Author: Jeffrey Krivis

Should We Submit This Case To Mediation?

18 questions to guide your analysis. A “yes” to any one means you should consider mediation.

  1. Is this a business relationship that has potential for the future?
  2. Has there been a significant breakdown in communication between the parties?
  3. Would you benefit from a quick resolution of the issues?
  4. Is this dispute highly charged emotionally?
  5. Is this case frustrating and difficult for you to cope with emotionally?
  6. Would you benefit from total confidentiality in the resolution of this dispute?
  7. Is this a case where setting precedent is not the objective, where the legal issues are of minimal significance?
  8. Are your chances of winning at trial less than you’d like?
  9. Are the costs of preparing for trial substantial relative to anticipated recovery?
  10. Is there a factual dispute based on the credibility of witnesses?
  11. Is this case going to become a battle of the experts?
  12. Is opposing counsel contentious, incompetent or difficult?
  13. Is opposing counsel an obstacle to resolution?
  14. Will you have difficulty funding litigation through trial?
  15. Is the time commitment for litigation difficult to manage?
  16. Will collection be a problem if you do get a judgment at trial?
  17. If you do win this case, is an appeal likely?
  18. If you lose this case, are you liable for the other side’s attorney’s fees?

This article appeared in Legal Management, March/April, 1995 issue.

Mediation: The Antidote To Civil Litigation

In what appears to be the first mixed marriage of its kind, the insurance industry and trial lawyers have linked resources to encourage the use of mediation as the preferred method for resolving disputes. Known as the National Pre-Suit Mediation Program, the aim is to institutionalize the use of mediation in all cases. The concept was the brainchild of the International Association Of Defense Counsel (IADC), which recognizes the importance of mediating disputes. The program has effectively put the IADC and the trial lawyers in the center stage of public service for the consumer, the real victim of the overburdened civil justice system. Once in that position, both sides found themselves in a win-win situation. Hence, the unique affiliation of former rivals.

The pre-suit approach is significant because it responds to the needs of all parties. For injured victims, the civil justice system has a way of exhausting people into submission, usually on the eve of trial, but only after extensive discovery battles. This program accelerates the resolution of the dispute so that the victim can receive fair compensation quickly, and without the emotional scars of litigation.

The insurance industry is predictably thrilled, since the costs of defending many of these actions sometimes exceeds the amount of indemnity paid to the victims. By reducing defense costs, insurers can concentrate on the actual value of the claim, as opposed to arbitrary figures that tend to focus on court costs.

As for the trial lawyers, they can now provide superior services for their clients and receive contingent fees much earlier in the process. This helps achieve positive cash flow and better use of staff resources. Furthermore, if the case does not settle at mediation, the trial lawyer can simply recommend to the client that the case go to a jury. In choosing this option, the clients go to a jury trial acknowledging that every effort has been made to reach agreement with the insurance company.

In addition, insurance companies may decide to stop expanding the role of house counsel when they see that their outside counsel has embraced a concept previously advocated by the insurance industry.

Why Mediation?

It often works better than traditional court intervention. The direct connection between the parties and the problem-solving process creates greater efficiency, solving the problems of increased transaction costs, delays in the judicial system, and the public perception of an unfair system.

Mediation is more efficient because the outcome of any mediation is controlled by those who have the most complete view of the case: the parties themselves. They are inevitably the ones best equipped to resolve the problems created by the case. The parties control how they wish to state their own view of matters, and the mediator provides a safe environment in which to do so. Eliminating the restrictions of formal rules, the mediator encourages an open dialogue that focuses on the forces that have brought the parties into a dispute in the first place. In so doing, the mediator is a catalyst for initiating mutually acceptable solutions.

The mediation process is completely confidential, and any information discussed in a private session cannot be revealed to the other party without permission. This is the basic technique used by the mediator to assist the parties in reevaluating their stated positions in a comfortable and supportive environment. The mediator also serves as a sounding board so that the parties can have an opportunity to “vent,” or release thoughts and feelings that have contributed to their position in the dispute. In a recent mediation involving a wrongful death action, the parties were over one million dollars apart on the eve of trial. Both sides agreed to mediation as a last measure before engaging in costly expert depositions. When the wife of the decedent finally got her chance to talk to the mediator about her deceased husband, and express the grieving that she felt over his death, the case took on a different posture. It was as if a weight had been lifted from her shoulders, and she could finally accept the fact that her husband was gone and that the only way the justice system could deal with the problem was by a monetary payment. After some discussion with the mediator, the case settled in less than four hours.

Since the mediator is not a judge and will not make any decisions on the matter, the parties are more inclined to share information that will help bring the case to closure. As reflected in the case identified above, the parties maintain full control over the process, while the mediator offers insights into the issues at hand. Any party is free to withdraw from the mediation at any time. However, this rarely occurs since progress toward settlement becomes obvious as the mediator assists the parties focus on resolution.

Another recent example of a successful mediation occurred when a 40 year old woman made an uninsured motorist claim against her automobile insurance company. Blood tests taken at the emergency room after the accident revealed that the claimant may have suffered a miscarriage. This claimant had previously tried unsuccessfully to become pregnant, and the revelation of a positive blood test had a devastating psychological impact on her.

The case was on the road to binding arbitration, with the insurance company being faced with potential bad faith exposure if they didn’t settle within policy limits. Rather then face the possibility that an arbitrator might be influenced by the blood test and psychological component of the claim, the parties went to mediation. During the mediation, the claimant got to tell her story. This opportunity in and of itself opened the doors to discussion and settlement within one day. Both sides left the mediation with an appreciation for each other.

In addition to the above examples, many personal lines insurers are submitting automobile and homeowners disputes to mediation. Some carriers will bunch their smaller disputes into three or four claims that can be mediated in one day in order to take advantage of the reduced mediation fees, and to move cases through the system quicker.

As can be seen, the mediation process is fair, friendly and efficient, with neither party dominating the other. Resolution is reached only if all sides agree, which, incidentally, occurs in over 85% of the cases.

How Does The Program Work?

The National Pre-Suit Mediation Program has been designed to mobilize mediation as soon as impasse occurs during settlement negotiations. If the injured victim’s counsel is unable to negotiate a fair resolution informally, he simply serves a Request To Mediate form upon the insurance company or self-insured participant. By the same token, the insurance company or self-insured has signed a written pledge to come to the table and allow the mediator to help facilitate the negotiations so that the parties can get past impasse and on to settlement.

Some insurance companies in selected jurisdictions are playing it a little more cautiously. They have agreed to the spirit of mediation, but have reserved the right to reject a Request To Mediate primarily where suspected fraud is involved. Nevertheless, the majority of jurisdictions and insurance companies have successfully followed the intent of the program which is to mediate any and all cases.

Once the Request To Mediate is served, the parties have 90 days within which to informally exchange information about their positions and have the mediation session. The IADC interviewed and selected professional mediation providers who submitted proposals and resumes. Several providers were selected that have agreed to provide volume discounts to program participants.

Upon receipt of a Request To Mediate with an approved provider and signatory company, the provider will assign a mediator who is acceptable to all the parties. The parties are always free to request a particular mediator if they choose. However, since the process does not involve a decision by a neutral and is non-binding, the idea of locating a neutral who favors one side or the other has been eliminated.

A mediator profile is provided to any party upon request. The mediator provider will then schedules the case for a convenient location and time. Notice of the Mediation Session will be mailed and the case is heard.

The IADC encourages signatory companies to pay up to 75% of the cost of the mediation up to $1,000. This has occurred successfully in such jurisdictions as San Antonio and on the East Coast. In Southern California, the signatory companies have agreed to share the cost equally with the trial bar, unless otherwise agreed.

The Program has achieved award winning success in a pilot program administered by the San Antonio Bar Association in 1992. Out of 300 cases that were submitted in the pilot program, 85% of the mediations resulted in settlement, avoiding costly litigation. The State Bar of Texas awarded the San Antonio Bar Association with the 1994 Public Service Project Award and the 1994 Partnership Award for local bar association.

