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A N 8 D 8 B 18 AR CE www. NYLJ.com SIN Volume 261—NO. 93 Wednesday, may 15, 2019 Outside Counsel Expert Analysis Is Contractually Required Mediation of Business Disputes a Waste of Time?

usinesses are increasingly of controlling these and other costs, mediating complex business but they cannot be avoided entirely. disputes before filing law- (2) Unexpected and even retaliatory By suits or going to arbitration. Conna A. counterclaims may be asserted by the This is sometimes required Weiner defendants. I have mediated a number asB part of a “step” or “waterfall” clause of cases where counterclaims became providing for mediation as one condi- the main event. In at least one of these tion precedent to litigation. Is requiring cases, the defendants told me without perhaps unwilling partners to dance a “check the box” exercise on the way avoid public fights with collabora- to litigation? Is it simply too early? tors, customers or regulators that Requiring business parties on I posit that requiring business par- can negatively affect their businesses; the brink of litigation to hit a ties on the brink of litigation to hit and focus on driving their business controlled mediation pause but- a controlled mediation pause button objectives. ton with the help of a business- with the help of a business-oriented It is therefore critically important to oriented mediator and the right mediator and the right process and focus business clients on the effects of participants almost always makes the filing of litigation. It can be too easy process and participants almost sense. Using the techniques outlined to say that “we need to show that we always makes sense. here can make pre-litigation mediation are serious” or to use the commence- successful in many more business dis- ment of litigation to “gain leverage.” reservation that they would have not putes than lawyers might expect—to While these may be legitimate strat- have asserted the claim without hav- the likely delight of their business cli- egies in certain circumstances, the ing been sued first. ents. following factors should be carefully (3) Taking the step into litigation Do Not Underestimate the Near- considered: inevitably hardens the parties’ posi- Term Effects of Filing a Lawsuit. (1) Litigation expenses can be imme- tions and increases conflict. Rather Business leaders generally desire to diate and significant. A litigation team than being intimidated into surren- preserve current and potential future will need to be assembled to conduct dering, business leaders can become business relationships, or at least to a reasonable investigation of the facts, infuriated. Potentially exacerbating end them quickly and efficiently in document holds will need to be imple- this reaction is the change in person- a way that makes business sense; mented, and an e-discovery vendor nel from the business to lawyers to will need to be retained to deal with litigators, which inevitably changes document discovery. Conscientious the perspective with which the busi- Conna A. Weiner is a neutral at JAMS. outside counsel do an excellent job ness disputants—now combatants— Wednesday, may 15, 2019

view the situation. The focus will (1) Set aside, for the moment, a (2) Set time limits. The clause should shift from what is fair, reasonable and litigation mindset. Any sophisticated set clear time limits on the process, practical from a business perspec- business mediation requires a willing- subject to extension by the parties. tive going forward to a retrospective ness to compromise, look forward and Once a set period expires, for exam- analysis of who was right and who avoid focusing on winning, account- ple, the parties should be able to pur- was wrong. ability or right and wrong. The best sue litigation (or perhaps, by contract (4) Unless parties agree quickly to result might be a renegotiated agree- or agreement, arbitration). Seeking settlement negotiations, the business ment or a negotiated termination with injunctive relief could be an exception loses control over the outcome of the multiple parts that entertains some as well. The clause should also require case and the opportunity for flexible, form of continuing relationship. As some of the preparation steps outlined business-focused remedies. Litigation, described below, a willingness to below. however, often takes on a life of its share information in order to get to (3) Give business representatives own; from both technical and momen- the bottom of things and value a case and business lawyers major roles. To tum perspectives, it can be difficult to early are critical to success. A media- keep the mediation focused on busi- stop. Settlement off-ramps are pushed tor may also recommend direct com- ness solutions, have business repre- further into the future because of this munications between business clients sentatives (both executives and func- dynamic. and—with the permission of counsel— tional personnel), inside counsel and (5) It is also important to remind direct communications between her transactional lawyers play major roles clients of the expense, disruption and those clients in order to improve from the start. In several of my mat- and uncertainty of litigation, and the the chances of a successful business ters, litigators have played important years it can take to get to trial—all resolution. roles behind the scenes, but they have for a very uncertain result. Someone All this is not necessarily the kind in a corporate legal department may of process to which trial lawyers are well be responsible for continuing to accustomed. Viewing the negotiation Making the most of the pre- justify the decision to keep pursuing as a problem-solving, forward-looking litigation moment is worth the an expensive case during business exercise and ceding some control over investment. budget reviews. the flow of information and client con- Steps to Pre-Litigation Mediation tact can be difficult. As my colleague elected not to attend the in-person ses- Success. Avoiding these issues and Yarko Sochynsky has noted, transition- sions. This is not always appropriate, dynamics should help encourage ing from a litigation advocate to the of course, but it can be one way of set- upfront investment in a negotiated lead negotiator in a mediation does ting the tone to ensure that the busi- solution, but what are the chances not come naturally to everyone. ness decision-makers and experts are of success? Getting parties involved Certainly, parties can and should guiding the business negotiations. And in a process like what is described expect litigators to advise them on having transactional lawyers involved below may ameliorate some of the their litigation chances and expect is critical to help with developing and common objections to early media- mediators to understand their argu- documenting the parties’ agreements. tion, keep a focus on a business solu- ments and push hard to get the parties (4) Select the right mediator. Differ- tion and convert the skeptical, as the to evaluate their risks realistically, but ent mediators have different experi- momentum created by a more objec- this should not overwhelm attention ences and skill sets. For a complex tive negotiated process with the help to commercial solutions. The best business case that will involve, for of a knowledgeable neutral moves the lawyers and business mediators are example, a significant adjustment/ parties forward. able to conduct the mediation on two renegotiation/multiple-part termina- The following tips are helpful in all separate tracks: (a) a business negotia- tion, a mediator with both litigation complex business mediations but are tion track, informed to an appropriate and hands-on transactional and busi- particularly important in a pre-litiga- extent by (b) an assessment of litiga- ness negotiation experience may well tion context: tion risk. be preferred. As suggested above, two- Wednesday, may 15, 2019

