Mediation’s Advantage: Money Isn’t Everything

By Alida Camp

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Seeking Creative Solutions

A fundamental tenet of negotiating an agreement is that each party to that agreement must agree with its terms. Unlike an adversarial proceeding, such as litigation or arbitration, in which one party is generally found to be entitled to a decision in its favor, a successful mediation requires the assent of all parties. Using creativity, business purpose, and farsightedness, the parties may craft an agreement that provides a better solution than a verdict or award ever could. Arriving at the solution that works best for both parties may require the synthesis of several alternatives.

Money is often a key ingredient in a settlement; however, in many instances, disputing parties can achieve a resolution with a significant nonmonetary component as well. Equal employment opportunity (EEO) disputes are a prime candidate for nonmonetary resolutions through mediation. Even where an employment dispute centers on a charge of discrimination in violation of Title VII or other state or federal statutes, parties may construct a solution that better fits their respective interests. For example, in one mediated case, an employer agreed to transfer the employee to a different department in which the complainant would have no further contact with the supervisor. In other recent mediated disputes, employers agreed to provide training in nondiscriminatory behavior for specified supervisors.

In other mediated conflicts in which the complainant was already terminated, the employer agreed to provide a positive letter of recommendation, rather than the standard neutral letter. In additional mediated disputes, employers agreed to remove negative remarks and letters from the complainant employees’ files. Similarly, and perhaps most important, in cases where the plaintiff has suffered significant emotional distress, a simple written apology from the individual or entity has been a key component of a mediated resolution.

In another recent case, an employee at a health-care facility complained of alleged age discrimination. Among other aspects of the eventual settlement agreement achieved through mediation, both parties agreed to options for the employee to retire within 18 months, on a date selected by the employee; for the modification, where possible, of a retirement plan to suit the employee’s unique circumstances; and for a letter from the employer acknowledging the employee’s years of service and the quality of his work. In that case, the complainant had been a valued employee, and it was important to the employer to correct an unfair situation.

In mediation, resolutions can often be achieved that satisfy the plaintiff’s desire to receive compensation, at little or no out-of-pocket cost to the defendant company. In one recent dispute, the plaintiff sought to enforce an agreement providing him with warrants for the defendant company’s stock. The plaintiff demanded payment equal to the current value of shares, assuming the warrants had been executed per the plaintiff’s alleged entitlement. As part of the mediated resolution, the company agreed to lower the execution price for the warrants, resulting in the plaintiff being able to acquire a greater number of shares. Because the defendant company had no excess cash, not having to compensate the plaintiff with a cash payment was of great benefit.

Expanding the Pie

Parties to a dispute should not miss the opportunity afforded by mediation to craft nonmonetary ways to resolve the dispute. Mediators term this settlement approach “expanding the pie.” One approach to expanding the pie is to consider future ways of continuing to do business. The nature of the dispute and of the industry in which the parties operate will often suggest a number of different avenues the parties may take toward resolution. For example, a financial services company recently brought an action against a former employee for resigning his employment prior to the close of a particularly lucrative deal for the company. The employee’s continued employment had been critical to the company’s entitlement to a hefty commission on the deal, which was forfeited when the employee departed. The employer sought compensation equal to the commission it would have otherwise received. It was apparent that the employee had a strong reputation in an industry sector related to the employer’s business. As part of the mediated settlement, the employee agreed to steer new business to the employer, which would enable the employer to both expand its area of specialization and receive future commissions on the new line of business. The former employee avoided an immediate cash settlement by agreeing to pay the employer a set sum if, after a specified period of time, the employer had not received sufficient commissions from
the employee’s referral business. Both parties left the mediation satisfied with the end result.

Similarly, in a recent case in which the parties to a distribution agreement were embroiled in a dispute, through mediation they eventually agreed to renew a modified distribution plan as part of a consensual resolution. Not only did the parties agree to do future business together, but they also rehabilitated a deteriorating relationship. Continuing to work together made practical and financial sense for their businesses. Similarly, in another litigation involving breach of contract, a consulting practice agreed, as part of the mediated settlement, to provide additional consulting services to the customer at no additional cost, thereby avoiding having to pay a cash settlement.

By contrast, in some mediated conflicts, the termination of a relationship may be the key to resolving the conflict. In one recent case involving the distribution of two films, one of which had been produced by the other party, the parties’ agreement that the producing party would regain the exclusive distribution rights for its own film resolved the matter. The plaintiff was satisfied with the knowledge that it would make its own distribution decisions and thereby have sole control, for better or for worse, over the film’s performance in the marketplace.

Corrections of perceived wrongdoings may also result in a complete or partial settlement. In one recent dispute, a visual artist alleged an entitlement to be credited in publications incorporating her work. As part of the mediated settlement, the publisher agreed to correct all future printings to include the artist’s credit. The publisher also agreed to provide the artist with additional free copies of the publications containing her work.

Disputes in which the parties have an ongoing and important business relationship usually lend themselves to creative mediated resolutions. For example, in a recent case, a national not-for-profit organization and one of its local offices disagreed over the allocation of royalties and the ownership of a copyright in certain printed materials. Through mediation, the parties worked out an agreement clearly spelling out the allocation of royalties and copyright ownership prospectively. As part of the settlement, the parties also agreed that the disputed compensation would be addressed through additional gratis admissions at the national conference for members of the local branch; a good-faith effort to hold the next national conference in the city of the local office; and specific additional opportunities for the local branch to participate in the national conference.