In order to gauge ongoing success of the National Pre-Suit Mediation Program, all mediation providers are required to provide written statistics of the number of cases submitted, number of cases mediated and the number of successful mediations conducted. The experience in San Antonio is being duplicated in other regions in the country.

Who Supports The Program?

The IADC, the oldest and largest organization of defense counsel in the United States, obtained seed money from several major insurers. The insurers that want to participate in the program sign pledges or “Position Statements” in which they commit to the spirit of mediation before a case goes to litigation. At the same time, the trial lawyers in the cities where the program has been implemented evaluate the program and endorse it as a membership benefit.

The National Pre-Suit Mediation Program Director, Jim Readey of Columbus, Ohio, is a former litigator who has spent the last several years as a neutral mediator. He is the past president of the Columbus Bar Association, and helped conceive and develop the popular concept of Settlement Week, an idea that now enjoys success throughout the country.

Conclusion

The National Pre-Suit Mediation Program commits insurance companies and trial lawyers to exercising an efficient and cost-effective option before placing matters into litigation. Clients are best served when their interests are managed quickly and in a fair environment. Mediation provides both, and contributes to the welfare of the court system at the same time.

Mediating Suspected Fraud Cases

fraud (frod), n. 1. An intentional perversion of truth for the purpose of inducing another to part with some valuable thing belonging to him or to surrender a legal right; 2. A false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations; 3. Deceit; trickery; cheating.

You are a well-respected lawyer who has been referred a garden variety soft tissue injury case. The client has been treating with her own selected physician who has referred her to a physical therapist. Upon receipt of the medical bills and report, you mail everything to the insurer along with a settlement demand. Months go by and you hear nothing from the insurer, except that they would like to copy the records of the medical facility. Since the statute of limitations is approaching, you file suit, send a copy to the insurer, who immediately refers it to outside counsel. Next thing you know you are barraged with written discovery requests, depositions and aggressive litigation tactics. There is no settlement in sight, only the prospect of trial.

How many lawyers have had promising cases turn into time consuming, unprofitable pieces of litigation only to find out late in the game that the insurer has sent the case to it’s “special investigations unit” (“SIU”) because of suspected fraud? Wouldn’t it be nice to know early on in the case that the insurer has questions about the legitimacy of some aspect of the claim, so you can either reevaluate your desire to pursue the case, or clarify the information so the insurer is in a better position to settle? Despite the obvious answers to these questions, many lawyers find themselves stuck, never knowing why certain cases are log-jammed in the system with no way out except through the litigation maze.

Drawing the lines in the sand are the insurers who are naturally concerned about paying out on claims that have suspicious qualities about them, such as a medical facility that is on its “watch list,” a low-impact case with “excessive” medicals, physical therapy rendered by a chiropractor not in conformity with the Chiropractic Code, examinations going far beyond the range of the injuries involved, questionable treatment cycles, and the like. Strategy or habit often dictates that until the eve of trial neither side will communicate with the other the real reasons the case is stuck. Not until then will the judge require that the parties discuss openly and candidly the various elements of the case.

The Benefits of Mediation In Suspected Fraud Cases

An early investment in mediation can accelerate the learning curve for both plaintiff and insurer, and open the lines of communication so that informed decisions are made about how to resolve cases. While the benefits of mediation have been artfully addressed in other fields, consider the opportunities available in the suspected fraud claim for both plaintiff and insurer:

  • Provides a place for an early evaluation
  • Allows for a strategic exchange of information
  • Allows you to engage in a dialogue in a “safe, non-threatening environment”
  • Requires complete confidentiality
  • Enhances the probability of settlement
  • Eliminates wasteful litigation-a great time-saver for counsel on both sides

1. Early Evaluation

In the mediation which occurs early in a case, the mediator serves the function of an agent of reality. By listening closely to the evidence available, or not available, the mediator can explore the consequences to all parties if their positions are taken to court. The ability to observe the plaintiff and the insured and review the facts of the case may provide both sides with information that was desperately needed to put a reasonable proposal on the table. In addition, the mediation setting provides each side with the chance to review:

  • the demeanor of the other;
  • the veracity of each other’s story based on their own version
  • recent medical bills not previously received
  • veracity of counsel from his demeanor

On the other hand, the evidence might also reveal facts which counsel was not aware, including, among other things:

  • improper licensing of the medical facility
  • violations of the chiropractic code
  • inconsistencies between medical bills and records
  • unsubstantiated examinations/treatment

Armed with this “new information,” all parties are then able to more intelligently communicate, with the aid of the mediator, different ways to resolve the case. By introducing the resources of a third party neutral the parties are afforded a rare opportunity to strategically manage the flow of information in a way that benefits their case. Faced with new information and the potential need to reevaluate a case, mediation may be the most useful forum in which to explore methods of changing direction and the significance of not doing so.

2. Strategic Exchange of Information

In managing the flow of information, the mediator capitalizes on the strengths and weaknesses of the parties by surveying information each side thinks might make a difference in his case. The dilemma to this examination of information which some parties find uncomfortable in their first mediation of this nature is how much of their investigative efforts should the mediator reveal to the other side. Often times insurers might be armed with information such as a witness statement, questions about the medical clinic, or even proof that the plaintiff wasn’t even at the accident scene, but are reluctant to share it with the plaintiff for fear that if the case doesn’t settle, they would lose the impact at trial or arbitration.

While the value of using the fruits of the investigative effort at trial are in theory very sensible, the necessary transaction costs and attorneys fees to prove the case as well as the reality that most cases don’t get to trial are rarely taken into account. The costs and fees to prove the case could be completely eliminated by offering to share the information during the mediation session. In so doing, the mediator can be the conduit for making the kind of recommendations about settlement or dismissal which the parties and counsel are prepared to accept. By strategically revealing information at certain stages in the mediation, the mediator can slowly assist in rolling out each side’s position in such a manner that protects each side in the event they decide to go to trial. Each side maintains control of the flow of information, and decides when to reveal evidence based on calculated decisions about the impact of the evidence and how it might be received during the mediation. This is accomplished through close consultation with the mediator, who gauges the temperature of the parties and recommends the appropriate time to exchange or disclose critical information.

For example, if the defense has a sub rosa film of the plaintiff that completely undermines the plaintiff’s case, the defense would explore with the mediator the right moment to allow the plaintiff to know about this information. When the mediator senses that the information would have an impact on the evaluation of the case such that resolution is possible by revealing the information, the mediator would get permission from the defendant to discuss the information with the plaintiff. This analysis holds true if the plaintiff presented evidence to the mediator that would undermine the defense position. In short, the power in the mediation of this type of case is in the information available to the parties. If one party chooses to bargain by keeping their cards close to the vest, the other party will not likely make a concession or even consider the outcome contemplated by the party with all the information.

By systematically controlling the flow of the information through a seasoned mediator, the ice can be broken and a fair negotiation of the claim can be accomplished. In a recent mediation, multiple parties were claiming injuries sustained in a low-impact bus accident. Given the impact, the involvement of an unlicensed clinic, and the high percentage of passengers injured (100%), the insurance carrier referred this case to its SIU from which it was sent to mediation. In mediation, the active participation by several of the plaintiffs resulted in a better understanding by their counsel of the risks of going to trial, and the ultimate value in settling quickly.

For example, in this case, it became evident during a confidential meeting with the mediator that counsel was not made aware of the fact that one of his clients never received any medical treatment, despite a report prepared by a medical provider and submitted to the carrier. Faced with that knowledge, counsel then began questioning other clients and discovered that at least one other plaintiff was having difficulty recalling significant events and dates. This potential bombshell was disclosed to the mediator privately, out of earshot of the defendant and counsel. Plaintiff counsel, however, knew what she had to do and was happy to do it without the embarrassment of facing defense counsel in the same room. She filed appropriate Requests for Dismissal the same day. The participation of the clients in the mediation assured a full understanding by them of the significance of this information and made unnecessary any lengthy explanation of the need to abandon their cases.

