5 Reasons Real Estate Mediations Fail

                        
                            Water Law San Antonio                         
                    

These days, Mediation is ubiquitous in civil lawsuits. The local court rules of most Texas counties require mediation, and the state’s policy has been made clear by statute:

Sec. 154.002. POLICY. It is the policy of this state to encourage the peaceable resolution of disputes, with special consideration given to disputes involving the parent-child relationship, including the mediation of issues involving conservatorship, possession, and support of children, and the early settlement of pending litigation through voluntary settlement procedures.

See Section 154.002 of the Texas Civil Practices and Remedies Code.

This means that just about every lawsuit involving real estate will be mediated. I have attended hundreds of mediations and even obtained certification to serve as a mediator.

Still, I never cease to be amazed at how terribly wrong some mediations go.  My impression over the last couple of years has been that a far lower percentage of complex disputes get resolved at mediation than in the past.

By “complex dispute,” I am not referring to a claim where one aggrieved party is asserting a monetary claim for damages against another. Those cases — particularly where liability is clear — are comparatively simple.  Settlement in those cases often comes down to  simply discerning how much the Defendant will pay and how little the Plaintiff will take. The mediator’s task is to help the parties achieve that “sweet spot,” where the amount to be paid disappoints all sides but allows them to put the dispute behind them.

The cases I believe that we are enduring an unacceptable lack of mediation success are those involving: (i) disputed liability; (ii) unique subject matter such as land, water or complex contracts; and/or (iii) opposing parties with close connections like neighbors, family members and business partners.

In my opinion, some of the most common reasons these mediations are failing are (in no particular order):

1. THE MEDIATOR IS NOT PREPARED OR DOESN’T UNDERSTAND THE CASE.

An unprepared mediator can be the kiss of death for a mediation. Unpreparedness in a mediator is usually, but not always, the mediator’s fault.

It goes without saying that, in order to be fully prepared to resolve a complex dispute, a skilled mediator must read the information provided ahead of time by the parties or their attorneys. But this doesn’t always occur. I have attended mediations where it is obvious that the Mediator does not understand the case, and has clearly not read the materials I took the time to send, and which the client paid me to prepare.   There is no excuse for this.

Sometimes, however, a mediator’s unpreparedness is the fault of the attorneys. This occurs when the attorney for a party fails to provide the mediator with sufficient information about the facts or issues involved in a case, or sends this information too late. Furnishing the mediator with a complex contract or pages and pages of documents the day before the mediation is not reasonable. When this happens, it’s no surprise that the mediator has not been equipped with the knowledge needed to adequately prepare.

In rare instances, the mediator simply does not understand the subject matter of the dispute because he or she has no expertise in the field of law involved.  This is also a failure of the attorneys for selecting a mediator whose experience does not match the parties’ needs in a particular type of complex dispute. When this occurs, the mediator’s inexperience is usually revealed early in the session.

2.  THE MEDIATOR DOES NOT UNDERSTAND THE PARTIES.

A Mediator understanding the parties and their motivations is equally important to understanding the case.

A diligent mediator will talk to the lawyers for the parties a day or two in advance to candidly discuss the personalities of the parties, any quirks and hangups they have, and to better understand the party’s “must haves” and “can’t live withs.”

A great mediator will spend a few minutes at the beginning of the mediation simply listening to and building rapport with the individual parties. So much can be learned from a short interaction and forming positive first impressions. Yet, it is shocking how rarely this occurs.

More often than not a mediator will start the mediation with a canned speech that seems a lot more like talk at the parties than listening to them and allowing them to ease into what can be a stressful process. This is a mistake. By simply listening to a party – even for a short time – he may learn much about their personality type and negotiation style.

A mediator who does not build early likability and trust with the parties misses so much opportunity to build on that relationship and the associated psychology that can be used to enhance settlement prospects.

If your last mediation failed, ask yourself about how much time and energy the mediator put into understanding and building a connection with the parties.

3.  EMOTION REIGNS OVER PRAGMATIC PROBLEM SOLVING

In my experience, the single most common reason that mediations fail is that parties (Plaintiffs and Defendants) cannot rise above the natural human tendency to have an emotional response to a business problem. This is often disastrous because lawsuits are business problems that demand business solutions.

Motives such as revenge, and emotions like hurt and anger become the focus point. When this happens, the parties are blinded to what should be the very most important considerations of any dispute resolution discussion:

  • What does a successful settlement outcome look like to me?
  • What will constitute a successful settlement outcome to the opposing party?
  • What will the future look like if I put this case behind me today?
  • What will the future look like if I continue to litigate?
  • When will the dispute achieve finality if I don’t settle?
  • What is the “price of admission” (i.e. attorney’s fees and costs to be incurred through trial and possibly on appeal) of letting a court decide the dispute?
  • What is my likelihood of success?
  • What constitutes a successful trial outcome?
  • How likely is it that I will end up better off, even if I achieve a “win” at trial? Given the costs to get there,, is the net recovery to me  worth the risk and cost?
  • How am I likely to feel tomorrow, next week, next month and next year if I end the dispute by settling today? How will I feel at those times if I am still embroiled in litigation?

With the exception of the  last, none of these questions focus on “feelings” or emotion. Instead, they are pragmatic considerations that will formulate the path forward for  a level-headed party-litigant. Unless and until a litigant can make this this category of questions the cornerstone for making decisions, emotion rules the day and settlement prospects are greatly diminished.  Mediations focused on emotion are likely to fail.

If your mediation session is more focused on the person or party sitting across the table (or down the hall) instead of the problem on the table,  you can almost count on having an unsuccessful mediation that seems like a waste of time.

4.,  THE PARTIES WANT TO WIN MORE THAN THEY WANT RESOLUTION – EVEN IF WILLING INVOLVES UNNECESSARY RISK AND EXPENSE

Sometimes, one or more of the parties just don’t want to settle.

Verbalizing opposition to settlement is rare, but parties attending mediation solely to “check a box” is a common phenomenon. When a party’s only reason for attending mediation is to comply with the local rules or a specific court order, they “tune out” meaningful settlement dialogue.  When this occurs, the mediation was DOA – dead on arrival — and is a complete waste of time and money.

Mercifully, these mediations tend to end quickly.

5. THE ATTORNEYS – OR ONE OF THEM – ARE PART OF THE PROBLEM AND NOT PART OF THE SOLUTION.

It is the job of the attorney to zealously advocate the client’s interests. More often than not, however, the client’s best interest involves settlement.

Settlement is often a viable alternative to continuing litigation because settling stops the financial bleeding in the form of litigation costs and also completely mitigates risk of losing the case.  All cases — no matter how great they seem — are at risk of being lost. It also seems sacrilegious to write that, but it’s a simple truth. Cases that should be won are sometimes lost, and the reverse is also true.  But attorneys don’t always explain this to their clients.

Whether driven by ego, competitiveness, financial need, ignorance, greed or mere aggression, attorneys often push their clients to fight when a reasonable settlement is the client’s best course of action. In my opinion, this is the absolute worst reason for a failed mediation because the failure doesn’t result from the client’s wishes or proclivities, but instead from that client being steered in the wrong direction.

When the attorney is the obstacle to settlement, the parties are always the losers. They continue to unnecessarily bear the risks, costs and distraction of litigation.