Alternative Dispute Resolution has long been heralded as a cost efficient method of resolving disputes. It is, of course, founded on the premise that to the extent protracted and expensive litigation and the uncertainty of result can be avoided, the parties to the dispute benefit in equal measure. While in its formative years ADR processes were typically invoked on the eve of or close to trial, there is an increasing recognition that “early intervention” should be on the parties’ and counsel’s checklist of options as a dispute begins to simmer.
The logical extension of early intervention is pre-suit mediation. Either immediately on the eve of or following an employee termination, a catastrophic accident, or a roiling business dispute, to cite a few examples, agreements to refrain from filing suit pending mediation are playing an increasing role in the ADR process. But before considering the pluses and minuses of pre-suit mediation a quick spoiler alert. Pre-suit mediation is not for every case. In selected matters, pre-suit mediation can be enormously helpful; in the wrong dispute, or with the wrong set of parties (or counsel), it can be counter-productive.
Not every dispute is amenable to pre-suit mediation. Based on my experience, the following types of cases are “high-value targets”:
While these examples are not exhaustive, what they share in common is the parties’ recognition that the filing of a lawsuit is potentially disadvantageous for one or the other; that avoiding the glare of publicity is important and that the cost and risk of protracted litigation is far less attractive than a prompt and speedy resolution of the dispute.
Implicit in this description is the recognition that there is an overlap of interests even amongst potentially feuding parties. For example in personal injury cases, the opportunity to achieve a prompt and fair settlement will ideally coincide with the insurer’s interest in avoiding extra-contractual damages or exposing the insured to personal risk. In the world of executive compensation disputes, preserving the good name and reputation of both the executive and the company is often critical. And in potentially explosive business disputes, especially in startup companies, a delay of months, let alone years, in resolving disputes can be fatal.
As you consider the possibility of pre-suit mediation, it is worthwhile considering the following questions:
Perhaps the greatest risk to a successful pre-suit mediation is a lack of shared assumptions and expectations. For example, in personal injury matters, plaintiff and defendant can confuse the suggestion for a pre-suit mediation with an assumption about the expected result. For the plaintiff, this can involve a misapprehension that the policy limits will be automatically offered or that the excess carrier will be significantly involved. The flip is true of the defendant. The carrier may incorrectly assume that a “discount” off the policy will be considered or that the excess carrier will be shielded from involvement in the settlement.
In employment and business disputes, the parties may misperceive the short term needs of the other side with each assuming that an immediate settlement is a matter of business necessity.
To the extent that counsel can have an honest and open conversation about their client’s expectations, the greater opportunity for a successful pre-suit resolution and the less likelihood of a fundamental misunderstanding about the range of possible outcomes.
From a litigation perspective the concern is that strategies, tactics, theories and facts may be revealed that will weaken the hand down the road. This is always a matter of judgment and balance. My experience is that there a very few “gotcha” moments in today’s discovery intensive proceedings and that, on balance, revealing information pre-suit that will move the other party to a settlement is generally worth the risk.
There are a number of preliminary steps that can increase the chance of an early negotiated resolution of an incipient suit. These include the following:
Under the right circumstances, pre-suit mediation can be a win-win for the parties. As soon as a potential litigation matter reaches counsel’s desk, the opportunity to resolve it without expensive and time consuming litigation should be explored with both client and opposing counsel.
Robert L. Holzberg, Connecticut Superior Court Judge (Ret.), leads the Alternative Dispute Resolution (ADR) practice at Pullman & Comley, and possesses extensive experience serving as a mediator and arbitrator in complex civil matters and can be reached at firstname.lastname@example.org.