This article was initially published on the Securities Arbitration Alert (SAA) Blog, here.
Author’s note: This article was originally written for the Practising Law Institute (“PLI”) seminar “Securities Arbitration 2020” which was held on September 10, 2020. It has been updated to include comments from practitioners and current information from FINRA. The best way to get up to the minute information is to check the websites footnoted here.
Remote Mediation Background
This article will discuss the positive aspects of online mediations and how to achieve the best results in the most effective manner. With people not able to travel or attend in-person meetings and hearings due to the COVID-19 pandemic, lawyers are turning to technology to enable them to continue to service their clients. With FINRA, JAMS, and AAA delaying in-person hearings (as of the writing of this article) there are many real-life issues that may weigh in favor of virtual mediations: investors may have liquidity issues and may not have the ability to wait for in-person hearings; the reality of delay in scheduling an arbitration with the attendant risk of needing additional hearing dates, managing schedules for arbitrators, counsel, witnesses etc.; post-hearing litigation and broker-dealers’ ability to wait 30 days for awards to be paid. Remote mediations offer a perfect opportunity for parties to resolve disputes. Remote mediations may be a post-COVID-19 “new normal,” as they afford the parties low-cost alternatives to in-person dispute resolution.
Online mediations have many positive attributes to achieving a resolution of the matter. For example:
Everyone has experienced the difficulty of aligning travel schedules to find a time slot to conduct a mediation before a key stage of the case — whether those logistical difficulties be a discovery deadline or a prehearing exchange. After much back and forth to get all the people and the paper in the same room at the same time, everyone is highly invested in getting the matter settled. While investment in a potential settlement as a result of the effort needed to be physically present may motivate parties to settle, it may also make parties more entrenched in their views and less willing to acknowledge weaknesses in their own case. Because of this attitude, parties may be reluctant to compromise, thus inhibiting a successful settlement.
Likewise, seeing the Claimant or Respondent in-person may have some value in an in-person mediations, since assessing the credibility of witnesses based on visual presentations and reactions is a critical indicator in risk-assessing the value of the case. However, as many litigants have already moved away from joint sessions with PowerPoint presentations and opening statements because of the potentiality of enflaming emotions, the utility of in-person mediations has diminished. The same benefit of at least seeing the adversary can be obtained with a Zoom mediation (or other similar video-conference platforms) because of the reliable video component of Zoom. Most in-person mediations start with a brief joint session followed by hours of shuttle diplomacy in the individual sessions. That construct is easily replicated online with the parties choosing to say their farewells together — or not. Many practitioners have commented that they do not see the utility of traveling or dealing with complicated scheduling when a telephonic mediation would be just as effective. Zoom is a perfect hybrid between in-person and telephonic mediations.
In-person mediations do have unique positives that are difficult but not impossible to replicate in a Zoom context. For example, many cases have moved forward to resolution due to the “off the record” conversations that sometimes occur between parties (with or without mediators present) at the pantry refilling their third cup of coffee when out of the confines of the breakout room. These conversations can still occur with proper planning (setting up separate, secure breakout rooms for all the anticipated stakeholders). However, given the circumstances we are currently in, the willingness to evolve is not an option, but a necessity. It is an opportunity to embrace.
Prepare Prepare Prepare
While everyone prepares for a mediation in both in-person and in telephonic circumstances, it is imperative that virtual mediation preparedness via Zoom or any other platform be taken to the next level. Here are some suggestions:
Bundle documents in advance: This is important because there are fewer opportunities to slide the “hot document” across the conference table for the mediator to digest and (with permission, of course) bring to the opposing side to get them more realistic about their evaluation of the strengths and weaknesses of their case. To that end, the parties may be asked to provide a bundle of their documents in advance of the hearing. The mediator will assess the document and of course, keep those private unless specifically authorized by the counsel for either side to release to the opposing side. I also believe that a “less is more” approach in constructing the mediation statement is not useful in the virtual context. Having the ability to assess the case in advance of the mediation and conduct confidential conversations with counsel for the parties will ensure a smoother and more efficient mediation session. With an experienced and professional mediator, there is no reason to “keep your powder dry.”
Execute the Mediation Agreement in advance: It is also an important “housekeeping” matter to have the parties execute the mediation agreement in advance of the remote mediation. The usual practice during an in-person mediation is to have the mediator outline the mediation process, which is especially important for the parties who may not have participated in mediation previously. After that discussion, the mediator will have the parties and their counsel execute the agreement which contains important disclosures about fees, confidentiality, record keeping, etc. Having this agreement executed in advance helps counsel educate the parties about the process but does not obviate the obligation of the mediator to have a discussion during the mediation. It is also imperative to have all attendees execute the agreement even if they are not parties to the actual arbitration case. The confidentiality concerns are extremely important if the case does not settle at mediation. In a virtual world, there may be observers in the forum who would not be physically present at an in-person session, but their confidentiality commitment is just as important.
