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How we resolve our disputes

Entries in caveat (3)


Caveat negotiator

An excellent article in the current issue of the Wisconsin Lawyer, titled “Negotiating in the Red Zone,” discusses the risk of legal malpractice liability for lawyers conducting settlement negotiations for clients.  The “red zone” occurs when an opposing party makes an offer within the client’s stated acceptable range but the attorney believes that they can obtain a better offer by rejecting it and negotiating further.  The risk is that the opposing party will terminate the settlement discussions and a trial will result in a worse outcome.  The author argues that lawyers are more vulnerable to professional liability when a settlement opportunity is lost in red-zone situations than in non-red-zone cases.

The article suggests that attorneys fully advise clients of the risks and benefits of continuing negotiations in such situations, and that they document and not deviate from the client’s agreed-on strategy.  It also mentions that this advice should be followed even in mediation.  It does not discuss how the mediator should address or participate in the decision to accept or reject a red zone offer.  At a minimum, the mediator should be aware of the ethical considerations and risks of liability that the attorney is facing.  While the mediator probably has no obligation to advise the lawyer of the heightened risk, doing so could enhance the prospect of a final settlement.  Without a participant’s consent, a mediator cannot disclose whether an offer is a final bottom line.  But the mediator can help attorneys and their clients to intelligently consider and evaluate the risks and benefits of continuing to negotiate versus accepting an offer.  The mediator might also help to document the attorney’s advice and the client’s decision regarding red zone negotiation strategy.  Thus, a mediator may help to reduce the attorney’s risk of ethical problems or professional liability. 

In other words, the article demonstrates another reason to seek out a mediator to assist in delicate or complex negotiations to resolve litigation or civil disputes.


Caveat Mediator

Diane Levin’s Mediation Channel post today concerns certification (or lack thereof) for mediators.  She notes that there is no governmental body that certifies mediators nor any uniform standards for doing so. Some states (like Florida) require certification by the State Supreme Court in order to be appointed by a court to mediate a case. However, even Florida does not require certification in order to be chosen as mediator by parties to a dispute. Private groups have arisen that promise to train and certify mediators, but there are no uniform standards for such groups to apply to their certificates. No state has defined mediation as the practice of law, so passing the bar is not required. In fact, neither is graduation from (or even attendance in) a law school. So, for parties to disputes who want to select a mediator, the rule is still caveat emptor — buyer beware! Ask your mediator for proof of training and references. For mediators, it would be wise to get some good training before hanging out a shingle. At a minimum, the mediator should know the rules concerning confidentiality and the requirements for an enforceable settlement agreement. Otherwise, caveat mediator — Mediator beware!


Caveat arbitrator

The recent settlement of the Minnesota Attorney General’s lawsuit against National Arbitration Forum (NAF) was a welcome development for consumers.  Minnesota alleged that the company—which had been named as the arbitrator of consumer disputes in tens of millions of credit card agreements—hid from the public its extensive ties to the collection industry.  Under the settlement, NAF must stop accepting any new consumer arbitrations and will permanently stop administering arbitrations involving consumer debt, including credit cards, consumer loans, telecommunications, utilities, health care, and consumer leases.  Mandatory pre-dispute consumer arbitration clauses have been suspect for many years because the clauses have been hidden in fine print and the parties’ bargaining power is extremely unequal.  The American Arbitration Association has developed Consumer Due Process Protocols in order to determine which alternate dispute resolution (ADR) mechanisms were fair and which were not.  Arbitrators and mediators should be required to be familiar with these protocols.  The Seventh Amendment to the United States Constitution guarantees the right to a trial by jury in civil cases, when more than $25 is in dispute.  This right can be waived, but like any other waiver, it should be done only after fully informed and voluntary consideration of the costs and benefits.  ADR can be faster and less costly than litigation, but we already pay for judges and the courts through our taxes.  Before giving up such a valuable right, consumers should be fully advised.  They may be giving up not only their right to be heard by a jury of their peers, but also the right to an appeal.  They may also be taking on costs that they are not prepared to pay.  And sometimes confidentiality is not desirable.  If one consumer has been harmed by an illegal financing scheme, it is likely that others have been similarly harmed.  If such disputes are kept out of public courtrooms, other consumers may not become aware of the problem.  There is also the issue of independence, which was the problem with NAF.  When deciding whether an arbitrator or mediator is truly neutral and independent, follow the money.  Where do their fees and referrals come from?  Everyone knows how judges and jurors are paid (poorly!).  Make sure you know how your mediator or arbitrator makes a living.