Updating the Global Pound Conference: A Survey on Mediation in Cross-Border Disputes

By Angela Cipolla

The recent Report on International Mediation and Enforcement Mechanisms found that, while mediation survey respondents believe in the necessity of using the process for cross-border disputes, a lack of education about how mediation works is a problem.

The report’s results also strongly boost calls for an international mediation enforcement mechanism.

The recent report was issued by the Institute for Dispute Resolution, at New Jersey City University’s School of Business in Jersey City, N.J., to the International Mediation Institute for the benefit of delegates attending the UNCITRAL Working Group II (Dispute Settlement) 67th Session, on dispute settlement, which was held last month in Vienna. For more information, see www.imimediation.org.

The report follows and incorporates results of surveying done at the Global Pound Conference, which concluded a year of face-to-face meetings with practitioners worldwide in July. See http://globalpound.org; for a wrap-up of the GPC series, see CPR Speaks blog post at http://bit.ly/2vxV2P1.  The IMI and NJCU IDR surveys received responses from users in various fields and professions that represented, according to respondents who identified their locations, 24 countries.

The information was collected in the 28 GPC events held in 22 countries, as well as through online voting. Votes were categorized by stakeholders.

The report, written by David S. Weiss, director of the Institute for Dispute Resolution and a visiting scholar at the New Jersey City University’s business school, and New Jersey attorney Michael R. Griffith, analyzed views on establishing an international treaty for the enforcement of mediated settlements collected online from June 2016 to March 2017; it also analyzed responses from the Global Pound Conference Survey, which was available at IMI Global Pound Conference gatherings and online from March 2016 to September.

The report also expands upon how the international legal and business communities use mediation.  See S.I. Strong, “Use and Perception of International Commercial Mediation and Conciliation: A Preliminary Report on Issues Relating to the Proposed UNCITRAL Convention on International Commercial Mediation and Conciliation,” U. of Missouri School of Law Legal Studies Research Paper (Nov. 17, 2014)(available at http://bit.ly/2yAzUhp).

Overview

Weiss and Griffith gathered the opinions of “those who are most likely affected by the adoption of any prospective drafts or proposals by Working Group II (Dispute Settlement) with emphasis on the users.” The views, reflecting 103 survey responses, reflect the “wider business community, their advisors, providers, and those that may influence the mediation space,” they write. The GPC conference and online surveying produced responses from about 2,500 stakeholders.

The report follows the same pedagogical and methodological process as Strong’s article, presenting research “gathered by an international quantitative-qualitative study of users’ assessments of the enforcement of international commercial settlement agreements resulting from conciliation.”

The Report’s Findings

With regard to the report’s own survey questions, the study brought to light a lack of education regarding the benefits and uses of mediation in cross-border disputes. It found that 40% of the respondents said they use or have been advised to use mediation in a cross-border dispute as a best practice in business “infrequently,” and 24% answered “not at all.”

When users were asked why they thought parties do not resolve their commercial cross-border disputes through mediation, the most frequent answer at 57% of the responses was that “they are unfamiliar with mediation.”

The study called the result “a surprisingly [sic] lack of knowledge about mediation among users.”

These results demonstrate a need for more education about mediation. Interestingly, the second highest-ranked reason in response to the question was that no universal mechanism to enforce a mediated settlement exists.

While the IMI and NJCU survey also showed “a general positive direction of users to incorporate mediation clauses into cross-border contracts,” 80% of users were even more apt to participate in mediation if there was a uniform global mechanism to enforce mediation settlements in place.

This demonstrates the incentive that such a mechanism would provide and the possible positive effects it would have on mediation use in cross-border disputes.

Accordingly, the report found that the majority of users and stakeholders in both the study conducted for the report and the GPC surveying “believe that a uniform global mechanism to enforce mediation settlements would improve commercial dispute resolution.”

Some concerns regarding faith and trust in the mediation process were raised in the IMI and NJCU study’s comments, suggesting that more confidence in the process needs to be built as the use of mediation becomes more prevalent.

The report also looked to whether a treaty should include provisions similar to the longstanding Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention.

This idea was well received. An overwhelming 84% of users stated that they would be “more likely” to use or increase their use of mediation in a cross-border dispute if there were a uniform global mechanism in place, similar to the New York Convention, which would ensure enforcements of settlement agreements.

The report speculates that a majority of users would like to use the uniform mechanism as a “bargaining chip;” 60% of users stated that they would prefer an “opt-in” system.

Additionally, the report examined the challenges users faced in mediation. When asked whether users faced any post-mediation challenges to settlement agreements in cross-border disputes on the grounds of capacity, duress, or fraud, the two largest recorded answers were 47%, responding “never,” and 36% responding, “sometimes.”

The report also asked users whether they would be less likely to use mediation if a uniform global mechanism of enforcement included any defenses.  The question didn’t show that defenses would have a significant impact on a user’s willingness. Forty-four percent of the users responded “no,” while 27% responded “yes.”

When asked if the users would prefer a uniform global mechanism that limited defenses, similar to the New York Convention’s Article V, 54% of users responded “yes,” while 22% responded “no.”

The report also revealed that though re-litigating settlements doesn’t occur often, the rate was high.  The study found that 35% of users answered “infrequently” when asked if they have ever were required to re-litigate on general contract defense a mediation settlement agreement that was not honored. “If this was not a problem,” the authors wrote, “we would expect to see user’s answering ‘infrequently’ at a much lower percentage.”

This indicates a problem that a global enforcement mechanism might help alleviate. Additionally, regarding the availability of mediators, the report showed that “[w]hile it is generally positive that 61% of users are generally able to find qualified mediators, there [is] a vast amount of room for improvement.”

In addition to its own questions, the report also analyzed the GPC Series Questions. The report found that just like the users in its study, a majority of GPC stakeholders “believe that a uniform global mechanism to enforce mediation settlements would improve commercial dispute resolution, with 51% [of users concurring.]”

Overall, the GPC Series Questions had a positive view of taking action on mediation settlement enforcement.  Those conference and web survey questions found 51% of users “clearly supporting a uniform global mechanism to enforce mediation settlements as their first preference.”

