The Guided Choice Process for Early Dispute Resolution

Category | Briefing Papers

Dean Thomson is a Shareholder in the firm’s Construction Law Department. Dean can be reached at 612.359.7624 or dthomson@fwhtlaw.com

The following article was originally published in The American Journal of Construction Arbitration & ADR, Volume 1, No. 1 (2017)

Most construction disputes settle. Settlement of sometimes contentious, always costly disputes is a great value to clients. An even greater value is obtained if the process used facilitates a rational, well-informed settlement as early as possible. Quickly resolving disputes is valuable because it reduces the time-related expense involved with using the adversarial process, preserves opportunities for maintaining valuable business relationships, and allows for innovative business ideas to facilitate settlement. By contrast, courts and arbitrations are designed to deliver a monetary award binding on each party. Because that award can be severe, the process is layered with costly procedural rules to ensure due process. While the litigation or arbitration process might eventually lead to a settlement, neither usually produces that result quickly, and neither is structured to deliver savings in process costs or to preserve relationships. If early dispute resolution is valuable to pursue, there should be an alternative way available to achieve that goal other than the typical routes of litigation and arbitration. The purpose of this article is to assemble and explain the various tools and best practices used by skilled mediators to promote and create that alternate route which the authors refer to as “Guided Choice.”

I. INTRODUCTION

The best way to achieve the earliest possible settlement is first to understand the impediments to settlement and then to create a customized settlement process addressing them. Those impediments often involve more than lawyers disagreeing about probabilities of binding outcomes based on the law, facts, and expert opinions. They can involve human factors such as perceptions of loss, anger, and both conscious and unconscious biases. They can also involve heuristics unique to the parties regarding how the individuals involved or their corporate cultures make decisions. These decisions are frequently influenced by the importance placed by the parties on factors such as legal and expert opinion, the availability of insurance proceeds, indemnity recovery from other parties, surety involvement, and governmental approvals.

It is difficult for a party to a dispute to recognize, much less objectively understand, these impediments simply by making internal investigations or by lawyers talking with opposing counsel. Often, confidential discussions between each party and the neutral mediator are needed for the parties – and the mediator – to identify and understand these impediments before the parties gather for a more formal negotiation. Yet this is not how most mediations proceed. Instead, most of what is currently referred to as “mediation” consists of a meeting among the parties at a scheduled time at the mediator’s office or other venue. Under this traditional model, usually the only background the mediator brings to the session consists of the pre-mediation statements, often reading like legal briefs, that the parties have sent to the mediator a few days before the meeting. Little time is spent on identifying and diagnosing impediments and settlement process design that could lead to an earlier and successful settlement.

In the traditional model, the mediator’s principal function is to assist in the settlement negotiations phase. The mediator has little influence on when that phase occurs. The date is controlled by attorneys, and it often occurs only after the parties have already spent a lot of time and money on discovery, court appearances, and motion practice preparing for a binding resolution of the dispute and not necessarily on settlement. During this period of adversarial activity, the parties’ relationship often deteriorates making opportunities for settlement and creative solutions more difficult.

Disputes settle when parties decide that it is in their best interests to do so, and this usually only occurs after the parties are satisfied their preparation and information needs have been reasonably achieved. If the parties’ counsel are focusing on the ultimate trial or arbitration hearing, their preparation and information exchange will be governed by the requirements of those demands and not necessarily by the often more limited needs of settlement. Using collaborative processes in the Guided Choice toolbox to satisfy the parties’ information needs for the purposes of settlement is more efficient and less time-consuming than using the rule-based adversarial processes required for binding decisions from judges or arbitrators.

Ironically, attorneys who push for early mediation may try to schedule the negotiations before the parties are ready to change their initial positions and agree to settlement. Often these early mediations are scheduled because the clients and their lawyers believe that parties acting in good faith will be reasonable. While most attorneys and their clients may have good intentions, good faith alone does not always lead to a successful mediation. Lawyers should resist starting to negotiate until the preparation needs of all the parties have been satisfied sufficiently so that parties have the information and answers necessary to change their initial settlement positions. Those needs may include receiving information, feeling heard in a neutral forum, obtaining an apology, avoiding the fear of loss or uncertainty, resolving significant legal issues, maintaining reputation, reducing differences among experts, creating settlements that avoid future business problems, avoiding unaffordable litigation or arbitration expenses, resolving insurance and indemnity or surety disputes, reevaluating erroneous assumptions based on biases, or engaging in necessary internal investigations. When negotiation and mediation start before these or other needs are known and can be fulfilled, impasse and further delay in the settlement process usually occur with resulting continuing expense. Even if these cases eventually settle and may not be tried, that result will come at a cost that could have been better minimized.

