JAMS ADR Blog by Chris Poole
As the oil and gas industry continues to evolve, oil and gas companies will no doubt see new types of claims asserted against them. Regardless of the players and the issues, oil and gas litigation is here to stay, and mediation will continue to be a valuable tool for resolving disputes, thus saving parties time and money. Many articles have been written about how to have a successful mediation, but there are specific considerations in oil and gas mediations that merit discussion, including mediator selection and preparation, documents and demand letters, pre-mediation conference calls, opening sessions and ongoing business considerations.
Mediator Selection and Preparation
As with many industries, the oil and gas world has a language all its own. In addition, oil and gas litigation can involve very technical issues, not to mention complicated contracts and regulatory schemes. For these reasons, it is helpful to select a mediator who has some familiarity with the industry.
Regardless of the extent of the mediator’s industry knowledge, every mediator will benefit from a thorough position statement. In all cases, a good position statement will outline the basic facts, the causes of action, the damages sought, the status of the case (e.g., discovery completed, pending motions, trial settings), prior settlement negotiations and the party’s view of the settlement value of the case. However, due to the complicated and technical nature of oil and gas disputes, there are additional steps counsel can take to ensure the mediator is well prepared. Here are some specific tips for your position statement:
Documents and Demand Letters
Well before the mediation, both parties should make sure that they have all the key documents they need from their client and the opposing party in order to fully evaluate the issues, especially those relating to damages. If necessary, enlist the mediator’s assistance in obtaining needed documents.
Plaintiff’s counsel should also send a written demand to defense counsel prior to the mediation that not only outlines the strengths of the plaintiff’s case, but also includes a detailed explanation of the damage model and calculations. This is essential because damage calculations can be very complicated in oil and gas cases, and valuable time may be wasted if a complex damage analysis is presented for the first time at mediation. Finally, plaintiff’s counsel should consider making an opening demand that is somewhat discounted from plaintiff’s absolute best day in court. Such a move shows good faith and helps get the mediation off to a good start.
Pre-mediation Conference Calls
Private, pre-mediation conference calls between the mediator and each party are invaluable. They should be held after the mediator has had an opportunity to review the position statements. During the call, the mediator can ask questions regarding the materials furnished and request additional information. The mediator and counsel can also discuss opening statements and other mediation logistics, and counsel can relate other information that may not have been included in the position statement. This process helps ensure the mediator and counsel are on the same page and allows the mediator to come into the session fully up to speed on the issues.
In many oil and gas cases, such as disputes alleging royalty underpayment, the lawyers on both sides of the docket have handled these types of cases before and are familiar with each other, the claims and the law. If so, an opening session for the purpose of making presentations about the causes of action and the law may not be necessary. However, opening statements focusing on the unique facts and damages in the case, followed by an opportunity for each party to ask the other for clarification on specific points, can be helpful. It is also more efficient than having the mediator carry such explanations back and forth from one party to the other.
Ongoing Business Relations
In many instances, parties involved in an oil and gas disputes have an ongoing business relationship that is expected to continue. In such cases, counsel should brainstorm with their clients before the mediation regarding possible modifications to the contract or other concessions that could help settle the case. A defendant may not be willing or able to pay as much upfront as the plaintiff is seeking but may be willing to make changes that could be just as valuable to the plaintiff in the future. Counsel should emphasize to their clients that mediation can be an opportunity to make a better, clearer deal going forward and to obtain outcomes that they could never get in court. Reaching such agreements in mediation can also prevent future disputes. These types of discussions often lend themselves to a joint negotiation session in which the mediator helps direct the discussion regarding the contract provisions and other concessions under consideration.
In conclusion, with advance consideration of mediator selection and preparation, and attention to documents and demand letters, pre-mediation conference calls, opening sessions and ongoing business relations, mediators and counsel can work together to craft a mediation process that maximizes the chances of settlement.