Mediation and franchise relationships

Blog Post
Virtually every contract in the franchise relationship contains a dispute resolution provision. While most contract provisions focus on where proceedings will occur, applicable law and the dispute resolution tribunal (court or arbitration), they rarely include pre-suit mediation.

In my experience, even if the agreement does not call for pre-suit mediation, engaging pre-suit mediation (or even mediation immediately after suit is filed) is often very helpful to achieving early conflict resolution. It’s also important to consider two other factors.  First, many Judges require mediation during litigation process and second roughly 95 percent of all lawsuits settle before going to trial, with many at the mediation conference itself or via the ongoing mediation process.
 
It's plainly obvious mediation and the mediation process are not incidental to the dispute itself. To the contrary, mediation is a central focal point that should be approached as a central focal point.  
 
Having been involved in hundreds of mediations over the last almost 30 years of practice, I have learned to create an "internal" checklist for every mediation.  I share that checklist with you now.
 
Know what you want from mediation
 
This seems simple enough, however, going into mediation with set benchmarks and goals is critically important. Without set benchmarks and goals, resolution during mediation becomes much more difficult as there is no basis to measure success.  
 
I am not saying you must settle once your benchmark is met. However, if you meet your benchmark, the mediation process should resolve your dispute.
 
Try to figure out what your opponent wants from mediation
 
More critical than your own needs is an understanding of your opponent’s needs and goals. If you can figure this out, you can map a strategy to achieve your goals and their goals.  For instance, if you are a defaulting franchisee, more likely than not, the franchisor wants you to cease use of its intellectual property. And, more likely than not you are losing money or see no value in the franchisor's intellectual property. 
 
With that in mind, you can assess your goals, their goals and mechanisms to get there.  As such, your options would be to close down, stay open without using their IP in exchange for something, or sell the location to the franchisor in exchange for something.
 
Prepare for mediation by knowing your decision maker
 
Preparation may take different forms depending upon what you want and who ultimately is making the decision.  For instance, if the decision maker is an insurance adjuster who attends mediation for a living and has an exposure (reserve) estimate, preparation differs from that of the company principal.  
 
With the former, both preparation and the mediation itself are more like preparation for trial and trial.  This is because the decision maker is less likely to be swayed by the mediator but more likely to be swayed by facts or information which demonstrate why there is more risk involved in litigation than the cost of litigation and financial exposure of the potential outcomes. 
 
With the latter, the decision maker understands the present cost of litigation because that person is writing checks to counsel. However, the principal may not understand the ongoing financial costs, the adverse outcome risk and the consequences of the adverse outcome. 
 
As such, prior to mediating, you should try and determine who is coming and what decision-making power that person has.  This knowledge can also be useful in choosing a mediator whose style facilitates resolution.
Pick your mediator wisely
 
Mediators may not be neutral.  That’s right, mediators like everyone else in the process may be biased.  Various factors contribute to that bias, for instance, what the mediator does for a living, what type of law the mediator practiced or how much income the mediator derives from a party or an industry. Additionally, like any other relationship, mediators form opinions about parties and counsel. 
 
You may also wish to educate yourself about the mediator’s philosophy.  Find out the mediator’s style. Is the mediator facilitative, evaluative or transformative in mediation process. 
 
Facilitative mediators assist the parties in reaching accord without passing judgment as to positions or outcomes. The mediator is there as a conduit to resolution while the parties are in charge of the outcome.  I liken facilitative mediators to the “hippies” of mediation.  Everyone can do their own thing as long as we all get along. The mediator helps everyone to get along. 
 
Evaluative mediators are more involved in the case, using experience to point out strengths and weaknesses of a case in an effort to educate each side and predict outcomes.  Often times, the evaluative mediator is aggressive in communication and positions.  In my experience, this is done to ensure each party to mediation understands the costs, risks and rewards of proceeding with the dispute.
 
Transformative mediators seek to use the mediation process to transform the parties from opponents to sympathetic recognizers.  The goal is for the adversaries to recognize and appreciate the opposing party’s positions in an effort to facilitate resolution.
 
I prefer evaluative mediators for several reasons. First, not every lawyer is honest with their client about litigation, the litigation process, the cost of the litigation process and the potential outcomes.  Second, not every client wants to hear what their lawyer has to say or is saying about a case. Therefor it helps to have a “neutral” third party say bad things to your client. Third, it’s always helpful to have someone else explain issues and concerns to my clients. 
 
On the downside, I have seen clients turned off by overly aggressive evaluative mediators. So, it’s critically important for the lawyer and client to discuss potential mediators and styles. 
In conclusion, mediation should be approached as the best opportunity to resolve a case. Use it that way. And remember, sometimes mediation is the first step to resolution as I have seen mediation conferences reconvene days or months later.  
 
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