One of the more memorable movie lines is from Forrest Gump (1994) when Gump comments “My momma always said, “Life was like a box of chocolates. You never know what you’re gonna to get.” ”

            Mediations are like that, too; as a mediator, I never know what to expect. I say this because I had two mediations  recently that turned out far differently than I expected. Both involved automobiles. In the first, the plaintiff – I will call her Jane Doe –purchased a used vehicle from a dealership – I will call it ABC Dealership – which sold both new and used cars. Ms. Doe had a continuous problem with steering – it was quite difficult to turn the steering wheel and when she did so, it whined. She took it back to the dealership seven (7) times for repair. . . and it was still not fixed. Believing that enough is enough, she sued. Under the particular statute involved, she was entitled to diminished value i.e. the difference in the value of the vehicle as represented (i.e. without the steering wheel problem) and the vehicle as it was in actuality (i.e. with the steering wheel problem). This sum probably amounted to a few thousand dollars. But, at the mediation, the owner of the dealership proposed an “out of the box” solution to take her car in a generous trade-in, for a new vehicle (that has a generous manufacturer’s warranty) at a reduced price, giving plaintiff incentives and the best financing obtainable in light of Ms. Doe’s credit. While no doubt, ABC Dealership will probably make some money on this deal (i.e. What’s In It For Me!), it will probably cost the dealership more than the few thousand in cash representing the diminution in value. It will also engender goodwill as it is far more than what the statute requires. Clearly, the owner of ABC Dealership was looking for a way to resolve this matter to plaintiff’s satisfaction – one that would not leave a bad taste in Ms. Doe’s mouth.

            In contrast was my other mediation – again involving an automobile. The plaintiff – whom I will call Sally Roe – leased a vehicle for three years. During that period, she brought it to the dealership for different things; one  or two of her complaints were at issue twice. At the end of the lease, she decided to purchase the vehicle. Soon thereafter, she brought the vehicle into the dealership once more to have other issues resolved. At this point, the vehicle was outside of the manufacturer’s warranty and so Ms. Roe did not bring it to the dealership anymore. Approximately 18 months after she purchased the vehicle at the end of the lease, she sued the manufacturer claiming the car to be a “lemon”, alleging defects that were complained of to the dealer once or perhaps twice, years ago.

            Part of my job as a mediator is to provide doses of reality and to manage expectations. So, I discussed the jury instructions that would be used at trial and the fact that a jury may question her credibility and/or motivation since she voluntarily purchased the vehicle at the end of the lease. (i.e. If the vehicle was so bad, why didn’t she simply walk away from it at the end of the lease?)

            My doses fell on deaf ears. Evidently, her attorney had counseled her that this was a good case to take to trial, and if the manufacturer was not willing to repurchase the vehicle, then the matter should be left for a judge and jury to decide. Thus, when I proposed the manufacturer’s cash offer to Ms. Roe, her response was simply that it was time to go to trial, and the mediation was over. She would not counter or negotiate for anything less than a repurchase.

            Two strange mediations, neither ending the way my training and experience would have led me to believe.

            The teachable moment is so obvious that it sometimes escapes me: Mediation is “like a box of chocolates, you never know what you’re gonna get.” Or, be flexible and ready to go with the flow!

            . . .Just something to think about.

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              Recently, I posted blogs on the necessity of “dancing” and on “difficult people”. This past week, both topics collided in a mediation! What an experience!

            The matter was a simple automobile accident in which defendant admitted liability. So, I thought to myself prior to the mediation (and after reading the briefs), this should be easy – just going back and forth between the parties trading monetary amounts as damages – medical expenses, pain and suffering, miscellaneous expenses, etc.

            I was wrong! The plaintiff’s attorney turned out to be impolite and a bully. After introducing myself, I outlined the facts and issues as I understood them from her brief, asking if I understood the facts and issues correctly. She said I did. I asked both the attorney and the plaintiff if either would like to share anything with me. Both said “no”. I asked the plaintiff’s attorney what monetary amount did she wished to demand. She responded that as she had obtained a default judgment (that had later been set aside), the defense was aware of the amount, and so she was waiting for a response. When I asked again, she then gave me an amount (which turned out to be higher than the default judgment amount).

