Business Breakups: Why Business and Commercial Cases Are Well-Suited to Mediation

Wed, Nov 20th, 2024 | by Miles Mediation and Arbitration | Article | Social Share

Breaking up is hard to do, as the old song says, and perhaps especially so in the case of partnership breakups and business disputes. Emotion and pride can easily cloud sound business judgment and make it difficult to reach a reasonable resolution.

Excessive focus on assigning fault for the business failure can blind the participants to a solution otherwise readily at hand. In such cases, a well-timed mediation often is the best mechanism to clear away the confusion and sharpen the focus to find the pathway out.

As a mediator of business and commercial disputes, I offer these four compelling reasons to consider mediating your next business dispute.

Reason #1: Control

Trials signify a loss of control. Participants entrust their case to 12 strangers who likely would rather not be there. A gifted trial lawyer hopes and believes that his or her powers of persuasion will compel the jury to the desired outcome. But one can never be completely sure, and even the very best trial lawyers experience disappointing trial results on occasion.

Business and partnership disputes heighten this risk, because successful businesspeople are used to being in control and expect to be. The assumption that a jury will agree with their position is very risky. Most jurors are not businesspeople and easily could carry biases against a business perspective. Further, the complexities of many modern business dealings means that juror misunderstanding, at least to some degree, is likely. Turning over a significant dispute to 12 people who may decide the case based on their faulty assumptions and possibly for the wrong reasons should strike fear in the heart of anyone who values control. Yet, it is so easy to declare, “I’ll just go to trial.”

Many years ago, I mediated a partnership dispute between two highly intelligent, highly trained specialists in their field. Both were very successful, high earners. They hated each other and would not yield an inch on any point. Pride and emotion were making settlement impossible. Separately, I suggested to each of them that we go downstairs, walk outside, and find the 12 people with the most confused looks on their faces and ask them how the case should come out. Whatever these people said, we would adopt as the settlement. Both participants recoiled in horror at the idea. I then asked why they thought a trial would be significantly different. The case settled within the hour. They wanted to be in control of the outcome and not give it over to a jury. The desire for control led to the compromise.

Reason #2: Cost

Cost also can be a significant factor in business litigation. In the absence of an attorney-fee provision in the contract, usually both sides will have to bear their own fees and expenses. Unless the amount in controversy is substantial, the cost of litigation can quickly swallow up the case for both sides. While at the beginning of a dispute it is common for a client to stand on principle, sometimes by the end of a protracted litigation the only principle that the client is standing on is, “Let’s stop the bleeding.”

In this context, mediation is a vital tool to attempt to minimize a client’s losses whether the client is the plaintiff or defendant. The lower the dollars that are in dispute, the sooner the better for the mediation. It often provides the best avenue for the attorney to obtain a successful outcome for the client in a business case.

Further, litigation is time consuming and diverts resources that otherwise could be applied to money-making endeavors. A mediated settlement allows the parties to cut their losses, refocus and begin to move forward again.

Reason #3: Creativity

Third, mediation provides an opportunity for the parties to be creative in finding a solution to the dispute. The outcomes available to clients at trial are usually limited. A jury can award money damages. Sometimes injunctive relief is available. But at mediation, nearly anything is possible so long as the parties agree. Payment terms, future work, buyouts, future price concessions—the possibilities are endless at mediation and dovetail nicely with the businessperson’s typical desire of retaining control. A jury has neither the knowledge nor the authority to come up with a creative solution to a business disagreement. Mediation is the perfect place for the clients’ creativity to blossom into a constructive compromise.

Reason #4: Confidentiality

Finally, unlike the public specter of a trial, mediation is confidential and lets the parties work through their issues privately. This helps protect the reputation of the parties involved, as well as the business itself. A public airing of a business dispute or partnership breakup can be harmful to the reputations of all the parties. Mediation allows the parties to resolve their differences in a confidential setting and to move forward with their reputations intact.

Conclusion

Mediation is the best place to resolve most business disputes. It empowers clients and attorneys alike to take control of the solution, it limits the risk and cost of an ongoing dispute and provides the flexibility needed for clients to tailor a compromise to their specific needs.

*Originally published in the Daily Report and reprinted with permission.

About David Nutter

David C. Nutter is one of the most sought-after mediators and arbitrators in Georgia. As a Senior Neutral at Miles Mediation, he has mediated over 2,000 cases involving commercial disputes, employment litigation, restrictive covenants, contracts and torts, corporate and partnership litigation and dissolutions, real estate, technology implementations, trust and estates, insurance coverage, construction, securities, banking and finance, nuisance claims, false arrest and excessive force cases, and significant personal injury suits.