Exchange contact info in advance: Exchange a list together with email and phone numbers of all the attendees of the remote mediation in advance of the mediation. This is required in order for the mediator to set up the joint session and “break out rooms” on Zoom. However, since there is no travel and it is easy to merely forward an invite for multiple parties to attend remotely, it is helpful for the mediator to understand who all the stakeholders are to the particular matter. Everyone has participated in a mediation where there are unexpected guests who may have separate agendas, whether they are compensated third parties (e.g. trust lawyers, expert witnesses) or heirs to the monies at issue. The addition of these other non-party participants can slow the process down, or to the contrary, make it more efficient since they may be consulted anyway. For a Zoom mediation, it is good practice to know in advance who will be present because of the ease of extending an online invitation and a potential lack of physical visibility of the non-party attendees.
Do a dry run: The technology should be tested with the counsel for the parties in advance of the mediation. It is important to do a test run of the video-conferencing platform and all connectivity issues for your virtual meditation. This medium is new to many, and with people working in remote locations and perhaps without access to their usual office technology support, it is important to practice with the software beforehand to lessen the possibility of technological glitches. With respect to the possibility of technological glitches, it is important to have a backup plan in the form of cell phone numbers in addition to emails. Much like at an in-person hearing, after much of the substantive discussions about the facts and legal theories have been completed, the remaining discussion is about the offers and demands. For these discussions, a cell phone call with the parties’ counsel suffices. Again, at the end of a case, having discussions with only the attorneys is very similar to an in-person mediation. The preparation for the virtual mediation is where the main differences present themselves. The actual virtual mediation is remarkably similar to the traditional in-person process.
The Actual Mediation
It is important to make the virtual mediation as close to an in-person experience as possible. To that end, make sure that the device being used is exclusively for the mediation, not for reviewing documents or taking notes. If there is a need for a second monitor, get one! Tablets make an effective second monitor when a second computer is not available. Also, disable any pop-up notifications or alarms to make sure they are not appearing on-screen while presenting. Use the best webcam and check to make sure the lighting is appropriate, and all parties can be seen clearly. Even a multiple-party conference call can have background noise distractions. Conduct the mediation in as quiet a location as possible to eliminate distraction and let the parties know their presentations and your conversations are the top priority. If notes need to be taken, consider a legal pad and pen rather than the clatter of a keyboard.
Make sure in advance that both parties are going to be represented by people with settlement authority and the ability to bind the respective sides. Being present means being able to participate at a moment’s notice just as if the mediation were being conducted in person. The key terms are “participate,” not just “be available.” Much time will be wasted if the mediator needs to track down the right people during the proceeding.
Confidentiality is of a major concern to the participants. There are tools in the various platforms to allay those concerns. Make sure access to the joint sessions, the breakout rooms, screen sharing and document sharing through “call out boxes” are carefully controlled. Additionally, unlike arbitrations, FINRA mediations are not audio or video recorded. All participants must be told not to record the mediation! This advice should be reaffirmed in the opening remarks by the mediator and should be included in the mediation agreement. This is harder to police in a remote mediation but is no less critical to earn the confidence of the participants and ensure the integrity of the process.
It is incumbent upon the mediator to set some time-boundaries. In an in-person setting, the participants will have some time pressure at the end of the day whether it be the traffic, a flight to catch, a personal obligation to attend to, etc. In the virtual mediation setting many of the participants will be in the comfort of their own home — petting dogs, watching television, eating snacks, etc. This environment eliminates some of the time pressure that is sometimes helpful at the end of a mediation to bridge a gap. Form an agreement in advance with all parties about what the timing schedule of the day will be in order to artificially produce this time-pressure.
As with a traditional mediation, it is important to memorialize the agreement before people leave the “room”. After a hard-fought day of mediation ending in resolution, the last thing the participants want is a broken deal. The mediator should ask one of the parties to bring a form term sheet to the mediation session to be able to get the essential components of the settlement agreed to with e-signatures. The parties will execute formal documentation post-mediation as would be the case in an in-person mediation. As stated above, the usual mediation is not recorded in any way. The mediation agreement (and ADR provider rules) will contain language stating that the parties may not subpoena the mediator, or notes from the mediation, for subsequent arbitration or litigation. For those new to Zoom, there is functionality to allow the mediator to record the proceedings. The only instance that the recording feature may be useful is to memorialize the agreement to stave off post-mediation disputes over whether or not there was a meeting of the minds for the settlement. This is a benefit that would otherwise not present itself during an in-person mediation but must be agreed to by the parties.
