|
The topic of the ADR Section Annual Meeting September 25, 2001 was the judicial referral of cases to mediation. Although some disputes find their way to mediation voluntarily, others end
up in mediation through judicial referral, or as a result of a mediation clause in the documents governing the relationship of the parties. This article offers a reason to make mediation
compulsory, as well as a sample mediation clause to help the parties insert that "velvet glove" into documents affecting their transactions.
Detractors of compulsory mediation argue, and often firmly believe, that mediation is effective only if both parties submit voluntarily to mediation. They quickly conclude that compulsory
mediation is ineffective and note that the highest settlement rates are for voluntarily submitted disputes. Indeed, in the ideal mediation context, both parties believe the dispute can be
resolved through facilitation by a mediator and the settlement rate is surprisingly high. The American Arbitration Association ("AAA") reports that 85-90% of their mediated
cases settle. The perhaps shocking news for the nay-sayers, is, however, that a high percentage of compulsory mediations also settle. For example, mandatory arbitration of cases in the
Tenth Circuit Court of Appeals nets a 40% settlement rate, in the Utah Court of Appeals for 1998 through 2000 the settlement rate was over 50%.
Most document drafters acknowledge the possibility of a future controversy and include an attorneys fees clause somewhere in the boilerplate of the document. The foregoing statistics
suggest that a clause requiring mediation may also be well advised. The provision must be tailored, however, to the demands of particular parties or situations. Just as a good drafter
appreciates the serious error in using any standard substantive provision without meeting the needs of the particular context, the drafter should also tailor the more traditional
"boilerplate" provisions, including dispute resolution provisions. Customizing the provision will probably reduce the likelihood of a dispute in implementing the mediation
process. Nevertheless, a form provision such as the following may provide a starting point.
Any and all disputes arising out of or related to this agreement or the parties' performance hereunder shall be submitted to mediation before a mutually-acceptable mediator prior to
initiation of arbitration, litigation or any other binding or adjudicative dispute resolution process. The parties shall: (i) mediate in good faith; (ii) exchange all documents which
each believes to be relevant and material to the issue(s) in dispute; (iii) exchange written position papers stating their position on the dispute(s) and outlining the subject matter
and substance of the anticipated testimony of persons having personal knowledge of the facts underlying the dispute(s), and; (iv) engage and cooperate in such further discovery as the
parties agree or mediator suggests may be necessary to facilitate effective mediation. Mediator, venue, and related costs shall be shared equally by the parties. Venue of the
mediation shall be the state of Utah. In the event the parties are unable to agree upon a mediator, the mediator shall be appointed by a court of competent jurisdiction. This
provision shall be specifically enforceable according to its terms, including but not limited to an action to compel mediation. The prevailing party in any action to enforce in whole
or in part this mediation clause shall be entitled to reimbursement of attorneys fees and costs incurred in said action.
Although the first sentence of the clause accomplishes the desired end of mandating mediation, it does not resolve any of the questions of how to choose the mediator, what documentation to
exchange prior to the mediation, where the mediation should take place or other questions specific to the particular contract. It is not uncommon to actually name the mediator in this
clause, making it far easier to initiate the mediation process in the event a controversy arises. In short, a more inclusive clause facilitates the process. In the event the parties are
increasingly adversarial at the time the dispute arises, it will be invaluable to have agreed on the basic parameters in advance. The clause may name the administrator for the mediation
and any particular mediation rules to be followed such as the Commercial Mediation Rules of the AAA.
In other situations, the parties may not have agreed in advance to mediation and wish to craft the clause to submit the controversy to mediation after it has arisen. The parties may not be
able to agree on the controversial issues, but may be capable of agreeing to the basic framework to be used for the mediation. The foregoing clause provides at least some ideas for those
parties.
Another consideration is whether to include an arbitration provision, turning the clause into a "med-arb" clause. To accomplish that result, one can tack on something as brief as
"Any unresolved controversy or claim arising from or relating to the contract or breach thereof shall be settled by arbitration." The AAA suggests the following:
If a dispute arises from or relates to this contract or the breach thereof, and if the dispute cannot be settled through direct discussions, the parties agree to endeavor first to
settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Rules before resorting to arbitration. Any unresolved controversy
or claim arising from or relating to this contract or breach thereof shall be settled by arbitration administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. If the parties agree, a mediator involved
in the parties' mediation may be asked to serve as the arbitrator.
As with mediation clauses, the arbitration portion of the provision may include the administration of the arbitration, any particular rules to be followed, the parties' determination of
how the arbitrator (or arbitration panel) is to be selected, any particular experience required for the arbitrators, or even the ultimate question to be arbitrated. For example, in one
very protracted and heavily negotiated transaction, the parties included the following in the arbitration clause for the employment agreement: the sole question for the arbitrator is
"Has the Executive committed an act which would allow the Company to terminate Executive's employment with the Company for cause". There were then two pages of instructions
about how the arbitrators would be selected and the standard for review of the facts to be undertaken by the panel, as well as specific guidelines for submission of the controversy and
fact-finding.
Allow your client to take advantage of all the benefits of mediation by including a mediation or med-arb clause in contracts you draft. Use everything available to resolve disputes as
quickly and economically as possible.
|
