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Five Compelling Reasons to Build a Presuit Mediation Clause Into Your Business Contracts

Business Law

Business people hate litigation. Loathe it. Fear it. They know it as it is — scary, expensive, unending, a drain on their time, their staff, their resources. The uncertainty of it skews projections and profit forecasts and drags down productivity. It casts business people into an unfamiliar world, with its own sense of time, its own jargon, its own rules, and its own decisionmakers. Yes, business people hate litigation. So why, then, do we as lawyers — to whom our business clients look for legal guidance and leadership — continually write business contracts1 with the same tired clauses regarding venue, jurisdiction, choice of law, and prevailing party attorneys’ fees? Why don’t we start steering our business clients away from litigation? Why not start writing business contracts that provide for presuit mediation?

Presuit mediation is the next wave of alternative dispute resolution (ADR), the sleeping giant that can revolutionize the way business disputes are resolved. We as lawyers know that many courts insist on mediation at some point in the litigation process,2 but why wait? It’s time for The Florida Bar to show leadership on this issue and make a serious and honest effort to promote a more cost effective and peaceful solution to business disputes.

Presuit Mediation Explained
Before advocating the presuit mediation alternative in your client’s business contracts, you must first be able to articulate what presuit mediation is and understand it yourself. F.S. §44.1011(2) defines mediation as:

a process whereby a neutral third person called a Mediator acts to encourage and facilitate the resolution of a dispute between two or more parties. It is an informal and non-adversarial process with the objective of helping the disputing parties reach a mutually acceptable and voluntary agreement. In mediation, decision-making authority rests with the parties. The role of the Mediator includes, but is not limited to, assisting the parties and identifying issues, fostering joint problem-solving and exploring settlement alternatives.

Likewise, the Florida Supreme Court in the Rules for Certified Court Appointed Mediators offers the following definition at Rule 10.210: “Mediation is a process whereby a neutral and impartial third party acts to encourage and facilitate the resolution of a dispute without prescribing what it should be. It is an informal and non-adversarial process intended to help disputing parties reach a mutually acceptable agreement.”

The essential differences between court-ordered mediation and presuit mediation are obvious and twofold. Court-ordered mediation is ordered by the court and occurs after suit is filed. Presuit mediation occurs without order of the court and before suit is filed. As a consequence, presuit mediation is not bound by Florida Statutes or the Florida Rules of Civil Procedure pertaining to mediation. It occurs outside the judicial system. The parties themselves develop their own referral process and select their own mediator. If the parties select a Supreme Court certified circuit civil mediator (one who has gone through the 40 hours of mediation training and has been certified by the Supreme Court), presuit mediation nonetheless requires that the mediator comport with the Rules for Certified and Court Appointed Mediators. That compliance would normally, in the absence of an agreement to the contrary, make applicable F.S. §44.401, the Mediation Confidentiality and Privilege Act. This statute is applicable to presuit mediations, which are facilitated by any mediator who is certified by the Supreme Court, unless the mediation parties expressly agree not to be bound by it.3 Confidentiality and privileges provided for in the act are broad and include not only the parties, but any person who attends mediation whether in person, by phone, video conference, or other electronic means.4 In presuit mediation, the application of the act commences when the parties agree to mediate and ends at the earlier of settlement, impasse, or termination of the mediation.5 The act simply states that with few exceptions, all mediation communications are confidential and as such, violations of the confidentiality provisions can subject the mediation participant to sanctions including costs, attorneys’ fees, and mediator fees. Mediation communication disclosed under the statute remains confidential and is not discoverable or admissible for any other purpose except for the narrow situations set forth in the statute.6

Implementation by Contract
Mechanically, the parties enter into a mediation agreement in which they agree that the Mediation Confidentiality and Privilege Act applies. The mediation agreement should be specific and detailed and outline the procedures to be followed, the fee structure, the manner and method of payment, and provisions for confidentiality under the statute. A sample clause to provide for presuit mediation might look like this:

Disputes arising under this Agreement must first be mediated by a Supreme Court Certified Circuit Civil Mediator in _________County, Florida. The parties agree that the mediation shall occur within thirty (30) days of the date mediation is requested by either party. The Mediator shall be agreed upon but if the parties are unwilling or unable to agree, the parties agree that a Mediator from __________(insert the name of any legitimate mediation company in the pertinent venue) shall be binding on the parties. The parties agree to abide by the Mediator’s Agreement, pay Mediator fees promptly and share them on an equal basis. Litigation may not be commenced until after mediation has been (i) declared an impasse by the Mediator or (ii) terminated in writing by one or both of the parties. The confidentiality provisions of the “Mediation Confidentiality and Privilege Act” shall attach to any such presuit mediation.7

Reason One: Presuit Mediation Is Fast
Rather than measuring the time for redress of a grievance in terms of months — or more likely years, in the case of litigation — mediation can be scheduled within a matter of weeks and in some cases, days. Litigation diverts resources and personnel away from productive business tasks and away from making money. With that in mind, ask your business client if it would prefer an attempt to resolve the dispute within 30 days, or if it would prefer to litigate the matter for the next year or more.

