Jul 03

PRE-LITIGATION MEDIATION: SELF-HELP JUDICIAL REFORM

Business Parties Can Reduce Their Reliance on Courts By Mediating Before Litigating

Paul Simon, CEO and Founder of Business Mediation Network

If parties to business disputes want to reduce the cost and burdens imposed by the court system, here is a suggestion: try mediating before litigating.

Business people dislike the legal fees, intrusive pre-trial discovery and disruption of business operations that come with every lawsuit. Public officials and business groups have proposed a number of court reform proposals to lower the burdens of litigation on businesses.

However, the easiest solution is for business parties to avoid the courts whenever possible.

Millions Of Reasons To Mediate1st®

It is estimated that as many as 80% of the disputes submitted to mediation are settled. Using a neutral mediator to facilitate negotiations, the parties can often reach a voluntary mediated settlement after a one-day mediation conference thus avoiding lawsuit preparation, pre-trial motions and disclosing large amounts of sensitive information, including the ever expanding area of electronic discovery, all of which can account for up to 90% of litigation costs.

Taken as a whole, business litigation costs are enormous. The annual revenues of America’s civil “litigation industry” (including attorney’s fees, filing costs, discovery services and expert fees among others) are estimated at over $250 billion. More than 15 million civil lawsuits are filed in the United States each year. Over 60% of these are classified as “contract” cases. These include disputes with suppliers, customers, employees, partners, lenders, etc. – the types of cases that usually involve companies and business interests. In contrast, personal injury cases comprise only 6% of civil cases filed.

61% of Civil Suits are Contract Claims

Just looking at the number of cases filed, the total number of “contract” lawsuits is 10 times higher than the total number of “tort” (personal injury) cases. However, business cases rarely go to trial. Although they last an average of three years nationwide, virtually all business-related cases settle or are dismissed without trial. According to one study of contract cases, only about 1/10^thof 1% (1 in every 1000) of those filed actually go to trial. Of the cases that go to trial, about two-thirds are tort cases. Business parties that find themselves at a trial are often defendants in personal injury cases.

In One Year, Business Parties Contribute $75 Million To Illinois Courts

The somewhat surprising conclusion is that business parties are significant supporters of a civil litigation system that they rarely use fully and that often operates to their detriment. For example, consider that there were over 425,000 civil cases filed in Illinois in 2016. Applying the national percentages, close to 262,000 of those cases likely involved “contract” claims. If the court filing fees are around $150 for each party, it is fair to say that business parties in Illinois lawsuits contribute around $75 million to the court system. This amount represents roughly one-third of the salaries and operating expenses for the court clerk’s offices throughout the state.

What if 10% of the existing Illinois contract cases were settled through mediation and never filed? Because these cases were highly unlikely to go to trial anyway, the most significant effect on the courts should be to reduce the demand on the clerks’ offices who would have to process roughly 26,000 fewer cases. Assuming a corresponding reduction in operating expenses, the state and county governments who fund the majority of court budgets could save millions of dollars annually.

The effect on businesses would be positive and immediate. Not only would Illinois business parties save about $7.5 million in filing fees, they would resolve their conflict quickly and inexpensively. Clearly there are times when lawsuits are unavoidable. However, many business lawsuits cause expense and disruption out of proportion to the underlying claims. Indeed, parties to smaller business lawsuits easily can spend more on fees and costs than the amount in dispute.

4 Out of 5 Mediations Successful

If nearly all business cases settle anyway and if 4 out of 5 contract disputes can be settled by using a mediator, pre-litigation mediation should be the first choice to resolve business conflict. By including a Mediate1st® clause in every contract, business parties can save substantial time and money and reduce the need for large clerical staffs to handle filings for cases that likely will never go to trial.

Business people need to recognize that litigation is nearly always a poor way to resolve business disputes. Mediation is a far more business-like alternative.

Paul Simon is the CEO and founder of Business Mediation Network, a company that trains and provides experienced business people to serve as mediators of business-related disputes. For a sample pre-litigation mediation contract clause, visit www.Mediate1st.com.

