it can often narrow the issues that remain in dispute and require court resolution.

What Are the Keys to a Successful Mediation?

Not all mediations will end in settlement. However, there are steps that you can take to increase the likelihood of a successful resolution. Below are a few tips.

Select the Right Mediator

Once you decide to pursue mediation, selecting a mediator is one of the most important steps in the process. It is important to conduct due diligence, as a poor mediator can sometimes do more harm than good.

When selecting a mediator, key factors include the mediator’s demeanor, training, experience, and success rate. An effective mediator will have a reputation for intelligence, patience, and fairness, while also being forceful enough to keep the process moving forward. If the case involves highly specialized subject matter, it is also important to verify that the mediator has the requisite expertise.

Commit to the Process

For mediation to be effective, the parties must be committed to the process and prepared to make concessions. Simply “going through the motions” will generally not yield a successful resolution. Instead, you must be prepared to put your emotions aside, listen objectively, and remain open to the mediator’s suggestions.