Transactional Mediation: Using Mediators in Deals

• Publication year: 2003
• Pages: 81
• Citation: Vol. 32 No. 10 Pg. 81

32 Colo.Law. 81 Colorado Lawyer 2003.

2003, October, Pg. 81. Transactional Mediation: Using Mediators in Deals

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81

Vol. 32, No. 10, Pg. 81

The Colorado Lawyer
October 2003
Vol. 32, No. 10 [Page 81]

Specialty Law Columns
Alternative Dispute Resolution Column
Transactional Mediation: Using Mediators in Deals
by Scott Peppet

This column is sponsored by the CBA Alternative Dispute Resolution Committee. The articles printed here describe recent developments in the evolving field of ADR, with a particular focus on issues affecting Colorado attorneys and ADR providers

Column Editors

Jonathan Boonin of Warren & Boonin LLP, Boulder - (303) 413-1111, jboonin@warren-boonin. com; James L. Stone of JAMS Denver - (303) 534-1254, jstone1672@aol.com

About The Author:

This month's article was written by Scott Peppet, Boulder, an associate professor at the University of Colorado School of Law, where he teaches contracts, professional ethics, legal negotiation, and mediation ethics - (303) 735-0818, scott.peppet@colorado.edu.

This article addresses whether third-party mediators could be helpful in deal-making, just as they are in resolving disputes. It makes a theoretical case for such use of mediators and presents preliminary evidence that transactional mediation already is taking place.

In the last twenty years, lawyers, judges, and litigants have become increasingly accustomed to using mediators to help settle legal disputes. The growing acceptance of mediation in the litigation context raises a puzzling question, however. Given that transactional negotiations are in some ways quite similar to dispute resolution, why has there been no corresponding rise of mediation in deal-making?

Transactional legal practice can be as adversarial as litigation. Deals break down. Communication falters. Relationships sour. Emotions rise. There often are strong advocates, whether lawyers or clients, on each side in major transactions. Those advocates frequently take positions and push for advantage. These are the same bargaining dynamics that can make a mediator valuable in settling disputes. Why then, don't mediators help contracting parties as they try to close deals, just as mediators help litigating parties reach settlement?

This article analyzes the use of mediators in dispute resolution and in deal-making. It briefly presents the benefits of transactional mediation and addresses whether it may be a growth area for the mediation community.1 Some recent research suggests mediators already are serving in this capacity, although sporadically. The article discusses reasons transactional mediation has not been used more often and provides a rationale for when and why it may be used effectively.

Overview of Mediators And Dispute Resolution

To address how transactional mediators may be effective in deal-making, it is essential to first examine why mediators are used in the litigation context. The alternative dispute resolution ("ADR") community - both scholarly and practical - has said remarkably little about this matter. Practicing mediators often give a quick, simple, and somewhat vague response when asked what they do: "We help parties settle."

As a general matter, however, mediators play four important functions in dispute resolution. As discussed below, mediators can: (1) discover whether settlement is possible; (2) help the parties find value-creating trades; (3) manage psychological barriers to agreement; and (4) deal with emotional and relational problems.

Discover if Settlement
Is Possible

A mediator can solicit and compare private information about the parties, their willingness to settle, their concerns, and their priorities. A mediator can, for example, confidentially compare a defendant's offer and a plaintiff's demand to determine if they overlap. A private comparison of this sort may encourage parties to take more reasonable positions than they would otherwise, because a confidential offer or...