In a similar case, fraud was believed due to the involvement of a “suspect” clinic, extended treatment that remained substantially unchanged from start to finish, and a delay of several weeks in starting to treat. At the beginning of the mediation session, the parties described the details of claimant’s physical examination and course of treatment. New information in this case was provided to the defense counsel which indicated a very credible injured party who had obtained a thorough, professional, and effective course of treatment that was entirely justified. The adjuster made an immediate offer substantially greater than either party might have expected, and the case settled at mediation.

What are the factors common to both of these examples? The new information provided by the mediation process enabled the recipient of that information to make a decision based upon greater intelligence and to do so earlier rather than later. In each case, one party minimized its losses and another maximized its gains. Thus, it was to the advantage of the bus plaintiffs to abandon a loser rather than spending additional wasted effort. The benefit to the defense was obvious. Likewise, in the second case, defense minimized its losses and plaintiff maximized its gains through the cost-effective exchange of important information.

3. Establishing The Safe Environment

To establish a safe environment is to create a process within which parties are encouraged to communicate productively. It is an environment in which they are comfortable enough to send and receive clear messages. This environment is generally created with a simple ground rule prohibiting comment, criticism, or any other form of behavior that might in any way distract a party while he/she is speaking. The mediator acts as a sort of filter in which the discussion will be allowed to drain through. The result of using this procedure may include any of the following:

  1. When meeting together as a group, the parties may express their entire view of the dispute without fear of interruption, criticism, or even comment.
  2. When meeting privately, the parties are open to brainstorming openly because they are not obliged to make commitments at that time. At the same time, the discussion of the case is realistic as opposed to simply posturing about positions.
  3. In private, parties may explore settlement scenarios with the aid of mediator, i.e. use the mediator’s “sense” of where the other side is at and hence more effectively explore options for resolution.
  4. Throughout, the safety of the process permits the parties to achieve a sense of having reached their optimum resolution

In other words, the safe environment of mediation is for lawyers who want to get their point across to the other side with the client in attendance, for lawyers who want to be sure all alternatives have been fully explored, and for lawyers who want to get a greater sense of what caused the other side to take their position before disclosing fully its own position. For example, if the defense wants to deliver the message that it thinks elements of plaintiff’s case are suspect, it can do so without fear of retribution or retaliation because the mediator may do the talking. This allows each side the ability to explore the full potential of each other’s case before committing oneself to a position that might be both embarrassing and financially challenging.

4. Confidentiality

The idea of confidentiality is the foundation upon which mediation is built, and the reason mediators are able to resolve cases. What does that mean to the consumer? It means that they are encouraged to tell the mediator their secrets without fear of having information used against them at anytime in the future. This is a powerful asset to an injured victim who might have sensitive issues surrounding his claim such as preexisting injuries, questions concerning the medical treatment and so on. Using this asset as a sword to get a case settled is precisely why mediation works.

To confirm the availability of the asset of confidentiality, the mediator usually promises not to divulge any information without the permission of the parties. This allows the mediator to build trust and openness, and encourages an honest disclosure of information and cooperation. Without it, parties are hesitant to reveal too much, fearing delicate information might be used in a later court proceeding. Confidentiality therefore encourages candor, a full exploration of the issues, and the possibilities of settlement.

Many states, such as California, have statutes which provide limited protection against the release of confidential information in civil proceedings. For example, Evidence Code 1152.5 protects disclosure of settlement discussions in a later court or administrative proceeding. Skilled mediators will make certain that any information is not transmitted across the table without the permission of all parties involved.

5. Enhances The Probability of Settlement

There are at least three reasons why the process enhances the probability of settlement:

  1. The information is coming through a neutral, increasing the chances that it will be heard objectively, and not defensively. As such, it is more likely to be analyzed effectively.
  2. Because the parties are present, participate actively in the exchange of old and new information, and understand the process in which new directions are explored, they are more likely to understand recommendations of others.
  3. The Mediator has created a safe environment by developing ground rules that preclude interruption and unwelcome cross- examination and assure a respectful and polite atmosphere. In this environment, the parties feel empowered and are in a frame of mind to resolve their dispute.

The safe environment of mediation and the confidential sessions with the mediator offer an opportunity to explore alternative outcomes. This joint effort of parties, to produce, with the aid of a mediator, an outcome based on both old and new information leads to a greater likelihood of achieving an expedited result that reduces or eliminates drawn out litigation.

6. Eliminates Wasteful Litigation

The idea of abolishing litigation that is either going to resolve quickly or go nowhere fast is the goal of mediating suspect fraud claims. This goal can be achieved in every case with the determination of counsel who is willing to look at his case with candor and openness. At minimum counsel learns why the case is dragging out so long and might find an exit strategy for a case that is going nowhere fast. At best the case gets settled and a settlement draft is received within a few days of the mediation conference.

Litigation is wasteful if it is either initiated inappropriately or maintained beyond a point where resolution appears reasonably feasible. Inappropriately initiated litigation is litigation that does not require the intervention of the judicial process but that could be resolved through more meaningful communication among the parties to the litigation.

In the area of fraud, the elimination of wasteful litigation often results when a mediation session provides an opportunity to review scenarios likely to occur outside the courthouse as well as inside. These scenarios may include pending or likely agency actions, the value of ongoing relationships with either the plaintiff or the defendant, and the desirability of controlling the outcome of a matter as opposed to “rolling the dice” where ethics, morality, and perhaps even criminal conduct have been brought into question.

While it would generally appear to be in the best interests of attorneys and their clients to prevail in court, the existence of other, and potentially larger, interests may dictate that the legal positions be abandoned. Frequently, the mediation session produces an awareness of broader interests and an assessment of their importance relative to the legal action which is the subject of the mediation. This assessment, assisted with the potentially more reasoned objectivity available in a safe environment often leads to the termination of actions otherwise labeled as fraudulent.

Convening The Parties To Mediation

How would you respond to a telephone call from a mediation service who has been requested by a carrier to mediate your case? Is there a downside in investing in a private, confidential conversation with an insurer about the case? If you are an insurer, how would you respond if the plaintiff made the same request of you? There is a perception on the part of both carriers and trial lawyers that he who recommends mediation first is viewed as weak. They wince at the idea of agreeing to come to the bargaining table, particularly when fraud is suspected. A simple strategy works – allow the neutral to act as the go between or “convener” i.e. the person that makes the call. This allows for face saving in the event the other side says no, and might even provide you with some clues as to why the case is dragging on for so long.

Another strategy is to encourage parties to participate in a “pledge,” or agreement to mediate any cases with a particular insurer. Here is an example of how some trial lawyers and insurers addressed the issue of convening a mediation without looking weak: The insurance carriers entered into an agreement in which they pledged to mediate certain types of disputes submitted by plaintiff’s counsel. The pledge enabled either party to serve upon the other a Request to Mediate followed by the selection of a mediator and scheduling within 90 days. Given the widespread acceptance of mediation, it is not surprising that the program has received broad support from both the insurance industry and the Plaintiff’s bars.

Furthermore, the existence of the pledge alone makes it simpler to convene the mediation. For those still clinging to the fear that a request to mediate may be a sign of weakness, the pledge is helpful because it applies to all cases and as such does not imply a “message” as to any single case. Litigants in other areas of law have expressed interest in entering into a pledge similar to the one above. Given the potential savings of time, effort and cost, and given the fact that mediation is entirely voluntary and can terminate at any time, the implications of the pledge remain primarily positive.

For counsel involved in large volume personal injury cases, the potential, through the pledge, for productive discussions and early resolution of cases through mediation is enormous. The insurance industry has already evidenced its broad acceptance of the mediation concept. This acceptance is an opportunity for the Plaintiffs’ bar to assess the potential for broader-based, more productive, settlement discussions available through the simplified access to mediation offered by a pledge to mediate. Before dismissing mediation as just one more “hoop” to jump through, skeptics should remind themselves of the potential benefits of this hoop which has a settlement rate in excess of 85%.