* * *

The report concludes that global enforcement of mediation settlement agreements is a “necessary tool for encouraging mediation,” and that such an enforcement mechanism should be “congruent with the methodological approach that was adopted by the arbitration community through the New York Convention.”

The report further emphasizes that “practical certainty” in mediated settlement agreements will (1) improve access to justice and (2) “increase efficiency for the wider business community,” and that both of these benefits are crucial to advance trading systems and aide businesses.

UNCITRAL’s Working Group II’s 68th session, expected to consider a mediation enforcement convention further, is scheduled to be held in New York, from Feb. 5 – 9.

* * *

The author is a Fall 2017 CPR Institute Intern.

The EU Mediation Blues: Is there a way to resolve the EU Mediation “Paradox”?

javierBy Javier Fernández-Samaniego

Almost ten years have elapsed since the European Union adopted the Mediation Directive (2008/52/EC) in civil and commercial matters, and four years since the European Parliament acknowledged the so-called “EU Mediation Paradox” [1] in its study “‘Rebooting’ the mediation directive”. The study drew attention to the lack of significant development of mediation, utilized only in less than an average 1% of the cases in courts of Member States in the EU, despite its high success and satisfaction rates when used.

As rightly pointed out in the Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee on the application of Directive 2008/52/EC (Aug 2016)[2], due to the “unofficial” nature of mediation compared to formal court proceedings, it is very difficult to obtain comprehensive statistical data on mediation such as the profile of companies using mediation, number of mediated cases, the average length and success rates of mediation processes.

In what seems to be a fresh verse in the EU Mediation blues song, a new Resolution of 12 September 2017 on the implementation of the EU Mediation Directive (2008/52/EC) issued by the European Parliament[3] notes that certain difficulties exist in relation to the functioning of the national mediation systems in practice. These difficulties are mainly rooted in the adversarial tradition and the lack of a “mediation culture” in the Member States, the low level of awareness of mediation in most Member States, insufficient knowledge of how to deal with cross-border cases and the functioning of the quality control mechanisms for mediators.

In this Resolution, the European Parliament has made the following recommendations:

  1. EU Member States should boost awareness of how useful mediation is and step up their efforts to encourage the use of mediation in civil and commercial disputes, such as through information campaigns, improved cooperation between legal professionals and an exchange of best practices in the different local jurisdictions of EU.
  2. The Commission should assess the need to develop EU-wide quality standards for the provision of mediation services, especially in the form of minimum standards ensuring consistency, while considering the fundamental right of access to justice.
  3. The Commission should assess the need for Member States to create national registers of mediated proceedings as useful sources of information for Commission and mediators across Europe.
  4. The Commission should undertake a detailed study on the obstacles to the free circulation of foreign mediation agreements in the Union and on various options to promote the use of mediation as a sound, affordable and effective way to solve conflicts in internal and cross-border disputes in the Union, considering the rule of law and ongoing international developments in this field.

Lastly, in an apparent call for new rules, the Parliament requests that the Commission offer solutions to extend the scope of mediation to other civil or administrative matters in future regulation and highlights that, despite the voluntary nature of mediation, further steps must be taken to ensure the enforceability of mediated agreements in a quick and affordable manner.

On the brighter side, there are some less worried notes to the EU Mediation blues tune since the Parliament also welcomes the Commission’s dedication to co-financing various projects aimed at the promotion of mediation and training for judges and practitioners in the Member States. It appears that, after ten years’ investment in civil and commercial mediation since the Directive has been adopted, the perseverance will pay off.

The International Institute for Conflict Prevention and Resolution (CPR) through its European Advisory Board is working hard to fulfill the agreed-upon objectives and has recently published a guide for European corporates and organizations on the use of mediation and other ADR processes [4] that includes resources and practices to help identify disputes suitable for ADR and make the most out of them. The Guide also includes several successful case studies. There is no doubt that such efforts will eventually turn the moody blues of EU mediation into a happier upbeat melody.

FOOTNOTES:

[1] See the European Parliament’s study: “‘Rebooting’ the mediation directive”: http://www.europarl.europa.eu/thinktank/en/document.html?reference=IPOL-JURI_ET(2014)493042

[2] Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee on the application of Directive 2008/52/EC of the European Parliament and of the Council on certain aspects of mediation in civil and commercial matters. Brussels, 26.8.2016 COM(2016) 542 final http://ec.europa.eu/justice/civil/files/act_part1_adopted_en.pdf

[3] http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P8-TA-2017-0321+0+DOC+XML+V0//EN&language=EN

[4] https://www.cpradr.org/resource-center/toolkits/european-mediation-adr-guide

 

Javier Fernández-Samaniego is the Managing Director of the IberoAmerican law firm SAMANIEGO LAW with offices in Madrid and Miami (for Latin America) and head of its Commercial, Dispute Resolution and Tech & Comms team. He regularly serves as an arbitrator and mediator of complex international disputes and he is a member of the Institute’s CPR Panel of Distinguished Neutral and of CPR European Advisory Board. He can be reached at javier.samaniego@samaniegolaw.com.

 

JAMS Disputes NJ’s Classification of its Operations as the Practice of Law

By Elena Gurevich

Earlier this month the New Jersey Supreme Court granted a cert petition request by JAMS, the nation’s largest private alternative dispute resolution provider, giving the organization a chance to argue that the retired lawyers and judges who serve on its neutrals’ panels are not practicing law, and therefore do not have to comply with all the state’s requirements for doing so.

In August 2016, JAMS filed a request for an advisory opinion from three New Jersey Supreme Court committees as to whether it could open an office to provide neutral services “without the requirements of a law office practice.”

Having reviewed the committee and Court opinions that guide New Jersey law practice, JAMS concluded that so long as its ADR office is “maintained as a business which does not offer or advertise traditional legal services where there is an attorney-client relationship, this business may be independently maintained, even though staffed by retired judges and lawyers who act as Neutrals in providing ADR services such as mediation, arbitration and the like and are held out to the public using the designation retired judge or ‘Esq.’ for lawyer neutrals.”

