How Mediation Confidentiality is Waived — A Ninth Circuit Decision

img_1628By: Donald L. Swanson

Can mediation confidentiality be waived?

The answer is, “Yes.”

–That’s according to the U.S. Ninth Circuit Court of Appeals, from an unpublished “Memorandum” decision in Milhouse v. Travelers Commercial Insurance Co., Case No. 13-56959, 13-57029 (9th Cir., Feb. 23, 2016).

Facts

The Milhouse residence, located in California, had been destroyed in a fire – a total loss. Disputes arose with Travelers over their home insurance policy, which resulted in a lawsuit and a jury trial.

The jury rules in favor of Mr. and Mrs. Milhouse on breach of contract. But the jury rejects their bad faith claim and their request for punitive dames.

Mediation Confidentiality Issues

–Trial Court Ruling

The trial court enters a final post-trial order (dated November 5, 2013) on multiple issues, from which both parties appeal to the Ninth Circuit.

Here is what the trial court says, in such order, about mediation confidentiality:

1. “At trial, evidence was presented regarding statements made during the course of the mediation proceeding between Dr. and Mrs. Milhouse and Travelers.”

–Such evidence includes this: “the Milhouses made a $7 million demand of payment” in mediation and “asked for nearly a million dollars of attorney’s fees when their attorney had only worked on the case for a few weeks.”

2. “The Milhouses now challenge the admissibility of such evidence, and argue that it resulted in prejudicial error that warrants a retrial on the issue of bad faith.” Such argument “fails on two independent grounds”:

–Waiver.  “First, the Milhouses failed to raise the issue with the Court at or before trial, and therefore waived their right to claim any privilege.”

–As to the mediation confidentiality agreement between the parties, the trial court says, “the Milhouses never presented” such an agreement as evidence and “incorrectly assume” that the court “can exclude testimony on the basis of a confidentiality agreement it has never seen.”

–Due Process.  “Second, to find evidence of statements made at the mediation proceeding inadmissible at trial would violate the due process right of Travelers to provide a complete defense to its alleged liability for bad faith and punitive damages.”

–Ninth Circuit Ruling

One of the Milhouse arguments on appeal is that the trial court (the U.S. District Court for the Central District of California) “erred” when it “admitted mediation communications at trial.”

The Ninth Circuit evaluates and rules on mediation communications issues in the following manner:

–Procedural Background Evaluation:

–Pretrial.  Initially, both parties file pre-trial motions to preserve mediation confidentiality and exclude mediation evidence. But both parties end up withdrawing those motions.

–Trial.  The Milhouse attorney does not object at trial, on mediation confidentiality grounds, to any evidence, nor does he alert the trial court to the requirements of California’s mediation privilege law.

–Post-Trial.  The Milhouse attorney raises mediation confidentiality issues for the first time in a post-trial request for new trial.

–Ninth Circuit Ruling:

“We therefore consider the [mediation confidentiality] issue waived.”

Editorial Comments

1.  I understand the waiver finding by both the trial court and the Ninth Circuit. Waiver seems to make sense:

–The Milhouse attorney apparently forgets about the confidentiality objection at trial.  Or . . . perhaps he has a strategic reason for abandoning the objection, and he fails to raise the objection intentionally?  We’ll never know.

2.  But the District Court’s “due process” finding is a concern – for two reasons:

–California’s mediation privilege law is about as strict as they come, with exceptions being almost non-existent. And California law would probably not recognize the Court’s “due process” exception to its mediation privilege.

–The District Judge appears to be saying that a mediation confidentiality objection, if raised at trial, would have been overruled and the evidence admitted anyway.

The Ninth Circuit does not even mention the trial court’s due process ruling and bases it’s “affirmed” decision on waiver alone.

3.  In this diversity jurisdiction case, the courts wonder whether mediation confidentilaity is governed by California state law or by Federal Evidence Rule 408.  Why the U.S. District Court doesn’t reference its own Local Rule 16-15.8 on mediation Confidentiality is mentioned: but the probable reason is discussed here.

What do you think about the waiver issue?

Mediator Neutrality: An “I believe . . . ” Test

image
No neutrality here — she’s on their side

By Donald L. Swanson

A mediator is, by definition, a “neutral.”

Neutrality seems to be a straight-forward concept: it means not-taking-sides.

But not-taking-sides is, apparently, not all that simple. Check out this excellent article and this fine series of essays on the subject.

Efforts to define or explain “neutrality” often get bogged down. Sometimes, new explanations of what “neutral” means create more ambiguity or uncertainty than already exist.

Non-Neutral Behavior

Here are some examples of behavior that run afoul of the neutrality standard.

–Mediator: “My law partner is an expert in this area. So I’ve asked him to critique your expert’s report. Here’s how he says your expert’s opinion is faulty.”

–Mediator: “Here’s a list of terms that everyone else has agreed upon. This is a great deal, and you must accept these terms.”

–Mediator: “Your legal position is way off base on this issue, and you are going to lose at trial.”

