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both participants were withdrawn.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
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.