Legal experts offer lessons in mediation

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Want to know what not to do in mediation?

Check out Affordable Erecting Inc. v. Neosho Trompeler, 2006 WI 67.

In that case, the parties reached an agreement at mediation. Affordable’s attorney was present, but not one of its principals was at the session. Several weeks later, all counsel signed the agreement, but Affordable’s lawyer indicated that settlement was contingent on approval from the company’s owner by a particular deadline. That never happened.

After the case was dismissed without prejudice, Affordable refiled, with new counsel, but the circuit court entered summary judgment against it.

On appeal, the Wisconsin Supreme Court held that the settlement did not meet the requirements set forth in sec. 807.05 — it was not subscribed by the party, because Affordable’s attorney had created a contingency that was never fulfilled. The high court nonetheless agreed with the lower courts that Affordable should be estopped from pursuing its claims because its actions and nonactions induced reasonable reliance by the other party to its detriment.

If Affordable’s owner had attended the session, and/or if the settlement documents had been finalized at the mediation, perhaps that could’ve brought finality much sooner for those parties, and at a much lower cost, says Madison attorney Donald Leo Bach, a partner with DeWitt Ross & Stevens S.C.

Inspired by this case, and others, Bach set out to petition the Wisconsin Supreme Court to add a comment to the annotated statutes. Specifically, sec. 807.05 provides that agreements will not be binding unless they are made in court on the record, or they are made in writing and subscribed by the parties or their attorneys. The comment provides in part, “This section also applies to agreements, stipulations, and consents reached as a result of alternative dispute methods outlined in s. 802.12.”

While there aren’t a large number of Wisconsin Supreme Court cases that are instructive for mediators and attorneys, the fact is that since alternative dispute resolution came of age some 15-20 years ago, looking across the U.S, a sizeable body of case law has developed. Some mediators undoubtedly think that’s unfortunate. But, considering it from the glass-half-full perspective, there’s a lot to be learned from mediation litigation.

Profs. James R. Coben and Peter N. Thompson, from Hamline University School of Law in St. Paul, studied the mediation litigation phenomenon on the national level (See accompanying article). They came up with a number of recommendations, some of which Wisconsin Law Journal discussed with a handful of experienced lawyers and judges-turned-mediators from the state. Here’s what they had to say.

Consider a “cooling-off” period.

For some cases, Coben and Thompson suggest a defined time period, within which the parties are free to exercise a right of rescission, to avoid the problems associated with buyer’s remorse.

“It depends on your goals,” explains Thompson. “If your goal is only to get a binding settlement, you want to get an agreement in writing and signed, or perhaps just a signed release, before you leave. However, if your goal is to encourage self-determination and to have an agreement that the parties truly believe in, then I’d recommend a cooling-off period.”

Retired Wisconsin Court of Appeals Judge Gordon G. Myse, of Appleton, disagrees. If the agreement reached at the session was voluntary and the parties are represented by counsel, “I see no reason for a cooling-off period, other than to accommodate parties changing their minds,” he says. “Retrospective regrets are common, and in my experience, whenever we’ve tried a cooling-off period, there’s inevitably some perceived problem or change of heart.”

Bach agrees. “With a cooling-off period, under Wisconsin law as it currently stands, if there’s no written agreement, one party can walk away. Meanwhile, everyone’s already spent a lot of time and money, and the person walking away has just made the distance between the parties even greater.”

“Now, in some cases, especially the ones where you anticipate an ongoing relationship, and preserving that is more important than settling this particular issue, maybe having another session 48 hours later to wrap things up is a good idea,” he says. “But as a general rule, the best settlements are probably the ones where no one leaves feeling very happy.”

Use caution when discussing confidentiality.

“Don’t oversell when it comes to confidentiality,” says Thompson. “The fact is, there is no total blanket of secrecy in the mediation room, and you don’t want to have to go back on your word.”

Wisconsin has fairly sweeping protections to prevent the admissibility of communications from mediation, says Mark A. Frankel of Madison, a former judge who now mediates cases. Frankel is referring to sec. 802.12(4), the general ADR statute, and sec. 904.085(3)(a), which makes mediation communications inadmissible in evidence and not subject to discovery or compulsory process in any judicial or administrative proceeding.

That having been said, Frankel recalls a case where he was subpoenaed, but the parties consented to his testimony and it helped resolve the case. Similarly, Myse was subpoenaed, and gave testimony in a National Labor Relations Board hearing, he says.

The hearing examiner did not inquire about the mediation communications, however. In addition, retired circuit court Judge Robert A. Haase of Oshkosh says he provided information about his understanding of an agreement reached in mediation in an affidavit. Like Frankel’s situation, the parties consented to him doing this, and therefore the mediator’s privilege was waived.

On a related note, Bach says that parties need to understand that, while what they say at the mediation table might not be admissible, they still might be revealing to the other side their case strategies and perhaps their most critical evidence.

In some cases, Coben and Thompson wrote that counsel might want to contract for confidentiality beyond protections offered by state or federal statute, court rule or common law. Bach says this is an especially wise idea in cases involving trade secrets, where sometimes documents are determined to be “confidential-counsel only” by agreement, or sometimes they are deemed confidential to the parties and counsel only, but won’t be made public.

Mediators should use written agreements to mediate, which are signed by all the participants, that clarify matters such as the role of the mediator, the mediator’s compensation, the extent of confidentiality, and the binding nature of any mediated agreements reached.

The vast majority do this, says Bach. “I’ve found that, the more pre-planning that mediators do, the better. They set out in writing the ground rules before anyone starts; they disclose any conflicts of interest; they cover who’s going to pay for what; they talk about confidentiality; and they discuss how the process works.”

Both Myse and Haase, however, don’t have their own pro forma mediation agreements.

Myse says he’ll generate one if
the parties request it, while Haase works for Resolute Systems in Milwaukee, which generally takes care of all the pre-mediation paperwork for him. Both agree that the formal, written mediation agreement is less important when the parties are represented by counsel. Haase also volunteers as a mediator for the Winnebago Conflict Resolution Center and when he’s a neutral for pro se parties, he always gets a signed agreement to mediate.

If possible, finalize all settlement documents in their entirety at the mediation. If that’s not possible, at the very least parties should reach agreement on the consequences for the failure to generate formal documents, whether the informal outline becomes enforceable, or whether there will be a return to mediation.

Myse and Frankel agree with the concept but follow different approaches.

“I tell them that the memorandum of understanding we prepare is enforceable, and from the discussions I’ve had with other judges, they are,” Myse says.

Likewise, Frankel generates a bullet-point list of the key aspects of the agreement, for the parties and counsel to sign off on before they leave. He additionally obtains a written, signed agreement that, should there be any follow-up disagreements over the terms of the settlement, the bullet-point agreement becomes binding and he’ll arbitrate any outstanding issues. Getting to that point is a rarity, he adds.

Bach is a proponent of the use of confidential memos to the mediator. Because they aren’t shared with the other side, they’re candid, and they help the mediator get a solid understanding of the real issues before the session even begins.

For his part, Haase says lawyers should opt for trained mediators whenever possible. Yes, there are some very effective mediators who’ve never had a any training. They’re the exception, not the rule, and the services they’re providing are more like early neutral evaluation or moderated settlement conferences, rather than pure mediation, which emphasizes helping the parties reach a voluntary settlement — and therefore, one that’s probably less likely to be subsequently challenged in court. More-over, a trained mediator is probably better-equipped to deal with the emotions that often drive the outcome of the mediation.