JAMS is a nearly 40-year-old Irvine, Calif.-based firm that focuses on mediating and arbitrating complex business and commercial cases via its panel of neutrals. See www.jamsadr.com. The ADR provider has offices in 14 states, the District of Columbia, and in London and Toronto.

JAMS agreed that its New Jersey lawyer-neutrals are subject to the Rules of Professional Conduct for lawyers, but argued that the New Jersey requirements for a traditional law practice “are not necessary for the provision of neutral services in the state.”

On May 1, 2017, three New Jersey Supreme Court advisory committees—the Advisory Committee on Professional Ethics, the Committee on the Unauthorized Practice of Law and the Committee on Attorney Advertising—responded to JAMS’ request with a joint advisory letter decision that says that the state’s ethics rules apply to the provider.

The consequences of the determination are that JAMS would need to open a bona fide office in the state, and maintain a trust account.

Predominantly relying upon ACPE Opinion 676/CAA Opinion 18 (April 1994)(available at http://bit.ly/2hRLF7E), the joint committee decision advised that, because the lawyers and retired judges at JAMS work as third-party neutrals, they are engaged in the practice of law and as such must “comply with the rules governing lawyers in private practice.”

On June 30, JAMS filed a petition to New Jersey Supreme Court seeking review of the joint decision. JAMS asserted that as a provider of “non-traditional legal services” it does not establish any attorney-client relationship.

The state’s top Court granted the petition on Oct. 4.

In the petition, JAMS cited a University of Baltimore law review article asserting that mediation “is not the practice of law because it is not illegal for non-lawyers to be mediators.” Robert Rubinson, “The New Maryland Rules of Professional Conduct and Mediation: Perplexing Questions Answered and

Perplexing Questions That Remain,” University of Baltimore Law Forum Vol. 36: No. 1, Article 2 at 12 (available at http://bit.ly/2yEf8fk).

The article also emphasizes the definition of mediation that involves mediators “who, without providing legal advice, assist the parties in reaching their own voluntary agreement.” That, according to the article, signified the fact that under Maryland law mediators are not practicing law.

In its joint answer brief prepared by the state attorney general’s office and filed Aug. 30, the Supreme Court committees reject the argument. saying that the Maryland law “carries no weight in New Jersey” since the jurisdiction uses a different analysis when it tries to determine if someone has engaged in the unauthorized practice of law. It explains that New Jersey “first decides whether an activity constitutes the practice of law; it then considers whether, if non-lawyers engage in that activity, it is in the public interest to permit them to continue.”

The joint answer also notes that the attorney-client relationship was “immaterial to the issue.” Instead, it focuses on the public interest and regulation of neutral services, saying it was “germane to the Committees ‘ analysis.”

According to the joint answer, the Court committees “sufficiently addressed” the public interest concerns in their decision, pointing out that JAMS’ “expressly markets its neutrals’ legal experience and skill through their roles as lawyers and retired judges.” The committees expressed their concern that JAMS’ prospective customers “are entitled to rely on that experience and those designations in their selection of a neutral, calling for proper regulation of “these individuals.”

JAMS filed a Sept. 18 reply brief arguing that “[p]ermission for N.J. admitted lawyers and retired judges to conduct a neutral practice under the JAMS umbrella does not diminish regulatory oversight or the public interest.”

JAMS asserted that it mentioned the Maryland law review article simply to “illustrate the shift by other courts throughout the nation towards acceptance of the provision of neutral services as not being tantamount to the practice of law.  . . .”

JAMS also underscored that it did not “seek to redefine how ADR practice in New Jersey fits into law,” asking the court to recognize that practice has evolved immensely over the past 20 years since Joint Opinion 676, discussed above, was issued.

The ADR provider drew the court’s attention to the dichotomy Joint Opinion 676 presented. According to the reply brief, “an ADR neutral’s practice is a part of law practice,” but the joint opinion simultaneously recognizes that non-admitted lawyers and other professionals also may practice in the field. JAMS opined, “It would be helpful and in the public interest for the court to address this dichotomy.”

JAMS expects to file a supplemental brief on or before Nov. 13, according to its attorney, Robert Margulies, of Jersey City, NJ’s Margulies & Wind. The joint committee’s response brief would be due on or before Dec.18.

The Court’s acceptance of the case was first reported in Michael Booth, “Justices Will Hear JAMS Challenge to NJ Ethics Rules,” N.J.L.J. (Oct. 10)(available at http://bit.ly/2hSuMdg).

 

The author, who has just completed her L.L.M. with a focus on IP law at Cardozo School of Law in New York, is a 2017 CPR Institute Fall Intern.

Celebrate with CPR – Mediation Week: Oct. 15-21, 2017

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Celebrate Mediation Week 2017!

Of course, it’s always a good time for mediation, but CPR will be joining numerous other organizations next month to formally celebrate this effective means of preventing and resolving disputes, at Mediation Week 2017: “Mediation, Civility and the Power of Understanding, organized by the American Bar Association Section of Dispute Resolution. Please join us, won’t you?

Tuesday, October 17 – Open Forum on (In)Civility in Mediation

The CPR Institute’s Mediation Committee invites all who are interested to participate in a convenient and open-to-the-public Lunchtime Teleconference on Tuesday, October 17th, 2017 from 12:30-1:30 pm ET. Distinguished mediator and CPR panelist, Jack P. Levin, will recount some of the lessons and inevitable trials encountered in his years striving for greater civility in mediation. This dialogue will be followed by an opportunity for caller participation.

While there has been research on the cost of incivility to corporations, we will explore the effects of this behavior in the mediation process, along with strategies for promoting civility in negotiations. We hope you will join us, prepared to share any anecdotes or observations on the effects of civility (and lack thereof!) in dispute settlement. To register, contact zchanin@cpradr.org. You will be provided dial-in information and links to supplementary material upon registration.

The Mediation Committee is a consortium of CPR members throughout the world.  We are currently exploring ways to enhance the quality and effectiveness of corporate mediation practice, both domestically and internationally.  The Co-Chairs of the Committee are Erin Gleason, of Gleason Alvarez ADR, and Rick Richardson, of GlaxoSmithKline. 