Real-Life Anecdotes from Practitioners
As parties are realizing travel and in-person meetings may be unavailable for quite some time, they are learning to adjust to the technology changes. Andrew J. Melnick offered: "I have overcome my initial skepticism and now appreciate that mediation lends itself to a virtual process. With Zoom or similar technologies, the mediator can simulate the physical dimensions of an in-person mediation and hold joint and individual sessions with the parties and counsel as well as allow parties and counsel to meet alone. The drawback is that it is sometimes harder in a virtual environment to maintain the momentum and connections that can develop when participants are together in the same physical setting.” Having interviewed several lawyers for both claimants and respondents, that sentiment has been expressed. It is not unusual for a mediation to continue over several sessions or days — sometimes with or without the use of Zoom.
Barry Lax had this to offer: “Throughout my career, I have conducted mediations throughout the country. Mediation is a great tool to focus the parties on the issues at hand. It is an alternative to bilateral negotiation where the parties may need an independent third party to assist in the risk assessment process in order to facilitate a mutual resolution. Remote or “Zoom” mediation is a great venue offering flexibility, lower cost, and the ability to caucus with your client and adversaries as needed. It also provides more options with regard to selecting your neutral as you are not constrained by geography and/or travel costs. Now that remote mediation has proven to be so useful during these trying times, it will be an important part of litigation practice for the foreseeable future.”
The PLI Securities Arbitration 2020 program held virtually on September 10 was attended mostly by attorneys — 53% of the participants. A live poll revealed interesting data:
It appears that participants have not yet had extensive experience with virtual mediations, but are more than willing to try it out.
Update from FINRA
In light of the COVID-19 pandemic, FINRA Dispute Resolution Services (“DRS”) was well-positioned to seamlessly transition from in-person mediation to virtual mediation, and continue to provide world-class mediation services to forum users without interruption. This includes providing Zoom training and resources to mediators, and offering a COVID-19 Reduced-Fee Mediation Program to encourage use of virtual mediation.
FINRA DRS staff adopted Zoom technology internally a few years ago, so with this secure functionality already in place, FINRA DRS was able to move quickly to offer FINRA Zoom Mediation in April 2020. Several mediators immediately adapted to Zoom and over the past several months, FINRA DRS mediation staff has trained numerous other mediators on Zoom, and are available to provide technical assistance in starting and conducting a Zoom mediation. To date, FINRA DRS has conducted or is scheduled to conduct, 91 mediations through Zoom, teleconference, or through a combination of both.
FINRA DRS also developed a resource guide, and training and informational videos to aid mediators, arbitrators, and parties considering or already participating in virtual mediation sessions and arbitration hearings. These are available on FINRA’s website at the following links:
From May 2020 through October 2020, to help encourage forum users to consider FINRA Zoom Mediation, FINRA DRS is offering a Covid-19 Reduced Fee Mediation Program which offers virtual mediation at significantly reduced fees. More than 100 mediators are participating. To date, approximately 20 cases have mediated through this program.
“We are encouraged by feedback received from mediators, arbitrators and counsel who have become more comfortable with Zoom and shared that after the COVID crisis ends, they may even prefer virtual mediation to in-person mediation! In the meantime, we continue to look for ways to continuously improve the program,” offered Manly Ray, Director of Mediation. In November 2020, FINRA DRS expects to expand the existing telephonic program to include Zoom and anticipates adopting similar features from the COVID reduced-fee program. FINRA DRS’s priority is to provide the highest level of service and continuing to innovate to meet the needs of all users of the forum.
Virtual mediations are a creative way to meet a business need during the COVID-19 epidemic. Since litigants still need efficient alternative dispute resolution tools, Zoom mediation may be one of the silver linings of 2020. This article discussed practical tips and techniques to guide participants through the process. Virtual mediations offer more flexibility, less cost, access to mediators without regard to geography and a very customizable format to achieve success in resolving matters. By dint of hard work in preparation, the virtual mediation will feel very similar to an in-person mediation– and you can pet your dog or snack on your own couch in the process! Zoom mediations are here to stay.
 As of this writing, in-person hearings at FINRA through December 4, 2020 have been canceled.
 Mr. Melnick is a shareholder at Murphy & McGonigle PC, where his practice focuses on representing financial services firms in litigation and regulatory matters.
 Barry Lax is a founding partner of Lax & Neville, a boutique law firm with expertise in all matters concerning the financial services industry.