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Mediation has become an integral and inevitable part of the litigation process in California. Because of this, it is helpful to reflect on the evolution of this process and the differing motivations of the participants, as well as the obstacles to success encountered in a mediation. An awareness of the underlying conflicting interests of the parties in a lawsuit is essential to understanding mediation and the role it plays in litigation. Cases dealing with personal injury and wrongful death, as well as other types of litigation, are susceptible to a basic Marxist analysis. A plaintiff in such cases seeks money damages from the defendant. The defendant’s goal is to pay nothing or as little as possible and to delay any payment for as long as possible. The plaintiff’s goal is to obtain the best result possible and do so at the earliest possible time. Other factors might modify or alter these goals but the basics are constant. In the 1970s, delay tactics on the part of defendants were so successful that often the only leverage to compel a trial date was the five-year statute of limitations. Without a trial date there was little incentive to settle a case. During this period, insurance commissioners were chosen from the industry and, despite statutory mandates, they made no attempt to interfere with delay tactics that suited the insurance industry. As long as defendants could make more money by holding on to the amount required to settle the case, they had no incentive to settle. Accordingly, only smaller cases settled while cases involving serious injury or death were generally delayed. The judiciary made attempts to intervene. In Royal Globe Ins. Co. v Superior Court (1979) 23 Cal.3d 880, the California Supreme Court mandated good faith attempts to reasonably settle cases by allowing attorneys to enforce the statutory mandate that had been ignored by the insurance commissioner. The court also made significant damages, including punitive damages, available as a remedy when the insurance companies failed to act in good faith. Suddenly, calls from plaintiffs counsel were returned, letters concerning settlement received replies, and there was at least a surface interest in settling cases. The demise of Royal Globe, spelled out in Moradi-Shalal v. Fireman’s Fund, 46 Cal.3d 287 (1988), eliminated this incentive. The responses stopped as quickly as they began. Beginning in about 1980 various courts attempted to expedite the process by offering judicial settlement conferences. Either the trial judge or another member of the local bench became the mediator. In addition, attorneys, either alone or in conjunction with the judge, contributed to the process by serving as pro bono mediators. The enactment of fast-track legislation in 1990 set serious time-limited goals for the trial of these cases. Alternative disputes resolution in some form was mandated, and the choice was nonbinding arbitration — the prizewinner when it came to wasting time and money — or mediation. The choice was obvious. While pro bono attorneys are still utilized, mediation has fueled one of the most successful growth industries in the legal world. Mediation in some form is now available for all. Mediation in major cases usually occurs through an agreed-upon mediator who may charge a substantial fee for services rendered. But the availability of mediation does not eliminate the underlying conflicting interests of the parties. In addition to the eternal conflict over time and money, other obstacles complicate the process and work to the benefit of one or the other of the parties involved. When it comes to selecting a mediator, cost might be a factor for some parties. But the primary considerations should be the skill and reputation of the mediator. Equally important is the trust and respect that both sides have in the mediator. Fees may be significant, but in larger cases this is not a major factor. In small cases the cost of a mediator can be kept down through use of volunteer attorney mediators working though court-run programs. Plaintiffs counsel should be aware of the mediator’s background and reputation and of any philosophical or ideological beliefs that would effect evaluation or impartiality. On the other hand, a mediator selected by the other side is one to whom that party is likely to listen. A mediator is typically judged by the success of the process and always has a motivation to conclude the case. Despite a relatively high success rate, mediation does not always succeed, particularly at the initial session. Such failure can be attributed to a number of factors. One is poor preparation by the plaintiff’s attorney. Counsel should prepare not only the case but the client. There is rarely a legitimate reason for an attorney to have a difference of opinion with his or client when it comes to the value of a case. In some cases, the defense may have staked out an early position that precludes or at least impedes settlement. Reserves are set early in the litigation or pre-litigation phase of the case. They are not easily increased. If the reserves are unrealistically low, the necessary authority may never be forthcoming. Plaintiffs lawyers should also attempt to identify other potential obstacles that might get in the way of a successful mediation. If the case involves an injury, for example, will the injury be susceptible to evaluation by the time of the mediation? Might there be an ideological or philosophical barrier to settlement? Worse yet, mediation of an auto or premises case in which the defendant comes with a computer-generated evaluation and no other authority is a guaranteed waste of time. One guarantee of failure is the presence of a low-level adjuster with limited authority and no ability to enter into a meaningful settlement. This is one instance in which there is a great advantage to mediating the case pursuant to a judicial settlement conference as opposed to using a retired judge or volunteer attorney. As part of the settlement conference, the judge can order a more senior adjuster to attend. The outside mediator has no such authority. The most