Quick! . . . Mediate That Business Divorce!

One of the officers of a corporate client calls. You note the distress in his voice immediately. He tells you that a dispute has arisen between the major shareholder factions of the company, and he wants you to advise on what he and those in his faction can do to win this. And you can tell he expects you to talk “reason” to the other faction.

But you quickly realize that although for the moment knowledge of the dispute is restricted to people in the company, it will only be a short time before it gets out to the customers, suppliers, banks and others with whom the company does business, threatening the existence of the company.

You should consider recommending the factions mediate the dispute, if possible before litigation is filed.

Advantages of Mediation

Some advantages of mediation are:

No Publicity. No lawsuit is filed. The situation can be kept as confidential as the parties want.

Speed. Trial, or even a hearing for significant injunctive relief, will take months, if not years. And as soon as customers hear there is an internal dispute — and they will — they will take their business elsewhere, to a “stable” competitor. And this risk increases significantly if a lawsuit is filed. A mediation can begin immediately.

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Lawyers Impacting Politics through Conflict Resolution

When I visit a new doctor for the first time, and complete a new-patient intake form, in the blank for “occupation” I often write “conflict-resolution specialist.” That’s because I find that health care professionals react differently when they realize they’re treating a lawyer.

The use of the term “conflict-resolution specialist” is not just careful lawyer-talk designed to convey a totally true statement without providing the information sought, it also happens to be an apt description of our profession. Whether we are seeking to solve problems through litigation, prevent them through transactional work, or just guide a client through an uncontested court process like Probate or Bankruptcy, we are all conflict-resolution specialists.

The better lawyers amongst us have learned that the most aggressive approach to a solution is only occasionally the best approach. A transactional lawyer can easily draft a highly biased document that creates a very lopsided power balance in favor of her client at the expense of the other party. But, this hyper-aggressive approach renders no benefit if it causes the other party to walk away from the transaction or, worse still, to regret signing the contract and thereby prevent the business relationship from thriving.

Similarly, any litigator that needs a document from an opposing counsel knows how to draft discovery requests and eventually obtain an order to compel. When the two lawyers have an adversarial relationship, that process typically takes at least ninety days and probably requires at least five hours of attorney time. The client is almost always better served by a lawyer that maintains a professional, collegial relationship with opposing counsel so he can place a six minute telephone call to opposing counsel and obtain the same document in a day or two. Certainly there are circumstances when we have to do things the hard way, but I would suggest that the ability and effort expended to avoid the hard way, through conflict resolution, often provides the client the best possible service.

The reason most successful law practices use this approach is because there are at least two sides to every story in real life. In fiction, on the other hand, we regularly encounter “bad guys” that act in evil ways because they are inherently evil. Those people are rare or perhaps even nonexistent in the real world. Most of us do what we think is “right” – or at least justifiable – even if our decision leaves others at a disadvantage. While all experienced lawyers know this, many non-lawyers do not think this way. The natural human reaction seems to be to vilify our perceived adversaries.

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You Should Exchange Your Briefs

Your pre-mediation briefs, that is.

It is generally agreed among lawyers that some amount of information must be possessed by both disputing parties to a mediation, if the mediation is to result in settlement. (Of course, theories on how much information is necessary, i.e. how much discovery, if any, differ with types of case and frequently from attorney to attorney.) I’ll write more about that in future memos.

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