            I then met with the defendant’s insurance adjuster and counsel and conveyed the demand. Noting that the amount now sought was higher than the default judgment, defense counsel provided me with a counter-proposal which I took back to plaintiff’s counsel.

            When I conveyed it to the plaintiff’s attorney, she rejected it, noting that the amount proposed was less than the actual alleged medical expenses. I asked for a counter-demand. The plaintiff’s attorney then informed me that her initial demand was a “take it or leave it” demand. (In essence, she did not want to “dance”.) I told her I would convey this to the defense.

            After meeting with the defendant’s insurance adjuster  and her counsel for a bit, they decided neither to bid against themselves nor to accede to plaintiff’s counsel’s bullying tactics. So, they requested that I go back and convey that they were not prepared to pay the amount demanded. I did and also mentioned that the defense would be willing to entertain a demand for a lesser amount, but was not prepared at this time to pay the requested amount.

            At this point, plaintiff’s counsel was in a dilemma: Does she walk out of the mediation in light of her “take it or leave it” demand or does she stay and lose credibility?

            Suddenly, the plaintiff’s attorney wanted to meet with defense counsel. She did not want to leave and lose the opportunity to settle a case. In doing so, she lost credibility, all leverage and got out bullied or out maneuvered.

            However, in the meeting with defense counsel, plaintiff’s attorney continued to be rude which, thankfully, both defense counsel and I ignored. Neither of us took the bait by responding to her belittling comments. She finally made a demand for an amount that was approximately the same as the amount of the default judgment. When  I asked her to explain the amount, i.e. what were each of the sub-totals (i.e., medical expenses, pain and suffering, miscellaneous expenses etc.) and how had she arrived at each subtotal, her demeanor changed – being forced to engage her “right” brain by analyzing each subtotal and explaining it, her “left” brain or bullying side disengaged. Not only did it help me understand the case from plaintiff’s perspective, it also helped defense counsel to understand the basis for the demand, and thus   be able to explain it to her client – the insurance adjuster – and allow them to justify and document their counter-proposal in the file for audit purposes. The entire tenor of the mediation changed when I asked for the factual basis behind the total amount demanded. It went from emotional to analytical. While plaintiff’s counsel was rude to me once or twice more, I continued to ignore it.

            But, at the end, the bully became meek and accepted the amount that the insurance company was willing to offer even though it was less than her second demand. Miraculously, the matter settled.

            There are two morals here: (1) when negotiating, do not make the initial demand a “take it or leave it” one as it requires either walking out (which is not what one wants to do), or losing face and leverage; and (2) if someone is being “difficult”, do not accede to it, or take the bait, but rather meet it head on and/or ignore it. More importantly, force the “bully” to “analyze” the issues or facts thereby switching to her “right” brain and away from the “left” brain!

            Real life certainly does add flavor to what articles and trainers talk about!

            . . .Just something to think about! 

            I conducted a “lemon law” mediation last week. It was a bit unusual in several ways. First, the repair history indicated that there were multiple issues with the vehicle that, despite innumerable days in the repair shop, had not been fully resolved: one or two of the many issues kept recurring.

            After reading the repair history, my first question to myself was why were these parties even coming to mediation? Why had not the vehicle been repurchased already? Having conducted several hundreds of these mediations, I guessed that the answer could be “outside influence” or “non-warrantable defect”. That is, Defendant believed that some third party – not necessarily the plaintiff -had tinkered with the vehicle to cause or create the concerns at issue. But usually, the fancy computers on these vehicles will reveal a pattern that arouses suspicion and/or such suspicions are reflected on the repair orders. But, looking at the repair orders again – usually verbatim of what the service advisors have written and what the technicians did and found – no such “suspicions” revealed themselves. So what was going on? I had to wait until the mediation to find out.

            As usual, I started with a joint session so that the parties could have a candid discussion of the repair history, the concerns at issue and insure that everyone was focusing on the same issues. But, unlike other mediations (and the second unusual thing about this mediation), the joint session never concluded: after some joint discussion, the defendant wanted to speak separately with counsel.

