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Good Faith Mediation - What are your thoughts?

If a contract calls for parties to mediate in good faith before arbitrating, what does that mean? Should there be minimum standards and/or acceptable norms?

Please provide your thoughts comments below.

Comments (6)

Courts generally disfavor treating these provisions as conditions precedent in the absence of clear language (see MBIA Inc. v. Certain Underwriters at Lloyd's, London, 33 F. Supp. 3d 344, 353-54 (S.D.N.Y. 2014); FCI Grp., Inc. v. City of N.Y., 862 N.Y.S.2d 352, 355 (1st Dep't 2008); and Lui v. Park Ridge at Terryville Ass'n, Inc., 601 N.Y.S.2d 496, 499 (2d Dep't 1993)). Parties must state that they intend for the negotiation and mediation steps to be preconditions to litigation or arbitration. Without express language, an ambiguity may be deemed to exist and a party risks that the other party may successfully attempt to commence arbitration or litigation without taking the preliminary steps (see, for example, Staviski v. Christa Const., Inc., 921 N.Y.S.2d 373, 375 (3d Dep't 2011)).

Courts also generally refer the issue of satisfaction of the condition precedent to arbitrators if the final stage is arbitration, rather than litigation (see Corporate Printing Co. v. New York Typographical Union No. 6, 601 F. Supp. 323, 328 (S.D.N.Y. 1984) and Ostberg v Dragan Litric, 915 N.Y.S.2d 256, 258 (1st Dep't 2011)). For more information, see Restatement (Third) U.S. Law of Int'l Comm. Arb. ยง 2-18 TD No 4 (2015) (discussing US law)). When the parties' agreement specifically incorporates by reference the AAA rules, questions about a condition precedent squarely fall within the purview of the arbitrator to determine (see Footprint Power Salem Harbor Development, L.P. v. Iberdrola Energy Products, Inc., 2018 WL 2020821, at *4 (Sup. Ct. N.Y. Co. May 1, 2018)).

People not meaning what they say and others not saying what they mean have been great for our profession! A good arbitrator and mediator in my view is a good communication facilitator. Contract disputes are often routed in mis- communication. A successful mediator would hear the parties, try to get to the real cause of the dispute and then offer a resolution. I consider mediation as an important possible solution to many disputes and it's success depends primarily on the mediator and his ability to listen, comprehend and then propose a solution carrying the resolutions to the new understanding which is the final document that includes the final resolution of the dispute.

Anonymous:

I conducted a mediation this past week where the contract had a pre-condition to litigation that the parties must first bring their dispute to mediation where they must mediate in good faith. The mediation lasted for 6 hours during which time the defendant kept going over their no-pay position at great length but never budged. Defendant kept saying that they had no liability and did nothing wrong and they were being " held-up" by the plaintiff. They brought (and paid for) an expert to the mediation who laid out, in great detail, the merits of his position.

Did they negotiate in "good-faith" ? It is a tough question to answer if they sincerely believe they had no exposure.

I always preach that mediation is to "make a deal,not make a point" but sometimes if a party truly feels it did nothing meriting payment, then mediation may not be the right process.

Richard Lutringer:

Mediating in good faith should mean that the real parties in interest listen to each other in a third party structured environment. Not to settle or modify claims or defenses after an open discussion may be the result, but that is still a successful exercise since the the parties themselves are more likely to have a better idea of the risks being faced and can modify their internal expectations and probably are more likely to settle later. Unless conciliation is required or specifically requested, the mediator should not propose substantive solutions.

As a practical matter, with respect to enforcing a clause requiring good faith mediation before arbitration, I think that all that can be required is that the parties show up and listen to each other, even if only briefly. One hopes that a skilled mediator can make a settlement follow, but I agree that good faith mediation does not mean having to make offers of compromise. Some cases do have to be tried.

Anonymous:

I endorse Mr. Shope's comments.

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