Each of these examples is from an actual anecdote from attorneys talking about bad experiences in mediation.  In each of these examples, the mediator is viewed as taking the other party’s side.

An “I believe …” Test for Mediator Neutrality

Whenever a mediator says something like the following quote, the mediator’s neutrality is compromised:

“Here’s what I believe about the merits of your case: [___fill in blank____].”

An expression of personal opinion on the merits of the dispute is “taking-sides.”

There are probably a million-or-so ways a mediator can convey the same type of message, while still maintaining position of neutrality: i.e., without giving a personal opinion on the merits.

For example, a mediator could say:

–“The other side’s position is . . . [then fully and faithfully explain that position].”

–“The other side says this about your expert’s opinion: . . . ”

–“Here’s one of the risks you run–that the judge will accept the other side’s version of the facts. And here is the evidence they’ve identified . . . ”

–“If you lose on that issue, here are the range of results that have been identified . . .”

–“I know you are confident in your case at trial. But your opponent is also confident. And here’s why . . .

–“Here is a risk that each side runs: that the judge will get it wrong, from your perspective. And ‘getting it wrong’ happens, as reflected by reversals that commonly occur on appeal.”

All of these examples are neutral responses that don’t take sides.

A mediator might even say to a party in caucus something like: “My experience is that judges rarely . . . ”

–Such a statement can be a neutral observation that helps the parties but doesn’t take sides: it’s talking about objective experiences, and not about the mediator’s opinion.

Such responses can be used by a mediator to clearly and effectively convey hard truths, without the mediator injecting his/her own opinion on the merits of the dispute.

Analogies

The following are some analogies that illustrate neutrality (good analogies) or provide a contrast with neutrality (bad analogies).

Good Analogies

The best analogies for what mediator “neutrality” means are from informal contexts. For example:

–a parent handling a squabble between siblings, when the parent avoids taking sides in the spat, is a good neutrality analogy.

–a friend trying to help solve a misunderstanding between two buddies, without taking sides, is also a good analogy.

Bad Analogies

Judges, referees and umpires, however, are bad analogies for mediator neutrality.  Here’s why:

–because the job of every judge, referee and umpire is to make decisions on the merits of disputes, and every decision on the merits favors one side over the other

Hopefully, every judge, over the course of a bench trial, will leave an impression of impartiality, even-handedness, and good judicial temperament.  But it won’t be an impression of neutrality.

–At the end of trial, the judge will make a decision that is anything but neutral.  A judge’s judgment will almost always favor one side over the other.

Similarly, every basketball referee will make decisions on who fouled whom.  None of such calls is neutral.

–Some of the decisions will be close calls: e.g., when a violent collision occurs during a drive to the rim.  Is that a charge on the offense, a foul on the defender, or a no-call?

–Hopefully, over the course of a game, the cumulative effect of a referee’s calls will leave an impression of impartiality and consistency, but every call favors one side over the other.

Likewise, every strike / ball call by an umpire favors one team over the other.  It’s not a neutral call.

–But consistency on the location of the strike zone will leave an impression of impartiality and fairness.

Mediator Neutrality

A mediator makes many decision and many communications over the course of a mediation. Most of such decisions and communications are about handling the mediation process and managing the parties, their conflict, and their negotiations.  And some decisions and communications will convey hard truths to the parties.

But a neutral mediator must not convey an impression of taking-sides by offering an “I believe . . . ” opinion on the merits of the dispute.

An  often-perceived exception occurs when a party asks, in caucus, for the mediator’s candid opinion on the merits of the dispute. But even in this context, the mediator who weighs-in with such an opinion is on dangerous ground.  See, e.g., this article.

Conclusion

Neutrality is an essential quality of a mediation. A mediator can be active and forceful and convey hard truths– and still remain neutral. It’s the “I believe…” input on the merits of the dispute that compromises neutrality.

What do you think about this “I believe . . . ” test?

 

Is Offering Opinions and Solutions a Bad Idea for Mediators?

image
When conflict management gets out of control (photo by Marilyn Swanson)

By: Donald L. Swanson

“Leadership is a perpetual exercise in managing conflict.”

–Morris Shechtman, 2003

A 2016 report on a mediation study evaluates and compares the effects on conflict of:

(i) mediators who elicit solutions from parties in conflict, and

(ii) mediators who offer opinions and solutions to the parties in conflict.

Mediator Eliciting Solutions from Parties in Conflict

This “eliciting” characterization refers to mediators who:

–ask parties what solutions they would suggest
–summarize the solutions being considered
–check in with parties to see how they think these ideas might work for their conflict circumstances

Parties in conflict who work with an “eliciting” mediator tend to give positive reports on:

–listening and understanding each other in the mediation
–jointly controlling the outcome
–the other side taking responsibility and apologizing
–changing their own approach to conflict
–the mediator acting properly by not,

–controlling the outcome
–pressuring them into a solution
–preventing issues from coming out

The study finds that an “eliciting” strategy works better than other strategies in,

–achieving settlement agreements between parties in conflict
–avoiding a return to court for agreement enforcement.

