An Example of How Mediation Works

First, no mediation is identical to another: participants vary
in their interests and/or level of sophistication, and counsel may or may not
be present—the variables are endless. With the foregoing caveat in mind, I
offer the following example of a voluntary mediation in which I served as the
mediator. No names are used and all identifying references have been deleted to
protect the confidentiality of the process.

The initiating party was a local bank that wanted to submit
a problematic loan workout with a developer to mediation. Neither party had
filed an action against the other yet, and the bank hoped the matter could be
settled without the need for litigation. The Bank explained that the participants
had reached an impasse over the issue of whether default fees and interest
accrued to date be included in the payoff amount, at which point all offers by
both participants were withdrawn. (As an aside, I wondered if something more
was going on, because waiver of late fees and penalty interest is usually one
of the first claims lenders let go of in work-out negotiations.)

Both participants agreed to mediate the issues. Neither
would be represented by counsel.

As a result of pre-mediation interviews with the
participants and review of the participants’ pre-mediation statements, I
learned that the parties had agreed to the major terms of the workout,
(modified interest rate, extended payment plan, personal guarantee of
borrower’s principal for difference between current appraisal and loan amount,
re-issuance of extended coverage lender’s title insurance), but that at the
last minute the bank had raised and stood firm on the issue of default interest
and fees. Each participant accused the other of bargaining in bad faith, but
was still willing to give it one last try. Their willingness to mediate
indicated to me  that there was still
hope for a agreement.

The participants arrived on time the day of the mediation.
The parties and I had agreed previously to set aside four hours for the
mediation.

As soon as the participants were seated, I got an inkling of
what the problem might be. The borrower, an LLC, was represented by the
managing member, (who was the guarantor under the previously proposed settlement).
He was tanned and wore a large gold Rolex, golf shirt, golf pants, and loafers.
He fit the stereotype of the rich developer to a tee. The bank representative
was the bank’s senior vice president in charge of real estate lending. He was
dressed in a business suit. Both men appeared personable, but avoided eye
contact with each other.

Based on a hunch, after the mediator’s opening, I asked the parties
to each tell, in turn, what brought them to the mediation, and also to tell a
little about their personal history—where they were from, where they’d gone to
school, how they came to be in their present occupations. I asked each how the
downturn in the economy had affected their business and personal lives.

I hoped the expanded personal information would help undo
any stereo-typing and misperceptions.

As a clarifying question, the bank representative spoke of
the stress caused by cost cutting and layoffs and the change of focus from deal
making to risk control. The developer representative identified with the stress
of cost cutting and layoffs, and additionally mentioned the pressure of trying
to maintain a positive, successful image to attract investors so he could stay
in business. The bank’s representative agreed, and said sometimes he felt
schizophrenic having to bring in business while controlling risk and limiting
losses at the same time.

The participants were more relaxed after these
disclosures, and eventually reached an agreement. The mediation lasted a little
over two hours.

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Mediation Styles

Before you decide on a mediator you should make sure to ask him or her to describe his or her mediation style. There are three types of mediation styles: evaluative, facilitative, and transformational. You should consider which of them would best further your goals. Some mediators choose a style and stick to it, but I, among many other mediators, prefer to pick whatever style fits the circumstances. Sometimes this approach results in use of all three styles in a single mediation session. For example, a facilitative style may work at the start of mediation, but a transformational style might be introduced later when it becomes obvious to the mediator that a participant’s prejudices, emotions, or perceptions operate as a barrier to agreement.  Finally, a mediator might use an evaluative style to move the participants through an impasse. The process of mediation allows for this kind of flexibility and creativity.

Facilitative style. In the early days of mediation, (the late sixties), facilitative mediation was the only mediation being taught and practiced. The function of the mediator is primarily procedural such that he or she is responsible for structuring a process to assist the participants in reaching  a mutually acceptable agreement. A mediator trained and practicing in the facilitative style will likely ask questions, request information, validate and normalize participants’ points of view, search for interests underneath the positions and thereby widen the field of possible solutions, and assist the participants in discovering and analyzing potential solutions. The facilitative mediator does not make recommendations to the participants, give his or her own advice or opinion as to the outcome of the case, or predict what a court would do in the case. The mediator is in charge of the process, and the parties are in charge of the outcome.

Facilitative mediators hold joint sessions with all parties present so the parties can hear each other’s points of view, but also regularly hold caucuses. (A caucus is when the participants are separated and the mediator assists each party to explore different options). They want the participants, not the attorneys, to have the major influence on whatever agreements are reached.

