Businesses can use mediation to resolve legal disputes because it gives the parties an opportunity to negotiate a custom tailored settlement retains more control over the process and outcome than traditional litigation. It may also reduce business disruption, protect working relationships, and eliminate the dispute much more quickly that waiting for trial on a crowded court docket.
What Is Business Mediation?
Business mediation is a form of Alternative Dispute Resolution (ADR) in which a neutral mediator helps parties discuss a conflict and work toward an agreed settlement. The mediator does not decide who wins; any settlement depends on the parties’ consent to all the terms of the negotiated agreement.
How Does Business Mediation Work?
Preparing for Mediation
The parties and their counsel gather contracts, records, evidence, and financial information. They should understand their legal positions, business interests, potential damages, litigation risks, and acceptable settlement terms, with someone from the company authorized to approve a settlement.
Discussing the Dispute
A mediator will start with introductions of all the parties and of the mediation process. A session may begin jointly with a discussion of the operative facts, followed by private caucuses where the mediator meets separately with each side. The mediator clarifies issues, tests assumptions, explores creative options for resolution, and keeps negotiations productive.
Negotiating a Settlement
The parties may consider payment arrangements, contract changes, project adjustments, future performance, favorable tax consequences, future business (or not) between the parties or and other agreed obligations as part of a comprehensive settlement package.
Finalizing an Agreement
If the parties reach a settlement, the terms are almost always put into a written Settlement Agreement. The mediator can assist by making sure all terms are included in the written document, that the language is clear, and that any wording problems are resolved.
Why Businesses Use Mediation to Resolve Disputes
- Cost: Mediation can reduce or eliminate some expenses associated with discovery, trial preparation, court proceedings, and prolonged legal fees. It is important to note that, unlike a decision at trial, there is no appeal from an agreed settlement.
- Time: A mediation may resolve a dispute sooner than litigation, especially in light of crowded dockets where criminal cases take priority because of speedy trial rights.
- Control: The parties decide whether to settle and what terms they will accept. A court decision is usually only for a dollar figure. The negotiated terms can factor in production schedules, trade secret protection, future business dealings, tax concerns, confidentiality of the agreement, reputation, and any other business issue important to the parties.
- Privacy: Mediation is almost always private, although confidentiality rules depend on applicable law, agreements, and procedures. Ohio has adopted the Uniform Mediation Act, which give mediation participants the freedom to talk candidly and freely about their business concerns.
- Business relationships: A negotiated resolution may help preserve relationships with partners, suppliers, contractors, customers, employees, or commercial tenants.
- Flexible solutions: Mediation can allow parties to consider practical settlement terms that address future business needs with the detail, creativity, and precision that is not available in a litigated decision by a judge or jury.
- Less disruption: Litigation can require management time, employee attention, document production, and legal expense that can be conserved or avoided with a prompt mediation.
- Risk management: Mediation gives parties an opportunity to accept a custom tailored negotiated result rather than leave the dispute to a judge or jury, or possibly a court of appeals.
What Types of Business Disputes Can Be Mediated?
Business Dispute Mediation may be considered for contract, partnership, corporate governance, construction, real estate, employment, insurance, and business transaction disputes. Suitability depends on the facts, evidence, parties, and applicable law.
Mediation vs. Litigation for Businesses
| Factor | Mediation | Litigation |
| Decision-maker | Parties decide whether to settle | Judge or jury decides the case |
| Control | Parties negotiate the outcome | Court determines the outcome |
| Time | May resolve sooner | Can involve lengthy proceedings including appeals |
| Cost | Can reduce some litigation expenses | May involve substantial legal and court costs |
| Privacy | Generally private, subject to applicable rules | Court records may be public, court proceedings are always public |
| Flexibility | Parties can negotiate settlement terms | Remedies follow law and procedure |
| Relationships | May help preserve ongoing relationships | Adversarial proceedings |
| Risk | Parties choose whether to accept terms | Outcome is determined by the court |
When May Business Mediation Not Be Appropriate?
Mediation may be less effective when a party will not participate in good faith, critical information is unavailable, or neither side is willing to compromise. It may also be unsuitable when immediate court action is needed or when the dispute cannot reasonably be resolved through negotiation.
How Harold Paddock Supports Business Mediation
With more than 53 years of legal and dispute-resolution experience, he has handled contracts, construction, land use, employment-related claims, and other civil matters. His work as a Magistrate and court mediator brings practical insight into case evaluation and settlement discussions.
Final Thoughts
Business mediation can provide an alternative to traditional litigation by giving companies an opportunity to negotiate their own resolution. It may help manage time, cost, risk, business disruption, privacy, and relationship concerns. Mediation does not guarantee settlement, and some disputes require litigation.
Frequently Asked Questions
What is business mediation?
It is a voluntary dispute resolution process in which a neutral mediator helps businesses negotiate a possible settlement through discussion and diplomacy.
Why do businesses use mediation instead of litigation?
Businesses may use it to seek a faster, private, flexible, negotiated resolution with greater control over settlement terms.
Is business mediation cheaper than going to court?
It may be, particularly when it avoids extensive litigation work, but total costs depend on the dispute, timing, and circumstances.
Is business mediation confidential?
Mediation is generally private, but the scope of confidentiality depends on applicable law, agreements, and the mediation procedure. Ohio has adopted the Uniform Mediation Act which gives protection from disclosure to the participants so they can freely discuss their dispute and possible solutions.
What types of business disputes can be mediated?
Contract, partnership, construction, real estate, employment, insurance, and other commercial disputes may be suitable.
What happens if business mediation does not result in a settlement?
Parties can consider other options, including continued negotiation, a second mediation, arbitration where applicable, or continued litigation.
How does a business case get into mediation?
There are three basic ways a business case (or any other case) can get into mediation.
1. The parties and their counsel agree to mediate. This can occur before or after suit is filed. 2. A court can order the parties to mediate their case. Once a case is filed, the judge has control of the procedure used. Some courts have local rules allowing or requiring mediation while the case is pending. 3. Mediation can be required by a contract between the parties.