Mediator Offering Opinions and Solutions

This characterization refers to mediators who,

–offer their own opinions
–offer their own legal analysis
–advocate for their own solutions

Parties in conflict who work with an “offering” mediator tend to give negative reports, that:

–the agreement does not work well
–they are not satisfied with the outcome
–they would not recommend mediation to others
–they have not changed their own approach to conflict.

A Study Conclusion

Accordingly, the study offers this conclusion:

–Mediators who offer their own opinions and advocate for their own solutions run counter to the goals of self-determination and better understanding between parties in conflict.

Consistent With Experience

As I reflect back upon my own experience as counsel for mediating parties, this finding seems well-founded.

I remember, for example, many years ago when a mediator begins a multi-party mediation with a declaration of how a certain issue should be handled and how an agreement on that issue should be structured.

–The other parties agree.  But my client and I do not agree — we view the mediator’s suggestion as a bad idea.

–However, the mediator dismisses our view out-of-hand, ignores our expressions of concern, and pressures us at-the-end to go along with his approach.

I am still irritated — to this day [I’m pressing harder on the keys as I type right now!] — with the memory of that experience. I view the mediator as out-of-line in presenting and pushing his solution without any concern or regard for what we thought [not that I’m bitter about it or anything . . . ].

What do you think about these findings and conclusion of the study?

 

Even “Failed” Mediations Have Value

image
Playing the Hand That’s Dealt

By: Donald L. Swanson

The concepts of “failure” and “success” in a mediation typically refer to whether a settlement agreement is achieved during the mediation session.

I’ve always felt uneasy about the use of such “failure” and “success” terms in this way.

–I can’t quite put a finger on the source of unease.  But it’s like hearing a “litigator” claiming to have “never lost a case.”  It’s not that I doubt the accuracy of such a claim [ . . . okay, maybe I do].  But the claim doesn’t quite seem to tell the entire story.  After all, lawsuits are high-risk exercises, and litigators are usually stuck playing the hand they’re dealt.

–Similarly, I have an unease about the concept of a “success rate” for mediators.  All mediators play the hand they are dealt—and there are some bad hands out there.

Beneficial Mediation “Failures”

My experience, from all sides of the mediation table, is that some of the most-beneficial mediations are the ones that do not reach a resolution in the mediation session (i.e., the “failures”).

–Reasons for the mediation “failures” I have experienced as attorney for a party have nothing to do with the mediator’s performance.   The “failures” have had everything to do with the parties and the nature of their disputes.

One common reason for mediation “failures” is this: the positions of the parties are simply too far apart.  The parties see the facts or applicable law differently in-the-extreme, and they can’t seem to recognize the other side’s perspective.  It’s in these circumstances that a mediation can be beneficial—even in “failure” with a settlement to come later.

Here are some examples:

–The parties have each hired experts who give contradictory opinions on a complex set of facts.  The mediation turns into an effort to understand the reasons for their differing opinions.  Settlement will occur later.

–The parties have differing ideas about a party’s capacity to pay a settlement.  The mediation turns into an effort to deal with that issue.  Settlement will occur later.

–The parties each attribute bad motives to the other.  The mediation turns into an effort to deal with mistrust.  Settlement will occur later.

All of the foregoing is anecdotal and intuitive.

Empirical Data

Fortunately, we have empirical data to support the idea that a mediation session has value, even if it does not result in a settlement during the mediation session.

Back in 1999, California establishes five “Early Mediation Pilot Programs.”  In 2004, The Administrative Office of the Courts issue an “Evaluation” of these five programs.  Among the conclusions of the Evaluation is this: “all five of the Early Mediation Pilot Programs were successful, resulting in substantial benefits to both litigants and the courts.”

The Evaluation includes findings from a survey of attorneys who participated in the Pilot Programs.  The report for each of the five Pilot Programs contains this finding:

A certain “percent of attorneys whose cases did not settle at mediation indicated that the mediation was important to the ultimate settlement of the case.”

Here are the percentages for each Pilot Program:

–74% in San Diego

–78% in Los Angeles

–67% in Fresno

–75% in Contra Costa

–90% in Sonoma.

Such findings are strong evidence, indeed, of the value of mediation in a “failed” context.

 

 

 

 

 

 

Seven Practice Lessons That Enhance Mediation

img_0169
Moose and Eagle: a life-enhancing experience

By: Donald L. Swanson

What do empirical studies tell us about court mediation”?

This question is asked and answered in a 2004 article. The authors of the article are examining “empirical data” and looking for “best practices” in programs that mediate non-family civil matters.  The practices they identify as “best” are those that promote “regular and significant use” of mediation “to resolve cases.”  Here are seven lessons from the best practices hat enhance mediation.

Practice Lesson # 1. Mandatory mediation outperforms voluntary mediation.

