Can You Mediate Before a Lawsuit Is Filed?

When a serious dispute develops, filing a lawsuit can seem like the obvious next step. The parties hire lawyers, a complaint is filed, discovery begins, depositions are scheduled, and eventually—often months or even years later—someone suggests mediation. There is no reason it always has to happen in that order.

In many disputes, the parties can mediate before a lawsuit is ever filed. Depending on the circumstances, doing so may save a considerable amount of time, attorneys’ fees, and frustration. It can also give the parties an opportunity to resolve the problem before litigation damages a business or professional relationship beyond repair.  This is generally referred to as pre-suit mediation or pre-litigation mediation, and it is an option that businesses, individuals, and their attorneys should consider more often.

You Don’t Need a Pending Lawsuit to Mediate

One misconception about mediation is that it is something ordered by a judge after a lawsuit has been pending for a while.  That certainly happens. Georgia courts frequently encourage or require parties to mediate pending cases. But court-ordered mediation is only one form of mediation.  Parties who have a dispute can agree to hire a private mediator before either side files suit. In fact, Georgia’s Alternative Dispute Resolution Rules expressly preserve the right of parties to select a third party to help resolve a dispute before a case is filed.

The process does not have to be complicated. If both sides are willing to participate, they can select a mediator, agree on a date, exchange whatever information is needed to make the mediation productive, and see whether the dispute can be resolved.  If they reach an agreement, litigation may never be necessary.

Why Mediate Before Filing Suit?

The most obvious reason is money.

Even a relatively straightforward lawsuit can become expensive quickly. Once litigation begins, the parties may incur attorneys’ fees for pleadings, written discovery, document production, depositions, motions, hearings, expert witnesses, and trial preparation.  Furthermore, litigation has a way of developing momentum.

For example, a dispute that originally involved $75,000 may reach the point where both sides have spent significant sums fighting over that $75,000. At some point, the cost of the fight itself becomes part of the problem.  That does not mean parties should settle every dispute. Sometimes litigation is necessary, and sometimes a party needs a court to decide the issue.  But it does raise a practical question:

If the parties are likely to mediate eventually, why not determine whether a resolution is possible before spending months litigating the case?

In the right case, an early mediation can answer that question relatively inexpensively.

Timing Matters

There is an important qualification. Earlier is not automatically better.   Mediation works best when the parties know enough about the dispute to make informed decisions.  Suppose two companies disagree about whether work performed under a contract was defective. If neither side has investigated the alleged defects or calculated the cost of repairs, scheduling mediation immediately may accomplish very little.  On the other hand, the parties may not need six months of formal discovery and a dozen depositions before they can have a productive settlement discussion.

Often there is a middle ground.

The lawyers may exchange important documents voluntarily. The parties may prepare damages calculations. An expert may inspect the property. Counsel may exchange demand and response letters that identify the principal claims and defenses. At that point, everyone may know enough to talk seriously. The goal should not necessarily be to mediate at the earliest possible moment. It should be to mediate as soon as the parties have enough information for the process to be worthwhile.

Pre-Suit Mediation Can Move Much Faster Than Litigation

There is another practical advantage: scheduling.

Once a lawsuit is filed, the parties become subject to court calendars, discovery periods, motion deadlines, attorney schedules, and procedural requirements. Even when everyone is working diligently, litigation takes time. Private mediation can often be scheduled much sooner. The parties choose a mediator and find a date that works. In appropriate cases, the mediation may occur within weeks rather than waiting months for the litigation process to develop. Virtual mediation has made scheduling even easier. An attorney in Atlanta, a corporate representative in New York, an insurer in Chicago, and another party in South Georgia can participate in the same mediation without spending a day traveling.

For a business, that efficiency has value beyond the legal bill. Owners and executives generally make more money running their businesses than sitting in depositions, gathering documents, meeting with lawyers, and managing litigation.

Business Relationships Are Another Consideration

Not every dispute involves people who never want to see each other again. A general contractor may have a payment dispute with a subcontractor it otherwise considers a good company. A supplier may be owed money by a long-time customer. Two businesses may disagree about a contract while continuing to work together. A commercial landlord and tenant may have a dispute even though neither wants the lease to end. Filing suit changes the relationship.

Allegations are put into pleadings. Lawyers begin communicating for the parties. Positions harden. People who initially disagreed over money sometimes begin disagreeing over everything. Pre-suit mediation gives the parties a chance to solve the problem before that happens. It also allows for solutions that a court might never order. The parties might agree to a payment schedule. They might modify a contract, complete corrective work, replace materials, provide future services, restructure a business arrangement, or combine monetary and non-monetary terms into a settlement. A judge or jury generally decides the legal dispute presented to it. The parties at mediation have much more freedom to decide what actually solves their problem.

Construction Disputes Are Particularly Good Candidates

Construction provides a good example of where early mediation can make sense.  A relatively simple disagreement over payment can quickly expand. The parties may begin arguing about change orders, delays, defective work, retainage, backcharges, warranty obligations, lien rights, payment bonds, or attorneys’ fees. Meanwhile, the project may still be underway. An owner may need the contractor to finish the project. The contractor may need a subcontractor to complete its scope. The subcontractor may need payment so it can pay suppliers and employees.

Everyone has an incentive to resolve the disagreement, but nobody wants to surrender a legitimate claim.

