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Mediation: Time-Money Saver In Business

If you run a small business and have ever been involved in a lawsuit, you how expensive it can be in terms of time and money. Quality legal counsel is expensive, not to mention the cost of your own time and the physical and mental strain of even a short trial.


In a trio of articles in the New Jersey Law Journal, the first on April 21, 2003, it was reported that in a Harris Poll which measured how “business friendly” a state’s court system is, the New Jersey court system was rated 30th. Overall, it was given a “C” by senior attorneys from companies with at least $100 million in revenues. The biggest complaint: “Cases take forever to move.”


In the second (September 20, 2004), it was reported that the number of CEPA (whistle blower) cases in New Jersey doubled since 2001. And, nationwide, whistleblower suits have resulted in the highest median trial awards compared to all types of employment lawsuits. Between 1997 and 2003 it was $338,386. Wrongful termination suits resulted in median awards of $135,000.

According to interviews quoted in the article, defense attorneys think a jury can be convinced fairly simply by connecting an event to a subsequent adverse employment action. A good plaintiff’s lawyer will then wrap his client in “truth, justice and the American way” to bring home a large verdict. There is also the possibility of penalties of up to $1 million and 10 years in jail for corporate officers for violations of Sarbanes- Oxley as the result of such a case.

Lawyers for both employers and employees believe that recent corporate scandals like Enron and Worldcom, and a new law (Sarbanes-Oxley Act) have increased awareness and led to more such suits.


In the most recent article (September 27, 2004), it was reported that the Toro Co. claims to have cut the cost of handling each claim by $80,000! That number includes attorney fees, verdicts and payouts. The program has been in place since 1991. Mediation is a part of this process.

Some other firms call it an “aggressive settlement strategy” and disagree with it. These companies feel that if you have taken measures to control quality, you should stand behind your product. They also feel by “just running out to settle”, they would make themselves a soft target for plaintiff’s lawyers.

The head of Toro’s legal team in charge of the program scoffs at that idea. He cites company statistics to show from 1996 to 2001, the number of claims actually declined. Toro’s rivals in the industry refuse to disclose per case information.

Other companies who have adopted similar settlement strategies are Johnson & Johnson, E.I. Du Pont, Georgia Pacific and General Electric.

In 1986, the Rand Corporation estimated that it cost $100,000 for a business to defend itself. Toro previously calculated its costs at $115,000.


But, there is a better alternative to litigation. It is mediation.

About 95% of all litigated cases are settled and never go to a judicial decision. So, if the odds are you are going to settle sooner or later, why not sooner; for less money; and in a confidential dispute resolution process?

Mediation is usually a voluntary process where the parties meet with an independent neutral who facilitates a resolution of the disputed issues. It is informal, confidential and non-adversarial. Mediation is faster and generally less costly than traditional litigation.


Quite often, mediation and arbitration are confused since both come under the general heading of “alternative dispute resolution” or “ADR”. Arbitration is faster and less formal than court but still adversarial. It is created by contract and can be binding or non-binding. If it is binding, it is very rare for an arbitration award to be vacated. The arbitrators control the process and the outcome. It is harmful to business relationships which may not survive the ordeal.

Court cases and binding arbitration result in a win or lose decision over which the parties have no control. The resolution in mediation has to be agreed to by the parties. The parties do not have to agree. Either party can terminate the mediation at any time without prejudicing their rights. It can be conducted before or even during litigation.

Mediation is also flexible. The parties can agree to creative solutions; temporary or trial periods; draw up new standards of performance based on their common experience. You are not limited to an award of money. You can experiment with other solutions which can maintain your valued employees, or customers In other words, a problem can be resolved; not just won or lost.

While both arbitration and mediation are more private than court, mediation is more respectful and confidential. It allows each party to float a proposal without committing to one. The negotiations not are admissible in court as evidence. Thus, sometimes a simple acknowledgment or apology will go a long way to resolving the issue. This is especially helpful in employment cases and family businesses.

Mediation is growing in acceptance in commercial and business matters. It is particularly suitable in disputes involving employment, landlord/ tenant, business continuation/ dissolution, contracts between suppliers and customers, consultants and clients, and product liability etc..

So, if you want to resolve a problem efficiently, economically and confidentially, and possibly save the working relationship you need to run your business, consider mediation. As President John F. Kennedy said: “Let us never negotiate out of fear; but let us never fear to negotiate.”


Thomas J. Hanrahan

Mr. Hanrahan is one of just 30 people statewide accredited by the New Jersey Association of Professional Mediators (NJAPM) as a Business and Commercial Mediator; he is also included on the roster of court approved mediators (and mentor) in Civil, General Equity and Probate Matters, for the N. J. Superior… MORE >

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