If the goal is to have a “regular and significant use” of mediation to resolve cases, then mandatory mediation is much better than voluntary mediation. The authors find:

–Voluntary mediation programs “rarely meet this goal” because they “suffer from consistently small caseloads”;

–By contrast, mandatory mediation programs “have dramatically higher rates of utilization”; and

–“Judicial activism” in mandating mediation “triggers increased voluntary use of the process, as lawyers begin to request it themselves in anticipation of court referral.”

Mandatory mediation outperforms voluntary mediation in other ways as well. The empirical data shows, for example, that mandatory mediation referrals do not adversely affect either “litigants’ perceptions of procedural justice” or “settlement rates.”

Lesson:  Don’t be afraid of mandated mediation.

Practice Lesson # 2. All types of cases are amenable to mediation — none should be excluded.

A common misstatement of mediation reality, over the years, is this:

“Some types of cases are ill-suited to mediation.”

Specific types of cases often assumed to be ill-suited for mediation include, (i) complex cases; and (ii) cases with high levels of acrimony between parties.

But empirical data shows that all such assumptions are wrong. The reality is this:

“there is no empirical support” for the notion that some cases are ill-suited to mediation.

Instead, empirical data shows that mediated settlement rates do not vary based on case types or on levels of acrimony (in non-family cases).

[Here’s an experience-based editorial note: Whenever a dispute is between family members and is characterized by acrimony and bitterness, mediation is almost always a hopeless proposition—as are all other forms of consent-based resolution tools.]

Empirical data also reveals that perceptions by the parties of procedural-justice within a mediation do not vary by case type.

Lesson: “[B]ecause no case characteristics have been identified for which mediation has detrimental effects, mediation programs do not need to exclude certain types of cases.”

Practice Lesson # 3. Early mediation is better than later mediation.

Typically, mediation occurs “late in the life of a case and often after all discovery is completed.” The empirical data shows, however, that this is not the best approach.

Holding mediation sessions “sooner after cases are filed” will yield these benefits:

–“cases are more likely to settle”;
–“fewer motions are filed and decided”; and
–“case disposition time is shorter, even for cases that do not settle.”

A challenge for early mediation is this: a “lack of critical information” will diminish the chances of settlement. However, empirical data shows that discovery “does not have to be completed” for cases to settle. Instead, what’s needed for meaningful mediation is a comfort, for all parties, in their knowledge and understanding of the essential facts of the case.

On mediation timing, the authors find that a pending motion on critical issues (e.g., a motion to dismiss or for summary judgment) will decrease the “likelihood of settlement in mediation.”

Lesson: A mediation should be scheduled as soon as initial discovery is accomplished and the initial flurry of motions is resolved.

Practice Lesson # 4. Local litigation customs, culture and judicial support should affect the design of a mediation program.

In two separate instances, the authors focus on local litigation customs and cultures as critical factors in the success of a mediation program.

The first instance is this:

“The local legal and mediation cultures influence which program design features are acceptable. Thus, mediation programs that obtain the input and support of the bench and the bar . . . are more likely” to be successful.

The second instance is this:

“Local litigation customs and case management practices affect lawyers’ comfort with” a mediation program.

The authors offer this example:

“some courts require lawyers to discuss the potential use of mediation or other ADR processes and report the results of that discussion to the court early in the life of a case.  Other courts require lawyers to discuss ADR with their clients.”

“These court rules face less lawyer opposition than does mandatory case referral and can give lawyers more control over the logistics of mediation.”

“Adopting these rules, combined with active judicial support, tends to increase requests to use mediation.”

Lesson:  Local cultures and customs, and support from both the bench and the bar, are important in the effective use of mediation.

Practice Lesson # 5. Mediator effectiveness is dependent on levels of expertise and experience.

Here are mediator qualities that enhance mediation effectiveness:

–“Mediation is most likely” to be successful “if the mediators are drawn from the pool that is preferred by lawyers: litigators with knowledge in the substantive areas being mediated.”

–“One characteristic of the mediators, namely having more mediation experience, is related to more settlements.”

–“Thus, program design options that maximize each mediator’s level of experience may enhance the success of the program.”

Here are mediator qualities that have little or no impact on mediation effectiveness:

–“the number of years” a mediator has practiced law has no relationship to settlement or to a litigant’s “perceptions of procedural justice.”

–“several aspects of mediator training, such as the number of hours of training or whether it included role-play, tend not to affect settlement or litigants’ perceptions of the procedural justice of mediation.”

Lesson:  Experience is important to a mediator’s effectiveness.

Practice Lesson # 6. Mediation works best when the parties, their attorneys and the mediator are all active and cooperative.

Here are specific findings in the article:

–“Both active facilitation and some types of evaluative interventions tend to produce more settlements as well as heighten perceptions of procedural justice.”

–“But when mediators recommend a particular settlement, litigants’ ratings of the procedural fairness of the process suffer.”

–“When litigants or their lawyers participate more during mediation, cases are more likely to settle and the litigants evaluate the mediation process as more fair than when they participate less.”

–“[W]hen the lawyers behave more cooperatively during mediation, both the likelihood of settlement and litigant perceptions of procedural fairness increase.”

