Jim and John had been successful design partners for six years. The business had grown from the two of them to twelve engineers. Now Jim wanted to accept an acquisition offer, but John wanted to expand while they could buy new building cheaply.  If the impasse continued, both opportunities would expire. Jim was bitter and frustrated, John bewildered and often sad.

John’s lawyer suggested mediation. Jim had fought the idea.  “Why do I need some old judge telling me what to do?”  The lawyer said “It doesn’t have to be a judge. Is there someone you both trust?” They had settled on their old boss Tim. He knew the industry, and had always been calm in a storm.

Now they were gathered around the conference table.  They spent some time talking about their office income and expenses, about the potential for expansion and the new building. Tim said “I’m surprised you boys are having such problems. You always worked so well designing things together.  You were real friends.  What happened?” Jim snorted. “Who designs things anymore? All I do is fill out forms and deal with employees. I hate it.  And now John wants MORE employees – please!”

Tim leaned forward. “How did Jim get to be a manager instead of a designer?” That’s a waste of his skills and you both know it.” The pair looked sheepish. John said “When we started out, we knew someone had to do it.  Jim lost the drinking game we used to decide who it would be. ”

Tim said “I guess I can see using a partner to manage the everyday details for a startup on a shoestring.   But for a business as big as yours, you ought to have an office manager. The extra hours Jim charges for as a designer can help pay for it. Also, you can lease out extra space in the new building for income.” They talked for a while longer, but that proved to be the key.  Jim was willing to expand if he didn’t have to manage.


Mediation is negotiation with the assistance of a neutral third party.  You’ve been a mediator if you’ve refereed an argument between friends, or your kids.  Perhaps it doesn’t seem likely that negotiating in front of stranger is any better than doing it yourself – especially if it costs money.  But mediation is everywhere – in real estate contracts, in credit card agreements, and in the courts. It’s a $2 billion a year industry. Why? Because it works, and saves both time and money.  

Studies show that mediating a litigated case saves between $10,000 and $20,000, and months or years of disruptive and costly litigation.  The United States government – a huge user of mediation – estimated that it saves about 90 hours of attorney time in each case.

Think about how much your lawyer charges an hour.  Ninety hours less per case could have a huge impact on your bottom line. The latest survey data shows that 97% of responding Fortune 1000 companies use mediation.  Even a “failed” mediation is beneficial.  Cases that go through the process of mediation without reaching resolution are four times more likely to settle later than un-mediated cases.

Stages of mediation

Mediation is a process, and like other processes has stages. Those stages are different depending on which role you play. But either way, each stage requires your active participation if you are to succeed.

For Mediators

Mediators are taught that the five stages of mediation are:

1. Convening – Convening means getting the parties to say ‘yes’ to mediation.  If parties (or their counsel) haven’t used the process before, mediators often emphasize that the process is neutral, confidential, low-cost and frequently successful.  In the convening stage, mediators also address administrative details and any concerns about their impartiality and qualifications. 

2. Opening statement -- Every mediator does an opening statement differently, but regardless of the details, the aim is to create optimism and set expectations. The mediator may talk about his or her experience, not boastfully but to build respect and a belief in the possibility of success. He or she will also discuss the process.  Will the parties remain at the table or meet privately with the neutral? Or both?  Are emotional outbursts frowned upon or accepted as part of the process?  Will the mediator make recommendations or not? And so on.  Familiarity with the process makes participants less fearful and more able to move forward.

3. Communication -- In the communication phase, the parties talk about what happened, it, what effect it has had on them, and how they feel about. Their counsel may also talk about evidence or legalities that make their case particularly strong, or the opponent’s case particularly weak. This phase is important because it helps highlight risk and evaluate the credibility and impact of witnesses.  It also meets the human need to be heard, and presents the opportunity for the understanding and acknowledgement of others’ needs, feelings, and problems.  Such understanding can make settlement easier.

4. Negotiation -- The fourth stage is negotiation.  For the mediator, it is about helping parties let go of counterproductive positions and emotions, take stock of possibilities, search for available resources and solutions, and discover what everyone can live with in return for living without the conflict.  It’s also about steering parties away from unproductive behavior, impatience or the right offer at the wrong time.

5. Closure -- Finishing the mediation.  Are the parties truly done or are there remaining issues that make a second mediation session advisable?  If there was no agreement, the mediator should maintain a positive attitude, highlighting the progress made and encouraging the parties and counsel to continue talking.

If they do settle, they may attribute the success to the mediator’s efforts and remember them when further work is needed.  If there is a settlement, the necessary future steps should be clearly identified and the terms of the agreement written down in a memorandum of understanding that provides it is enforceable.  Further, the memorandum should be drafted before the parties leave the session, and should provide that any dispute must be mediated.  The parties will not thank a mediator if the process results in further disputes and litigation, so clarity is paramount.

For Disputants

Perhaps it seems illogical that the stages of mediation should be different for disputants than for mediators.  But each has different goals and tasks, and so thinking about them differently makes perfect sense.

