Mediation: Recession Proof Or Not – A Discussion Of Mediation And How The Recession Affects It

From the Mediation Matters Blog of Steve Mehta.

The current economic climate that we are all facing is the worst recession since the Great Depression.  Unfortunately, just like all other businesses in America, the business of mediation appears to be affected by recession also.

 Just recently, I saw an article about the Tulsa Early Mediation program.  Over 27 years, Tulsa’s Early Settlement program has saved government, courts and citizens tens of millions of dollars, and thousands of hours of frustration. It began as a local experiment and became a national model for mediation.  The article discussed that the Little Mediation Engine that could now has financial woes and could fall victim to crippling revenue shortfalls.

 The same fate appears to be affecting other mediation programs also. For example, the city of Kansas City has eliminated its Dispute Resolution/Community Relations section of the Human Relations Division due to adoption of the fiscal year 2009-10 budget, which involved a substantial reduction in force and eliminated all remaining staff in that office last week.  See article on Kansas City Mediation Program

 On the other hand, other evidence seems to suggest that mediation may weather the storm.  For example, in Ireland,  according to a recent poll conducted by the Irish Commercial Mediation Association (ICMA), three quarters of lawyers, accountants and business consultants rank mediation as their first preference for dispute resolution, followed by conciliation, arbitration and litigation.  (click here for more information on the poll)

 ICMA spokesman Austin Kenny said: “Although commercial mediation is still relatively new in Ireland, there has been a significant increase in the number of cases dealt with through mediation in the last year. Cases are typically dealt with in three to six weeks from commencing the process, which is significantly quicker than going to trial.

 The respondents in the ICMA survey said the key advantages of mediation were cost (saving up to 70 per cent on litigation), speed, control of the process and the preservation of business relationships. The survey found that mediation was most widely used in family businesses and construction disputes, followed by partnership conflicts, property issues and business terminations.

 Given the conflicting views regarding the effect of the economy on mediation, I thought I would pose the question to my peers.  Here is what they had to say.

 According to Lee Jay Berman, A Los Angeles mediator and educator regarding mediation. 

 “While many believe that mediation is a recession-proof business, the truth is that a difficult economy slows every business and practice as people have less money to pay for things. When a mediation practice slows, there are three things that mediators can do to make productive use of increased down time. They can increase their marketing efforts (attend more networking events, update websites, etc.), improve or update the administrative infrastructure of their practices, and they can hone their skills.”

 Lee Jay Berman also wrote an informative article on Mediation marketing.  To learn more about Lee Jay’s article click on “Recession Advice for Mediators”

 According to Deborah Rothman, a Los Angeles Mediator

 I’ve asked a few attorneys with whom I work regularly, about how their litigation practices are being affected, and though one can’t extrapolate from such a small, non-random sample, here are a few non-random thoughts: Some said business is still strong. But clients are much more price-sensitive to the mediator’s rate. Those clients who are in real trouble financially are anxious to slow down their lawyers’ burn rate, but can’t afford to settle the dispute because that would require the payment of a chunk of money they either don’t have or don’t dare allocate without knowing if they are going to be able to stay in business.

 My personal experience is all over the board. Some cases are extremely price-sensitive and counsel want to negotiate my rates, other cases see the cost of the mediation as an insignificant cost, and one that is well worth the value. I am finding that everyone is paying slower on balances due, which is causing me to reconsider how much I require for a deposit. I rarely used to get requests for a half-day mediation, but now that I receive them, if I’m free that day any way, I don’t mind scheduling them. But I’m beginning to think it’s a ploy whereby the client only has to deposit a smaller sum, leaving me with collection problems at the end of a 9-hour mediation. 

 According to Steve Hindmarsh, a U.K. mediator,

 I’ve found enquiries to be up, and it’s certainly looking recession proof at present. I focus mainly on training work and this is possibly linked to changes in employment legislation in the UK coming into effect on 6th April. Another factor is that I launched my business last July so the lead in may just be coming to fruition now.

 According to Rajiv Chelani, another U.K.mediator

 People seem to be slowing down and not rushing thru their decisions and considering ADR as an option. Mediation logically sounds to be a more effective option. Though the challenges still remain for the non-legal mediators for getting sufficient no. of referrals.  – 

 Finally, here is my view as a mediator in Los Angeles.

In my view, I have found that the economy does have an impact on the mediation business. It appears that because times are tough, in some occasions, both sides are willing to spend less on litigation and want to resolve cases. On the other hand, I have also seen that people are hanging on to cases longer. Sometimes as it primarily applies to defendants who may have to pay some money to resolve the case, when it is obvious that the case should settle, the sides seem less willing to do so and more willing to spend money. It could be because they can afford the short term litigation costs, and cannot afford the immediate payment of settlement. In fact, in one case, the defendants all but said that they could afford attorneys fees, but not a settlement.

                       

Steve Mehta

Steven G. Mehta is an attorney and mediator providing unique mediation services in a variety of types of civil litigation. His ability to understand the human process and complex emotional issues involved in legal negotiations enables him to effectively assist the parties in obtaining the best possible results during mediation.… MORE >