            For the next hour or so, that separate session occurred: Defendant was using the time to really and carefully review the matter to determine what stance to take. It seems that prior to the mediation, the defendant had concluded not to repurchase the vehicle, basing that decision on a suspicion of “outside influence”; I was told that the plaintiff was associated with others who had had their vehicles repurchased – i.e., “guilt by association”.

            When plaintiff’s counsel took great umbrage at defendant’s stance during the joint session and after actually meeting the plaintiff and evaluating her credibility, defendant went into a separate session to rethink its position.

            The mediation concluded without a resolution as defendant wanted to speak with others about how best to resolve this matter, i.e., should the vehicle be repurchased, after all?

            But, the next unusual thing about this mediation was that plaintiff’s counsel sent me an e-mail (in the form of a poem). It lyrics made me stop and pause. In essence, counsel noted that her client had been victimized and her veracity put into question by assumptions that the defendant had made automatically and without really investigating (i.e., “guilt by association”). Then, when plaintiff refused to accede to the defendant’s demand to settle for a minimal amount of funds, defendant became even more upset. Counsel continued:

“Maybe the problems lies much deeper in the hearts of our system today

the money a plaintiff takes should not just be

a function of what the plaintiff will take to go away

instead it should be tied to the wrong in question

the thing that has provoked the client to seek legal intervention

that way clients may not feel that they have won some pot of gold

but perhaps they will feel that someone cares about the story they have told.”

            Have we become too cynical? Are we all just going through a pre-scripted exercise except for the plaintiff who has become an interchangeable fungible? Have we become too detached, to the point that we have forgotten that to this plaintiff, this is not just another file to be dealt with, but it is her vehicle, her time going to and from the repair shop, her aggravation and frustration in having to make car payments every month for a vehicle that she cannot use because it is always in the shop? To her – it is very real, not just another matter to be dealt with in a long day at the office.

            Life is real: everyone  has a story and everyone needs to tell it and, more importantly, to be listened to. We cannot allow ourselves to lapse into “it’s just another dispute/mediation file” but, instead, must force ourselves to remember that we are all “human” and we are all a part of “humanity.”

            . . .Just something to think about. 

            Postscript; The matter settled a few days after the mediation with Defendant repurchasing the vehicle.

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            Almost four years ago (February 23, 2007), I posted a blog on ‘Fairness”. I had attended a training session in which the teacher asked the very simple yet complex question “How do you define “fairness”? Is it from a legal viewpoint? Equitable viewpoint? Moral viewpoint? Ethical viewpoint? Cultural viewpoint? All of the above? None of the above?

            I suddenly recalled this blog during a mediation I conducted last week in which the many definitions of fairness collided. As of now, I am not sure which definition will “win”. What I am certain of, is that if the “legal” definition wins, the outcome may be quite “unfair”.

            The story unfolds (using fictitious names): Jane Owner (“Owner”) owned some real property on which she wanted to develop and build a small commercial/residential mixed use building consisting of condos and retail shops. To do this, Owner hired Mary General Contractor (“GC”) and also obtained a one-year construction loan from California Friendly Bank (“Bank”). The loan was secured by a mortgage on the project. The project proceeded, and as is typical on construction loans, at set stages in the construction, GC was to submit applications for payment to the Bank, and the Bank was to pay GC who, in turn, would pay her subcontractors and materialmen.

            At first, all went well. But gradually, Owner fell behind in her monetary and other obligations to the Bank. Once this occurred, the Bank refused to pay the applications for payment submitted by GC. Eventually, the Bank declared the Owner to be in default on the loan, and the Bank no longer made any payments to GC who was now owed $1.3 million. To protect herself and her subcontractors and materialmen, GC timely filed her mechanic liens and bonded stop notices in accordance with California law. Upon receipt of the bonded stop notices, Bank should have set aside 150% of the amount needed to pay the mechanic liens in full, but did not do so.

            Instead, the Bank itself, failed and defaulted. But before it did so, it sold the defaulted note to Joyce New Buyer (“Buyer”) who then foreclosed on the property and became the owner of the property.

