Top 10 Reasons Why Mediations Fail

On January 16, 2012 I previewed an upcoming program hosted by the OBA's ADR Section.  The focus for the program was on why cases don't settle at mediation and what mediators and advocates can do to improve the chances of settlement at mediation. I attended the program. Here is my review.

I found the program interesting and informative, especially on the first topic - identifying the reasons why mediations fail.  However, I wish more time had been spent on the second topic - what we can do to improve the chances of settlement.   

The format for the evening was a panel discussion, moderated by Barry Fisher.  Barry is an employment mediator and labour arbitrator based in Toronto.  Barry put together an experienced panel, comprised of Stephen Grant, Les Dizgin and Philippa Samworth - all senior Toronto-based counsel, mediators and arbitrators.  Each provided their own unique perspective on the subject - Stephen from the vantage point of the family lawyer and mediator, Les from the point of view of the commercial litigator and mediator and Philippa Samworth from the perspective of insurance defence counsel and the personal injury mediator.

As moderator, Barry took an active role in the discussion, which was not surprising since the topic is one that he claims to have studied informally for a number of years.  Barry explained that over a recent three year period he followed-up on 150 failed employment mediations (virtually all wrongful dismissals) that he had conducted. In each case, he asked counsel if the lawsuit had ultimately settled.  If the case had settled, he then went on to ask when it settled and for how much.  Through his survey Barry found that 95% of the cases that had failed at mediation eventually resolved and that of the remaining 5%, 3% didn't settle (and went on to trial) and 2% died. Regarding the timing of settlement he learned that on average cases settled 8 months after the completion of mediation.  As to what the parties settled for, he found that employers got a slightly better result after mediation.  Employers recovered 60% of "the gap" (the difference between what the employer last offfered at mediation and what the employee last wanted at mediation) and employees recovered 40% of the gap.

Stephen, taking a page from David Letterman, provided the top 10 reasons why mediations fail in the family area.  Drum roll please...

10. Counsel is an impediment (self serving agenda; hasn't prepared client with range of outcomes)
  9. Discordance of interests (one person is focused on custody, the other on money)
  8. Power imbalance (money, emotional power, domestic violence)
  7. Client not in frame of mind to take advice
  6. Manipulation (one side is using litigation to delay)
  5. Timing (too early/too late)
  4. Insincerity (mediation is being used as a method to ferret out dirty laundry)
  3. Fatigue (psychological, emotional)
  2. Unrealistic expectations
  1. Delay (parties are not ready to settle; unfinished psycho/emotional issues)

From Philippa's experience the number one reason why mediations fail is that new information comes to light at the mediation that cannot be properly digested or tested to allow for an informed decision or an adjustment in the authority that the insurance representative present at the mediation can exercise.  I have seen this dynamic play out on occasion in personal injury cases that I have mediated.  Plaintiff's counsel presents a new medical report that perports to show previously undetected injuries to the plaintiff as a result of the accident.  Or, the plaintiff furnishes new evidence of income loss.  I find these moments deflating because they are often avoidable.  While most plaintiff's counsel prepare their medical brief and client well in advance to maximize the opportunity for settlement at mediation, there are, unfortunately, occasions when key evidence in support of a claim, such as,  the latest medical report from a treating specialist or current financial information, is being exchanged at or on the eve of the mediation. It's, therefore, not suprising that that these cases don't settle at the mediation. 

For Les, a key reason why mediations fail in commercial cases is that parties fear the implications of not settling.  Following that reasoning, counsel may be reluctant to take their best shot at mediation if they perceive that doing so may result in rejection and the realization that they've wasted their best attempt at settlement.  So, they strategicaly choose to delay the negotiation process, figuring they can do better later on.   In my experience, the real issue here is the fear of of making a making a bad decision.  In my view, the fear and anxiety can be lowered simply through proactive pre-mediation preparation by counsel and the client, so that when lawyer and client arrive at mediation they are able to assert their best case to the opposing side and support it with strong evidence.