Feb 06

Mediate Business Disputes

In Business Disputes There is No Such Thing as a “Good Case”

Business Lawsuits Are Either Avoidable or Unavoidable

Paul Simon, President and Founder of Business Mediation Network

Paul Simon, CEO and Founder of Business Mediation Network

Lawsuits are a dismally inefficient way to resolve business disputes. Business litigation is costly, slow and rarely delivers what the parties seek – a decision on who wins and loses. Consider three facts:

1. 8 million – the approximate number of business-related lawsuits that are filed each year in the United States

2. 3 years – the average length of time for business cases

3. 1% – or less of business lawsuits go to trial

No matter how confident parties and lawyers are that they have a “good case,” choosing litigation to resolve conflicts over contracts, partnership disagreements, loan terms, employment matters or any other business dispute, makes little business sense in most circumstances. Rather than to classify lawsuits as “good” or “bad,” business people should think of litigation as “avoidable” or “unavoidable.” Because of a lack of planning, there are far too many avoidable business lawsuits.

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Business Lawsuits Last Years – Trials Rare

The secret hiding in plain sight is that business litigation is almost always a slow dance toward settlement. Even if the parties are determined to stand in line through the lengthy (and expensive!) pre-trial process, at some point before the trial date, it is inevitable that there will be significant internal or external pressure to settle a business case. Often, suffering financial exhaustion from costly and disruptive pretrial discovery or seeking to avoid the risks of trial, the parties will conduct direct negotiations before the trial date. Alternatively, out of necessity due to crowded dockets, the court will direct the parties to attend a settlement conference with a judge or encourage them to retain a private mediator.

Business People Should Not Spend Years In Expensive Litigation If The Outcome Will Likely Be A Pre-Trial Settlement Anyway

It is clear that business people should stop automatically choosing litigation to resolve business disputes. Business problems do not become legal problems when a dispute arises. They are still business problems requiring business judgment. Business people should be very reluctant to ask others who likely have little or no experience in their business to decide who wins and who loses business disputes. Judges and juries do a great service when carefully deliberating and deciding whether or not a criminal defendant is guilty. However, the strengths of the legal process are not easily applied to interpreting a business agreement, deciding an intellectual property dispute or determining the value of partnership assets.

When business people try to resolve their disputes through litigation, they are hiring very expensive coaches to prepare for a game that rarely will be played and whose outcome will be decided, not by the teams, but by the referees and a vote of the spectators (who do not want to be there and usually do not understand the plays). It is little wonder that nearly all business parties eventually become desperate for a way out before trial.

Business Mediation – A Better Way

Experienced Business Mediators Can Resolve Disputes In A Day

Business Mediation Network provides mediators with extensive business experience to assist the parties in resolving disputes before the case is filed or before significant additional litigation expenses are incurred. BMN Business Mediators are experts in the business world. Rather than guessing who will ultimately win or lose a legal battle, Business Mediation Network offers mediators who use their business skills and experience to help the parties take a realistic view of their business interests. A clear majority of disputes submitted to mediation are resolved and the parties usually know early in the mediation whether or not a settlement can be reached. In the minority of disputes that do not settle in mediation, at a minimum the parties come away with a much better idea of the commitment and resources of the opposing party; two important but often misperceived factors in deciding whether to pursue, defend or abandon a business lawsuit.

It is very important for businesses to have Business Mediation Network’s Mediate1st® clause in every contract including partnership, employment, loan, lease or other agreements. Absent true emergencies, requiring parties to mediate before filing a lawsuit is the only way to make sure that businesses will have an opportunity to seek a mediated settlement without litigation. It is smart business to have a plan and planning for dispute management is very smart. Without Business Mediation Network’s Mediate1st® clause, the party who is least willing to talk chooses the forum.

Using an impartial BMN Mediator with business experience to facilitate a deal is a far more businesslike way to resolve disputes than entering the strange world of litigation that is often hostile to business interests. Most parties eventually discover that fact, which is why only a tiny number of business cases actually go to trial. If it can be avoided, it is almost always a bad idea to litigate a business dispute – no matter how strongly you feel about your case.

8 Very Bad Reasons Why Businesses Litigate

If business lawsuits nearly always settle anyway, why do businesses litigate? There are eight very common and very wrong reasons – one or more of which is involved in nearly every decision to litigate a business dispute. Please follow upcoming articles in the Business Mediation Network Blog as we explain the “8 Very Bad Reasons Why Businesses Litigate.”

Paul Simon, the CEO and Founder of Business Mediation Network, is a business mediator, lawyer and educator. For more, information see Paul’s Bio. To follow the Business Mediation Network Blog – Sign Up Here.