In Support of Voluntary Mediation

I just received a wonderful update prepared by Mike Schless of Austin on the status of efforts by the Texas Supreme Court to comply with a legislative directive to make more efficient the resolution of disputes where the amount in controversy is $100,000, or less, and the parties have elected to proceed with a new Expedited Jury Trial Process. This is the legislation that for awhile threatened to include a controversial “loser pays” provision, but ultimately did not. A task force of ABOTA, Trial Lawyers, and Defense Counsel, after considerable debate, has recommended to the Supreme Court Rules Advisory Committee the following: “ADR: Unless the parties have agreed to engage in alternative dispute resolution or are required to do so by contract, the court must not–by order or local rule–require the parties to engage in alternative dispute resolution”.

The principal issue debated is whether ADR in these cases can be mandated, or should be strictly voluntary.

I wonder how far in the minority among my professional neutral colleagues I may be, but I actually think “voluntary” is the way to go. I have become concerned in recent years about abuses of mediation referral by some courts, who have become, in my view, overly dependent on ADR as a mechanism for docket control. Too often mediation has become not the efficient win-win alternative to disputing, but an added layer of delay and expense for the parties.

Ten to fifteen years ago a healthy percentage (90%?) of my mediations were mediations of pending lawsuits, and a healthy percentage (50%?) of those mediations were court-ordered.

Today about 50% of my cases are “pre-suit”, and the percentage of cases I mediate because the parties are satisfying a court-ordered obligation is around 10%.

I am close to the point where I could not receive another court-ordered mediation and it would not make a difference in my practice. I may get to a point in five years where 100% of my mediations are pre-suit (or at least pre-arbitration).

Mediation is not going away, but the market for ADR services is evolving—more contractual, more voluntary, and less court-annexed. Mediation works best when it is voluntary.

It will be interesting to see in which direction the Texas Supreme Court decides to go.

Tip: How to Make the MSA Binding!

Most successful mediations result in a written “Mediated Settlement Agreement” (MSA). Advocates usually agree that it is best to reduce the settlement agreement to writing, even if the MSA is merely an outline of the essential terms of the settlement.

What if the agreement breaks down over the terms of the more elaborate settlement documents that everyone assumed would not be a problem”? Fortunately the Houston (14th) Court of Appeals, in a recent decision, helps us with this perplexing issue! In Border Gateway, LLC v. Gomez the parties obligated themselves, in an MSA, to “enter into a formal settlement agreement within ten business days”. In a trial over an alleged breach of the MSA, it was argued that the failure of this condition precedent rendered the “agreement” non-binding on the parties. Citing established precedent, as well as the Restatement (2nd) of Contracts, the Court opined, “the fact that the parties intend for an informal agreement to be reduced to a more formal writing will not necessarily prevent present, binding obligations from arising”. The party challenging the MSA could not establish that the MSA manifested an intent to not be bound.

Practice tip? An expression in an MSA of “the parties intend to be bound by this agreement, notwithstanding the fact that more formal settlement documents are contemplated”, should go a long way in bolstering the enforceability of the agreement. Conversely, if you have any reservations about the “more formal settlement documents” to follow, the MSA should clearly state that the MSA is non-binding (in which circumstance why even sign the MSA?).