Even in a legal market where clients are eager to avoid the heavy costs of litigation, broaching the option of mediation can be tricky for outside lawyers.
Some fear bringing it up will make them or their case appear weak. Others may wonder if a faster, less adversarial approach could mean a smaller recovery for their client—and fewer billable hours for their firm.
But veterans of mediation involving global companies said clients with a solid case may have all the more reason seek out a neutral mediator before spending a fortune in legal fees. An escalation clause that sets up mediation as a first step to addressing problems can save time and money, and also a client’s business relationship, which is a long-term win for a lawyer’s book of business.
“What sophisticated companies want … is a quick resolution of their problem, whatever it takes. Outside counsel sometimes resist this because they think ‘I’m going to bill by the hour. If I resolve issue through mediation I’m not going to make money,’” said Olivier Andre, vice president of International Institute for Conflict Prevention and Resolution. “This is a short-term vision. Twenty-first century users want their lawyers to resolve their problems and that’s the means to building a long-term relationship.”
Andre’s comments came during a panel discussion Thursday on “Escalation Clauses in Cross Border Dispute Resolution: Why Your Client Wants Mediation” at the annual Florida Bar Convention in Boca Raton.
Panelists said choosing the right mediator—one who knows the subject matter and has the mediation style you need—is crucial.
Lawyers need to be careful how escalation clauses are drafted and consider the kinds of disputes that could arise, the speakers said. But in long-term relationships the clauses almost always have a positive impact in getting to a final resolution, said Carlos Hernandez, chief legal officer of Texas engineering and construction firm Fluor Corporation.
Teresa Garcia-Reyes, senior litigation counsel for GE Oil & Gas, recounted an episode when a customer with $1 million in unpaid invoices countersued. A lot of money was spent on legal fees, she said, but court-mandated mediation eventually spurred the companies to reach a new agreement. They would have saved a lot of money and salvaged the relationship earlier had there been an escalation clause, Garcia-Reyes said.
Along with Garcia-Reyes and Hernandez, in-house counsel panelists included Laura Stipanowich, senior counsel for Bechtel Oil, Gas and Chemicals.
Other panelists included mediation practitioners Andre and Luis Martinez, vice president of the International Centre for Dispute Resolution. Joan Stearns Johnsen, a University of Florida Levin College of Law legal skills professor and commercial arbitrator and mediator, moderated the panel.