Lesson: “Thus, mediation programs should encourage mediators to facilitate participation and enhance the amount of cooperation, but discourage them from recommending particular settlements.”

Practice Lesson # 7. Preparation and presence at a mediation session are important.

Here are specific findings in the article.

–“In civil mediation sessions, lawyers generally speak on their clients’ behalf and do more of the talking.”

–“Neither settlement nor litigants’ perceptions of procedural justice tend to be harmed by this allocation of responsibility between the lawyer and client.”

–“Litigants’ presence during the session, however, is important”: (i) “Litigants who are not present view the dispute resolution process as less fair”; and (ii) “lawyers feel their clients’ presence influences ultimate outcomes.”

–“Preparation for the mediation session is important”:

–“The more lawyers prepare their clients, the greater the likelihood of settlement in mediation and the greater the litigants’ perception of procedural fairness.”

Lesson: “mediation programs should encourage litigants to attend and participate in mediation sessions and should provide information to assist lawyers’ preparation.”

Summary

Active judicial support for mandatory and early mediation of all types of cases before experienced mediators, by actively engaged parties and well-prepared and cooperative attorneys, who are familiar with and supportive of the process, will achieve the best mediation program results.

What do you think about this?

A Mediator–ish Role: “Settlement Counsel”

image
Trevi Fountain — Bringing People Together (Photo by Marilyn Swanson)

By: Donald L. Swanson

Here’s an experience that’s common to all trial attorneys.

We’re working in our litigation War Room.  Trial is scheduled to begin in ten days.  Our focus on trial preparations is intense.

But then the phone rings.  It’s an attorney on the other side with a settlement offer.  The offer is a pretty good one – much better than their final offer at mediation.

So, now we have a problem:

–Our clients wants to settle the case, if possible, and wants us to focus our attentions on negotiations.

–But, if we focus on negotiations to settle the case — and the negotiations fail — we’ll then be scrambling with trial preparations.

The Settlement Counsel Solution – Bringing People Together

Here’s a solution to the problem:  “Settlement Counsel.”

–A disputing party hires “Settlement Counsel” to take the initiative, beginning in the earliest stages of the case, toward bringing parties together, identifying disputes that can be resolved, and focusing on settling those disputes.

–The same party also hires separate “Litigation Counsel” to fight the legal battles and to focus on winning the case.

So . . . when that call with a settlement offer arrives shortly before trial, Settlement Counsel steps in to handle the settlement negotiations, while Litigation Counsel continues preparing for trial.

But . . . better yet, Settlement Counsel would have been working since the earliest stages of the case to achieve a settlement long before trial is about to begin;

Settlement Counsel Information

“Settlement Counsel” is an actual thing.  There are lots of articles on the Settlement Counsel subject, such as:

–“Why Should Businesses Hire Settlement Counsel?” in the Journal of Dispute Resolution

–“In Their Own Words,” a publication of the Section of Litigation, American Bar Association, in the series called “50 Shades of Settlement Counsel—What Role is Best for Your Client?”

Settlement Counsel in Bankruptcy

The Settlement Counsel role seems to be perfectly-suited for bankruptcy cases, and especially those cases with multiple parties and high levels of complexity.

Here is an example of a division of labor in bankruptcy that makes perfect sense:

–-Debtor’s litigation team fights the legal battles:  prosecutes first day motions, defends motions for relief from stay, presents a plan and disclosure statement, etc.

–-Meanwhile, Debtor’s settlement team identifies disputes to be addressed and takes initiative to resolve as many disputes as quickly and efficiently as possible.

My guess is that nearly every attorney who’s made a career of representing bankruptcy debtors or committees or trustees is really-good at the “Settlement Counsel” function.  They’ve been doing “Settlement Counsel” types of things their entire career, while functioning as “Litigation Counsel” at the same time.

Mediator Role and Settlement Counsel Role are Similar

A two-part article (appearing here and here) connecting the mediator role with the Settlement Counsel role is by Mitchell Rose, a mediator and Settlement Counsel in Toronto, Ontario.  He writes:

–“In addition to practicing as a mediator, I regularly attend mediations of civil disputes as settlement counsel.”

–“As Settlement Counsel I approach mediation differently than when I was a conventional litigator. This is best reflected in how I participate in joint sessions and make opening statements at mediation –- two things that I used to loathe as a litigator, but have now (dare I say it) grown to love — or at least like on most days.”

A Basketball Analogy

Differences between a Mediator and a Settlement Counsel are like differences between a point guard and a shooting guard in basketball.

–A “point guard” must be really good at bringing the ball up the court, initiating and directing the offense, and assisting others to score.

–A “shooting guard” must be able to score off the drive and from mid- and long-range and must be able to create his/her own shot against defensive pressure.

–A “combo guard” performs equally well at both the point guard and the shooting guard functions.

A mediator is retained by all sides collectively, must be able to perform as a neutral, tries to help all sides find common ground, and usually performs in a passive manner (i.e., others bring disputes to him/her for mediation).