Reason Two: Presuit Mediation Is Cheap
Presuitmediation is not free, but relative to litigation, it remains cheap, even in an era when attorneys are preparing more thoroughly for their mediations, preparing PowerPoint presentations. Mediations can often last a full day or two, but mediation obviates the need for filing fees, discovery, and protracted attorneys’ fees incurred over months, if not years. Many mediations are resolved within a matter of hours at only a tiny fraction of the cost of litigation. Ask your business client if he or she would prefer to pay a few hours or a day’s worth of mediator time and attorneys’ fees with a chance of resolving the matter in 30 days, or if it would prefer opening its checkbook for protracted litigation for the next year or more.

Reason Three: Presuit Mediation Is Informal
Presuit mediation can be done in your business client’s conference room with available coffee, soda, lunch, or donuts. The ambiance is informal. The dress is informal. The tone and tenor is informal. Employees of your business client can step out of the room from time to time to check their e-mail, make calls, or touch base with their staff. Presuit mediation is less intrusive, less cumbersome, less stuffy, less scary, and less inconvenient than the formal setting of a courtroom. Ask your business client whether he or she would like to resolve the matter in their own conference room or the conference room of the mediator rather than before a jury and a judge in the public setting of an open courtroom.

Reason Four: Presuit Mediation Is Empowering
In presuitmediation, the parties control it. The parties make offers. The parties interface directly with the mediator, unlike a courtroom in which the attorneys do most of the talking. And most importantly, the parties get to tell their story. Everyone wants a “day in court,” a chance to be heard. Lawyers often hear: “If I could just sit down with the judge and explain this.. . . ” Your business clients can be more a part of any resolution in mediation. Your business client will not be told by a judge what the outcome will be, will not be told by a jury whether and to what extent it may have won (or lost) its case, but in fact and in practice, will fashion its own resolution of the matter. Ask your business client if he or she would prefer to work out their own resolution to a problem or whether it would prefer to be dictated to by a judge or jury in open court.

Reason Five: Presuit Mediation Is Confidential
Trials are public. Presuit mediations are private. The statute providing for mediation confidentiality is broad, simple to understand, clear, and provides sanctions for its violations. Ask your business client if he or she would prefer to keep business matters private or lay them bare in an open courtroom.

Mediation is a powerful means of resolving disputes. When mediation succeeds, the parties move on. When mediation fails, it often narrows the focus of the dispute and bridges the wide gulf that often exists between the expectations of each party. But many attorneys seem to feel that mediation does not work until the client has “bled enough,” that is, the client has been dragged through the legal meat grinder and incurred thousands, if not tens of thousand dollars in costs and fees. However, this type of thinking ignores the reality of the business world. Business deals are not made in court. Business deals are not made in public. Business deals are normally not made with lawyers. They are struck between business people thinking (more or less) rationally, with an eye on the bottom line. Ordinarily, only after a deal is made do the parties seek out counsel to “write it up.” Why do we as lawyers conclude that our business clients cannot do the same with disputes? Who are we to substitute our judgment for that of our clients and assume that mediation too early in the timeline will be of no use? How can we as a Bar advance alternative dispute resolution and more peaceful settlements among parties if we do not begin to encourage presuit mediation with our own clients? It’s time we started.

1 A typical “business contract” would be a shareholders’ agreement, covenant not to compete, employment agreement, commission agreement, purchase order, vendor contract, partnership agreements, or other “garden variety” commercial agreement.

2 Fla. Stat. §44.102(2)(a) provides that a court must, upon request of one party, refer to mediation any filed civil action for monetary damages, providing the requesting party is willing and able to pay the costs of the mediation or the costs can be equitably divided between the parties, unless (citing eight examples).

3 Fla. Stat. §44.402(1)(c).

4 Fla. Stat. §44.402(2).

5 Fla. Stat. §44.404(2).

6 Fla. Stat. §44.405(4)(a) 1-6.

7 The practitioner must be mindful, however, of the applicable statute of limitations.

Mike Christiansen is a Supreme Court certified civil mediator and a member of Mastriana & Christiansen, P.A., practicing in business, real estate, and telecom matters. He received his J.D. from the University of Pittsburgh School of Law in 1973 and has been a member of The Florida Bar since 1976.

This column is submitted on behalf of the Business Law Section, Louis T. M. Conti, chair, and Melanie E. Damian and Peter F. Valori, editors.

Business Law