Wednesday, October 18 – Mediation Settlement Day

CPR has been invited to speak on a panel as part of the Mediation Settlement Day Kick-Off Event on October 18, 2017 from 4:30 pm – 7:30 pm at New York Law School, 185 West Broadway in New York City.

The focus of this event will be “Diversity and Inclusion in Dispute Resolution, 2.0.” Following an open house and a remembrance of Margaret Shaw, panelists Maurice Robinson, Esq. (Moderator), CPR’s Niki Borofsky, Esq., John D. Feerick, Esq., Rekha Rangachari, Esq. and Maria Volpe, Ph.D. will discuss:

  • What is Diversity and Inclusion in Dispute Resolution?
  • How are bar associations, professional organizations, court-connected dispute resolution programs and community dispute resolution centers addressing diversity and inclusion in the field?
  • A New CLE Category: Diversity, Inclusion and the Elimination of Bias
  • Current opportunities for diverse mediators

The evening will conclude with the Frontline Champion Award Presentation and a Keynote address by John Kiernan, Esq. of Debevoise & Plimpton on Diversity and Inclusion. For more information and to register click HERE.

Tuesday, October 24 – CPR Webinar on Including Effective ADR Clauses in Contracts

Admittedly, this date is slightly outside of the formal “Mediation Week,” but we’re going to squeeze it in and keep on celebrating with this CPR members-only event, being hosted by the Fundamentals Task Force of the CPR Transactional Dispute Prevention and Solutions Committee on October 24, 2017, from 12:30 pm – 2:00 pm ET.

All transactional lawyers would benefit from an understanding of how various forms of dispute resolution can be included in contracts and other agreements. We help to accomplish this through our easily used online CPR Clause Selection Tool. Michael B. Keating of Foley Hoag LLP will demonstrate a method to train transactional lawyers to craft an appropriate ADR contract clause using this tool. Following this session, attendees will be able to do the same for their colleagues. The program will qualify for one hour of New York CLE credit–details to follow. 

For more information and to register for the CPR members-only event, click HERE or email Zoe Chanin at zchanin@cpradr.org.

And for more information about Mediation Week 2017, please visit the ABA event website HERE.

EU Court Backs Mandatory Mediation Referral

By Ugonna Kanu

The Court of Justice of the European Union, which rules on cases between members of the European Union often involving treaties, issued a significant opinion on compulsory consumer ADR earlier this year.

Advocate General Henrik Saugmandsgaard Øe, who prepared the ruling, supported an Italian national law that compels consumers to mediate as a precondition for bringing legal proceedings in the Italian courts.

At the same time, the opinion suggests that parties may determine their own fate without a lawyer, overruling an Italian law requiring that a litigant use an attorney to mediate their case.

The EU Court of Justice opinion was based on a request for a preliminary ruling from the District Court in Verona, Italy.  Menini v. Banco Popolare – Società Cooperativa, Case C-75/16 (February 16, 2017)(Available at http://bit.ly/2usImgu).

In the case, a dispute arose between a bank and two clients concerning the performance of a mortgage contract. The bank obtained a court order against the consumers to pay the required sum.

The consumers appealed the order to the Verona district court and sought to have its provisional enforcement suspended.  The district court found that the parties making the appeal must, in order for the appeal to be admissible, use a mediation procedure in accordance with the national law.

But questions arose whether the national law that forces consumers to mediate as a pre-condition to judicial proceedings; mandates legal representation of consumers in a mediation, or penalizes a party from withdrawing from a mediation without valid reason, was incompatible with the EU consumer ADR directives.

The District Court decided to stay its proceedings and to refer the questions to the Court of Justice for a preliminary ruling.

The EU court mostly backed the mediation requirements.

According to the 2013 EU directives, the opinion noted, consumer ADR mechanisms are voluntary.  But they do not preclude “any national rules making the participation of [parties] in such procedures mandatory or subject to incentives or sanctions or making their outcome binding on parties, provided that such legislation does not prevent the parties from exercising their right of access to the judicial system.” Recital No. 49, Directive 2013/11/EU  of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No. 2006/2004 and Directive 2009/22/EC)(available at http://bit.ly/2jv7LjA).

Accordingly, Advocate General Saugmandsgaard, in his ruling, held on one hand, that the Italian law was compatible with the EU directives to the extent it does not deny the consumers access to the judiciary and that the limitation period does not expire during such mediation process.

On the other hand, however, the ruling precludes national legislation which mandates consumers to be assisted by lawyers, or penalizes consumers who withdraw from the mediation process without valid grounds (unless the concept of “valid grounds” includes the party simply being dissatisfied with the ADR procedure).

The author is an attorney in Nigeria who has just completed her L.L.M. in Dispute Resolution at the University of Missouri-Columbia School of Law.  She is a CPR Institute 2017 summer intern.

Changes to Mediation Confidentiality to Be Considered by California Legislature

By Lyn Lawrence

The California Law Revision Commission, acting under the order of a resolution by the California Legislature, last month finalized a tentative recommendation that creates an exception in the state’s Evidence Code to mediation confidentiality.

If it is passed into law it will allow disgruntled clients to use information that is currently considered confidential as evidence in attorney malpractice suits.

The final version of the CLRC proposal is available at http://bit.ly/2rIuTvF.

This week, CPR and its monthly newsletter, Alternatives to the High Cost of Litigation, continue their coverage with two extensive examinations of the moves to change mediation confidentiality—a commentary by Los Angeles neutral Jeff Kichaven (see http://bit.ly/2snQUjF), and a compilation of key debate points submitted to the CLRC during its three years examining the issue, by CPR Summer 2017 intern Lyn Lawrence.

The new July/August issue of Alternatives can be found at http://bit.ly/1BUALop. CPR Institute members can access the issue when signed into CPR’s website at http://bit.ly/2kAakxH. Kichaven’s cover story will be available at altnewsletter.com later in July.

You can read last month’s “How California Intends to Recalibrate the Concept of Mediation Confidentiality,” 35 Alternatives 93 (June 2017) at http://bit.ly/2sWyqr1.