A Settlement Counsel is retained by one side, makes no pretense at neutrality, tries to help all sides find common ground, and usually performs in a proactive manner (i.e., identifies disputes to be resolved and initiates negotiation action).

I’m sure that many successful mediators, like Mr. Rose identified above, would also serve well as Settlement Counsel.  We might call them “combo” professionals.

Applications

  1.  Many experienced mediators should be a perfect fit for the Settlement Counsel role.  Those two roles, it seems, go together like peas-and-carrots and are easily embodied in a single person.
  2. Settlement Counsel seems particularly helpful in disputes among multiple parties and with high complexity.  And since bankruptcy often has multiple disputing parties with complex disputes, bankruptcy is a perfect context for utilizing the Settlement Counsel role.

What do you think?

 

 

Mediation in China — Thousands of Years of Mediation History

By: Donald L. Swanson

There is nothing new under the sun.”

–Ecclesiastes 1:9

My first-hand knowledge of China is limited: I’ve traveled to Beijing a couple times, spent time (both there and here) with Chinese citizens, practiced law with a Chinese national, etc.

But here is something I’ve never understood:

–How are personal and business disputes handled in China?

China does not follow a “rule of law.”  And, therefore, they don’t have a bunch of lawyers or lots of lawsuits.  So . . . how do they handle business and personal disputes?  It’s always been a mystery to me.

Here’s an article with historical insights on the subject – written a half-century ago:

–S. Lubman, “Mao and Mediation: Politics and Dispute Resolution in Communist China,” 55 Cal. L. Rev. 1284 (Nov. 1967).

As it turns out, mediation has been the primary dispute resolution tool in China for a very long time.  This Mao and Mediation article provides the following information and explanations.

MEDIATION IN CONFUCIAN CHINA

img_0172
The China of Confucius (photo by Marilyn Swanson)

Confucianism idealizes “harmony” throughout heaven and earth, beginning with the emperor and extending downward to the lowest level of society.  The aim of all human relations is to preserve natural harmony.

Therefore, “mediation had been the primary mode of dispute settlement for thousands of years in traditional China”: 

“Confucianism, the dominant political philosophy in pre-Communist China, stressed the virtues of compromise, yielding, and nonlitigiousness. [The state], its governing institutions, and its traditional social nuclei . . . combined to create pressures and institutions for extrajudicial mediation.”

Here is an explanation of how mediation worked in traditional China:

“Often, mediators had to shuttle between the parties, talking separately with them and with other persons having knowledge of the matter in an effort to reach a mutually satisfactory compromise.”

“One observer described the process thus:

First, the invited or self-appointed village leaders come to the involved parties to find out the real issues at stake, and also to collect opinions from other villagers concerning the background of the matter.  Then they evaluate the case according to their past experience and propose a solution. In bringing the two parties to accept the proposal, the peacemakers have to go back and forth until the opponents are willing to meet halfway. Then a formal party is held either in the village or in the market town, to which are invited the mediators, the village leaders, clan heads, and the heads of the two disputing families.”

“Procedures akin to arbitration and adjudication were sometimes used if informal mediation had failed. Settlement of a dispute  . . . might involve a formal hearing . . . before a group of clan leaders and, perhaps, other respected members assembled for the occasion. . . .  parties and witnesses would give testimony, and then a decision would be reached [with the idea that] leaders should try to bring the parties to compromise without imposing a decision on them.”

MEDIATION UNDER MAO

img_0174
Mao’s China (photo by Marilyn Swanson)

The author of the Mao and Mediation article contrasts traditional mediation in China with mediation under Mao:

“[T]he Communists have sought to replace older values with their own, urging struggle where the Confucians counseled compromise . . . [and] weakening or totally abolishing family, clan, village, and guild, which were . . . the forums in which most disputes were resolved.”

“The Communists, while continuing to use mediation, have substantially altered the traditional mode of mediating disputes. They have redefined the identity and role of mediators and have partially succeeded in transforming the process and functions of mediation.”

“In short, the Communists have incorporated mediation into their effort to reorder Chinese society and mobilize mass support to implement Party policies.”

Here is a concrete example of how mediation worked (or was intended to work) in China under Mao:

“Model Mediation Committee Member Aunty Wu … If mediation isn’t successful once, then it is carried out a second, and a third time, with the aim of continuing right up until the question is decided. Once, while Aunty Wu was walking along the street, she heard a child being beaten and scolded in a house. She went immediately to the neighboring houses of the masses, inquired, and learned that it was Li Kuang-i’s wife, Li P’ing, scolding and beating the child of Li’s former wife. She also learned that Li P’ing often mistreated the child this way. After she understood, she went to Li’s house to carry out education and urge them to stop. At the time, Li P’ing mouthed full assent, but afterward she still didn’t reform. With the help of the masses, Aunty Wu went repeatedly to the house to educate and advise, and carry out criticism of the woman’s treatment of the child. Finally, they caused Li P’ing to repent and thoroughly correct her error, and now she treats the child well. Everyone says Aunty Wu is certainly good at handling these matters, but she says, ‘If I didn’t depend on everyone, nothing could be solved.’”

