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The When of Mediating a Complex Business Dispute

Increasingly the question regarding mediation of a complex business litigation case is not whether but when. Among experienced litigation counsel, there is widespread agreement that mediation should be attempted in many if not most cases. The resources of time and money committed to mediation are usually modest compared to the requisites of full-blown litigation. It is a voluntary and confidential process. Though experiences may vary, I have found that mediation succeeds more times than not in obtaining mutually acceptable settlements. Even if a case does not immediately settle in mediation, both parties are apt to receive significant value in obtaining the assessment of a neutral third party and also in learning more about how the other party (or parties) calculates the risks and rewards of the case.

So the question often boils down to: when is the best time for mediation in business litigation? The full course of a complex commercial litigation case usually consumes more than a year and sometimes more than two years. At what point in the processes of investigation, joining the issues, document discovery, depositions, motion practice, the retention and preparation of experts, pretrial preparation and the conduct of the trial, should counsel and the parties switch gears and give mediation a try?

There is of course no correct answer to this question. However, it is useful to approach it by considering the concept of perfect information, which traditional economic theory assumes to be the basis for rational decision-making in market transactions. Mediation can be seen as an attempt to produce a market-like transaction for the resolution of a claim, freely entered into by the plaintiff and defendant. The price of the settlement is based upon a shared understanding of all relevant facts, including the risks of not settling, which ideally amounts to a kind of perfect information.

This manner of thinking suggests that it is unwise to attempt mediation before there has been an exchange of all relevant information. But the parties need not wait for discovery to run its full course before such an exchange can occur. As early in the process as possible, counsel should discuss the desirability of mediating the case. In that context, they identify the discovery that will be absolutely required so each can confidently assess the strengths and weaknesses of each other's case.

We know that the economist's ideal of "perfect information" does not exist in the real world. However, skilled counsel should know what information is perfectly sufficient for a realistic appraisal of a case and therefore a successful mediation. It is usually in the best interests of all litigants that their counsel reach that point sooner rather than later.

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