1. Deciding -- When a mediator calls to convene the mediation, it’s time to make some decisions:

Do I want to mediate?  The answer to this question should almost always be “yes,” given the proven advantages in time, money and stress of mediation.  Even if you can’t stand the thought of being with the other disputant, consider mediation.  A good mediator can help resolve the matter even if you are separated.  And even if you don’t settle, the process will be beneficial.

Is the dispute ripe for mediation?  Mediations work best when work has been done beforehand. If you don’t know what provable facts support your positions, or what you have authority to offer – if any demand or offer would make you say “I don’t know,” then you aren’t ready for mediation yet. The same is true for the others involved. If a dispute isn’t ripe, it will likely fail or be continued. But this is only a reason to wait a bit, not a reason not to mediate.

2. Preparing -- Like everything else, your mediation will go better if you prepare for it. First, if there are things to do to make the dispute “ripe,” do them right away.  Don’t let the session be a waste of time. 

Second, decide on concrete, realistic goals.  Plan not only where you'd like to end up, but what concessions you're willing to make – and which you aren't. Understand that concession will be needed.  The pattern of give and take creates pressure to move toward settlement, and if you do not concede, the other parties will be angry and freeze in place.  

Third, go over the negotiation history.  What has been offered and refused? That will give you some idea of the boundaries you’ll start at.  Remember, if you expect to settle at a number that’s been turned down, you’re going to have to convince the mediator you are right and enlist his or her aid, or convince your opponent they were wrong.  Using objective data is probably the best way to do this.

Fourth, think about what the other side is likely to do and decide your reaction.  Know when you would walk away, and what your alternatives are if the deal doesn't work out.  Don’t forget to factor in both the cost and the likelihood of success of alternatives to a negotiated agreement.  If you want $100,000, but the chance of winning at trial is only 50%, and trial will cost $10,000, anything over $40,000 is an economic win in a negotiation ($100,000 x .50 - $10,00 = $40,000).

Fifth, determine the value of settling.  Disputes have a cost, whether it’s monetary or emotional.  That cost is often overlooked when we consider the value of a settlement  That cost has to do with the resources absorbed and opportunities missed because of the dispute – what economists call “opportunity cost.” Think of it this way.  If I spent $100,000 a year on my legal bills, but could have used that money to develop a product worth $500,000, the opportunity cost of not settling is $400,000.  One of the most powerful questions you can ask yourself before a mediation is “What would I be doing with my time, money and energy if I weren’t in this dispute?”  Keeping the answer in mind – it’s a real cost that you’re very unlikely to recover in court.

3. Presenting, Evaluating and Listening -- For mediators, this stage is “communication.” It’s changed here to emphasize that it isn’t just a conversation.  It’s a chance to present your best case to both the mediator and other disputants.  No, it isn’t a trial, and no, you don’t have to settle, but it’s an immediate opportunity to put the dispute behind you, at what may be low cost.  

Also, if you convince the mediator and/or the disputants of the strength of your case, your outcome will improve.   No, a mediator won’t decide things.  But he or she has a lot of influence – or they wouldn’t be there.  So impressing them is important.  Likewise, impressing the other disputants will lower their expectations of success, so negotiation will go more smoothly.

But this is also an opportunity to evaluate the other disputant(s).  Is the mediator impressed by them?   Are you? Do they speak clearly and convincingly?  If you were on jury, what would you think? What does your lawyer think?

Listen for opportunities to settle.  What is important to the other disputants? What do they emphasize? Can you give them those things without suffering unduly? Also remember that people crave recognition of their experiences and hardships, and that if you sincerely apologize, studies show plaintiffs will settle for less than if you don’t. These concessions to the psychic needs of others can save you serious money. Talk to your lawyer before you apologize, though. Depending on the words used, and the applicable statute, apologies might be used against you as admissions of liability.

4. Negotiation -- If you have planned for your mediation, this stage will be straightforward. You will have gotten as much information as you can, planned your strategy, and decided what the limits of your offers.  This will give you confidence, and allow you to project strength and competence during the session.  But mediation is a dynamic experience.  You will receive offers and demands beyond your expectations, and the mediator may tell you that the next move you have planned is a terrible idea.  You, not the mediator, are in charge of things, so you could stick to your plan. 

A better approach, though, is to pause and ask yourself whether the new offer makes sense in view of your aims, and/or whether the mediator’s advice makes sense.  Use your prior planning as a guide but not a prison.  After all, depending on the demands of your opponents, you could end up doing better than you expected.

5. Closure -- When the session ends, be sure that whatever agreement there is has been clearly put on paper.  Because of mediation confidentiality, it can be extremely difficult to prove an oral agreement reached in mediation.  You can let your lawyer draft the detailed version, but be sure a there’s a signed memo with the major deal points before you leave. 

Scott Van Soye is the managing editor of ADR Times. He is also a full-time mediator and arbitrator working with the Agency for Dispute Resolution with offices in Irvine, Beverly Hills and nationwide. He is a member of the California Bar, and practiced real estate, civil rights, and employment law for over twenty years. He holds an LL.M. in Dispute Resolution from Pepperdine University, where he is an adjunct professor of law. He welcomes your inquiries, and can be reached at scott.vansoye@agencydr.com or (800) 616-1202, Ext. 721. www.scottvansoye.agencydr.com