Please allow this Blog post to serve as the second installment in a five part series entitled “Top 5 Construction Mediation Tips and Techniques.” The previous installments can be found below:
Tip #1 – Ensure you and your client fully understand what mediation is and what its benefits and purpose are.
The Blog posts from this series are intended to be cumulative and should be reviewed as a whole in order to fully receive the message of the author. This post will focus on the importance of knowing your case and that of your adversaries.
Without a doubt, the single most important thing you can do to influence the outcome of the mediation is be prepared. I cannot stress to the reader enough the importance of solid mediation preparation. Prior to any mediation, you should review your entire file from inception to ensure intimate familiarity with the case and its issues from the beginning. Many times in a multi-party, multi-year legal battle, litigants lose track of the salient issues as they were outlined in initial demands and the complaint/counterclaims/cross-claims at issue. Thorough preparation may mean a lot of things to a lot of people, but to me it entails a wide-ranging knowledge of my case and an even wider-ranging knowledge of my opposition’s case(s). For each side, you should have a functional understanding of:
- Legal strengths and weaknesses
- What are the required elements for each claim asserted?
- What defenses stand in the way of meeting required elements?
- Is the case fully at issue such that the pleadings properly frame the final triable issues?
- Are there any dispositive motions filed or to be filed which will affect claims asserted? If so, should these be adjudicated before the mediation? How will lingering motions affect negotiations?
- Have you researched and briefed the legal issues such that you are aware how the case law affects all claims and defenses asserted? Will you be able to use any of this law in a motion in limine to exclude evidence should the case go to trial?
- Have you prepared a preliminary set of jury instructions on all remaining claims and defenses?
- Have you analyzed verdicts or holdings which interpret the contract at issue or key provisions pertaining to the contract at issue (including plans, specifications and/or change orders)?
- Factual/technical strengths and weaknesses
- Has each party developed facts through discovery which meet required elements of claims asserted?
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- By the time a case has reached mediation, you should have a pretty thorough first draft of an exhibit list and witness list for trial. I prefer to keep this as a running document in a trial brief from the moment the case first becomes contested.
- Has all meaningful discovery been conducted? Unless the amounts in controversy or other extraneous factors dictate otherwise, I prefer not to mediate a case without a full document exchange and key witness deposition testimony on record. On the other hand, the threat of systematic and costly discovery should the case not settle is a very motivating factor for parties interested in avoiding protracted litigation.
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- If I had to, could I give my opening and closing arguments right now? Could I do the same for the opposing side? The latter is a novel technique I employ when trying to fully understand the perspectives of the opposing party.
- Who has a stronger expert? Could the expert’s participation in the mediation assist in furthering technical discussions and resolving issues as they arise? Are expert reports ready to be shared with the opposition?
- How has our perception of facts changed over the course of the litigation and how does that affect the legal issues and damages?
- Has each party developed facts through discovery which meet required elements of claims asserted?
- Damages
- Have the damages experts reduced the factual grievances to a monetized value?
- Do you understand the differences between your: a) “on my worst day I can prove these damages” scenario; b) “the likely outcome” scenario; and c) “we will get these damages if the stars align and there is divine intervention” scenario, and all variants in between?
- Do your legal theories of the case connect with the facts in a way that support the damages you are seeking? Do your expert’s reports evidence this connection?
- Can you itemize each “bad act” of the opposing party to a particular value such that the parties can have a fluid number to add or subtract from given the weight of each respective “bad act?”
- Outside factors
- What are the driving factors to the litigation aside from the issues at bar?
- Does this litigation impact future work between the parties or otherwise?
- Does this litigation have an impact on future risk exposure for any party?
- Collectability of those with liability
- Have you conducted preliminary asset reports and a judgment collectability analysis on the parties such that you know whether a judgment is even worth pursuing?
- Do you know what ongoing projects or financial opportunities the parties are actively engaged in? Can you suppress untruthful attempts to claim inability to pay amounts owed?
- Have you analyzed implications of fraudulent transfers or other asset protection measures the opposition parties have employed to mitigate judgment risk?
