Disputes happen. Frankly, if disputes didn't happen, most lawyers (solo or otherwise) would be out of business. Whether you're in an active battle because a client didn't get paid or was (heaven forbid) injured, or are looking at a contract and determining the likely impact of certain clauses should a dispute arise, our lives as attorneys are often spent dealing with disputes (current or anticipated). Personally, this is the majority of my construction law practice. While I do my best to perform an advisory role and help manage risk before a dispute arises, even the best advice cannot avoid all disputes. The unforeseen tends to happen. This is why Murphy's Law is so popular and seemingly universal.
On the one hand, such a world is great for the bottom line. I am rarely sitting twiddling my thumbs looking around and wishing I had more work. I can generally stay busy with the risk management aspects of my practice. However, I have the occasional spike in activity and workload. While a busy month or two in a row is a good thing for my bottom line (I bill more hours, therefore get paid more on a per matter basis), a spike in litigation activity is an expensive proposition for my construction clients. As a construction lawyer, when I'm extremely busy, as opposed to just busy, it means that my clients have me in court, in depositions, or performing other litigation related activities. While this is great for my bottom line because I have great clients that appreciate my representation, litigation is not a good way for construction companies (or any other company or person for that matter) to make money. Quite honestly, the litigation process is a zero sum game in most cases where money spent on court related activities is money taken from the bottom line.
While some of the hard costs: attorney fees, expert expenses, court costs and the like, can be made part of a judgment on the back end if your construction contract is properly drafted, these costs are hard expenditures that are paid on the front end with hopes of recovery at the end. Add these to the "soft" costs of lack of productivity and focus on the past instead of advancing the business and making money and litigation is not a winning proposition, even when you win.
In short, by the time you as a construction company (and I use construction as an example because those are my clientele) are in court, you are not going to make money on that project. At best you are in triage mode and should be looking, from a financial, if not a legal, perspective at trying to limit the damage and move forward. You didn't (and shouldn't have) made your bid or priced your work with an eye toward having to sue for your money.
This fact of life is why, in almost every case, I recommend trying to settle the matter early, even if it is not a 100% dollar for dollar payment of what you could get at the end of the long, winding and potentially risk filled road to a judgment. Should you be paid 100% for your hard work? Yep. Is it difficult to accept less just because the other side didn't pay? Absolutely. Unfortunately, once attorneys get involved, you won't net 100% regardless of the outcome of the court or arbitration process. You are more likely to net a better result monetarily and business wise from accepting a portion of what you feel you are owed than to go forward to trial. Of course every case is different and that portion will be bigger or smaller based on those factors and the advice from your attorney and others relating to risk, reward, etc.
Now that I've discussed the business and monetary reasons to settle and get the most out of a bad situation, let's discuss why you should think about mediation. Mediation is a confidential process of settlement negotiation with the help of a third party who's only "dog in the fight" is seeking a settlement. The mediator does not make a decision and the parties are in control. The only binding part of a mediation is the settlement agreement itself. This allows for more flexibility in the resolution of a dispute.
While money is often the outward sign of the issues between the parties, often money is far from the only driver of a dispute. Whether it be a feeling of being slighted or a lack of communication that caused friction, the parties most likely have other “grievances” that need to be worked out. In contrast to litigation where many of these non-monetary and non-contractual issues would be considered irrelevant and inadmissible, in mediation the parties get to “vent” and air their thoughts on these less tangible issues. A good mediator encourages this sort of back and forth and knows that if these issues can be worked out, often settlement can also be achieved.
Another driver for a monetary dispute can be that money got tight and one party may be unable to pay the other as required by the contract. In court (aside from in bankruptcy court), the inability to pay is not an excuse and not relevant. In the “real world” this fact is highly relevant because a judgment is only as good as the ability to collect it. The mediation process also can and should take this fact into account and allow the parties to be creative to get past this hurdle.
Finally, even if the mediation "fails" and does not result in a settlement, that does not mean it was a waste of time. Often the ability to simply get some of the issues out in the open leads to a settlement later down the line. Parties are generally more open to discuss potential weaknesses in their respective positions in such a confidential environment. Also, once the non-monetary issues have been voiced, the parties often see the other side better and are in a frame of mind more conducive to settlement.
After years of construction litigation and advising of my great clients, I am a firm believer that putting resources toward settlement (whether mediated or otherwise) early in a dispute will go a lot further toward a better resolution for your business than flying headlong through the litigation process. As I've stated before, mediation is near and dear to my heart. So much so that I became a Virginia general district court certified mediator. As a mediator (and a lawyer representing clients in these mediation), I fight for a good and proper business resolution of a dispute. While sometimes the best way to get to the best result is to play out the litigation or arbitration process (and I can and do so in the proper circumstances), I find that more often than not informal direct settlement of a claim or resolution through the more structured mediation process is more than worth the time and effort.
Christopher Hill is a construction lawyer at The Law Office of Christopher G. Hill, PC in Richmond, Virginia and a member of the Virginia's Legal Elite in Construction Law. You can follow his blog at: http://constructionlawva.com/about-2.