Conclusion

The ability to find out the reasons why a claim is bottle necked in the system is a smart business practice. Mediation can be used as a tool to unlock the door to settlement of the case, or at minimum understand why things have stalled. With that understanding, an intelligent strategy can be designed for the case.

Cooperative Defense Agreements Reduce Costs for Insurers

Co-op-er-a-tion ~ 1: joint effort or operation. 2: the joining of persons in an enterprise for mutual benefits or profits.

Multi-party litigation looks very much like strategic military maneuvers, with each party looking for ways to ambush its opponents into judicial surrender. Armed with troops of lawyers with discovery weapons and indemnity cross-complaints, the co-defendants propel endless paperwork at each other until the objectives of the battle all but disappear.

These strategies only serve to benefit the party who originally brought the lawsuit. The defendants are in essence providing the plaintiff with information at the defendant’s expense, while concurrently shifting the blame onto their co-defendants. The plaintiff is put in the enviable position of sitting back and watching as the defendants destroy each other with discovery and multiple cross-actions.

By turning the dispute into the typical battle described above, defense lawyers often fail to deliver benefits to insurers, and, in the process, weaken the civil justice system as a whole. The blueprint for successful dispute resolution is to treat the conflict as an opportunity for parties to understand each other, out of which comes collaboration and eventual resolution.

In order to reach a favorable outcome, defense lawyers would be well served to consider adding a collaborative strategy such as a Cooperative Defense Agreement (CDA) to their arsenal. A CDA amounts to a temporary cease fire between co-defendants.

What is a CDA? It is a private, confidential agreement among co-defendants or potential co-defendants which provides a strategy to manage the litigation in an economical and efficient manner. A key feature of a CDA is an alternate dispute resolution mechanism for resolving the indemnity claims of the potentially liable defendants. This mechanism often is designed with both mediation and arbitration components to allow flexibility in resolving indemnity disputes.

Collaborative strategies among similarly situated defendants provide them with a chance to concentrate their efforts on defeating the plaintiff’s claim, rather than defeating each other. Out of necessity these strategies create an inherent accountability between the defense lawyer and the insurer.

This approach also minimizes the need to deal with disputes between similarly situated defendants until the primary conflict is resolved, resulting in cost savings to insurers. Given the fact that over ninety percent of all cases are resolved out of court, it is unlikely that the co-defendants ever will have to spend significant legal resources fighting amongst themselves after a primary dispute has been completed.

Benefits Of A CDA

Significantly reducing defense cost to the insurers. By combining resources among codefendants, dividing responsibilities, and avoiding cross-claims, parties can keep litigation costs manageable and realistic. For example, one law firm can be assigned the task of document assembly, thereby eliminating the need for paralegal assistance in other law firms. Similarly, the participants can select one law firm as primary counsel to handle various discovery matters, such as depositions, on a shared basis, resulting in profound savings in billable hours to the insurers. In addition, joint investigation and retention of one expert to perform a task which is often assigned to several experts would be cost-effective.

Providing a path by which insurers can resolve coverage issues of the plaintiff. Complex cases often present difficult coverage questions for the insurers. Since the insurers usually err on the side of caution and proceed to defend the cases (sometimes under a reservation of rights), the insurer can privately resolve the coverage issues without disrupting the main litigation. This can be accomplished either within a CDA or through a binding alternate dispute resolution process.

Reducing arguments between codefendants. Traditional litigation warfare concentrates on shifting liability among parties, which creates multiple layers of costly discovery which doesn’t necessarily deal directly with the plaintiff’s claim. This discovery swells into non-productive and time-consuming tasks which increase the conflict between codefendants at their own expense. By collaborating, the parties focus their attention on defending the primary action, while utilizing powerful alternative dispute resolution resources to shift blame privately, or after the main action is handled.

Utilizing confidential alternative dispute procedures to allocate liability and damage percentages among the codefendants. The CDA route removes the customary posturing that occurs among codefendants, and decides the issues through negotiation or binding arbitration. This takes the secondary dispute out of the civil justice system and puts it back into the hands of the disputing parties. The participants (primarily insurers) regain the element of control which is lost when a dispute is managed through the court system.

What Are The Risks?

Like any strategy to resolve litigation, Cooperative Defense Agreements have perceived risks. Often, defense counsel summarily rejects the thought of cooperating with their adversaries to avoid being viewed as weak. This fear reflects an underlying uncertainty and lack of a specific defense strategy for resolving the case.

A more realistic concern is that of decreasing control over the litigation by individual defendants. Defendants who are accustomed to performing some of the most important preparation tasks, such as depositions, could argue that they are not willing to risk having unknown counsel do their work for them. On the other hand, many other tasks, such as research and document coordination, lend themselves easily to cooperation. A cooperative approach to at least some of the litigation preparation functions prevents a duplication of effort and cost savings for the insurers. Obviously, important tasks could be assigned to counsel whose client has the most visibility or exposure, thereby assuring the necessary control in the case.

Another perceived obstacle is that potential conflicts of interest may crop up between the parties after the agreement is entered, consequently leaving the parties unprotected. While this is certainly a predictable response from a defense attorney, a CDA can be drafted to anticipate and deal with such potential problems in advance, or at least address unanticipated problems by means of an alternative dispute resolution device.

In reality, once the parties experience the inherent strength available in working together toward mutual goals, most of the risks associated with collaborating fade.

Concerns In Drafting The Agreement

The primary concern presented by a Cooperative Defense Agreement is how to effectively share counsel while achieving common defense objectives and maintaining individual control of the litigation. Consideration should be given to: apportionment of legal fees; conflicts of interest waivers; sharing confidential information among counsel who may or may not have similar interests; and how long common representation may extend.

A secondary concern that needs to be addressed by the drafters is how to resolve disputes among parties to the CDA. Typically, multi-step alternative dispute resolution procedures are established in writing so that the disputes, if any, can be managed out of court.

Another point that must be covered in a CDA is how to share in the cost of a judgment or settlement. This can usually be accomplished with the assistance of a neutral facilitator hired by the group to assist in hammering out these fine points both before the agreement is signed and during the litigation.

Basic Elements Of A CDA

When drafting a Cooperative Defense Agreement, the parties should ensure that each of the following elements are included. Other provisions may be added, but these are the fundamentals:

  1. Identification of the parties. Like any enforceable agreement, it is imperative to clearly name the players. This is particularly important in multi-party lawsuits, since it is possible that not every defendant will participate in the CDA.
  2. Objectives of the participants. A statement of purpose should be set forth in plain English at the beginning of the agreement. The statement should include a denial of any inference of liability arising from the group effort, as well as the goals of the group to reduce legal costs of each participant, promote judicial economy, and to facilitate an early resolution of the matter. The purpose should be stated in such a manner that it assumes it might one day be read to a court or a jury. This is due to the fact that the attorney/client privilege and attorney work product doctrine have not developed to the point where the shared information is completely protected.
  3. Neutral facilitator. The group may need a neutral facilitator to assist with discovery, resolve internal conflicts, and help to keep the group sailing in the right direction. This provision should include the facilitator’s responsibilities, the terms of compensation and payment, removal provisions, and an assurance of confidentially.
  4. Cross-claims. A fundamental reason for utilizing the CDA is to forego the filing of cross-claims until the conclusion of the primary action. Still, the parties should preserve their right to claim indemnity or contribution. The resolution of such cross-claims can easily be handled through a two-step approach, such as mediation and/or arbitration. This keeps such claims out of the court system, and makes them more manageable for the parties. Statute of limitations tolling provisions should be included in the section.
  5. Confidentiality. Each party should affirm that their joint cooperative effort may require the exchange of information, documentation, or materials normally subject to attorney/client and work product privileges. Any such exchange would be in confidence, and solely for the purposes of advancing and enhancing each party’s defense, and for promoting an atmosphere for settlement more quickly and economically than would otherwise be possible. In the CDA, the privileges should be reaffirmed; the parties should confirm that they are not waiving those privileges without prior written consent of the producing party before each separate exchange.
  6. Work product. Shared confidential information can remain protected under the attorney work product doctrine under certain circumstances. The question turns on whether there is a commonality of interest among the sharing parties. The agreement should state that there is a common interest amongst the defendants so as to avoid a potential waiver of the privilege.
  7. Expenses. The parties to the CDA need to allocate costs. One party may have insurance coverage, while another may be uninsured. The uninsured party may not have the financial ability to participate in a cost allocation on a pro rata basis. This should not be a stumbling block to signing the agreement, but it must be considered by the parties.
  8. Approval/withdrawal. The CDA should be signed not only by the parties, but by their counsel as well. It is important that signatories not be allowed to argue later that they did not approve of the terms. The agreement should also address the possibility that one or more of the parties will go into bankruptcy or seek to withdraw from the arrangement.
  9. Ability of one party to act for another. Oftentimes a minor party defendant will give authorization to another defendant to act on its behalf. The ability to do so should be spelled out in writing, as well as the extent of authority granted to the particular party.
  10. No admission of liability. The fact that a party enters into a CDA is not an admission of liability; this should be so stated in the agreement. It should also be stated that each party intends to defend itself and the interest it represents vigorously, and that it is in the parties’ mutual interest to cooperate without compromising the quality of the defense.
  11. Meetings. Regularly scheduled joint meetings of all the defense parties should be held. Provision for such meetings should be made at the time the agreement is signed.