The cited source of this story is “Kuang-ming Daily (Peking), Oct. 14, 1955.”

img_0173
Today’s China (photo by Marilyn Swanson)

CONCLUSION

This is fascinating stuff.  Here in the West, we refer to mediation as a “young profession”; whereas, in the East, it’s been around for millennia.  Perhaps we can learn something from them!

And I’d love to know how all this works in today’s China.  Can anyone help us out on this?

People in Conflict Avoid Spending Time Together: A Bad Idea in Mediation?

“Nothing will lower your credibility faster than avoiding conflict.”

–Morris Shechtman, 2003

By Donald L. Swanson

Conflict is difficult.  And conflict is uncomfortable.  So, the easiest and most comfortable way to handle conflict . . . is to avoid it.

image
Caucus Room No. 3

That’s why caucus-only mediation has become standard practice in many mediations of business disputes.

In a caucus mediation, the disputing parties sit in separate rooms, and the mediator shuttles back and forth between them conveying negotiating messages.  In a caucus model, the disputing parties rarely talk to each other, rarely have to be in the same room together — heck, they don’t even have to see each other!

Some caucus mediation sessions begin with everyone in a single room, where the mediator explains what will happen and why the parties should get their disputes settled.  But this joint session appears to be trending out-of-fashion in business mediations—because the parties want to avoid spending time together.

In such beginning joint sessions, a representative of each party can give an opening statement.  But such opening statements have been out-of-favor for quite some time—because it’s uncomfortable.

Obviously, caucus-only mediation puts a heavy burden on the mediator to listen carefully and communicate faithfully between the disputing parties.

But there are, apparently, negative consequences from avoiding conflict via caucus-only mediation.

A Mediation Study

A 2016 report on a mediation study is published, in January of 2016, on the effectiveness of various mediation strategies.

Here are some of the findings and a recommendation from the study on the caucus mediation model.

Short-term effects

According to this study, the greater the percentage of time participants spend in caucus, the more likely the participants are to report that:

–the mediator “controlled the outcome”

–the mediator “pressured them into solutions”

–the mediator “prevented issues from coming out”

–they are dissatisfied “with the process and outcome”

–they do not believe “the issues were resolved” with a “fair” outcome

–they do not believe “the issues were resolved” with an “implemenable”               outcome

–they have a “sense of powerlessness”

–they have a belief that “conflict is negative”

–they have a residual desire to “better understand the other participant”

Long-term effects

According to this study, the greater the percentage of time participants spend in caucus, the more likely the participants are to report:

–a decrease in “consideration of the other person”

–a decrease in “one’s ability to talk and make a difference”

–a decrease in the sense that “the court cares about resolving conflict”

–an increase in “the likelihood of returning to court . . . for an enforcement action.”

Study Recommendation

Accordingly, the recommendations of the study include this:

to “discourage strategies that are heavily focused on caucus.”

Consistent With Experience

This recommendation seems to be well-taken, based on my experience.

As I look back over decades of mediation practice, on all sides of the table, items of regret from mediation often center on caucus-only situations.  Examples of such regret include these:

–a personal injury plaintiff wants to tell his story directly to the other side, but doesn’t get the chance.

–a fact dispute might be resolved in a face-to-face discussion of fact issues between the parties in a joint session, but the joint session doesn’t happen

–a credibility issue might be resolved in face-to-face discussions, but that possibility doesn’t get a chance.

What do you think?

 

 

How Mediation at the End of a Case is Wasteful

img_0170
A Wasteland

By: Donald L. Swanson

When mediation occurs early-in-a-case, instead of late, “cases are more likely to settle, fewer motions are filed and decided, and case disposition time is shorter, even for cases that do not settle.”

–B. McAdoo, N. Welsh & R. Wissler, “What Do Empirical Studies Tell Us About Court Mediation?” (2004)

A lawsuit consists of these overlapping phases: (i) pleadings, (ii) discovery, (iii) dispositive motions, (iv) pretrial steps, and (v) trial with final verdict or judgment.

The study linked above concludes, obviously, that an early-in-the-case mediation is more effective than a late-in-the-case mediation.

Wasteful

Nevertheless, the customary time for mediation is late-in-the-case: as discovery winds down, pretrial steps are in process, and trial is in the offing. Unfortunately, this late-in-the-case time (without an early mediation effort first) is about as wasteful as can be imagined. Consider this:

–A huge amount of time, effort, energy and fees are spent before a late-in-the-case mediation begins, and avoiding many of such costs can be a powerful incentive to settle in an early-mediation; and

–If the optimum time for mediating is early-in-the-case, then all the time, effort, energy and fees spent between an unused early/optimum time and the late/customary time is a pure and unmitigated waste!

A Faulty Rationale: More Time is Needed

One faulty rationale for end-of-the-case mediation is that the parties need more time to, (i) recognize the risks of their legal position, and (ii) come to grips with the reality of what it takes to resolve the case. Here are two examples of how this rationale is faulty.