In traditional mediation, the major sources of information about parties’ needs are the issues raised in legal briefs given to the opposing side and to the mediator only days before the start of the mediation session. These briefs are often argumentative, trying to convince the mediator of why the presenting party is right, and they are based only on the one-sided interpretation of information known to the party writing the brief. How decision-makers from other parties view these issues is unknown to the briefing party. As the ancient Greeks well knew, advocacy without knowing the interests or needs of the audience sought to be influenced is a fundamental error in the art of persuasion.[1] If the parties engage a mediator to discover those needs before briefs are submitted, the chances of meaningful persuasion are significantly increased and the mediator can more effectively reach closure during the mediation session. If these needs are discovered only after the mediation begins, however, it is more difficult and time-consuming to establish processes to address them after an unsuccessful mediation session.

By contrast, the Guided Choice process has the parties involve the mediator as soon as possible after the dispute arises and legal expenses begin to be incurred. The mediator uses his or her power of confidential investigation to determine all the settlement needs of the parties and not just the ones that will be raised in the legal briefs. With this knowledge, the mediator uses Guided Choice tools to recommend to the parties the best components of a customized settlement process before negotiation begins. The components may involve creative business solutions or even “adjudicative” tools such as third-party opinions on a binding or non-binding basis for legal, factual, or damage disputes that appear intractable without further third-party guidance.[2] Once the mediator determines the parties’ needs, the Guided Choice process has techniques to fulfill these needs using collaborative rather than traditional tools of adversarial discovery, to avoid the latter’s resulting expense and delay. One such tool is to show the parties that the information they need for settlement is much less than information needed for a trial or arbitration. This often can result in postponing the need to exchange massive amounts of electronically-stored information.

Mediators have the unique ability to efficiently conduct confidential discussions, usually by telephone, with lawyers and others the attorneys recommend or desire – such as their clients. The ability to ensure confidentiality is granted by the law of mediation as supplemented by the mediation agreement which may also incorporate by reference the rules of agencies such as the American Arbitration Association, JAMS, or the CPR Institute domestically or one of the other international tribunals such as the International Chamber of Commerce.

The Guided Choice method employs a collection of tools aimed at a fast and efficient dispute resolution by identifying and satisfying the parties’ needs so that initial settlement evaluations can change and actual settlement can be reached. Knowing how and when to use these tools is what distinguishes the mediators who know how to get disputes settled earlier.

II. DIAGNOSIS OF IMPEDIMENTS

A mediator is retained to first investigate the settlement impediments and make recommendations for a settlement process. At this point the parties may, but need not, commit to a date for the negotiations to begin. The parties and the mediator may believe that before negotiations can be productive, there first needs to be a targeted exchange of information on a collaborative basis, or on an adversarial basis if necessary. For example an out-of-state witness may need to be subpoenaed. The mediator may recognize that there are issues with insurers, sureties, third parties, or governmental agencies that need to be addressed before negotiations between and among the parties can make significant progress. Parties who are reluctant to start mediation often have these unarticulated process concerns, and rather than resolve them through expensive and time – consuming litigation, the Guided Choice method allows them to structure a cheaper and quicker process to get them to a stage where they are comfortable participating in negotiations. For parties concerned about the cost of this initial diagnostic phase, the mediators and parties can agree to a budget.

III. PROCESS DESIGN RECOMMENDATIONS

Based on the mediator’s diagnosis of the dispute and present and potential obstacles to settlement, the mediator recommends to the parties a customized settlement process. The mediator does not impose the process. Rather, based on his or her dispute resolution experience, the mediator proposes and advocates a particular process that the mediator thinks will be in their ultimate best interests. Again, at this point the mediator is making no recommendations about the terms of settlement. Ideally, the client decision-makers should be involved in reviewing these recommendations. Whether this is possible or desirable will depend on what the mediator confidentially learns about the decision-making process of each of the parties.

IV. A REPERTOIRE OF EXPERIENCED PROCESS ADVICE

Guided Choice process recommendations can include the following, and the key to their success is how quickly they can be implemented and completed by the parties. Convincing parties to act in their best interest is a key responsibility of the mediator. Parties and attorneys tend to be much more collaborative when they are agreeing to a process rather than trying to settle the substance of the dispute.