Conclusion

The value in collaborating in multi-party cases lies in the flexibility and significant cost savings to the insurance companies. This factor, coupled with the inherent accountability that develops among defense lawyers and insurers, makes a Cooperative Defense Agreement an attractive option. While the concept of walking into these unchartered waters may instill apprehension in the litigator’s strategic plans to win the battle, it only takes one expensive war to develop creative options like a CDA to help manage disputes.

Defense Resistance To ADR Is Killing the Golden Goose

Legal disputes have traditionally been resolved by each side taking a position, digging in and hoping that a judge or jury will award them a decision. In the final analysis, the dispute cripples the losing participant, and buries both parties in expenses that sometimes exceed the value of the entire dispute. Nevertheless, some lawyers find it necessary to follow this tradition wholeheartedly and recommend that their clients repeat this process every time they have a problem that needs to be solved.

Against this backdrop, many insurance companies have mandated the use of alternative dispute resolution procedures as a required tool for good risk management. Simply telling the insurance company that a case is defensible and should be tried is no longer the solution for managing legal disputes. ADR is now considered a reasonable option which accelerates the process and results in cost savings and usually mutually acceptable solutions.

ADR forces the parties to think about the issues of the case, not just the position taken on paper. Besides the obvious advantages of cost reduction and the positive resolution of conflicting claims, ADR offers the parties an opportunity to design their own process, in the manner they consider the most efficient, to resolve the conflict. This flexibility affords the opportunity to experiment with different rules, which often go beyond the well-established judiciary limitations.

It is no wonder that many attorneys have generally resisted the opportunity to integrate ADR into the typical dispute. Clearly it is most comfortable, and typically more profitable, to litigate cases rather than solve problems. The rules we lawyers spend years understanding become so much a part of our makeup that the prospect of change, even through something as positive as ADR, brings out the worst in people. Generally, when ADR is recommended to a defense attorney, it is instinctively rejected. Defense attorneys often object to ADR for their lack of knowledge of the ADR process and fear of losing insurance business. It is this fear that could kill off the goose that has laid the golden eggs. What is needed is the recognition that one can live very easily off the eggs without killing the golden goose.

Insurer Expectations

While ADR is not the panacea for proper case evaluation, it does act as a catalyst for lawyers to start considering specific actions which must be undertaken to resolve a dispute. These actions have always included litigation. While litigation is certainly the best option for advocating a case and building a position, it is on the far end of the spectrum for risk managers in the business of managing legal disputes.

Insurance companies are no longer accepting at face value the typical defense evaluation of a case which does not include a specific settlement strategy. Most lawyers are getting around that by telling the carriers that it is too early to discuss settlement since discovery has not been undertaken. Interestingly enough, it is unusual for a defense attorney to contact the other side to determine what the case is all about. By not contacting the other side, the defense attorney gets to fulfill the prophesy of waiting until discovery in completed before evaluating the case. If talking to the other side about the facts of the case is considered ADR, then so be it.

Some defense attorneys are of the belief that recommending ADR in the early stages of litigation is a sign of weakness. This comes from a misplaced premise that when a case is assigned to defense counsel, it is there because the insurance company does not want to pay on the claim. In fact, verifiable data confirms that at least 90 percent of all cases are settled without a trial. Given this reality, the basic assumption under which attorneys have been operating must be re-evaluated to align with the interests of the insurance company, or the carrier will start aligning with other attorneys.

This means change in the way defense attorneys view their rules in the context of dispute resolution. It requires a broad case evaluation and strategy which provides the insurance companies with specific options available to resolve the claim.

Is That All There Is?

Once an attorney accepts the role of problem solver in addition to that of an advocate, innovative solutions become obtainable which match the needs of insurers. In fact, the usual attorney fear of losing business because of the potential drop off in litigation will likely disappear. This is because insurance companies reward defense counsel with more business when innovative solutions are suggested for streamlining cases. In fact, the volume of defense files may rise since insurance companies will be getting the value-added service of an attorney to mediate claims which would normally be handled by an adjuster.

Creative Approaches

One option is a hybrid mediation/arbitration process. Specific rules of engagement are agreed upon between the litigants which allows for meaningful settlement negotiations. A neutral mediator analyzes the issues on the table, and helps the parties consider objective criteria concerning the evaluation of their positions. Objective criteria includes jury verdicts, medical research and independent expert evaluations. Removing the subjective part of the evaluation forces the parties to focus on realistic solutions which are mutually acceptable.

If the parties are unable to reach agreement through the mediation, they then have several days within which to continue negotiations on their own, without the benefit of a mediator. If the parties are unable to reach agreement by a specific date, the mediator then issues a binding decision, supported by a written explanation. This “med-arb” approach encourages the parties to in- vent options for mutual gain while still at the table, since they recognize that a failure to reach agreement will result in a third party issuing a binding decision.

While certainly this approach not applicable to all cases, it is an effective solution to certain types of cases, such as the modest personal injury case. Insurance companies appreciate this type of alternative for cases which simply do not justify years of litigation expense.

Another valuable option in the arsenal of ADR processes is the “baseball” procedure. The parties each submit a last, best offer to the neutral hearing officer. The hearing officer must choose one or the other without modification. Because an extreme position will usually lead the hearing officer to choose the opposite position, the parties have an incentive to be realistic in their final offers.

Another variation on the baseball theme is what is called “night baseball.” The hearing officer evaluates the case but does not immediately disclose the recommended dollar figure. Instead, the award is kept in a sealed envelope while the parties provide their last, best offers. The closest to the arbitrator’s award wins the case. Once again, the chances of a party taking an absurd or extreme position are reduced dramatically.

Posturing And Judge-Shopping

ADR is not a substitute for the judicial system. The value in ADR comes from its recognition as a balance between the all-or-nothing attitude associated with litigation and the encouragement of honest discussions of interests and needs. It is the latter that results in the type of flexibility typically associated with ADR, and permits the exploration of settlement possibilities that are aligned with insurance companies’ interests in reducing risk.

A typical defense response to the suggestion of mediation is that there is no value in going through such a process since the insurance company will only have to pay additional monies for the mediator and for its attorneys to prepare and participate in the case, with no guarantee of a final resolution. This response is simply a way to sidestep the opportunity to engage in problem-solving, and perpetuate the more familiar.