frequent problem in mediation probably occurs over coverage disputes. Is the defendant defending under a reservation of rights? In many cases — and in almost all construction cases — a dispute will arise over whose policy applies and who has the obligation to defend. There is no reason for the plaintiff to pay for a mediation devoted only to the resolution of a coverage dispute among carriers. These disputes also serve the interests of the carriers that have the ultimate responsibility to pay by increasing the delay. The only loser on the defense side is the primary carrier with low coverage and high defense costs, which they alone incur. Defense counsel is theoretically precluded from taking a position on coverage, but both liability and coverage counsel find continued employment as a result of these disputes. An unfortunate and all too common situation occurs when the plaintiff shows up at a mediation expecting his or her case to be addressed, only to spend the day in a small room awaiting an offer that never comes. Meanwhile, the process of mediation offers benefits to both sides of a dispute, even if the mediation fails. Plaintiffs can present their case in a manner of their choosing and can reach the carrier or risk manager directly rather than through the filter of defense counsel. The defense may view this as a kind of free discovery, but they are looking at what the plaintiff wants them to see. Not only should the plaintiff provide a complete, well-written and well-documented settlement statement, but exhibits, video of experts and even video of focus groups can be used to good effect. Defendants are looking for the hallmarks of evaluation. They will already know some of them, including the basic facts of the dispute, venue and some of the jury verdicts in the area. But they have not generally seen the attorney, the client or the preparation that they will encounter. The presentation by the plaintiff’s counsel will not only convey the desired specific message, but will also demonstrate a willingness and preparation to try the case and to do it well. But no matter how good the presentation, the basic mediation statement must be provided sufficiently in advance for the decision-makers to assess it. Mediations can sometimes lead to an agreed settlement amount only to unravel over other issues. One talented mediator often begins by asking the parties to identify issues other than money. These commonly include confidentiality of either the amount or the settlement itself, use of a structured settlement and who will do it and the resolution of liens. These issues should always be addressed at the outset. A structure should never be considered until a cost is identified. The issue of liens can be a major factor, and reduction and payment of liens have become an exceedingly complex and ever-changing problem. But without dealing with the lien, an attorney can never provide an answer to a client’s most important question: “How much will I net under the settlement?” In addition to the potential complications already discussed, other recurring problems can crop up in mediations that counsel for plaintiffs need to address in a timely fashion. Keep in mind that, from the standpoint of the company paying the money, it is all about the float. There are many ways to delay payment even after settlement. Consider the following typical mediation conclusion: A settlement is reached. The parties gather in a room with the mediator. The amount of the settlement is announced and recorded by a court reporter or signed on a paper reciting the amount and a few brief terms. The defense will prepare the release. Hands are shaken, courteous remarks exchanged. A week later, no release has yet been prepared. Defense counsel has been busy. A month and several phone calls later, still no release. Finally, after even more calls (less cordial and more threatening than before), the release finally arrives. It contains a confidentiality provision, an overly broad hold-harmless clause and a release of the insurance company and all other possible defendants. None of this was previously discussed or negotiated. None of it was in the paper signed at the conclusion of the mediation. None of it can be legally justified. After more back-and-forth messages and conversations between counsel, another draft of the settlement agreement follows, but problems still exist. And even when those issues are finally resolved, three months have now passed since the mediation. Even then, further delays occur because the adjuster is on vacation, an East Coast office has to approve everything and it takes time to get this much money authorized. Your client suffers while the insurance company holds onto the settlement funds. All of these problems can be anticipated and eliminated at the mediation. Counsel should specifically identify the confidentiality issue. If it really is an issue, it needs to negotiated or identified as a deal-breaker. If it is not a genuine issue, then it will not suddenly show up in the release as a cause for delay. The hold-harmless and indemnity issues can be addressed and language agreed to in advance. It is sometimes a good idea for plaintiffs counsel to bring release language to the mediation and to make it clear that no one but the defendant or defendants who are paying will be released. It is often a good idea to provide for disputes over language in the release to be resolved by the mediator within a specified time. Plaintiffs attorneys are well advised to set time limits for payment of the settlement, with a penalty or interest to run at a specified rate in case of noncompliance. It is a big mistake to let the time start running from the date the release is signed. Mediations will continue to be a part of the litigation process. Properly understood and utilized by counsel and conducted by knowledgeable and competent mediators, it can be an effective method of resolving disputes. At this time it is the ADR method of choice. Peter J. Hinton is a partner at Hinton, Alfert & Sumner in Walnut Creek, which represents plaintiffs in a variety of civil actions.

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