1. The mediator should help the parties satisfy their respective, individual information needs, preferably on an expedited, collaborative basis. However, it may be necessary to use judges or arbitrators for such purposes, especially with non-parties. The goal is to keep the exchange limited and targeted for settlement purposes so that it is not just an early F.R.C.P 34 document exchange. Information which a business needs for settlement is much less than the needs of the lawyer to try a case. If the dispute needs to be prepared for a binding decision at a later date, those additional information needs can be addressed through normal discovery if the dispute does not settle. Whatever methods are chosen should be done on an expedited basis.
2. The mediator should explore the need for the parties’ experts on liability, damages, or both to exchange preliminary reports and explore how they might bridge their differences and help the parties identify creative solutions. This often results in expert meetings before negotiations begin. As part of the mediation process, these discussions can be confidential.
3. The mediator also has to decide how to handle communications with insurers, sureties, owners, subcontractors, governmental agencies, and other third parties to make sure they are ready to engage in the process when it comes time to mediate, and even to become participants, if appropriate.
4. The mediator must also keep in mind and encourage the parties to create a structure for formal negotiations that meets their needs – e.g. will the sessions be public or private, will there be presentations from and to all parties, who will present and how, etc.
5. The use of Guided Choice-based “What If” scenario planning allows each party to try to anticipate impasses long before negotiation begins and address how they might be managed. This process is taught in many business schools and enables parties to consider their range of options if and when impasse is encountered and to address and possibly reconsider errors in decision-making based on overconfidence.[3] This contingency planning technique can be especially useful in larger, multi-party disputes and when the form of a settlement agreement may be difficult to anticipate.
  Examples of “What If” issues to be discussed in pre-negotiation discussions could include: (1) what if an impasse develops over a legal, factual or damage calculation issue; (2) what if the insurer or subrogee disagrees with the proposed settlement; (3) what if the person attending the negotiation claims they do not have authority to raise or lower an offer; (4) what if a delay in settlement is delaying the project completion; (5) what if the parties are committed to commence litigation or arbitration before settlement discussions are exhausted? Discussing these issues and acceptable outcomes privately with the mediator before they surface makes the parties less likely to consider their appearance to create an impasse that should terminate the mediation.
6. The human and business organization factors that influence whether or not people will settle should be investigated by the mediator. Considering whether there is a need for an apology is but one example.
7. Educating the decision makers and the lawyers about what to expect during the subsequent negotiation session is productive. This allows the parties to learn why an initial impasse is seldom a reason to terminate the settlement process. “Impasse” should be understood as an opportunity to overcome impediments and not a reason to terminate settlement negotiations.
V. THE GUIDED CHOICE NEGOTIATION – SETTING THE STAGE FOR SUCCESS
1. The physical characteristic of the negotiation site should be optimized for anticipated logistical issues such as involving people remotely, if necessary. This would require an ability to view video images either on laptops, smartphones, or large room monitors. The facility should have sufficient break out rooms if multiple parties are involved.
2. A negotiation using Guided Choice encourages the parties, their lawyers, and their insurers to be fully prepared to address the other parties’ needs as well as their own before the parties start negotiation. Many traditional mediators learn about impediments during negotiations when they are more difficult to overcome. Assembling every party for a negotiation session only to find out that an important insurer has not been given the time to evaluate the file is a problem Guided Choice seeks to avoid. Sometimes parties just want to start negotiations, even if they are not fully prepared, just to see if the other parties “are serious.” Based on the mediator’s confidential investigation, the mediator can convince the parties that they should instead invest in preparation rather than premature negotiations if they expect to settle at the mediation.
3. Based on prior confidential discussions, the parties and their lawyers will understand why impasses could occur and how they will be dealt with if they arise. Sometimes impasses cannot be immediately resolved at the negotiation and an adjournment of the session may be necessary to allow the parties to work on solutions. Adjournment of a negotiation session, however, should never be a reason to terminate the settlement process and recognize an impasse.
4. Because Guided Choice mediations emphasize planning in advance of negotiations, successful one-day negotiation sessions are common.
5. The parties should always have some form of settlement agreement in hand before they leave a successful negotiation. Again, the desired form of release is an issue that should be dealt with in the “What If” scenario planning activity.
6. The mediator should prepare the parties for the possibility of ongoing negotiations if a settlement is not reached at the initial session. This is especially important when the parties acknowledge that they still may be missing information necessary to reach settlement, but would like to see what progress could be made and whether the other parties are interested in reaching a negotiated settlement. After an adjournment of the session attended by the mediator, the parties can even resume negotiations without the physical presence or involvement of the mediator because the mediator will have established a framework by which the dispute can be resolved. In such situations the parties should be able to consult ex parte with the mediator.

Professionals in this field have long recognized a need for alternatives not only to expensive and time-consuming litigation but to ineffective and inefficient mediation as well.[4] Apart from Guided Choice mediation, there have been other similar suggested methods to better tailor the ADR process to the parties’ needs in an attempt to save time and resources only if necessary.

