In order to recognize how pre-suit mediation can benefit your small business, you must also understand mediation in the context of a civil lawsuit.
Using Florida as an example, unless excused by the Court, mediation is usually required in all civil lawsuits.
Therefore, if you are involved in a civil lawsuit there is a good chance that you will mediate all or part of it at some point.
Mediation is more intimate and less formal than litigation.
The rules of evidence and procedure that apply to lawsuits do not apply to mediations.
Further, the mediation process is cloaked in a cape of confidentiality that can only be pierced in very limited circumstances.
Also, the parties are not limited to a number of mediations can mediate multiple times during the course of their lawsuit.
Depending on the circumstances and complexities of the dispute, multiple mediations even of parts of a lawsuit can greatly benefit the parties and usually does not have a significant negative impact on the overall litigation process.
Procedurally, the parties select the mediator, location, and date, and are usually equally responsible for the mediator's fees.
If they are unable to agree, the Court may appoint a mediator or set guidelines for the mediation.
Mediators generally are (but don't have to be) certified by the Florida Supreme Court.
Therefore, they are usually experienced attorneys or retired judges.
The parties start the mediation together in the same room.
The attorneys present opening remarks to frame their client's perception of the facts and their legal positions.
The parties then retire to separate rooms and the mediator meets privately with each party.
The process can end in a settlement, an impasse, or an adjournment with the mediation resuming at a later date.
With that background we can examine the process and benefit of pre-suit mediation.
Unlike mediation in a lawsuit, pre-suit mediation can only occur by agreement and consent of the parties.
It is ordinarily found as a clause in a written and enforceable contract, but can also be a stand-alone agreement.
Some benefits of pre-suit mediation are that it can entirely obviate litigation expenses if the parties settle and it can substantially reduce those costs by allowing the parties to narrow their dispute with the help of an objective, neutral mediator.
In sharp contrast to an agreement to arbitrate where the parties forego their right to litigate, parties retain that right with pre-suit mediation.
Therefore, contractual pre-suit mediation clauses provide parties with a comparatively cheap and informal chance to amicably resolve a dispute to the benefit of both sides.
Presuming there are no statue of limitation issues impacting any claims, the singular drawback is the actual expense of the mediation, however, the parties can agree in their pre-suit mediation clause to share that cost and be responsible for their own attorneys' fees.
The decision by any business to include or to agree to a pre-suit mediation clause in a contract should be made in conjunction with consultation with counsel.
The particular and unique circumstances of a transaction will dictate whether such a provision is appropriate.
If you don't already have an attorney for your business, contact your State's Bar Referral Program, such as the Florida Bar.
Certain States recognize and certify attorneys for their expertise and experience in particular areas of the law.
Florida Bar Board Certified Business Litigation attorneys are experts in that area and can provide competent and comprehensive advice to your business as to whether to include or to agree to a pre-suit mediation clause in a contract.