The reluctance to mediate can also be traced back to the mistaken assumption that insurance companies want to go to court on every claim. This “all-or-nothing” premise, if followed through on every case, would put insurance companies out of business. Nevertheless, attorneys rationalize that it is the job of the courts to decide cases, and not a job for the disputing parties and their attorneys. Mediation requires the parties to have honest discussions about their mutual interests and perceptions of the case, rather than the normal posturing found in litigation. Since lawyers are not trained in defining interests and considering needs, it is predictable for defense attorneys to resist the opportunity to mediate a case.

Nevertheless, in the spirit of settlement, and usually after volumes of discovery have been undertaken, defense attorneys go on a Judge shopping” spree in order to find a neutral who might be available to handle a settlement conference. Judge shoppers look for a certain type of retired judge who they know is defense-oriented and will grind the plaintiff into submission. Interestingly enough, some of these defense attorneys, when asked, will argue that what they engage in during these judge shopping sprees is actually mediation! To say that the defense attorney in this case does not understand ADR is an understatement.

For true mediation to occur, and to get the results that naturally flow from mediation, judge shopping must be eliminated. Lawyers must study the various mediation processes that are available and evaluate their usefulness. In addition, defense lawyers must also volunteer their time as mediators on cases so that they can get acquainted with the process, and learn the value in considering options and interests rather than rhetorical positioning. Without this background, lawyers will not be prepared to recommend mediation to their clients.

ADR Skills: How Structure Helps Mediation

Bob McDowell followed a common routine each morning. He would get up early, take a two mile walk, and stop by the Canterbury Bakery for hot tea and scones. This morning was no different, except that his 27 year old daughter Meg joined him at the bakery.

Having purchased his tea and pastry, Bob sat down at his usual table in front of the window overlooking the sidewalk and parking lot of what had become a mini mall. As he was taking a sip of his tea, he heard a crashing sound, which would be the last thing he could remember when he woke up in intensive care with broken arms and legs, a cracked skull and third degree burns on his chest and arms.

Miriam Wendel was 82 years old at the time Bob was hurt. She drove a 1984 Oldsmobile which she bought new. She had just done some shopping at the pharmacy and was hoping to pull out of her parking space in front of the bakery and drive the three blocks to her daughter’s home. Unfortunately, Miriam accidentally put the car in “drive” instead of “reverse” and stepped on the gas, crashing through the front window of the Canterbury Bakery. Miriam survived the accident, but Bob sustained permanent injuries. Meg had some minor cuts from the glass window but was generally unhurt.

At the time of the accident, Miriam had an insurance policy that provided up to $50,000 in coverage per occurrence. Because of the severe injuries to Bob, the insurer offered to pay him the entire policy limits, which was rejected. The case ended up in litigation and the judge urged the parties to consider mediation. That’s where I came in.

When I get a call inquiring about mediation, I first attempt to assess the temperature in the case, i.e., how hot is the dispute. I’m interested in knowing not only the facts of the case and the status of negotiations, if any, but also why the parties think mediation might be useful. Once I gather that information, which comes together in the first phone call with the attorney(s), I then follow a very strategic pattern or template which can be used in almost any case.

The pattern I often follow was developed by Professor Randy Lowry of Pepperdine Law School. This approach is based on the idea that mediation sessions are generally broken down into five distinct segments or “Stages,” and that within each stage there is a “Task,” the objective—what the mediator is trying to accomplish; an “Action,” how the mediator is going to accomplish the objective; and a “Result,” the outcome which the mediator expects to achieve. Once you have gone through all Five Stages of the mediation, the goal is to achieve a final and durable settlement of the dispute.

Stage One: Convening The Mediation

In the McDowel case, it was the defense who contacted me about setting up a mediation. The first TASK was to speak to Bob’s counsel about his response to the judge’s suggestion to participate in mediation. I was initially concerned that Bob’s counsel would think that I was biased since I was calling at the recommendation of defense counsel. That problem was avoided, however, since the defense counsel had already sent a letter with my profile, indicating my experience and high level of impartiality. The ACTION I took was to get counsel to start talking about the case by first connecting or building a personal rapport on the phone. We had a brief conversation on general topics until I sensed a rapport had been built. We then moved the discussion to the McDowell case, and he indicated that although he wanted to settle, he was concerned that mediation might be a waste of time. He felt that his client might want to get a judgment and try to collect from Miriam’s assets, which, though not tremendous, included two modest homes which were paid in full. I asked him if he had anything to lose by at least spending a couple of hours talking about how his client could be compensated. Upon further reflection, he allowed that it might be worthwhile and was willing to try it. We then discussed the process in general, what he could expect and the costs, and selected a tentative date for the mediation.

Rather than sell mediation as a panacea, the RESULT I was simply trying to achieve in the Convening stage was to create a “willingness” to come to the table, not to actually settle the case.

Stage Two: Opening Session

Once the mediation got started, my TASK in stage two was to describe the process so that the parties would know what to expect from the session. The ACTION I took to complete the task was to advise the parties that we would explore a risk analysis of the likelihood and amount of recovery. I further told them that we would meet privately at which point they should be prepared to discuss a realistic assessment of what they expected to pay and receive. For Bob, this turned out to be the key to the case. He knew he had a strong case, but the question in his mind was whether he could recover from Miriam’s estate, or whether he had the heart to put Miriam in a vulnerable financial position. The RESULT I tried to achieve was a sense of “Safety and Hope” about the process of mediation and prospect for settlement. I wanted to allow the parties to feel comfortable enough to speak candidly with me about their objectives, and open enough to accept new information or at minimum a new spin on old information.

Stage Three: Communication

The TASK at this stage is to allow the parties an opportunity to explain their positions both in front of each other and in private meetings with me. The ACTION is a series of open ended questions followed by active feedback which permits me to listen for clues about what is driving the parties. This is much more difficult than cross examination in court since I don’t have the benefit of having deposed the person in advance. It therefore requires delicate questions, skillfully posed to keep the conversation moving forward, while continuing to build credibility and rapport with the parties. The RESULT in this stage is that the parties have a chance to air their perspectives and feel confident that they have been heard. Often, too, this communication discloses hidden values and interests.

The fact that Miriam had no available cash and a minimal insurance policy was already known to the attorneys. However, Miriam did have two properties which she worked her entire life to own, and the thought of losing her estate at this point in her life was hard to fathom. Miriam’sdaughter, also present at the mediation, commented in our initial joint session that she was scared that her family would end up homeless if Bob won the case. This explanation, I learned later in private caucus, had a tremendous heart rending effect on Bob, who concluded in his mind during the mediation that he couldn’t live with himself by possibly ruining their lives through a jury verdict.

Bob explained in front of Miriam and her counsel how this incident had had a devastating affect on his health, though after about one year he felt fairly recovered, with the exception of some scars from the coffee.

While I could have jumped directly into the Negotiation stage of the mediation at this point, I decided to stick with the Communication process. I find it critical to the success of a case to spend some time in the Communication stage in order to surface all sides of the conflict and in essence let the parties have their day in court. Inevitably when I am anxious to cut to the chase and begin the negotiations, I find the parties are more apt to get locked up in positions that could have been softened up in the communication stage.

Stage Four: The Negotiation

I sensed that it was the right time to move into the Negotiation stage when the parties were starting to repeat themselves and I could see that the attorneys were anxious to work on what they came to the table for the deal. To accomplish this, the TASK was to begin the bargaining dance between the parties. In this case, Bob understood from his counsel that he could expect a verdict in excess of $500,000 in court, but that such a verdict might be a pyrrhic victory due to the limitations on cash available from Miriam’s estate. The ACTION I took was to suggest to Bob that he and his attorney start considering other options that would require courageous thinking on his part, including significantly reducing his expectations so that Miriam could start figuring out some ways to free up some of the cash in her estate. The RESULT we were trying to achieve was “flexibility and innovation.” This would allow us to close the gap in the negotiation and ultimately come together.