The CLRC’s recommendation for a mediation confidentiality exception for legal malpractice was sparked by California Supreme Court Justice Ming W. Chin’s concurring opinion in Cassel v. Superior Court (2011) 51 Cal. 4th 113, 117 (available at http://bit.ly/2tOHBgV). In the case, the client accused his attorneys of coercing him into accepting a mediation settlement that was not in his best interest.

The client was unsuccessful in his claim, but Chin wrote that the court had “to give effect to the literal statutory language” prohibiting disclosure of the mediation communications. “But,” he added, “I am not completely satisfied that the Legislature has fully considered whether attorneys should be shielded from accountability in this way. There may be better ways to balance the competing interests than simply providing that an attorney’s statements during mediation may never be disclosed.”

The exception contained in the CLRC’s tentative recommendation has received mixed reviews from ADR professionals, organizations and even California state departments operating in the mediation field.

Opponents of the CLRC efforts were dealt a blow when the tentative recommendation was approved by the commission on June 8. The approved tentative recommendation is available for public comment until Sept. 1, 2017.  A press release and instructions for commenting are available at http://bit.ly/2t0UyE8.

The creation and acceptance of the tentative recommendation come as a surprise to at least some practitioners, mainly due to California’s longstanding advocacy for the protection, support and growth of mediation. At the same time, some longtime practitioners viewed the preservation of a path to attorney malpractice cases as an enhancement to the integrity of mediation practice.

Confidentiality is a cornerstone of the mediation process, and it is unclear what the effect the exception would have if it is adopted into California law.  A legislative fight looms.

But exceptions to mediation confidentiality aren’t particularly new. For example, the Uniform Mediation Act (available at http://bit.ly/2tGNrRj) has been adopted by numerous states and contains exceptions to mediation confidentiality. Jeff Kichaven expands on these exceptions in his Alternatives commentary, which strongly backs the CLRC tentative proposal.

The CPR Institute will continue to follow the CLRC’s activity, including when the commission publishes the public comments, which it stated in an email would be after the Sept. 1 comment deadline.

The author is a CPR Institute Summer 2017 Intern.

Why You Should Always Mediate

AnnaBy John R. Goldman and Anna M. Hershenberg (pictured)

If we had a nickel for every time a client instinctively refused to consider mediation to resolve a dispute, neither of us would have to work anymore. We have heard every excuse in the book:

We do not want to come in from out of town.
It is going to be a waste of time.
We are going to outspend them in litigation
so they will give up.
We want to crush them in litigation.

And our all-time favorite:

Suggesting—or even agreeing to—mediation
makes us look weak.

The notion that mediation makes a client look “weak” is an unfortunate gut reaction, typically fueled by the misconception that pounding the table and fighting your adversary on every issue is the only way to show strength in litigation. Sure, there are circumstances where litigation is necessary and a mediated resolution is impossible, but those situations are few and far between. Let us explore why it is almost always prudent to mediate—especially for budget-conscious corporate counsel trying to resolve disputes most efficiently (i.e., cost-effectively) so they and their company can focus on accretive business.

1. You Might Actually Resolve the Dispute. First (and foremost), you might actually settle the case and save lots of dough in unnecessary and unproductive litigation expense. That would be good, right? Look, we all know that litigation is often time-consuming, distracting, expensive and unpredictable. Even if you are convinced you have a “slam dunk” case, elephants sometimes fly in courtrooms (and when they do, it can vastly alter—and increase the cost of —that case you thought was definitely a winner). Mediation gives you a chance to resolve the dispute in a much more controlled environment with a smart mediator you have a hand in selecting. A savvy mediator typically redirects the parties away from unproductive competitions over litigation issues and strategy and towards consideration of a mutually beneficial business solution. Indeed, if mediation happens quickly enough (i.e., before the parties become entrenched in litigation posturing), it is possible—even likely perhaps—that the settlement will include the parties doing productive and mutually profitable business together going forward.

2. You Always Learn Things (and That Is Really Good). Even if mediation does not result in settlement right away, you never leave a mediation empty-handed. Going through the mediation process educates you (hopefully early on) about the strengths and weaknesses of your position, as well as those of your adversary. A good mediator is an expert at helping both sides to most sincerely and realistically evaluate the case—both from a legal perspective and from a practical perspective. That analysis provides critical information as to what a fair settlement might be. This information is always valuable to corporate counsel in setting strategy and managing expectations going forward. The very process of mediation lends itself to this. In trying to push each side toward settlement, the mediator—as a neutral third-party (often a former Judge)—will flag the legal and practical obstacles each side will face should the case continue and will provide valuable insight into how those weaknesses may play out in front of a Judge and/or jury. A neutral assessment of the viability of the claims and defenses in the early stages of the case provides corporate counsel with the opportunity to most effectively manage the case (and the expectations of his or her business people) and be in a much better position to determine strategy—for example, whether to recommend settlement or to recalibrate litigation tactics going forward.

3. In the Immortal Words of the Late, Great Philosopher Yogi Berra, “It Ain’t Over ’til It’s Over.” Even if the case does not settle right away, a good mediator is persistent and stays on the matter. He or she often (indeed, almost always) remains an independent and trustworthy sounding board for both sides. Many times after “unsuccessful” initial mediations sessions, we have reached out to the mediator and so have our adversaries. This means there is always the possibility that the matter will settle at a later point in the litigation. In our experience, we have found that parties who have already had at least one  mediation session—even if “unsuccessful”—are often more likely to return to mediation at the mediator’s invitation (or after tiring of throwing more money at the litigation) because they trust the mediator and the process, have a sharper awareness of the strengths, weaknesses and settlement value of their case and, in many instances, because opposing counsel have had an opportunity to establish a productive working relationship.