            So, the GC now finds herself owed $1.3 million (that she, in turn, owes to subcontractors and materialmen) from Owner who has since filed bankruptcy and from Bank now taken over by and under the control of the Federal Deposit Insurance Corporation (FDIC). (Not a fictitious name!)

            How does the GC attempt to resolve this? She sues Owner, Bank and Buyer. The Owner having filed bankruptcy, does not answer the lawsuit as she is now judgment proof. The FDIC answers the lawsuit on behalf of Bank since it has now taken over the Bank. The Buyer answers the lawsuit.

            They come to mediation. The FDIC contends that it must comply with federal law and pursuant to that law, it must pay first the administrative expenses, second, reimburse the depositors of the failed bank and then third, pay the unsecured general creditors of Bank such as GC. The FDIC further states that, in all probability, there will be no money left over to pay the unsecured general creditors including GC.

            Joyce New Buyer contends that since she obtained the property in foreclosure, that foreclosure sale erased whatever prior liens were on the property including the mechanic liens and bonded stop notices of GC. In short, Buyer claims that she took this property “free and clear” of GC’s mechanics liens and bonded stop notice.

            And, the GC contends that under California law, she is obligated to pay her subcontractors and materialmen out of her own pocket and even though she cannot get paid by Owner, Buyer, Bank or FDIC. 

            Is this fair? Accepting (for purposes of this blog) all of these arguments as true, if one defines “fairness” according to law – the GC loses – she is out $1.3 million, and must pay the subcontractors and materialmen with no hope of reimbursement.

            If one defines “fairness” in terms of morals, ethics and/or equity, then perhaps a different and more “fair” or equitable” result can be reached. And that is precisely what the parties are investigating; even though Buyer can “legally” avoid this obligation altogether and would probably win at trial or on a motion for summary judgment, Buyer is looking for ways “outside of the box” to do what is “right” vis-à-vis GC so that all involved will “win” a little bit and be able to walk away with  clean consciences. The mediation ended without a settlement but with the parties struggling to define “fairness” in a way that everyone can “live with.”

            Sometimes, “fairness” has nothing to do with the law but has everything to do with doing the “right” thing. “Justice” and “fairness” can be oxymorons. 

            As the case is still pending, the definition of “fairness” is as yet undetermined. We shall see.

            . . .Just something to think about!

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  Black’s Law Dictionary defines “good faith” as    

“A state of mind consisting in (1) honesty in belief or purpose, (2) faithfulness to one’s duty or obligation, (3) observance of reasonable commercial standards of fair dealing in a given trade or business, or (4) absence of intent to defraud or to seek unconscionable advantage.”

(Black’s Law Dictionary, 2d. pocket ed. 2001 at p. 307.)

  It defines “bad faith” as “dishonesty of belief or purpose.” (Id. at p. 56).

         A few weeks ago, I, unwittingly, conducted a “bad faith” mediation. One of the parties was clearly there with a dishonest purpose and an intent to seek an unconscionable advantage.

         The matter was a simple one, arising out of an everyday business transaction. Debtor did not pay the invoices and so Creditor and Debtor worked out a settlement by which Debtor agreed to make monthly payments. The parties signed a settlement agreement drafted by the Debtor’s attorney because the Creditor did not retain one. However, the agreement was heavily negotiated. (During the mediation, the Creditor claimed it was one-sided in favor of the Debtor.)

         When the Debtor failed to make the monthly payments, the parties sought mediation as required by the agreement. If the mediation did not resolve the matter, the parties were then to arbitrate using a three arbitrator panel. What I did not know at the time this mediation was scheduled was that the Creditor never intended to settle; it wanted to go to arbitration so as to run-up the attorney’s fees and then have the Debtor pay the fees as part of the arbitration award. The file was being “churned.”

         I, slowly, began to realize this during the mediation when the matter became increasingly more difficult to settle. The Debtor admitted it owed the debt, without any question. The issue became how much and the terms of payment.

         First, the Creditor claimed the principal balance to be slightly more than the Debtor thought it was. But, for the sake of compromise, the Debtor agreed to pay the higher sum. Then, the Creditor wanted the interest paid on this sum as well. Again, for the sake of compromise, the Debtor agreed. The Debtor then proposed terms with the first payment not starting for a few months. The Creditor balked.