1. A lack of opportunity. I remember representing a business defendant who gives ten reasons why they are not responsible for the bad things that happened. The months-long discovery process turns into a ten-step effort that proves each and every one of the reasons wrong. No early-settlement overtures occur in the case from either side, and my client appears ready to engage in meaningful settlement discussions only after all ten reasons are refuted. In retrospect, however, I’m pretty sure that, (i) they knew or suspected, all along, that they were in the wrong, and (ii) would have jumped at the end-of-case settlement terms, had those terms been available early in the case.

2. A lack of imagination. I remember representing a plaintiff against a business defendant that had clearly breached standards of care. But defense counsel refuses, in numerous different contexts, all early settlement overtures (he blames his client for the refusals). We settle at the end with defendant paying much more than defendant would ever have had to pay in an early-stage settlement. The early-refusals cost defendant dearly! I’ve often wondered why all early olive branches were rebuffed . . . and attribute it to a lack of imagination from the other side.

Another Faulty Rationale: Exhaustion Helps

Another faulty rationale for end-of-the-case mediation is the exhaustion element: when parties are weary of paying fees, weary of the time and energy consumed by the lawsuit, and concerned about risks of losing, they become more-inclined to settle. But this exhaustion element bears an unreasonably high price to pay for getting into a better mood for settling the case.

Bankruptcy Experience 

This early-mediation idea is now institutionalized in the Delaware Bankruptcy Court. In 2013, the Delaware Court establishes an early-mediation program for preference cases (see this article).

And it should be noted that early-mediation benefits are particularly in-play for bankruptcy reorganization disputes. Reorganization cases are best served when many disputes are resolved as quickly as possible. The business needs of a debtor, typically, cannot survive long and protracted battles. A debtor, simply, cannot afford to fight every battle all the time. So, early-mediation can be critical to the success of the reorganization process.

Conclusion

Early-mediation is optimal for resolving legal disputes, especially in bankruptcy cases. But end-of-the-case mediation is what usually happens (without any attempt at early mediation).  This is wasteful and needs to change!

🎶 “This is the dawning of the Age of Aquarius [for Bankruptcy Mediation]”🎶 — A New Jersey Example

image
A Dawning

By Donald L. Swanson

🎶Harmony and understanding,  Sympathy and trust abounding, . . . Aquarious🎶

                —The Fifth Dimension

The year is 1968.  The musical “Hair” debuts on Broadway, with the self-assurance of those who have thrown off the norms of prior generations.  Aquarius is now here, we are assured.

I’m not sure what happened.  Perhaps Jupiter didn’t align quite-right with Mars.   Or maybe the moon couldn’t figure out where the “seventh house” might be.  

Whatever the explanation, the peace-love idealism of 1968 is confronted by five decades of reality.  The Age of Aquarius still seems far away.   

The Dawning of Mediation

But if, back in 1968, the “dawning” song had been talking about mediation, it would have been accurate–both as to, (1) creating harmony and sympathy, and (2) the beginning of extensive use. 

–As the 1970s and 1980s progress, mediation is beginning to be a common tool for resolving civil lawsuits. 

–Since then, mediation has become a primary means of resolving suits in a most courts.

Bankruptcy Mediation Catching Up

Bankruptcy is an exception to the history of mediation progression.  For the final two decades of the last century / millennium, bankruptcy courts had little use for mediation.

–But, since then, that has been changing.

–Mediation of bankruptcy disputes is starting to catch up with mediation in other civil courts.

A New Jersey Example

An example of this catch-up is in the New Jersey Bankruptcy Court.

For many years, non-bankruptcy courts in New Jersey have had “presumptive mediation” rules.  Here’s what that means: 

–rules of procedure require that mediation occur before a case is tried, unless an exception applies. 

–It’s presumed that mediation will occur in every case.

New Jersey attorneys, in courts other than bankruptcy, are accustomed to presumptive mediation rules, and they plan their case strategies around the mediation requirement.

So, in 2014, the New Jersey Bankruptcy Court decides to catch up with other courts and adopts “presumptive mediation” rules for adversary proceedings.       

 Here is the operative rule language:

“Every adversary proceeding will be referred to mediation,” unless an exception applies.

Specified exceptions are for cases involving pro se litigants, requesting a TRO or preliminary injunction, being initiated by the US Trustee, or involving requests to be excused.

In July of 2016, a New Jersey bankruptcy attorney / former bankruptcy judge (Raymond Lyons) reports that the New Jersey bankruptcy bar “has accepted” presumptive mediation, “after some initial grumbling,” and that “both the bench and bar are happy with” presumptive mediation.

What we see in New Jersey is an example of bankruptcy courts catching up, on use of mediation, with other courts that have, for many years, been using mediation as a primary case-resolution tool.

Conclusion

The Age of Mediation Aquarius has been around for decades in many non-bankruptcy courts.  The Age of Aquarius for bankruptcy mediation is dawning, as well.