4. Suggesting or Agreeing to Mediation Is Not Weakness. It Is Strength. This one really is our favorite. It is the one where we scratch our heads, furrow our brows and remind ourselves that when really smart people get really angry, they become their own worst enemy. (Typically, the clients who tell us mediation is a sign of weakness are the same ones who will not attend a settlement meeting unless it is at their office and are the same ones who write us emails thanking us for convincing them to give mediation a try). The goal of litigation should not be to win an award for being the best posturer. It should be to reach the most efficient resolution. Mediation is often the best route to that result. In this context, it is confounding why anyone would think it demonstrates weakness when it is actually just the opposite. In fact, suggesting or agreeing to mediation sends a clear signal that you are ready to persuade an intelligent and experienced neutral that your case is better than your adversary’s. Who would not want to seize that opportunity? And remember, mediators (unlike Judges) have manageable dockets and can spend the time to understand the nuanced arguments that might cause elephant lift-off in a courtroom.

In the end, budget conscious corporate counsel are, and should always be, looking for ways to save—and make—money. Given the reality that almost every case settles before trial anyway, it is in everyone’s best interest to reach that settlement as early in the process as possible. This is especially true for in-house corporate counsel, who have the unenviable task of having to explain to management how the company could possibly have spent so much money on a litigation for the privilege of ultimately settling a case on terms equal to or worse than those that could have been obtained early on (and at a much reduced cost). Mediation is an excellent way to try to avoid that nightmare.

Anna M. Hershenberg has recently joined CPR as its Vice President, Programs and Public Policy. John R. Goldman is a litigation partner at Herrick, Feinstein LLP, Anna’s former firm.

This article was originally published in volume 33, number 3 of the Winter 2015 publication of the Corporate Counsel Section of the New York State Bar Association. It has been republished with permission.

Removing Anger in a Mediation Allowed Parties to Settle

StephenGilbert By Stephen P. Gilbert

I conducted a mediation several years ago between two companies in the healthcare field, one a small high-tech company (“Company A”) and the other a much larger conglomerate. The smaller company had invented certain cutting edge technology (“Technology A”), which held great promise but required a substantial investment of money and personnel (scientists and engineers), each of which Company A had little of, to finish the R&D work and bring Technology A to market.

Company A had entered into a joint development agreement with the conglomerate to conduct the R&D work and, if possible, commercialize the technology, which Company A hoped would be used in some of the conglomerate’s products. The agreement provided that if Technology A were commercialized and used in the conglomerate’s products, the conglomerate would pay a running royalty to Company A. The few scientists and engineers of Company A worked closely with the scientists and engineers of the conglomerate and disclosed significant confidential information to them to aid in the R&D work. The conglomerate also loaned substantial capital to Company A (covered by a promissory note) because Company A was operating on a shoestring.  The agreement contained a stepped dispute resolution clause: in case of a dispute, executives of the two companies were to confer to try to resolve the dispute; if that did not work, they would go to mediation; and if that did not work, to arbitration.

A year or two after entering into the joint development agreement, the conglomerate acquired a small company (“Company B”), which had developed its own technology (“Technology B”), which, with sufficient and successful R&D work, could be used instead of Technology A in the conglomerate’s products. Both Technology A and Technology B were also potentially useful in third-party products, not just the conglomerate’s products.

Sometime after acquiring Company B, the conglomerate terminated the joint development agreement, requested payment on the promissory note (as it had the right to do) and eventually started marketing products incorporating Technology B.

Company A accused the conglomerate of purposely trying to harm Company A and prevent commercialization of Technology A. The actions of the conglomerate to which Company A pointed included acquiring Company B, terminating the joint development agreement, demanding payment of the debt, and using Company A’s confidential information to help develop and commercialize Technology B. Company A said it would now have to try to raise money to pay the debt and at the same time would have to try to find a new R&D partner, since it still could not afford the R&D work required (nor did it have sufficient personnel) to commercialize Technology A.

Company A said commercialization of Technology A would now be substantially delayed or altogether prevented and that it might have to cease operations. It noted that the conglomerate would not have to pay any royalty for using Technology B in its products because the conglomerate owned that technology through its acquisition of Company B and, if the conglomerate wished to do so, it could license Technology B to third parties without worrying about competition from Technology A, since Technology A was not yet ready to be commercialized (and might never be).

After reviewing the two confidential mediation statements and speaking ex parte with each side prior to the mediation session, it seemed settlement was possible but getting there would not be easy.

There were about ten people from each side present at the joint mediation session: Company A had business people, investors, technologists, and outside counsel; the conglomerate had business people, in-house lawyers, and outside counsel. There were no technologists from the conglomerate present. I suspected this mediation was make or break for Company A; I doubted it had the money to litigate against the conglomerate.

Each side made a short, polite opening statement, and we then split up for caucus sessions. I started with the Company A team. It was the first time I was speaking in a caucus session with anyone on the Company A team other than its outside counsel. Company A did not mince words: it was positive that all of the conglomerate’s actions had been part of a long-term plan to harm it and delay commercialization of or kill Technology A. Everything it said about the conglomerate was laced with anger.

I went to see the conglomerate team. The conglomerate felt it had done nothing wrong. That was the same message that had been conveyed to me by its outside counsel during my discussions with them before the mediation session.

One of the conglomerate’s in-house counsel who was present had been involved with the joint venture when he was a junior member of the conglomerate’s legal department (he was now significantly higher up in the department). I asked what he had done with respect to the joint venture, and it became apparent he was a goldmine of information. He had participated in drafting the joint venture agreement, had helped “administer” that agreement for the conglomerate, knew about the substantial money it had spent and R&D efforts its technologists had made on Technology A, knew (at a high level) about the technical problems that had been encountered, and knew (at a detailed level) how the decisions to abandon the technology and terminate the agreement had been made. He also knew about the “wall” the conglomerate had put in place between its people working on Technology A and those working on Technology B.

During the pre-mediation session ex parte discussions, I had asked each side that, if possible, people familiar with the joint venture relationship be at the mediation, but the depth and breadth of this individual’s knowledge was more than I could have hoped for. I asked if he would feel comfortable sharing some of this information with the other side, and I also asked lead in-house and lead outside counsel if they would feel comfortable with his doing so. They asked why; I said I thought it might be helpful, added that I didn’t see any downside (since all the information would likely be disclosed during discovery if mediation didn’t work), and received yesses from everyone. Then I went to see the Company A team.