Most counsel prepare their clients well for mediation.  That's certainly been my experience.  I've also found that a signiciant majority of cases settle at mediation.  Barry's statistics seem to accord with what we've heard for years: only a very small percentage of cases that don't settle at mediation end up being tried.  Ultimately, they settle.  So the question is what, if anything, can we do to encourage parties to  settle at mediation more often?  

Not to diminish the reasons put forward by the panellists at this program, but it's my view that there are three basic reasons why mediations fail:

1. inadequate preparation
2. unrealistic expectations lead to incomplete authority
3. limited time

Most counsel come to mediation having carefully considered the strengths and weaknesses of their case and the range of options that they're open to consider. And, most importantly, they've prepared their clients for the  realization that a successful outcome requires signifciant and, at times, painful movement from their dream outcome to a realistic one based on the evidence, the cost of litigating and the will of the other side.  But, some counsel do not properly prepare their evidence or their client and the result can be overinflated expectations and disappointment.  As the mediator, I work hard to educate parties around the strengths and weaknesses of their case and the costs inherent in litigating, but if counsel hasn't done their job in advnace of the mediation I'm faced with a delicate and difficult task.

At the start of every mediation, I confirm with the parties that they have full authority to reach a binding resolution.  It's then frustrating to find at crunch time that someone who has not participated in the process now needs to be consulted. This becomes very difficult because that new person has not been a part of the ebb and flow of the day and has a view of the case based on pre-mediation expectations. I understand that this happens.  Insurance adjusters have managers, human resources managers have directors, claimants have spouses or loved ones.  The easy solution would be to ensure that whoever needs to be consulted is present at the mediation. Unfortunately, that's not logistically possible in all cases.  So, we have to live, to some extent with the reality of incomplete authority.  But, what this issue really points to is unrealistic expectations.  And, this is something that can be addressed through proper preparation (the timely exchange of key evidence prior to the mediation and hard talks between counsel and client about the real strengths and weaknesses of the case and the attendant risks - financial, emotional, etc. - of moving on with the litigation).

Another impediment is time.  Most of the cases I mediate are lawsuits that are making their way through the court system.  Accordingly, they are mandatory mediations that are often scheduled for three hours.  Some cases can be settled in three hours or less, but some cannot. The majority of counsel understand this and are willing to invest additional time if momentum is building towards a settlement.  But sometimes counsel and their clients  are not prepared to spend extra time and this creates challenges. 

First, a three hour deadline can pressure the parties to move too quickly to an assessment of the value of the case before the they are ready to do so.  Often, this assessment is done through shuttle negotiation, where the parties sit separately in caucus through most, if not all, of the mediation while the mediator shuttles back and forth tendering offers and counter offers.  Not to sound too nostalgic, but I've been mediatong long enough to remember when parties welcomed the opportunity to exchange information and expore interests in joint session and caucausing was used as a strategic tool when the moment called for it, not as an automatic starting point.  I still prefer to spend some time in joint session, particularly at the outset of a mediation, because there's value in it.  When time is invested digging into the issues and developing the building blocks for settlement in joint session the process  often moves faster during negotiation over numbers. 

Second,  cases that should settle don't settle because the parties have not committed sufficient time to get the job done.  Two recent examples are worth considering.  In each of these cases the mediation ended without a settlement in the fourth hour with the sides in each case $3000 apart.  In one case, a lawyer had to leave for a meeting; in the other, it was a party that had to leave.  In both cases, deals should have been struck at mediation.  Happily, in one of the cases the parties settled (yes, they split the difference) two weeks after the mediation.

I am certainly not advocating for a change in the court mandated three hour mediation.  The system is working.  Most of my mediations settle within three to four hours.  But, I do encourage counsel to think realisitcally about committing sufficient time to a process that far more often than not leads to settlement.