That can be an excellent setting for mediation. It is also an area where the mediator’s background matters. A neutral who understands construction terminology, contracting relationships, payment practices, liens, bonds, scheduling issues, and common construction claims may be able to get to the heart of the dispute more quickly. The same principle applies in other specialized disputes. Subject-matter experience can make a significant difference when selecting a mediator whether you are talking about domestic issues, general business disputes, or banking and finance matters.

What Kinds of Cases Can Be Mediated Before Suit?

There is no single category of dispute reserved for pre-suit mediation. Depending on the circumstances, mediation may be useful for:

• Business and commercial disputes;
• Construction claims;
• Contract disputes;
• Real estate disagreements;
• Partnership and shareholder disputes;
• Employment matters;
• Landlord-tenant disputes;
• Payment and collection disputes;
• Professional-service disagreements; and
• Other civil matters where the parties are willing to negotiate.

The better question is usually not, “Can this type of case be mediated?” Instead, ask, “Do both sides have enough information to evaluate the dispute, and is there a realistic possibility that a negotiated solution could make sense?” If so, mediation may be worth attempting.

Do You Need a Lawyer for Pre-Suit Mediation?

A mediator is neutral. The mediator does not represent either party and should not be confused with an attorney representing a client’s interests.  For that reason, parties involved in significant disputes should consider consulting their own counsel before and during the mediation process. An attorney can help a client understand the strengths and weaknesses of the case, evaluate potential damages, identify important deadlines, prepare for the mediation, and review the terms of a proposed settlement.

That last point is particularly important. Resolving a dispute usually involves giving up legal rights in exchange for the certainty of a negotiated resolution. Parties should understand what they are agreeing to before signing a settlement.

What Happens If Mediation Doesn’t Work?

Nothing about agreeing to mediate means the parties must settle. That is one of the fundamental differences between mediation and arbitration. An arbitrator is generally selected to decide a dispute. A mediator helps the parties try to resolve it themselves. If no agreement is reached at mediation, the parties can consider their remaining options, including litigation or arbitration where appropriate.

An unsuccessful mediation may still have value. The parties often leave with a much clearer understanding of the opposing side’s position. Issues may be narrowed. Unrealistic expectations may be corrected. Information may be exchanged that leads to settlement later. There is, however, an important warning.

Parties should not assume that agreeing to mediation extends a statute of limitation, notice deadline, lien deadline, contractual limitation period, or other legal requirement. Anyone facing a potential deadline should consult an attorney about protecting his or her rights while mediation is underway.

What About Confidentiality?

Privacy is another reason parties may prefer private mediation to immediately filing a lawsuit. Court filings are generally public. Private mediation, by contrast, is typically conducted in a confidential setting, although the precise legal rules governing confidentiality can depend on the circumstances, applicable law, and the parties’ mediation agreement. The parties and their attorneys should understand the applicable confidentiality provisions before mediation begins. For businesses, however, simply having the opportunity to discuss a dispute outside a public courtroom can be significant.

How Does Pre-Suit Mediation Actually Start?

Usually, quite simply: One party or its attorney proposes mediation. If the other side agrees, the parties select a mediator or mediation service and schedule the session.

Before mediation, the parties may provide the mediator with written summaries and important documents. In a construction case, for example, those materials might include the contract, change orders, payment applications, photographs, schedules, correspondence, and a summary of the amounts claimed. A business dispute might require the contract, relevant emails, invoices, financial information, and a concise explanation of each side’s position.

The point is not necessarily to recreate formal litigation discovery. It is to make sure everyone has enough information to negotiate intelligently.

The mediation can then take place in person or virtually.  If the dispute settles, the parties can document their agreement and, in many cases, put the dispute behind them without ever filing a lawsuit.

So, Should You Mediate Before Filing a Lawsuit?

Sometimes the answer is no. A party may need immediate injunctive relief. Important facts may still be unknown. The opposing party may refuse to provide necessary information. A deadline may require prompt filing. Or one side may simply have no interest in negotiating. But in many business and civil disputes, pre-suit mediation deserves serious consideration. Before committing both sides to months or years of litigation, it may be worth spending a day finding out whether the dispute can be resolved. The potential upside is substantial: lower legal expenses, a faster resolution, greater privacy, more control over the result, and sometimes preservation of a valuable business relationship. And if the case does not settle, the courthouse is generally still there.

Considering Mediation Before Litigation?

The Georgia Center for Arbitration & Mediation (GCAAM) provides mediation and arbitration services for businesses, individuals, and attorneys dealing with a wide variety of disputes. GCAAM offers access to neutrals with experience in particular areas of law and business, because we believe a mediator who understands the subject matter can often help the parties use their time more effectively.

Mediations can be conducted in person in Georgia or virtually, making it possible to bring together parties, attorneys, insurers, corporate representatives, and other decision-makers even when they are located in different cities or states. If a dispute appears headed toward litigation, there may be value in asking one question before the complaint is filed:

Would it make sense to try to resolve this first?

To learn more about pre-suit mediation, find an appropriate neutral, or inquire about scheduling, contact the Georgia Center for Arbitration & Mediation.

This article is provided for general informational purposes only and is not legal advice. Parties should consult their own attorneys regarding their legal rights, deadlines, statutes of limitation, and the consequences of any proposed settlement.