The Mental Process in Commercial Mediation

Commercial mediation is a dynamic process. The most effective and successful mediations occur after exchange of substantive information and evidence regarding the main issues in dispute. Decision makers for the parties, including insurers, should be present and participate in the mediation. Through years of experience as a mediator, I have noticed a mental and emotional pattern with participants when resolving commercial disputes. Participants generally start from the “I’m Right” mindset and move toward resolution as facts are more clearly understood, some legal principles are explored, and the realities of dispute economics come into focus.

As with everything in the law there are exceptions, but almost invariably the parties approach the mediation process with a specific biased mindset; the party is correct in its facts and conclusions. Sometimes this posture is simply a negotiating tactic. But just as often, parties truly believe they are undeniably correct in their position. This can be reinforced by their counsel’s advice and legal analysis, and (frankly) sometimes despite their counsel’s well-founded advice. There are often injured egos and hurt feelings, even in the commercial context. When both parties are in this mind frame, resolution is unobtainable. The parties are on opposite sides of the resolution spectrum, as depicted in the diagram.

In order to work toward resolution, facts are explored, examined, and tested during the mediation process. This is typically the hardest part of the mediation process. The challenge arises from basic human nature. Our brains are wired to accept electrical signals from our ears and our eyes. Those signals are interpreted based upon our own expectations. As a result, we do not see reality, we see a (our) reality. It takes effort, patience, and persistence to assist participants in realizing the facts as they see them may not be as others perceive them or the conclusions drawn therefrom. The mediator should ensure in advance of the mediation the proper exchange of information has occurred necessary to bring about likelihood of resolution, with an eye toward limiting discovery expenses, to the extent possible.

Factual assumptions and conclusions are explored, and even challenged depending upon the mediator’s practice, using skills as a facilitator or evaluator as appropriate. Varying perceptions of the parties may need to be accepted, even if not actually reconciled in the mediation. Through a guided mediation process, pre-mediation engagement by the mediator can help facilitate and increase the chances of resolution on the day of mediation.

It is imperative the parties move beyond the factual disputes that cannot be resolved in order to reach a resolution. For example, a contractor asserts a roof leak had been fixed once after initial installation. However, the other participant produces recent photographs and videos of the roof leaking. Despite this clear evidence, the contractor refuses to visit the site and investigate the roof leak. The contractor takes the position the roof is not leaking because it has already been remediated. It is clear this participant, despite reality, is not interested in seeing the perceptions of others or exploring the idea his facts are outdated. Obviously, it is entirely possible his crew fixed the roof, but another leak manifested later in time. The lack of a reality check by the contractor makes this mediation a challenge. This is where counsel can assist the participant in acceptance. However, sometimes, as we all know, an attorney-client relationship is such that counsel has an inability to challenge his/her own client. The mediator needs to facilitate that change or recognize the parties cannot agree on the facts and be able to move the parties forward despite such disagreement, or in certain circumstances, obstinance.

As the mediation progresses through discussions and time, the participants’ respective perceptions will shift, even if they do not admit it to the mediator or their counsel. While parties may attempt to hide their change in perception, an observant mediator will pick up on these shifts. Effective communication can be artfully implemented to help move the parties toward the zone of agreement. As the facts are established, including factual disputes explored, the parties will then typically take a legal posture as applied to the facts in an effort to convince the other side, and the mediator, the strength of their position.

The exploration of the application of law to the facts usually takes only a short period of time. The parties will have their opinions about what a judge, jury, or arbitrator will accept as fact or do with the facts, and the mediator may have his/her own opinion. The influence of legal analysis, even if brief, can have an impact on the parties, exposing risk to their positions, even assuming their facts are all correct. Sometimes this impact is minimal, but sometimes it can be quite significant. In our example, when the contractor fails to honor a warranty claim, even if the issue was once remediated, it still exposes the contractor to liability. It may not matter how many times a construction defect needs to be addressed, if it is covered under a warranty, or whether such claim arises under a contractual or negligence theory.

Once the parties have moved off the polar positions where they maintain the “I’m Right” posture, after the facts have been thoroughly vetted and the legal positions explored, then the economics of the dispute can be addressed. In most cases, this becomes the most important and significant factor in a commercial dispute, which helps the mediator facilitate the final resolution. This last phase brings the dispute’s financial impact into focus.

Mediators often uncover financial motivations for a party’s willingness to resolve the matter. These economic motivations can certainly include the obvious (i.e., a contractor wants to get paid for his/her work, or an owner does not want to pay for defective work). Obviously, costs of litigation are explored and analyzed- but economic influences may have nothing to do with the dispute itself. Other economic factors should be considered. For example, a contractor dealing with a defect claim may be half a continent away from the project, with no strong ties to the project’s local subcontractors. Where it may cost a local contractor a nominal amount to address the remediation, the costs for the out-of-state contractor may be relatively exponential. Sometimes it is discovered that one party is motivated to resolve the matter to clear up funding for another project. There are a myriad of reasons that can be unrelated to the dispute as to why a party will resolve a matter. Most of the time, these motivations are kept between the party and the mediator. It is the mediator’s challenge to utilize this information toward a resolution, in most cases without disclosing such motivations to the other party. With effort and patience, difficult cases can be resolved – even those where there is little to no expectation of a resolution.

While the economics influence stage can have quite a powerful impact on the mediation process, one should be cautioned from starting with economics influence arguments. The parties, even in the commercial context, must make the mental and emotional journey that allows them to get to a point where they can have a pragmatic and practical discussion about the effect economics has on the dispute.

The resolution process appears evident as a matter of human nature; a way to accept and move past a perceived or actual loss that invariably occurs during a dispute. Some parties may attempt to shortcut this process, but this is a sure way to have a very quick and failed mediation. Even if one party is further along the resolution path, either through preparation ahead of or experience with the mediation process, the other party may need time to catch up. The mediator must promote patience and be persistent to permit each party to proceed with their own journey toward the zone of agreement.

For successful mediations, it is important to select a mediator who understands the natural process for resolution experienced by participants. The mediator will use his/her facilitative and evaluative skills as appropriate to assist the parties in reaching a resolution. The participants, with the help of their advocates, will be successful in reaching resolution when the dynamic process is fully utilized through patience, persistence, and effort.

For assistance, please contact Richard Hamilton at 513-721-3330 or rhamilton@rkpt.com.

Article written by Attorney Richard Hamilton.

Categories: Litigation