Jeremy Lack, one of the coordinators of the Global Pound Conferences, whose data supports Guided Choice, has said:

By focusing on the parties’ interests, it should be possible to design a process that will lead to a faster, cheaper and/or better outcome, possibly including evaluative and non-evaluative components in the process and set aspirational goals that may even exceed the client’s and the other side’s [perception of their best options].

Thinking along these lines requires…re-assessing the range of tools available both in terms of the escalation stage the parties are at and the process that would best fit the client’s future interests. The range of procedural tools available is rarely limited. It typically includes negotiation, mediation, independent expert appraisal (a determination of “facts” by an expert), conciliation, non-binding evaluation by a neutral (an assessment of the “facts” and the law), arbitration and litigation. These options create a spectrum of tools that ranges from unstructured, non-evaluative and informal processes to structured, evaluative and increasingly formal processes…. Depending on whether the parties are seeking a consensual dispute resolution process, in which they remain in control, or an adversarial process, in which a third party will determine procedural and substantive issues, the parties have a wide range of choices available to them. The important thing is not to think about them in a binary “either/or” manner, but to realize that it is possible, and sometimes even advisable, to combine them.[5]

Courts have also started incorporating requirements similar to Guided Choice principles in pretrial orders. In a recent Pre-Trial Conference Notice and Order, a federal Magistrate Judge ordered the parties to each submit a confidential letter three days before the conference providing an assessment as to when sufficient discovery should be completed to allow scheduling of a settlement conference so that “settlement efforts would be most fruitful.”[6] Ordering parties to let the Magistrate know what information is needed for a productive settlement reflects the Guided Choice principle of identifying and resolving obstacles to settlement before formal negotiations begin. Some judges see their roles solely as adjudicators, but even those who also want to assist the parties as process facilitators regrettably often do not have the time or resources to fully do so. Nevertheless, the incorporation of Guided Choice concepts into pre-trial orders could greatly assist the parties in better preparing for earlier resolution of their dispute.

VI. CONCLUSION

Businesses understand the high probability that their commercial disputes will be settled and not tried. However, businesses also want earlier settlements with less internal and external expense. They also want to use mediators and lawyers that can get those results. Data from the forty worldwide Global Pound Conferences confirms the market’s unmet demand for such services.7 The successful lawyer and mediator understand that just settling disputes is not enough. Settlement must occur earlier to provide more value to disputants and their attorneys. Guided Choice principles are increasingly being used to add that value.

Also, successful attorneys understand that providing value to their clients entails getting disputes settled faster and to the client’s satisfaction. Discounted rates do not do that. As fixed-fee arrangements become more common, well-informed and managed early settlements will be an appropriate way for attorneys to address the risk inherent in any estimate provided for taking disputes to trial or arbitration. Attorneys will want to use mediators who use Guided Choice in order to provide the value that their clients want and expect.

The ideas of this paper need to become a larger part of the culture and dialogue of dispute resolution in the legal community. They need to be taught to lawyers and their clients before disputes arise. They should be included in the curriculum of law and business schools. Unfortunately, anyone can hold oneself out as a mediator regardless of the quality of one’s education or experience in the mediation process. The training of current mediators in the importance of Guided Choice concepts and goals for early dispute resolution is critical.

Announcements

Once again the legal rating service Chambers and Partners has rated Fabyanske, Westra, Hart & Thomson as a Band One construction law firm. Chambers provided the following report: What the team is known for: Esteemed for its dedicated construction group, which brings deep industry insight to disputes, contract negotiations and planning issues. Represents diverse participants from the public and private sectors, including design professionals, insurers and subcontractors. Frequently acts on large-scale regional and national projects. Numerous attorneys within the team are well known in the sector, having been appointed to leadership roles at a variety of industry bodies.

Strengths: Sources report that the firm enjoys an “excellent reputation in the Minnesota construction community” due to its “commitment to cost-effective representation.”

Peers consider Fabyanske to be “the premier construction firm in the Twin Cities,” while clients describe it as a group of “great attorneys with a strong knowledge of construction law.”

One interviewee states that working with this department is “always a positive experience and I always appreciate their advice.”

Work highlights: Represented the claimants, including Faith Technologies, in multiparty mechanic’s lien proceedings involving some $80 million in claims arising from a major construction project.

Lead counsel to Golden Villas LLC in proceedings arising from the use of non-fire-retardant lumber in the construction of an apartment complex.

