The Reasonable Refusal to Mediate

I seriously doubt the wisdom of mandatory mediation, for a number of reasons. One is that sophisticated parties who have paid lawyers to advise them, to serve pleadings and to discover evidence, should not be subjected to the additional financial and emotional trauma of mediation where without prejudice settlement discussions have been fruitless.

A UK High Court costs decision last month illustrates the point. At trial a claim for 16 million pounds for breach of a distributorship agreement was dismissed. The claimant argued that although the defendant was prima facie entitled to its costs, there should be a 50% reduction because the defendant refused to mediate.

In rejecting this submission the court relied in part on this passage from the leading authority:

The fact that a party unreasonably believes that his case is watertight is no justification for refusing mediation. But the fact that a party reasonably believes that he has a watertight case may well be sufficient justification for a refusal to mediate. (Emphasis in the original.)

The issue then was the reasonableness of the positions taken by the parties.

The chronology set out by the court reveals that the defendant had offered without prejudice settlement discussions 4 times, and made two settlement offers which the claimant regarded as nuisance offers. A month before trial the claimant proposed mediation . The defendants responded that they welcomed without prejudice discussion but did not think mediation would be a worthwhile or successful investment of time and cost, as each side at that stage was familiar with the other’s case, and “each ought to be able to assess with a reasonable degree of accuracy the relative strength of its position”. In the absence of any indication that the claimant would accept much less than $16 million, the defendants said mediation risked being no more than waste of time and money when both parties should instead be focusing on the trial.

In his costs ruling the trial judge observed:

I very much doubt having seen Mr Karlsen in the witness box that he would ever have accepted a nuisance offer, which is all that would have been available either in mediation or in without prejudice discussions. I do not in any sense blame Mr Karlsen who I did not and do not believe was or is dishonest, but he clearly and very obviously wholly believed in the Claimant’s case and would have found it very hard to accept a small six-figure sum inclusive of costs, which would have left the Claimant nothing after costs had been paid out on its side.

The court held that the claimant failed to meet the onus of showing the defendant had acted unreasonably in refusing ADR. It made no reduction in the defendant’s costs on this ground.

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Comments

  1. It’s a pleasant enough sentiment for a litigator John, but it’s simply just not supported by the research.

    A 2010 study in Psychology, Public Policy, and Law concluded that lawyers tend to be unrealistically overconfident about their positions in litigation.

    If the lawyers, who are supposedly subject-matter experts and can’t get an accurate read, how do you expect “sophisticated” clients to? The authors point out that the more complex the litigation, the poorer the predictive ability:

    Overestimation is more common on difficult tasks.

    Mediation provides what the authors refer to as outcome feedback. Surprisingly, this did not improve with more experience as a lawyer:

    Outcome feedback is an important factor in the development of well calibrated metacognitive judgments… To increase calibration accuracy,one needs to learn whether previous predictions were correct.

    The overconfidence bias of lawyers are generally created by the following factors:
    1) the adversarial system creates confirmation bias and commitment bias
    2) The illusion of control fosters an inappropriately high expectancy of success
    3) temporal biases increase confidence the closer a file is to trial

    Perhaps most notably, the lawyers’ perceived success rates in litigation was higher than their objective success at trial. The mind compensates for what could be perceived as a personal lack of skill in order to preserve the highly confident persona needed for future files.

    This same study found that anchoring and adjustment heuristics resist cognitive manipulation which could result in more realistic estimates of success. The implications of this is that clients may make poor decisions based on unrealistic case assessments by lawyers. However, the involvement of a third-party assessment, by a colleague or a mediator, may be of some benefit.

    Also worth noting is Tamara Relis’ Perceptions in Litigation and Mediation. A review of her book is available in the Canadian Journal of Law and Society.

    Relis describes the parallel worlds which lawyers and their clients dwell. The utility of mediation for lawyers is money, but for their clients it’s often an opportunity for an apology or explanation. Relis also finds that the mediators often align more with the lawyers’ interests than the clients, because that’s where they expect their future work.

    There are plenty of grounds to improve on mediation. But it’s somewhat disingenuous to suggest that a full-blown trial will not be more expensive and emotionally difficult than a mandatory mediation.

  2. I agree with Omar. The point of mandatory mediation is to get the clients talking about what their real interests are, while the lawyers are inclined to be thinking only of strategy and only in the context of going to trial. Yes, negotation and mediation have to keep in mind the ‘best alternative to a negotiated agreement’, but when the client just wants to be heard, the negotiated agreement can be very useful.

    A very experienced mediator once told me – in the days before mandatory mediation came to Ontario (in some places) – that willing parties to mediation settled about 80% of the time, and those who were forced unwillingly to mediation settled about 60% of the time. So it was of value to them.

    It was pretty clear during the debates in Ontario about the Apology Act that some lawyers thought that the only real compensation for injury was money. It was equally clear that many victims of harm put a higher priority on something else, usually recognition of some sort.

    In the English case discussed, it is possible that no mediated settlement was possible. Maybe the earlier conversations should have counted as mediation. But trusting counsel to the parties – litigators who live and breathe trials, at least in theory (in practice of course almost every case settles) – to decide whether to mediate is a bad idea.

    Mandatory mediation also elimimates the fear, probably more apparent than real anyway, that offering to mediate a claim is a sign of weakness (despite the Rules of Professional Conduct – in Ontario anyway – that requires lawyers to discuss ADR with clients). Better that it should simply be compliance with the Rules of court.

  3. Ontario’s mandatory medation program was evaluated as long ago as 2001. The evaluation report (exec summmary found it was considered beneficial by parties and their counsel.