         The Debtor requested to meet directly with the Creditor – without the attorneys. The Creditor agreed, and so they met. The Debtor explained its financial situation, how strapped it was for cash and how it did not want to make promises it could not keep. After several minutes of conversing, the Debtor and Creditor tentatively agreed on a payment plan but the Creditor had to check with counsel.

         When the Creditor returned from speaking with its counsel, it told the Debtor that it needed additional monies as “collection costs.” With some more negotiation, I convinced the Creditor to cut its demand in half and convinced the Debtor to agree to pay these additional “collection costs.”

         The Creditor then spoke with its attorney again and suddenly there were additional “future” “collection costs” that had to be paid.

         Naturally, this led to more negotiation but with convincing, I was, again, able to convince the Creditor to accept a lesser sum and to convince the Debtor to pay that additional sum.

         Then suddenly, the Creditor became dissatisfied with the payment terms, not liking that payment would take many months.

         At this point, the Debtor was extremely frustrated and was ready to leave because the Creditor had continuously been inserting new terms into the deal: the sands beneath the Debtor’s feet had been ever shifting for the last four hours.

          I managed to convince the Debtor not to walk out but rather to have a joint session to see if the parties could brainstorm their way to a resolution. After several minutes of joint discussion, the Debtor agreed to pay a slightly higher amount each month thereby reducing the number of months.

         I reviewed the details of the settlement with the parties and counsel, and it appeared that both parties were in full accord. The Debtor was willing to sign a settlement agreement then and there.

         But, then the Creditor’s attorney removed a Confession of Judgment pleading from her briefcase and slid it toward the Debtor and its counsel. The Creditor’s attorney insisted that it be signed then and there, and absolutely refused to sign a settlement agreement.

         Although the Creditor’s attorney had told the Debtor and its attorney that if the matter resolved, she wanted the Debtor to execute a Confession of Judgment, neither the Debtor nor its counsel expected one to be thrust in front of them at the mediation. To say the least, they were taken aback: I could see the look of shock if not dismay on their faces.

         So, after recovering from this “new demand”, the Debtor and its counsel began reading the document and saw that it provided for an additional several thousand dollars in attorney’s fees and costs. It also required counsel to execute an affidavit under oath attesting to certain facts and waiving certain rights.

         By this point, the mediation had been ongoing for more than four hours; never once during that time had Creditor’s counsel mentioned the additional attorney’s fees and costs set out in the Confession of Judgment much less offered to share this actual document with Debtor and its counsel so they could review and analyze it (although she had mentioned to them that she wanted one signed!) Rather, counsel showed it to them at the very end, knowing full well that they would never agree! When the Debtor and its counsel tried to negotiate over the additional monetary sums, the Creditor’s attorney demurred: the term had to remain as a disincentive to default on the payment schedule. 

         In short, Creditor’s counsel never wanted to settle. She came to mediation because the settlement agreement required it as a pre-condition to arbitration. Every time the Debtor agreed to the Creditor’s terms, Creditor’s counsel added a new term, changing the playing field, then “compromising” a little so that it seemed that Creditor’s counsel was there in “good faith.” Her true intent was shown when counsel slid the actual Confession of Judgment across the table containing additional terms (attorney’s fees and costs) with a “take it or leave it” attitude.

         Naturally, the Debtor and counsel were unwilling to sign such an ominous document with such far reaching consequences without first studying it or negotiating its terms. But no – that opportunity was not to be had. Either sign it or arbitrate.

         Not surprisingly, the parties walked out without settling. And on the following day, the Creditor’s attorney demanded that Debtor’s counsel choose three arbitrators by the end of the day.

         This was a dishonest, unprincipled, mediation. While the purpose of mediation is to explore options and to reach a resolution, the hidden agenda or goal of this mediation was simply to go through this charade in order to arbitrate and run up fees and costs: To “churn” the file.

         While I hope never to be an unwitting victim of such a mediation again, sadly, I know I will be: Such unprincipled negotiations will occur!

         . . . Just something to think about! 

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