Commercial mediation in the U.S.

There is strong public policy favouring Alternative Dispute Resolution, including mediation. Mediation is voluntary, unless the parties have contractually agreed to mediate, although it is increasingly common for courts to order parties to try to mediate their disputes. The courts can also support mediations through interpretation of mediation clauses and by encouraging the parties to mediate. There are generally no adverse costs consequences for failing to mediate, unless a party has not participated in a mediation in good faith. Mediations are confidential and are enforced as contractual agreements.

What is the status of mediation in this jurisdiction?

There is a strong public policy in the US favoring methods of ADR, including mediation. The mediation process is essentially a facilitated negotiation between the parties to a dispute in order to reach a mutually acceptable settlement. Mediation can be a useful tool in complex commercial litigation to enable parties to manage risk, avoid litigation delay or reduce costs and can be commenced at any stage of a litigation, even prior to a litigation being filed. Mediation is in many cases a voluntary form of dispute resolution, although parties may have contractual obligations to mediate due to contractual mediation clauses and in some cases a court may require litigants to submit their dispute to mediation.

How is a mediation conducted?

Parties select a mediator by agreement, with the assistance of an organization such as JAMS (formerly known as Judicial Arbitration and Mediation Services, Inc.) or the American Arbitration Association (“AAA“), or, in some cases, from a roster of court-approved mediators where the mediation relates to a dispute being litigated in a court that requires or encourages parties to submit disputes to mediation. Parties may be, and typically are, represented by counsel. Parties also typically need to have someone present who is authorised to make decisions regarding resolution of the dispute.

Mediation is more informal than arbitration or litigation and does not use rules of evidence or procedure, other than those procedures agreed by the parties. A mediation may include a joint conference with the parties and their counsel to set the agenda and define the issues, and then separate caucus sessions between the mediator and each party to discuss any specific issues or concerns affecting a settlement. A mediation may include the submission of written legal briefs or documentary evidence regarding the relevant issues. The mediator does not rule on questions of fact or law, does not render a decision or award and does not have authority to impose a settlement. The end result for a successful mediation would be a settlement agreed on by the parties.

Is there any obligation on litigants to mediate?

Mediation is typically voluntary and both parties therefore need to consent to submit their dispute to mediation. However, parties may have contractual obligations to mediate due to mediation clauses in a relevant contract and in some cases a court in which the parties are litigating may require the parties to submit to mediation.

Does the court have powers to support a mediation?

Courts may resolve disputes about the enforceability of a mediation clause in a contract. In addition, judges may encourage parties to a litigation to pursue out-of-court settlement through the mediation process. It has become increasingly common for courts to order parties to try to mediate their dispute (e.g., New York courts, as well as the Second Circuit Court of Appeals and many other courts, have procedural mechanisms in place for handling such mediations), although the court cannot force the parties to agree to a settlement. Court-ordered mediations are usually conducted before a judge or magistrate judge, or one of a number of court-approved neutral mediators.

Are mediations confidential?

Yes. Parties to mediation typically agree to confidentiality, and the model procedures set out by organisations such as the AAA provide that the mediator and parties shall treat as confidential any information disclosed during the process (subject to applicable law). As a general matter, settlement discussions, including statements made during a mediation, are inadmissible as evidence in a court proceeding. This is due to the well-established and strong public policy in favour of settlement of disputes. Of course, facts and documents otherwise admissible in evidence in a court proceeding will not be rendered inadmissible simply by their use in mediation.

Does failure to mediate attract adverse costs consequences?

In general, any party can withdraw from mediation at any time without adverse costs consequences (other than any costs or fees associated with the mediation itself). As a general matter, parties to a dispute in the US bear their own legal costs (with the exception of disputes involving certain federal statutes that contain fee-shifting provisions or agreements to pay costs under a settlement agreement or other contract). However, where the parties have been ordered by a court to submit to mediation, the court may impose sanctions, including awarding costs, if one party fails to participate in the mediation in good faith.

How are settlement agreements enforced?

Any settlement agreement reached through the mediation process must be reduced to writing and executed by the parties. Neither the mediator nor any organisation such as JAMS or AAA has the authority to enforce a settlement. Settlement agreements may be enforced in the same way as any other contractual agreement – either through arbitration (if the agreement contains an arbitration clause) or in court.

Is there a system of accreditation and/or regulatory body for mediators?

Although each state may have rules or guidelines related to mediators, there is no general system of accreditation or regulatory body for mediators in the US. Mediation organizations such as JAMS or AAA may set minimum qualifications for their mediators, including requisite professional experience and licences, amount of training in mediation skills or continuing education requirements and certain courts maintain rosters of court-approved mediators. Most mediators are lawyers or former judges, although mediators may also possess other professional backgrounds or expertise.