THE CHALLENGES IN MEDIATING MULTI-DEFENDANT CASES
Posted on Jul 31, 2018 |Publications
By: Richard P. Byrne, Esq.
One of the challenges a Mediator faces is multi-defendant litigation where the defendants are consumed with the issues among and between each other and are drawn more to in-fighting than in addressing the claims of the plaintiff.
This can materialize not only through the traditional debates over liability and exposure as presented in cross-claims and third-party practice, but via questions of contractual indemnity, insurance coverage and the scope/priority of that coverage – issues which, in and of themselves, can present layers of intense complexity.
There are a number of ways a Mediator can confront this situation and endeavor to posture the matter to allow for effective negotiations and, hopefully, a global resolution.
The first – and optimal – scenario is to develop an allocation structure whereby the defendants agree to percentage contributions and, upon doing so, set aside the claims among one another, focusing solely on their common interests vis-à-vis the plaintiff. Of course, this is much easier said than done. To begin, the Mediator needs to identify the points on which the defendants (or sub-sets of the defendants) have common interest. The corresponding effort is to aggregate those issues on which the defendants differ among themselves and to assess which “camps” each may belong.
Once the issues among the defendants are adequately identified, a hierarchy needs to be developed, placing each defendant on a spectrum for purposes of participation at the Mediation. Ideally, an acknowledgment should then be secured from the defendants, if at all possible, that the line-up is not arbitrary or irrational and that, in an admitted fashion of “rough justice”, the hierarchy could form a foundation for continued discussions.
Next, those discussions should move into the realm of allocated percentages of participation, so that a means of funding can be constructed. (One of the interesting exercises for a Mediator in this regard is to have the defendants privately provide their proposed allocations to see where consensus may lie.) Of course, each and every defendant will inevitably say “it ultimately depends on a percentage of what…”, but that is a signal to the Mediator that the dialogue can proceed to the collective interest of the defendants – that is, contesting the claims of the plaintiff and disputing their value. Also, it is helpful to seek understanding on what the defendants agree would represent a reasonable settlement range. And, hopefully, by this point, the defendants are beginning to eye the prospect of resolution.
It is often not possible, however, to get defendants to agree on percentage allocations. In that instance, although less desirable from a process standpoint, the Mediator can solicit individual offers which are then pooled and presented to the plaintiff as a global offer. The difficulty with this approach is that once the defendants learn of each other's offers, they then may take stock of where they stand relative to one another, calculate the percentages to the whole, and digress to their original positions – with the in-fighting resumed.
An alternative to that scenario is to have the defendants bid blindly with the Mediator gathering up individual contributions confidentially and then packaging them together for a global offer to the plaintiff. While the defendants learn of the global counter-demand to the packaged offer, they are not privy to each other's individual contributions. Unless and until, that is, a settlement is announced and the individual offers are revealed. Once this occurs, though, one or more of the defendants may be displeased when they see how their contributions stand relative to the other defendants and the overall settlement figure. This needs to be ameliorated, on an anticipatory basis, by the Mediator reminding each defendant in caucus during the negotiations that they should be making offers based on an independent assessment of their potential liability and exposure – untied to what that party believes a co-defendant may or should be contributing.
If the “blind” negotiation process is not successful, a sub-option is for the Mediator to endeavor to privately secure a “rock bottom” figure from the plaintiff and then provide a recommended figure to each defendant – individually and confidentially – with the group of defendants thereafter being advised, collectively, that if they all provide a “Yes” to their recommended contribution, the case is settled, but that if any one returns with a “No” the negotiations will come to an end. It is important here that both the plaintiff's “rock bottom” number and the amounts sought of each defendant be kept confidential unless a settlement is achieved in order to insure that no party's position is compromised. This option is admittedly a “Hail Mary” pass to be used in a last ditch effort to settle the matter, although it is conceivable that if there is only one or two hold-outs, further cajoling by the Mediator may prove warranted.
A separate option if the defendants cannot agree to a percentage allocation or to individual negotiations (in the open or blindly) is for the Mediator to again seek to secure that “best and final” figure from the plaintiff, but this time with the understanding that the Mediator will simultaneously seek the defendants' agreement to arbitrate their differences and pay that sum within a defined time period. In other words, the goal is to try to reach a figure with the plaintiff that all defendants agree is not unreasonable with the understanding that the defendants will then arbitrate their differences and secure a determination of who is responsible to pay what share of that figure within a set time frame, e.g., 90 or 120 days. Perhaps not surprisingly, some defendants (and/or their insurers) are hesitant to agree to this process; however, any hesitation needs to be balanced against the continuing cost and increased exposure of on-going litigation in which the defendants are pointing fingers at one another and effectively assisting the plaintiff make their case. In contrast, an Arbitration, which can be designed to capture the entirety of the defendants' disputes (including any attendant insurance coverage issues) will provide speed and finality at a reduced cost with a capped exposure.
The bottom line is that a Mediator faced with the challenges of a multi-defendant action needs to find the most effective mechanism to defuse the inter-defendant claims in order to promote productive negotiations with the plaintiff and secure a comprehensive resolution for all concerned.
Richard P. Byrne, Esq., is a member of NAM's (National Arbitration and Mediation) Hearing Officer Panel and is available to arbitrate and mediate cases throughout the United States. In 2018, for the fourth year in a row, he was voted one of the Top 3 Mediators in the country by the National Law Journal Reader Rankings Survey and was also voted a Top 3 Mediator by the 2018 Corporate Counsel Best of Survey. Also, in 2018, for the third straight year, he was named a National Law Journal Alternative Dispute Resolution Champion, as part of a select group of only 46 nationwide. Further, for the fourth in a row, he was voted a Top Ten Mediator in New York State by the 2017 New York Law Journal Reader Rankings Survey.
For any questions or comments, please contact Jacqueline I. Silvey, Esq. / NAM General Counsel, via email at email@example.com or direct dial telephone at 516-941-3228.