Evaluative Mediation, (sometimes called Directive Mediation). Evaluative mediation involves a process very similar to settlement conferences held by judges.  The mediator assists the participants in reaching resolution by pointing out the strengths and weaknesses of the participants’ respective positions, and predicting the verdict an arbitrator or a judge or jury would likely reach. Evaluative mediators might make formal, written recommendations to the participants as to the outcome of the issues. Evaluative mediators are concerned with the legal rights of the participants rather than needs and interests, and evaluate based on legal concepts of fairness. Evaluative mediators may hold an initial session where each of the participants presents its position, but most of the time the participants will be separated and the mediator will participate in the negotiation through shuttle diplomacy. The mediator helps the participants and their attorneys evaluate their respective legal positions and the costs and benefits of pursuing litigation or arbitration.  The evaluative mediator structures the process and directly influences the outcome.

Evaluative mediation emerged in court mandated or court referred mediation. Attorneys normally work with the court to choose a mediator, (although in some instances the court will appoint a mediator from a list without participant attorneys’ input). A participant attorney is much more active in an evaluative mediation and might meet with the mediator alone or with his or her client. Further, there is an assumption in evaluative mediation that the mediator has substantive expertise or legal expertise in the  substantive area of the dispute. Because of the connection between evaluative mediation and the courts, and because of their comfort with settlement conferences, most evaluative mediators are  attorneys.

Transformative Mediation.  Transformative mediation, the newest of the three styles, came about in 1994 with the publication of The Promise of Mediation, by Joseph P. Folger and Robert A. Baruch Bush. Transformative mediation is based on the values of empowerment of the participants and recognition by each of the participants of the other’s needs, interests, values, and points of view. The potential for transformative mediation is that any or all participants or their relationships may be transformed during the mediation. Transformative mediators meet jointly with participants since only the participants can give each other recognition.

The values of transformative mediation are similar to those of early facilitative mediation with respect to its interest in empowering parties and transformation. Early facilitative mediators fully expected to gradually transform society with their pro-peace techniques. Modern transformative mediators want to continue the process by allowing and supporting parties in mediation to determine the direction of their own process. In transformative mediation the participants structure both the process and the outcome of mediations, and the mediator follows their lead.

Some transformative mediation advocates theorize that win-lose processes such as litigation and arbitration have high-jacked the power of people to meet and make decisions that are in their best interests. Further, many people are barred from court or arbitration processes due to prohibitive costs and lengthy delays. However, with the introduction of a trained neutral party equipped with the tools for facilitating discussions and overcoming barriers and impasses within a safe environment, participants can successfully problem solve at a fraction of the cost of  adversarial proceedings with win/lose outcome, and the participants are allowed to pursue the interests that most matter to them.

Pros and Cons

Both the facilitative and transformational styles work well when the participates desire or must maintain an ongoing relationship. A divorcing couple with children, an employer and employee, a lender and a borrower negotiating a loan workout, and a manufacturer with a long standing relationship with a supplier are good examples of when transformational and facilitative styles are valuable. The facilitative and transformational styles are also effective in that both styles empower the participants to determine, and take responsibility for, their own outcomes. Detractors opine that facilitative and transformational mediations take too long and often end in no agreement after the first session. They also express concern that outcomes can be contrary to rights and standards of fairness, and mediators using these approaches cannot protect a weaker participant.

My next few blogs will consist of examples of real cases in which the mediator used one or a  combination of these styles.

 

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Why Mediate?

Wilenchik & Bartness is expanding its mediation practice
with shareholder Becky Bartness leading the charge.

So why choose mediation? What exactly is it?

Mediation is a form of alternative dispute resolution
(“ADR”) that has grown in use and popularity over the last decade. It is a
voluntary process in which an impartial third party, the mediator, facilitates
communication and negotiation and promotes voluntary decision making by the
parties. The mediator does not function as a decision-maker like a judge or
arbitrator. Nor does the mediator act as counsel for any party. The mediator
acts as a facilitator only. Think of it as not just negotiation with oversight,
but negotiation with facilitation that focuses discussions, leads the parties to
consider a broader range of solutions, encourages reality testing of solutions
and parties’ positions, and moves the parties through impasses.

Further, mediation gives the parties opportunities to define
and clarify issues in a comfortable, informal environment, understand different
perspectives, identify interests, explore and assess possible monetary and
non-monetary solutions, and reach satisfactory agreements.

Mediation proceedings are confidential as provided in ARS
Section 12-2238.

Mediation is used in just about every context: contract,
labor, community, landlord tenant, HOA, health care, or neighbor disputes, you
name it. Whenever there is a dispute, mediation is available as a vehicle for resolution.
It works because mediation creates a safe environment for party discussions and
negotiations, empowers the parties to work together to reach mutually
satisfactory agreements, and occurs in the presence of a mediator with
experience and training in ADR and negotiation, and equipped with the tools to
break impasses and facilitate constructive dialogue and creative solutions.

Mediation can be used as an alternative to litigation or
arbitration, and is an option available at any time during the litigation
process as well.

Try it. You’ll like it.

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