I told them I had had a helpful discussion with the other side and asked if they would be interested in hearing some information directly from the other side (since I could never do as good a job as the conglomerate’s people could of imparting the information). The Company A team said it saw no downside, and I asked both sides to reconvene for a joint session.

It was less than two hours since the original joint mediation session had started. I asked the in‑house counsel who had given me all the information to address the other side. I said that in particular what might be helpful for the other side to hear was the history of the conglomerate’s effort to develop Technology A, the problems it had encountered, and how it had come to make the decisions to abandon Technology A and terminate the agreement.

The conglomerate’s in-house counsel began by recounting the history of his involvement and then turned to the R&D efforts that had been made and the money that was spent. At first, the Company A team just listened but soon started asking questions, which the in-house counsel answered without hesitation. I didn’t speak again until there seemed to be a logical break point, at which time I suggested we have lunch.

After lunch, he was asked more and more questions by a few members of the Company A team, some rather pointed. Others from the conglomerate’s team started to chime in. It was a lively, sometimes loud discussion. I said little except to suggest breaks when I felt it was appropriate and to remind everyone it would be better if people spoke one at a time so everyone could hear what was being said. We broke for dinner and agreed to reconvene the next morning.

The next morning, the Company A team started by discussing what it would like to see in a settlement. Bargaining ensued. Agreement was reached late afternoon, and a heads of agreement (which provided for subsequent negotiation of a comprehensive agreement) was negotiated and executed, after which we all shook hands, each side thanking the other for participating and congratulating it on reaching agreement.

It was then that the key decision-maker of Company A shared with me and with the key decision-maker of the conglomerate the following. At the end of the first day, while the Company A team was returning to its hotel, he said to his team that in view of what they had heard from the conglomerate’s in-house counsel who had spoken at length and provided answers to their questions, they might have been wrong about what had happened and about what they had been sure was the conglomerate’s bad faith. His team sat at dinner that evening talking about what they had heard and came to agree with him. Once that happened, their feelings of anger dissipated and they started to focus on how to resolve the dispute.

We were lucky to have in attendance a smart individual from the conglomerate’s side who had sufficient first-hand knowledge of the entire situation and could present information (including answering probing and pointed questions from the other side) in a non-confrontational, believable way. There is no way of my knowing, but I think it would have been difficult, if not impossible, to have reached settlement at that time if the anger Company A felt and had expressed to me so strongly had not been removed.

Stephen P. Gilbert (www.spgadr.com) is a CPR Distinguished Neutral, CEDR Accredited Mediator, American Arbitration Association Commercial Master Mediator, Fellow of the College of Commercial Arbitrators, Fellow of the Chartered Institute of Arbitrators, Fellow of the American College of e-Neutrals, Member/Panelist of the Silicon Valley Arbitration & Mediation Center, and was a computer programmer, a chemical engineer, and a patent attorney.

Gorsuch on Mediation

By Russ Bleemer

U.S. Circuit Court cases referencing mediation aren’t unusual. Since most cases settle before they get to a courthouse, and long before they reach the appellate levels, the intervention of a third-party neutral is commonplace part of the recounting of the case histories that ultimately appear before appeals courts.

But it’s comparatively rare for a U.S. Circuit Court to write and rule on mediation mechanics.

Last night’s nominee to the U.S. Supreme Court, Tenth U.S. Circuit Court Judge Neil M. Gorsuch, of Denver, has written about the mechanics and effects of mediation in his decade on the bench at the circuit’s home in Denver.

In Hand v. Walnut Valley Sailing Club, Case No. 11-3228 (10th Cir. April 4, 2012)(available at http://bit.ly/2jVWsO7), a unanimous Tenth Circuit panel strongly backed mediation confidentiality in an order and judgment written by Gorsuch—a rare pronouncement on mediation and how it works by a federal circuit court.

For fans of mediation, it’s an instructive and fun read for its support of the ADR process, even though the appeals court’s support of a district court dismissal because a litigant abused mediation confidentiality rules was focused on a pleading technicality.

In the unanimous, three-judge panel order, Gorsuch details a move by the plaintiff, a member of the defendant sailing club, to tell “at least” 44 club members and others why a mediation of the plaintiff’s suit against the club failed.

The email sent by the plaintiff “disparage[ed] the club’s positions and relat[ed] all the details of the mediation, including what the mediator said and the amount of the club’s settlement offer,” the order states.

The plaintiff, according to the Gorsuch judgment, had complained to Kansas’s governor “that a storage shed owned by [the] sailing club didn’t comply with the Americans with Disabilities Act.” The club revoked the plaintiff’s membership, and the plaintiff filed suit.

The plaintiff had claimed ignorance of the mediation confidentiality law, but in dismissing the case, Gorsuch pointed out that the issue hadn’t been briefed in the district court.  The Tenth Circuit order says that the plaintiff’s contention that his lack of knowledge of the law was in an accompanying affidavit wasn’t sufficient where “both sides’ briefing, all prepared by retained counsel, proceeded on the premise that he knew the mediation was supposed to remain confidential. [The plaintiff] argued merely that the club’s request for dismissal was a disproportionate sanction.”

That was the sole issue, Gorsuch wrote, that the appeals panel saw as “worthy of mention,” noting that without the briefing, the issue couldn’t be considered.

But that conclusion followed the Tenth Circuit panel’s strong endorsement of mediation confidentiality. “Our review confirms that the district court did not abuse its discretion,” wrote Gorsuch, adding that the plaintiff

committed a serious violation of the confidentiality rule. He didn’t just share a few tidbits about the mediation with a friend, he revealed extensive and prejudicial details about the mediation to over forty people, many likely witnesses in the case. And he did so not accidentally but intentionally. In his deposition, [he] explained that he “absolutely” disclosed mediation information because he believed club members “had a right to know.”

