More on the AAA Mediation Rules

By: David S. Riddle, P.E., Guest Author and Bricker & Eckler Construction Law Fellow

Reprinted from August 2006 ohioconstructionlaw.com

When parties litigate their disputes, the procedures are well defined in the Rules of Civil Procedure. When parties agree to mediate their dispute, the procedural rules are not as clearly defined. The last couple of months we have been examining the Construction Industry Arbitration Rules and Mediation Procedures of the American Arbitration Association (known as “AAA” or “Triple A”), which provide one popular set of procedures. This month we will continue our review by examining the rules that govern how the mediation shall be conducted.

Dispute resolution can take many different forms, ranging from negotiation to full litigation. Two forms of dispute resolution in the middle of this spectrum, mediation and arbitration, are on occasion incorrectly perceived to be interchangeable. While both involve a neutral third party, mediation is a form of dispute resolution that is distinct from arbitration, as the court in Oliver Design Group v. Westside Deutscher Fraue-Verein d.b.a. The Altenheim (2002), 2002-Ohio-7066, made clear: 

Mediation is, by definition, a procedure by which the parties negotiate a resolution to their dispute with the assistance of a third-party mediator. If the parties do not reach an agreement, the mediation process is at an end; no resolution may be imposed on the parties. Arbitration, by contrast, is a procedure for submitting disputes for decision by a third party . . . . Thus, mediation and arbitration cannot be functionally equivalent. 

AAA Rule M-10 makes this distinction clear. “The mediator does not have the authority to impose a settlement on the parties but will attempt to help them reach a satisfactory resolution of their dispute.” How may the mediator help the parties reach a satisfactory resolution? While the rule continues to provide some guidance, its power is in its flexibility. 

The approach of most mediators falls within a broad spectrum ranging from facilitative to evaluative. Mediators using a facilitative style set the framework for the process but do not offer any opinions or advice as to the proposed settlement or any possible outcome of a court proceeding. The mediator will ask questions to help the parties find or develop their interests that underlie their positions. The mediator drives the process, but the parties drive the outcome. 

At the other end of the spectrum, a mediator using the evaluative approach not only sets the framework for the process but will also make recommendations for settlement. An evaluative mediator assists the parties in reaching a resolution by evaluating each party’s position and predicting a probable outcome. Frequently, a mediator using an evaluative approach will have substantive knowledge of the issue in dispute as well as the procedural knowledge of mediation. For a more detailed explanation of mediation styles, see “How Should You Select a Mediator” (ohioconstructionlaw.com for October 2003).

While an individual mediator may have a particular style, the approach used by the mediator will typically fluctuate during the course of the mediation. Rule M-10 allows the mediator this flexibility by authorizing the mediator to make oral and written recommendations for settlement. It is important to note that the rule authorizes, but does not require, mediators to make recommendations, so mediators have the flexibility to modify their approach based on the current state of the mediation.

Are there other differences in the two approaches? They generally differ in the physical process. Mediators using the facilitative approach often keep the parties together to resolve jointly their dispute. Mediators using the evaluative approach will usually meet separately with each party and shuttle between the parties to resolve the dispute. These separate meetings allow for more frank discussions with the parties and prevent the absent party from becoming emboldened by the mediator’s evaluation or comments. Again, Rule M-10 allows for this flexibility by authorizing the mediator to meet jointly or separately with the parties.

Regardless of the approach used by the mediator, preparation is the key to a successful mediation. Preparation applies to both the parties and the mediator, who should also have an understanding of the matters in dispute. Under Rule M-9, the parties must submit mediation briefs to the mediator at least 10 calendar days before the first scheduled mediation session. The brief must present the party’s position with regard to each issue that needs to be resolved. For a more detailed description of how to prepare the mediation brief, see “Preparing for Success in Mediation – Part III: The Position Statement” (ohioconstructionlaw.com for February 2004). 

It is up to the discretion of the mediator to determine if the brief will be exchanged by the parties. In a future column, we will explore the important role that a well-prepared brief plays in the mediation process.

