Pre-suit mediation?when and how to do it, what to expect

Edmund J. Sikorski, Jr.

The history of Alternative Dispute Resolution (ADR) in Michigan reveals that MCR 2.410 and MCR 2.411 were first introduced into procedural jurisprudence in 1998 and subsequently adopted in 1999.

Case Evaluation, MCR 2.403, was part of that comprehensive procedural rule change. It is noteworthy that Michigan has the honor of being the only State in the Union that has such a procedural rule.

The Michigan Supreme Court State Court Administrative Office, Office of Dispute Resolution, published the Mediator Standards of Conduct February 1, 2013 and followed with the Michigan Judges Guide to ADR Practice and Procedure, Version 1 in April, 2015.

It is evident from the time line described that Michigan courts are just now beginning to implement and utilize ADR practices on a statewide basis. The Rules are applied and implemented on a County by County basis as those Circuit Courts and individual Judges see fit.

The Introduction to the Michigan Judges Guide to ADR Practice and Procedure states:

“ADR processes are an integral component of the trial courts’ case management systems, and litigants are increasingly exploring how ADR techniques beyond case evaluation and mediation can help achieve timelier, cost effective, and mutually satisfactory settlements earlier in the litigation life cycle. 

There is a growing body of evidence (evidence-based practices--EBP) that to be most effective from a cost and time standpoint, ADR should be introduced early in the case, and it should be strategically timed based upon the nuances of each case”

For the purposes of this article, it is important to note that the Rules and Guide apply once a case has been filed.

When To Do It

The logical extension of early intervention is pre-suit mediation.

However, not every dispute is amenable to pre-suit mediation. In selected matters, pre-suit mediation can be exceptionally valuable but in the wrong matters it can be it can be counter- productive. When faced with a dispute with serious litigation potential it is critical to think through whether it makes sense to negotiate or litigate. Dispassionately answering the right questions can yield the answer:

1. Interests: What are my interests? What are my adversary’s interests?

2. Alternatives: What is my alternative to negotiation?

3. Potential negotiated outcomes: Is there a deal that could satisfy both parties’ interest better than the alternative to negotiation?

4. Costs: What will it cost me to negotiate? What – if anything – will I lose in terms of money, time, and reputation? Could negotiation set a bad precedent?

5. Implementation: If we reach a deal, is it likely to be carried out?

In other words, the parties must recognize that the filing of a lawsuit is potentially disadvantageous to one or the other, that avoiding publicity is important, and that the cost and risk of protracted litigation is much less attractive than early resolution. Implicit in this description is the recognition that there is an overlap of interest among the disputing parties.

Examples of pre-suit cases that may be candidates of this process include:

1. Personal injury matters where liability is not disputed and damages may exceed insurance limits.

2. Employment cases involving C level executives where terminations affect company morale/value/restrictive covenants/intellectual property rights.

3. Commercial disputes which would impair acquisition or sale of one or both companies.

4. Claims involving breach of fiduciary duty.

5. Required prior to initiating adjudicatory procedures pursuant existing contractual documents.

6. Construction disputes.

No matter what subject the case involves, there are two caveats that apply:

1. Inclusion of all necessary parties to conclude the dispute. If resolution requires something beyond the control of the parties, participation by a party in control of that issue may be a precondition to settlement.

2. Sufficient available or readily available to make an intelligent decision. Exhaustive complete in every detail information (if that could ever happen in the first place) is probably not needed to make a case resolution decision. Information exchange may proceed on the basis of reliable reports, summaries, records, and statements.

Among other limiting factors on the viability of pre-suit mediation are:

1. The nature and approach of counsel. To the extent that respective counsel can have a civil, open, and honest conversation devoid of belligerent accusations and grandstanding about their and their clients’ expectations, the greater the opportunity for successful pre-suit resolution.

2. Withholding of information. The stark reality is that withholding of information in the mediation context is an exercise in futility for three basic reasons;

a) The mediation model is totally dependent on full disclosure – all parties must have access to the same information.

b) Well over 98+% of cases settle before trial, meaning that the withheld information either comes out at some stage before trial or the withheld information was/is irrelevant or useless.

c) In the context of insured claims, the reality is that carriers will not pay money to resolve a claim without documentation of damage. injury, and treatment.

 
How To Do It

1. Explicitly negotiate a process

Assuming that the subject matter and timing meet pre-mediation criteria, the proponent of pre-suit must set forth what is hoped to be accomplished and how the expectant goals will be achieved. There must be clarity of issue identification and information exchange parameters.

2. Build an agenda

Obtain agreement of the order of discussion items i.e. the elements of the claim and possible defenses, followed by damage assessments, then discussion of resolution options as well as the implication of terms and conditions affecting resolution.

3. Manage the commitment process

Many issues are linked and must be dealt with as a bundle even after there may appear to have been agreement on an individual issue. The whole may paint a different picture than the individual part. In short, managing the process will probably mean there is no agreement until all the components are dealt with as a package.

4. Prepare for pre-suit mediation

Practical suggestions:

1. Plaintiffs could draft and share with the other side a proposed complaint or, at minimum, a detailed statement of potential claims.

2. Defendants could share the proposed responses that could be asserted.

3. Enter into a tolling agreement if the statute of limitations is a potential issue.

4. If the dispute involves a technical or financial issue, have the proposed experts present at the mediation and/or available to discuss the matters in dispute/explain the basis of their report/conclusion.

5. In business disputes, have the principals attend. Frequently, a direct meeting of the principals can unwrap a difficult issue. The principals often put the deal together and can figure out a workable way to take it apart that is beyond the knowledge of counsel.

What To Expect

There is value in impasse. 

The mediation process gives a preview of the opposite trial strategy and narrative. It gives the parties a means of considering different settlement positions. Often, it gives the parties more time to process and reconsider their case assessments, risks, and options instead of giving the problem to a third party to decide for them.

There is empirical data (although very little) that, given the right circumstances, pre- suit mediation is successful.

The U.S. Equal Employment Opportunity Commission website publishes mediation statistics. In FY 2010 there were 12,755 mediations conducted in the EEOC system prior to suit being filed. 73.4% settled with an average closure rate of 100 days. Since FY 2005 the settlement rate has been over 70% each year.

Michigan attorney Richard C. Boothman is the Chief Risk Officer and Director of Patient Relations and Clinical Risk at Michigan Medicine in Ann Arbor. Prioritizing safety over prevailing practices, he designed an approach that become known as the “Michigan Model”. Since implementing that pre-suit model, medical malpractice case filings have dropped.


Conclusion

Under the right circumstances, pre-suit mediation can be a win-win for all parties. As soon as a potential litigation matter reaches counsel’s desk, the opportunity to resolve it without the expensive time-consuming litigation should be explored with both client and opposing counsel.

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Edmund J. Sikorski Jr. is an attorney and civil mediator in Ann Arbor. He can be reached at edsikorski3@gmail.com.