Benefits and pitfalls of pre-suit mediation
Are you a fan of early mediation? I’m often asked about the best time to mediate. Although every case is different, my answer is the earlier the better. For starters, I help settle roughly the same percentage of cases before a lawsuit is filed as I do after some discovery is conducted. The impediment to pre-suit settlement is that the parties know less about the opposing parties, so it may be tougher to overcome their belief that their case is foolproof.
But there is also a hurdle to post-discovery mediation because the parties often want to recover the attorneys’ fees as part of settlement, even when they are unlikely to recover them in the litigation. Both of these obstacles are overcome every day in mediation but the latter issue often leaves the client wondering why their attorney didn’t recommend this settlement earlier.
With pre-suit mediations, the client and lawyer know their own side of the case and have a tendency to believe their case is better than it is. Here are a few things I encourage lawyers to tell clients before a pre-suit mediation:
There is no smoking gun. The chances that document discovery will produce a game-changing admission by the opposing party is extremely low; it almost never happens.
Every case will get worse with age. You may think you know the other party’s position, but they will certainly be prepared to answer all of your issues between now and depositions and trial. Neither their witnesses nor the independent witnesses will testify exactly as you expect.. And you will be surprised when some unhelpful information is disclosed. This is true for all parties.
You will learn about the case through the mediation process, so you don’t want to be too rigid in your expectations. Try to be open-minded about the risks and listen to what the mediator tells you about the opposing party’s position.
Lastly, it is extremely helpful to provide your client an estimated budget for the litigation, even in a pre-suit mediation, and despite all that you don’t know about the case. Budgeting is difficult--there is tons of uncertainty, you don’t want to scare off your client with too high a budget, and you don’t want to anger your client later on if your budget is too low. But fees play such an important role in achieving settlement, so you absolutely have to do your best.
The most common exception to my “the earlier the better” rule is when a damages analysis is not ready. This is often the case when you need expert testimony to complete it, such as an accountant to analyze your lost profits, an appraiser to value property, or a contractor to provide a repair estimate. Due diligence with respect to damages is important. Importantly, once you have a reasonably well-developed damages analysis, share it with the opposing counsel giving them sufficient time to absorb it and respond to it. This is particularly important when insurance is involved. Insurance companies often won’t settle cases without substantiation of the alleged damages.
Early mediation pays for itself even when you don’t settle. You will gain a tremendous amount of knowledge that will save you money by avoiding chasing dead ends in discovery and unnecessary discovery battles, and will assuredly reach earlier settlements merely by narrowing the gap.