Earlier in the order, Gorsuch reiterated the U.S. District Court holding that his panel was affirming, boosting the ADR process and noting that the plaintiff’s disclosures

“demonstrated complete disrespect for the confidential mediation process.” [Citation omitted.] In discussing the importance confidentiality plays under the congressional scheme created by the Alternative Dispute Resolution Act of 1998, see 28 U.S.C. § 652(d) (requiring district courts to “provide for the confidentiality of the alternative dispute resolution processes and to prohibit disclosure of confidential dispute resolution communications”), the court recognized that an assurance of confidentiality encourages parties to participate in mediation with candor and is essential to the success of mediation programs. The need for confidentiality, the court said, is particularly strong where a mediation program is, as here, mandatory, “because participants are often assured that all discussions and documents related to the proceeding will be protected from forced disclosure.” [Citation omitted.]

Still, the Gorsuch-written Hand order isn’t a published opinion and comes with a caveat:  “This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.”

***

Gorsuch also had to address the effect of a mediation settlement agreement in A.F. v. Espanola Public Schools, No. 14-2139 (Sept. 15, 2015)(available at http://bit.ly/2ki2QAa).

The case was mediated as per the requirements of the Individuals with Disabilities Education Act, and settled.  But the IDEA’s procedures contemplate moves for further relief under other statutes, but only after the act’s procedures have been exhausted.

Both parties took advantage of the mediation step in the act, according to the 2-1 Gorsuch opinion.  The case settled.

Then, the plaintiff filed suit on behalf of her daughter under the Americans with Disabilities Act, the Rehabilitation Act, and 42 U.S.C. § 1983, making the same allegations in federal court that she had made in her original administrative complaint, and which were successfully resolved in mediation.

The Gorsuch opinion affirmed a district court decision that said the plaintiff hadn’t exhausted her remedies under the IDEA scheme for the second suit.

The plaintiff claimed that because she had mediated her claim under the IDEA procedure scheme, the procedures’ application to her new claim had been exhausted, or were inapplicable.

Gorsuch’s opinion didn’t take issue with the mediation results itself, and even agreed that the plaintiff’s court case could proceed under the other statutes, so long as it followed the IDEA procedures required for the other laws.

But the opinion said that the IDEA procedure enabling the subsequent suit also required exhaustion of the claims, under the statute’s plain terms.  The mediation wasn’t enough. For those claims using the statute to launch the plaintiff’s subsequent lawsuit, the opinion said, more is required for exhaustion of the IDEA resolution procedures than the mediation for the first IDEA claim.

A dissent stated that a more reasonable interpretation of the IDEA is that a mediated resolution constitutes exhaustion for the pursuit of other permitted claims.

The author edits Alternatives to the High Cost of Litigation for the CPR Institute.

See also: “Gorsuch on Arbitration”

The New Italian Mediation Law: Experimenting with a “Soft” Approach to Mandatory Mediation

By Giulio Zanolla, LL.M., Esq., CPR Speaks Contributor

GiulioMediation was first introduced as a prerequisite to litigation in the Italian legal system in 2011, when the government issued a decree to implement the EU Mediation Directive of 2008. This legislative measure sparked a mix of enthusiastic reactions and harsh criticisms that culminated with lawyer strikes against its implementation. In 2012, the mandatory provision of the mediation regulation was declared unconstitutional, but the Constitutional Court’s decision was based on the government’s lack of legislative legitimacy to impose the mandatory requirement, rather than on the illegitimacy of the mandatory requirement itself.

The heated debate on the mediation regulation continued inside and outside the rooms of policymakers and led the Italian Parliament to enact a law in 2013 re-introducing mandatory mediation for certain civil and commercial actions in a mitigated form. The new mediation law, which is not affected by the constitutionality issue of the previous regulation, aims to address the concerns brought by a sector of the legal community claiming that the prerequisite of participating in mediation prior to bringing a legal action unjustly burdens and restricts disputants’ rights to access to justice. Unlike the previous regulation, the new Italian mediation law mandates that parties in certain civil and commercial disputes attend only an initial information session with the mediator; it does not require parties to participate in an actual mediation process as a prerequisite to litigation. The parties remain free to opt out of the mediation before the actual process starts and without any consequence for refraining to continue in mediation.

Through the initial information session, the parties have an opportunity to learn about the mediation process and make an informed decision regarding whether to attempt an out-of-court resolution through mediation or to initiate litigation. The information session is free of charge, and parties who refuse to attend the session are subject to sanctions in the subsequent trial. Only if all the parties agree to proceed with mediation will the mediator formally commence the procedure and begin to facilitate discussions of the disputed issues. With the new Italian mediation law, the parties’ participation in the actual mediation process is fully voluntary. The parties’ only mandatory requirement is to educate themselves about the option of mediation through the initial information session.

Recent statistical data available from the Ministry of Justice regarding the first six months of 2014 demonstrates that more than 22 percent of all disputes for which the initial information meeting is mandatory and more than 50 percent of disputes mediated by deliberate initiative of the parties are resolved without recourse to court litigation. In a little over a year since enactment of the law, the benefits of the new law are tangible, not only for those parties who resolved their disputes without litigation, but also—and especially—for the overwhelmed Italian judicial system as a whole, and ultimately for all taxpayers.

Most important, each of the numerous information sessions and mediations that took place but did not result in settlement created a concrete opportunity for parties and attorneys to familiarize themselves with the mediation process and educate users about mediation, thus contributing to the development of the culture of mediation throughout the country.

If we believe that the principle of voluntariness is of fundamental value to the mediation process and if we agree that the need for user education is a critical element in the development of a culture of mediation, the Italian mediation law could represent a balanced solution to the question of how to promote the use of mediation through legislation. The next few years’ statistics will reveal whether the number of parties who choose to continue in mediation past the initial information session, and the concomitant overall settlement percentage, will grow thanks to an increased level of awareness and sophistication among mediation users.

Giulio Zanolla is an attorney, a mediator, an ADR instructor, and the author of the blog The Case for Mediation: An ADR Blog by Giulio Zanolla. This article was first published in the The Weinstein JAMS International Fellow Newsletter, Fall 2015. Mr. Zanolla can be reached at giulio@zanollamediation.com.

2016 Copyright of Giulio Zanolla, Esq. – All Rights Reserved