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Because a federal court decision on August 22 has a lesson for individuals involved in dispute resolution at any level, we depart from the usual approach in this column to look at Innovative Engineering & Consulting Corp. v. Hurley & Assocs., Inc. (N.D. Ohio 2006), 2006 U.S. Dist. LEXIS 59214. The case involved a court-ordered mediation session, with a magistrate judge, Judge Hemann, acting as the mediator.

The court ordered the parties to have an individual with full settlement authority attend the mediation. During the course of the seven-hour mediation, the representatives of Innovative, two of the four principals of the company, made numerous phone calls to the two principals who did not attend. 

While it is disputed whether or not all four principals were required to approve any settlement, the court noted that the numerous phone calls “both prolonged the mediation process and assured that key players in the negotiation would be shielded both from the judicial officer’s neutral evaluations of the case and from the inconvenience of spending the day working through the process.” The mediation did not result in a settlement. 

After the mediation, Hurley filed a motion asking the court to sanction Innovative for violating the court’s order to have an appropriate representative at the mediation. Responding in opposition to the motion, Innovative filed a two-paragraph brief denying, “without providing any explanation,” the accusation that it had violated the court’s orders. 

The court, while considering the motion, again ordered the parties to attend mediation. This time, the court specifically ordered all four “partners/owners” of Innovative to attend. In preparation for the mediation, Judge Hemann contacted the counsel for both sides to confirm that each side “would be willing to negotiate in good faith and move from their prior settlement positions if doing so was reasonable and necessary toward resolution.” Based on conversations with counsel for the parties, Judge Hemann canceled the second mediation.

Upon cancellation of the second mediation, Judge Hemann issued a Report and Recommendation recommending that the court grant Hurley’s motion for sanctions against Innovative and its counsel. Judge Hemann recommended that the sanctions include reasonable compensation for the seven hours Hurley and its counsel spent at the mediation, but not for any travel costs incurred. Innovative objected to the report’s conclusion that Innovative did not engage in good faith negotiations. 

The court considered several items in ruling on the motion. First, the report recommending sanctions was based on the first-hand account of the judicial officer authoring the report. Any objections to the report simply represented a “credibility contest” between Innovative and Judge Hemann. In the court’s words, Innovative’s “objections face an uphill battle.”

In addition to Judge Hemann’s first-hand account, the court looked to the conduct of Innovative before and during the mediation. While its conduct during negotiations at the mediation did not expressly show “bad-faith,” its overall conduct outside of mediation was suspect.

One fact the court pointed to was an e-mail from Innovative’s counsel to Hurley’s lead counsel sent several days prior to the mediation:
John – I was out and just now finished reading your letter. My thoughts are: I wonder why you asked for the mediation conference and why you are coming to Cleveland. As far as we’re concerned, we don’t want to waste our time or our client’s money. Let me know promptly what you think. If you want to call it off, let’s do so now. If you still want to come, make sure there’s money in one of your suitcases.

Innovative’s counsel claimed the e-mail was an attempt to interject humor into an exchange with Hurley’s local counsel, with whom counsel had a long-standing and warm relationship. The court found nothing on the face of the e-mail to indicate that was true. In fact, the e-mail was sent to Hurley’s lead counsel and only copied to the local counsel. 

Based on its review, the court found that Judge Hemann’s finding that Innovative did not enter “into the mediation session with the intent to negotiate in good faith and, despite substantial efforts by the court, never altered their position” was accurate. So the court ordered Hurley to submit an affidavit reflecting the fees and expenses incurred in connection with preparing for and attending the mediation, including travel costs. After considering the materials received, the court will determine the appropriate amount to impose against Innovative and its counsel.

Among the lessons to be learned from this case, it is important to note that the court specifically pointed out that under the Federal Rules of Civil Procedure, the court could sanction a party and its counsel. A mediator may not impose a resolution on the parties; however, a mediator in a court-ordered mediation has some additional tools with which to encourage the parties to negotiate in good faith. 

This case raises two fundamental questions: 

(1) Does the Uniform Mediation Act apply to a mediation ordered by a federal judge; and if so, 

(2) Are the facts upon which the judge issued its ruling the result of the admission of evidence banned by the Uniform Mediation Act? 

Next month we will explore these two questions.