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Cited as “a mover and shaker in the construction world,” Marvin Fabyanske has over 40 years’ experience and continues to be thought of as one of the preeminent advisers on construction law in Minnesota. Peers describe him as an “amazingly well-respected guy.”

With over 30 years’ experience, Dean Thomson is considered by some to be “the go-to construction lawyer in town.” He has experience advising on an array of construction disputes and noncontentious matters relating to major projects across the country. Sources acknowledge him as a “standout lawyer,” adding that he is “great to work with.”

Kyle Hart is noted for his frequent representation of construction contractors. Clients state: “We truly value his advice and representation,” with one source asserting: “Working with Kyle is always a positive experience – we trust him implicitly and really enjoy working with him.” Interviewees also value his ability to “separate out the legal and business issues to help you make the best decision.”

Clients commend Gregory Spalj for his “great knowledge of construction law” and peers affirm that he is “well respected” in the market. He was joint lead partner representing the Houston Rapid Transit joint venture in proceedings stemming from the alleged deficient performance of a commuter train signaling system.

Mark Becker has experience representing construction clients in a variety of litigation and contract negotiations. Appreciative clients describe him as “proactive in handling cases” and someone who “focuses on the issues that will really resolve them.” One interviewee goes on to call him an “excellent construction litigator” who “scores five out of five on subject matter expertise.”

Jesse Orman has significant experience in all aspects of the construction sector, with a client base that includes contractors and subcontractors alongside architects and materials suppliers. Peers describe him as both “pragmatic” and “very smart.”

Mark Becker presenting Construction Early Dispute Resolution Fundamentals live webinar

Dispute resolution in the construction industry is moving in new and game-changing directions as industry participants demand earlier and more efficient resolutions. Hear from two front-runners in early dispute resolution, Mark R. Becker, shareholder with Fabyanske, Westra, Hart & Thomson and Paul M. Lurie, partner with Schiff Hardin, as they provide proven techniques to achieve earlier resolutions.

The speakers believe this program will be of particular interest to you, and as their guest, you are eligible for 50% off the registration fee!

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*Dean B. Thomson is a Shareholder in the Minneapolis, Minnesota law firm of Fabyanske, Westra, Hart & Thomson, P.A. Paul M. Lurie is Mediation and Arbitration Counsel in the Chicago, Illinois office of the law firm of Schiff Hardin LLP. Both are Fellows of the American College of Construction Lawyers. The authors would like to thank Tracy N. Roth, a law student at Mitchell-Hamline School of Law, for her research assistance.

[1] See Rapp, Christof, Aristotle’s Rhetoric, The Stanford Encyclopedia of Philosophy (Spring 2010 Edition), Edward N. Zalta (ed.), URL = <https://plato.stanford.edu/archives/spr2010/entries/aristotle-rhetoric/>.

[2] See Meyer, J. and Holt, T., New Sequences, Techniques and Approaches for Commercial Mediation, Dispute Resolution Magazine, Spring 2017 (American Bar Association) (discussing Guided Choice and Mixed Mode mediation).

[3] See Oxford Scenario Program. Oxford University www.sbs.ox.ac.uk Gilbane Construction uses a form of scenario planning under the name of Gilbane “Card Trick” Schedule Meetings. Construction Partnering also uses scenario planning to enable parties to anticipate potential problems and agree in advance to the process by which they should be addressed. See International Partnering Institute www.partneringinstitute.org.

[4] Thomas Stipanowich was one of the first to touch on this idea in an article discussing the concept of retaining a conflict management adviser who would facilitate the design of a customized ADR process. See Stipanowich, Thomas, The Multi-Door Contract and Other Possibilities (March 4, 2012). Ohio State Journal on Dispute Resolution, Vol. 13, No. 2, 1998. Available at SSRN: https://ssrn.com/abstract=2015805. Mediators can also set the stage for a later arbitration by helping the parties define or refine the arbitration procedure and facilitate an agreement on the exchange of documents and other

information to create a more efficient and less costly arbitration process. See, Commercial Arbitration at Its Best, 18-20 (Stipanowich and Kaskell, ed., ABA 2001).

[5] Lack, J. Appropriate Dispute Resolution (ADR): The Spectrum of Hybrid Techniques Available to the Parties, ADR in Business Practice and Issues across Countries and Cultures, Volume II, Ch. 17 (Arnold Ingen-Housz ed., Kluwer Law International BV, 2011).

[6] Westfield Insurance Co. v. Miller Architects & Builders, Inc., No. 17-400 (RHK/LIB), (D. Minn. Mar. 22, 2017) (pre-trial conference notice and order).

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The Guided Choice Process for Early Dispute Resolution