In our private meeting, the first thing I heard was that if Bob pushed this case any further, Miriam would let him get a judgment and file for bankruptcy, virtually eliminating any chance for recovery. I asked permission to share that information with Bob but Miriam’s counsel declined. He wanted to see what Bob was willing to do before he pushed the bankruptcy button. I then asked Miriam and her counsel if they would consider taking steps to free up some cash from the equity in her homes. Bingo! The question was something they had already considered and though they preferred not to, they checked with the bank and could access about $50,000 in an equity line on the homes. That was the most they could get and encouraged me to sell it to Bob. I understood that if that wasn’t acceptable, Bob would then be presented with the bankruptcy option.

I then caucused with Bob and asked him if he was able to reduce his expectations and come up with some creative ideas to solving this dispute. I was pleased to learn that Bob did not want to put Miriam and her family out on the street, and that they were willing to consider settling for something in the neighborhood of $200,000 $250,000, which would be the amount that could be realized if one of Miriam’s homes was sold. Though I knew that Miriam would not consider selling one of her homes, I thanked Bob for coming up with such a creative option and I would see if there was any interest.

At that point I knew that we had narrowed the gap from $500,000 as a demand and $50,000 as an offer to $200,000 as a demand and $100,000 as monies available to settle. In short, we were only $100,000 apart.

The next step in the negotiation was to explore Bob’s idea, though I knew Miriam wouldn’t accept it. What came out of that round was that the house that Bob wanted Miriam to sell was only worth about $150,000 after paying a broker’s commission. Bob knew the area where the house was located and agreed with that assessment. He indicated that he would be willing to accept the $150,000 if the house were sold. Now we were $50,000 apart and I was the only person who knew it.

Bob’s counsel pressured me to reveal what Miriam was willing to do financially. I told him that I wasn’t at liberty to disclose what she can offer, but that I felt that the parties were making good progress and that Miriam would find a way to pull out some money from the houses. Realizing that the last $50,000 would be the hardest gap to fill, I asked for more time to speak to Miriam’s counsel so that I could get them a solid offer.

I then met privately with Miriam’s counsel to inquire if there was any possibility of getting more money out of the equity line. I was convinced that $50,000 was the maximum and spent the next several minutes discussing the appropriate negotiation strategy to present to Bob. We agreed that offering the entire $100,000 at this point might not give them any room to move later, and I received permission to offer $85,000 with an explanation of the potential that Miriam might file bankruptcy.

I then presented the $85,000 offer to Bob and his counsel, explaining the risk of collecting if they forced Miriam to judgment. They pressed me on where Miriam was getting the extra money without selling a house and I informed them that it would be from an equity line she would set up with a bank. Bob was fascinated by the concept of the equity line and had questions about the effect of a bankruptcy on any potential judgment. His counsel conceded that a bankruptcy would make collection difficult, but still felt that the amount offered was too low. I asked him if he would consider anything less then “six figures.” The answer was probably not, but at least I got a sense that they weren’t adamant in their position. I suggested that they allow me to determine the most that could be obtained from the equity line, and to report my findings to them. I suggested that they be prepared to close a deal at whatever that number might be. They agreed to listen.

At this point I felt like the entertainer who did the spinning plates routine on the Ed Sullivan show, going back and forth trying to keep the plates spinning simultaneously until the time was ripe to close the deal. I then advised Miriam’s counsel progress was being made but that the only way to find out if we could settle the case would be to give me permission to offer the entire $100,000. He agreed.

Moving back to private caucus with Bob, I submitted that there was a good possibility that the bank would allow up to $50,000 on the equity line, and that if that were so, I would encourage Miriam to offer it. I didn’t want to propose it unless I was certain that Bob would accept it. I asked him to speak to his counsel privately and let me know in a few minutes what he wanted to do. Sensing that the spinning plates were slowing down, I waited a few minutes with Miriam, her daughter and counsel. I then went back into the room and learned that Bob would settle for $100,000 if it was offered, but not a penny less.

Stage Five: Closure

Knowing that a settlement was imminent, my remaining TASK was to finalize the agreement. The ACTION I took was to discuss with Miriam and her counsel the paperwork involved in getting the equity line, the commitment she must make to the bank to pay off the $50,000, and importantly, what it meant to her to put this case behind her. She understood everything and was ready to finalize the deal. The insurance company was waiting in the wings with their additional $50,000 and couldn’t have been happier. The RESULT here was that both parties would make an “Informed Decision” about settlement, and that everyone could deliver on their promises.

I then congratulated Bob and his counsel for their hard work and confirmed that we had a deal at $100,000. I emphasized that Miriam was willing to stretch to make it happen and that Bob could finally put this chapter of his life behind him. I then prepared a Memorandum of Understanding and called everyone together in the conference room to sign the agreement. I also discussed the specifics about finalizing the deal, such as signing releases, dismissal of the lawsuit, the time it would take to fund the settlement, and other details necessary to implement the agreement. It was obvious that all parties were satisfied with the terms of the settlement, and the case was closed.

Examining EDR: Email Dispute Resolution

After 10 hours mediating a catastrophic injury case resulting from a construction accident, the parties are tired and want to go home. The ball has been moved up the field considerably, but not to the goal line. The mediator can see daylight on the horizon if he can get a few of the insurers to reassess their exposure. Rather than terminating the mediation, he considers adjourning for the purpose of resuming the discussion on electronic mail. The parties will continue to engage in the process, except it will be done asynchronously (not occurring at the same time).

The universal proliferation of email is the single greatest weapon in the mediator’s arsenal in cases that don’t settle or need extra stimulus. The advantages to moving into a non-real time environment are considerable. Information about a case can be exchanged instantaneously and saved for historical purposes. Disputants can easily search through archived messages and recall case data which is not accessible in real time communications. Messages can be distributed to several people at the same time, with appropriate links to other pieces of information. Filters can be set up so that case information doesn’t get mixed in with the typical litter that sometimes fills up email boxes.

The gamesmanship that instinctively springs from competitive negotiations is partly muted since the parties are not watching the clock and planning their next moves. The control of the gamesmanship is now in the hands of the mediator. The mediator decides how much information to provide, what suggestions are made and at what moment in the process. This allows for strategic moves by the mediator that are well thought out with closure always in mind. The mediator plants ideas in the minds of the parties which gives them the sense that they are making their own decisions. While this can all be done in person in real time, asynchronous communication takes advantage of the freedom of time. It permits a dispute to brew for a longer period while parties revisit their settlement goals in a new light. More importantly, parties can’t run into each other in the bathroom!

In managing the flow of information, the mediator can demonstrate the appearance of vulnerability or strength on the part of parties to the dispute by providing key data that surfaces conveniently when the parties aren’t prepared for it. For example, the mediator might have been aware that a similar case went to jury trial and resulted in a $5.7 million dollar verdict, which is substantially higher than the insurers are willing to pay here. This verdict can be forwarded to the insurers with “For your information” in the subject line and no comment. They will get the message.

In addition, the selection of appropriate language to communicate to a party is enhanced when the mediator has time to bypass the spontaneity inherent in caucused communication. To begin with, the mediator can utilize reusable language i.e. language which has been used successfully in another case to persuade a party to modify their position.

Assume the lawyers might forward your message to the client(s). In that case, the language selected will have significant meaning in the negotiation. While maintaining neutrality, the mediator can offer subtle recommendations and advice that establishes boundaries in the negotiation. These boundaries might be very different than that which was discussed at the in-person mediation. If the lawyers continue to participate in the email discussion, the mediator has successfully moved the boundaries to a range which gives rise to potential settlement.

Communicating in writing brings out a human element in some people, particularly insurance adjusters, that they might keep hidden in the caucus room. Many of these professionals are active in chat rooms, use instant messaging services and are computer savvy. In essence the mediator is putting the parties in a socially desirable setting through email where they can put on a relaxed face. They sit at their desks and reflect upon the dispute while not feeling dominated by the other side. At the same time, the mediator is quietly moving them toward the finish line.

The use of email in continuing efforts to settle cases exercises the very approach which mediators thrive on, namely the ability to serve as a confidential listener. Without disclosing the content of the email messages, the mediator receives and delivers messages in a concentrated way with little or no side chatter. It permits the parties to focus exclusively on settlement options at a comfortable pace.