- Are the parties solvent or is the judgment at risk of being discharged in a bankruptcy?
- Have you conducted a preliminary bankruptcy analysis to ensure what your positioning and strategy would be if any party (including your client) filed for bankruptcy protection?
- Litigation budgets
- Do you know what your client has spent to date in prosecuting claims? Do you know where that number fits in the budget established at onset? Do you know the same, or can you reasonable estimate the same, for the opposition?
- How much money will it take to take the case to trial for each party should you not settle at mediation?
- Do the legal expenses make sense in relation to the amounts in controversy, or has the matter devolved into a pot-committed prevailing party fee lawsuit?
- Role of insurance in the issues
- What coverages exist and what are their limitations? Have I fully requested and analyzed the policies and the reservation of rights documentation?
- Have the pleadings properly triggered available coverages?
- What role will the insurer have in affecting the negotiations?
Knowing all of the foregoing (at a minimum) will ensure you are not blindsided by distracting assertions at a mediation which can stifle progress of negotiations, eliminate goodwill, or in a worst case scenario scare you into shrinking your target settlement number. It will also ensure that you aren’t the party at the negotiation table holding up the process or requiring the mediator to waste vital communications goodwill in teaching you about your own case.
Knowing your case also means understanding what the impact of taking a settlement amount less than the full damage amount prayed for as a plaintiff, or paying more than you had valued due and owing as a defendant has to the client. Typically, well in advance of a mediation, I will meet with my clients and discern what their tolerance for risk associated with a trial is, what the practical repercussions of minimal or no recovery will be on their business operations (as a plaintiff), and exactly what their definition of success in the action will be. Many times a client’s definition of success in the case is a bit different than the real world definition of the success actually attainable. For instance, we could go all the way to trial, receive a full damages/interest/prevailing party fee judgment and collect it, but never receive the emotional satisfaction of an apology that some clients seek, or be able to turn back time to continue what was a profitable bid win or make up for missed work as a result of the distracting litigation. Sometimes in lawsuits even winning the Super Bowl means that you may miss the playoffs next year. Clients need to know this information and lawyers, in turn, need to know what the fiscal impact of the negotiations are and what internal considerations mean the most to the company. I’m consistently surprised at what my clients divulge to me as factors that are important to them in the litigation. Very often those factors are not pecuniary in nature. Accordingly, well before a mediation, it is important to sit down and understand what the “levels of victory” are. At a minimum, that involves understanding what your damages and recoverable fees and costs will be in the: a) worst case scenario with a modest win where you prove damages for only things that are provable by proverbial smoking gun evidence; b) a split-victory where the damages rewarded are a mix between what you were asking for and what they were asking for; c) a complete and total annihilation win in which you get everything you are asking for; and d) a few plausible outcomes in between. It is not uncommon to have non-monetary issues defined as a measuring point for the litigation, so it is important to have a full grasp of what those issues are before the first opening construction mediation statement is given. It is also prudent to understand what the costs and risks are to continue litigating the action, as well as the exposure to prevailing party fees and counterclaim damages. Defining your “levels of victory” will help you understand what level each respective round of negotiations will lie in as your mediation progresses. Having a clear understanding of end game outcomes will ensure that the litigant will not leave the mediation pressured into making a settlement decision that is not of their own volition. Just as success in litigation is about controlling variables and eliminating surprises, each round of negotiation should be subject to forecast based on reason, logic and knowledge of the issues. Hopefully, the end resolution will be a settlement on terms in one of the higher levels of victory, without the cost and risk of a trial to attain that victory.
Please revisit the site tomorrow as we post Part 3 of our 5 part Construction Mediation Tips and Techniques series entitled: “Tip #3- If there are reasons why your case may not settle at a construction mediation, understand them in advance.”
Sources:
Robert J. McPherson, Building Resolutions, News from the AAA Construction Division, Issue #1, March 2010
Gregory S. Martin, Mediating the Construction Dispute- Are You Ready to Mediate, RPPTL Action Line, Volume XXXII, No. 2, Fall 2010
Larry R. Leiby, Florida Construction Law Manual, Volume 8, 2011-12 edition