track mediation analysis, consisting what they think already; we have (f) Conduct email and telephone of an assessment of the chances of been arguing about this for a year” follow-up sessions (involving the prevailing in court and a detailed, only to find that when the parties mediator as an observer or sound- informed discussion of business terms sit down to define their current ing board) to draft definitive agree- and workarounds, could be critical to understanding of the facts and law, ments. What constitutes success achieving success. A mediator with additional issues arise. This work in a business mediation should be hands-on business negotiation and saves time in the mediation by carefully considered; it need not even industry experience has many obviating the need for legal open- be a final settlement if a road map tools with which to assist the parties ing statements and/or relying upon for future discussions is identified. in considering their options and to run the mediator to pass basic posi- This expanded procedure is often a mediation business negotiation ses- tions back and forth when direct more realistic and certainly more con- sion. communication ahead of the ses- sistent with the look and feel of a busi- (5) Think of mediation as a process sions can be more efficient and ness negotiation. Complex business involving preparation, in-person ses- effective. arrangements are rarely negotiated sions and follow-up. For a pre-litigation (c) Exchange information, key in just one day. complex business case, the typical documents and perhaps even Ultimately, making the most of the in-person mediation session should external expert opinions on dis- pre-litigation moment is worth the be viewed as only one part of a more puted technical issues, which will investment. It greatly increases the nuanced mediation process emphasiz- take the place of the litigation dis- likelihood of settlement in the early ing preparation and follow-up, much covery phase to the extent practi- stages. Furthermore, even if a settle- like a business negotiation. In addition, cal and necessary to ensure the ment does not result at or within the using the mediation process to prepare sharing of facts materially affect- months following in-person sessions, avoids the concern that it is simply too ing any business deal and case time has not been wasted, for the par- early to negotiate by filling information settlement value. ties will be in a good position to litigate gaps and substituting to some extent (d) Supplement what is shared with efficiently and well—and the issues for discovery. Consider the following confidential memos for the media- to be litigated (or arbitrated if that steps, which can occur sequentially tor and ex parte calls to discuss the is the next step in the agreement or or overlap and should involve the information that has been obtained the parties agree to do so) may well mediator: and the range of possible solutions have been crystallized or narrowed (a) Conduct an internal analysis acceptable to the clients. as a result of the process. (much like an early case assess- (e) Have the key participants— ment) by interviewing key par- including adequate representation Conna A. Weiner, Esq. is based in ticipants and in-house or external from various business functions— Boston, MA and available nationwide. experts and obtaining stakeholder meet in person with the mediator Please contact Jeffrey Poirier at (617) buy-in from both executive and in a flexibly structured session (or 228-9121 or [email protected] for functional (such as tax and finance) sessions) to discuss the disputed further information. personnel regarding acceptable issues and exchange detailed term outcomes and required approvals. sheets memorializing possible (b) Given the absence of a com- resolutions. These term sheets plaint and answer, the parties should be drafted by the parties should then define and share in themselves to ensure buy-in and writing the issues to be addressed, approval. The parties should per- the parties’ respective positions mit the mediator to make sugges- and any additional entities that tions about who should be present Reprinted with permission from the May 15, 2019 edition of the NEW YORK should be present at the table. I at the meeting and when to discuss LAW JOURNAL © 2019 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 have often heard that “we know certain issues. or [email protected]. # 070-06-19-31