Online Mediation Revisited

Consider the latest and perhaps most notable discovery of this century, the microchip. This small object, similar to the fast-disappearing arcade game Pac-man, needs constant nourishment to survive, snacking on outdated electronics and gobbling up obsolete modes of communication. On the way, the device serves notice that we had better accept it or there will be consequences to our personal fortunes.

What is the dispute resolution community going to do with this little creature? Does it make sense to bring the microchip into the mediation room, or will it be more of a barrier than a useful tool to help mediators solve problems?

Conventional wisdom is that the best practice for solving legal disputes is to use “real time” methods such as talking on the phone or having people in the same room or office to conduct a settlement discussion. The system which the microchip has begun to nourish is “asynchronous” communication- not occurring at the same time. This type of communication can be done in many formats including email, website, chat or instant message.

There are advantages and disadvantages to moving into a non-real time environment. For example, consider the most obvious choice, Electronic Mail (Email). Information about a case can be exchanged and saved for historical purposes, in an instant. Disputants can easily search through their messages and recall case data which is not customarily as accessible in real time communications. This blessing can also be a curse in that things are often said in the heat of the litigation battlefield or the mediation conference room which one might not want documented or referenced in the future. A bigger problem which has not been thoroughly addressed in the online community is the protection afforded litigants through the confidentiality statutes. That protection might become blurred in an online environment.

Another choice might be to set up a web site where disputants can review notices about the case, deadlines, briefs and anything else the mediator believes might be useful in moving the case forward. The advantage of doing this in a multi-party case such as a construction defect matter with insurers around the country are enormous. No longer will the parties have to exchange reams of paper each time something remarkable happens in the case. Simply go to the website every day and find out what’s new or post something for others to know about. Expert reports can be accessed instantaneously by decision makers, photos of damage can be downloaded and deposition transcripts can be accessed, just to name a few. On the other hand, a web site for a small case involving two or three parties might be too inconvenient to be of any value to the parties.

It might make sense to blend the real time world with the non-real time world by utilizing the instant messenger technology available through AOL or www.icq.com. This allows parties to talk in real time through their computer screen in a chat environment. It’s like having a joint session in a conference room except voices are replaced with typing. The problem with this technology in resolving disputes is that it forces parties to think and react quickly, taking away the ability to reflect and consider options that might, in the end, be more meaningful to them.

At this point in the development of digital technology, the computers are way ahead of the mediators and lawyers. Although a computer has the capability of putting someone’s face on the screen at the same time mediators are asking probing questions, the marketplace hasn’t shown enough interest in the technology to encourage the microchip handlers to promote these tools to lawyers on a mass scale. They would rather have us focus on the simple things the chip can do, such as word processing.

At the same time, the mediation community is training people in skills and techniques for person to person communication, such as active listening, questioning and facilitating negotiations that occur spontaneously. Many believe these techniques require warm bodies, not a computer screen. Understanding body language and other nonverbal clues, say mediators, are critical to the success of a mediation, and cannot be achieved through computers.

Others might say computers don’t belong in mediation rooms because of the fear that confidential communications might never be secure. While that certainly is a consideration, the possibilities that a tape device might be secretly planted in a mediation conference room or a phone tapped are just as likely.

Most clients are truly interested in achieving closure in the most cost effective, efficient manner available. That might require substantial litigation with its commensurate costs, or it might just involve a little creativity on the part of the attorney. Assuming the client wants an early, out of court resolution, and the principals are located in different parts of the country, it makes sense to use whatever technology is available to communicate and help solve the case. For the price of a local phone call, a tremendous amount of communication can occur and allow the mediator to diagnose the problem and suggest solutions.

As the first step in the online process using email technology as the starting point, the mediator sends the parties an agreement that includes not only online specific confidentiality language, but also specific rules about responding to e-mail. The rules should include clauses stating that all communications shall go through the mediator and no communication between the parties is allowed without permission from the mediator, and that the mediator shall be notified when a party will be away from the computer for more than 24 hours.

Next, the mediator should ask all parties to submit a brief, confidential position statement that will be used to analyze the issues and set an agenda. This is the first critical piece of information in the case for the mediator and sets the tone for the rest of the online mediation. Based on the position statements, the mediator crafts a concise, balanced summary of the dispute. An agenda of issues should accompany the summary.

The mediator will then ask each side to approve the summary of the case and agenda. The parties have the right to make comments or changes. This might require some back and forth communication until a consensus is arrived at on the issues of the case to which both sides agree. The success of getting both sides to agree on the statement and agenda is an important element in unlocking the dispute.

In cases where the mediation is being conducted in an asynchronous method such as email (not teleconferencing), it is critical for the mediator to be extremely facilitative, defining the issues in a narrow sense and focusing primarily on the legal issues. This initial approach gathers the most information for the mediator and helps the parties feel comfortable. This is not the time for an advisory opinion or outcome prediction, because one or more of the parties might lose confidence in the process.

At this stage, gathering information requires thoughtful, articulate questions which allow the parties time to carefully analyze their responses. It helps if the mediator is knowledgeable about the area of law in which the parties are operating, since the personal dynamics usually available in an “in person” mediation are not available. The mediator often must follow up each answer with a more in depth question which reflects both the mediator’s knowledge of the law and a sense of understanding or compassion about the parties’ positions. At the same time, it is important for the mediator to help the parties become realistic about their chances of success by asking the tough questions.

This ongoing stage is also an opportunity to learn more about the driving forces behind the parties’ positions. Although it is useful to learn about those forces because could assist in crafting an ultimate settlement, it is easy to get off track with matters that might not be relevant and will not help reach agreement. The objective is to ask questions that lead to a common goal, and then to float trial theories that might be used later in the mediation as the subject of a proposed agreement.

As the mediator begins to synthesize and understand the information gathered, it becomes apparent that the case turns on an issue or two. This is the point to ask forceful questions that will define the crux of the disagreement and determine what resolution will be acceptable. For example, a mediator might ask in private email messages to each disputant what the other party views as a fair outcome for both sides. The response received via email might reveal a situation where the parties actually are in agreement at least in the same range about an issue such as the dollar value of a case.

Another approach might be to set up an electronic conference room where the mediator can post these questions in a more public forum where the disputants can respond openly to the line of questioning. This dynamic would be similar to a joint mediation session where the parties speak directly to each other, one at a time. A good example of software that is used to organize this type of environment is available at www.webboard.oreilly.com.

These questions, whether done through private email messages or in an electronic conference room setting, can be asked all at once or at strategic intervals depending on the progress of the case. The goal is to keep the conversation moving forward and to search for clues so that the mediator can begin to develop a proposal for settlement.

Sometimes the parties are in geographically different regions, for example an insurance claims person may be on the East Coast, while the claimant is on the West Coast. In this case, the mediator could consider setting up a joint session using teleconferencing techniques. This would allow all the parties to actual view each other and work together in real time, without having to spend money on travel. Obviously this addresses the concern of some that body language is important to the process.

At some point in the electronic communication, the parties will be looking to the mediator for a specific settlement recommendation which is supported by facts and law if applicable. The timing of this recommendation is meaningful if it is at a moment in the online process where the parties have completely exhausted all options and are not sure where the process is going. It allows for the parties to deliberate, like a judge or jury, before making a decision on how they would like to resolve their dispute. The heart of this online approach is to turn the control over the outcome of the dispute back to the parties, which, ironically, is the essence of mediation.

The process of confronting and solving litigated problems is not always perfect, particularly in the civil justice system. Since lawyers are under a continuing obligation to look for tools that will aid in achieving the client’s goals, ignoring the imposition of the microchip is like the physician who doesn’t use penicillin because he hasn’t had the time or inclination to learn about it’s ability to fight infection. The willingness of the legal community to explore the use of digital communication in a case where the parties are geographically challenged could provide the key that unlocks the dispute, as well as the shield against legal malpractice.