Mediation is a tale of two unlikely stories

The dictionary defines "palimpsest" as "a manuscript or piece of writing material on which the original writing has been effaced to make room for a later writing but of which traces remain." It might equally be a definition of the mediation process, especially because so often the settlement of a case requires the original "story" to be extensively rewritten.

To illustrate this, let's take a hypothetical, but quite typical, example of a dispute between a homeowner and contractor. The homeowner hires the contractor to remodel a single family residence. As is usually the case, the owner and contractor get along well at the start but by the end of the job, which is over-budget and well beyond the original completion date, the honeymoon is over and the divorce proceedings are underway. All that's left is the mediated "property settlement."

By the time of the mediation, the contractor has recorded a mechanic's lien for a relatively insubstantial sum, let's say $25,000, that represents the unpaid contract balance and has filed an action to foreclose the mechanic's lien; the owner has responded with a cross-complaint alleging $400,000 of construction defects. The contractor's insurance company has picked up the contractor's defense and insurance defense counsel has cross-complained against various subcontractors. Most, but not all, of the parties potentially responsible are ready to join the party.

Before the parties appear at mediation they have each written their own story. The owner's story is simple and in the owner's view, compelling: The incompetent, dishonest and unscrupulous contractor has taken advantage of the unsuspecting and trusting owner and built a house that is riddled with defects that are expensive and difficult to repair. The contractor's story is equally simple, and, in the contractor's mind, equally compelling: The hard-working contractor has completed the job while overcoming every conceivable obstacle created by the owner, who redesigned the project on the fly, was late in paying (or refused to pay), had unreasonable expectations, provided faulty plans and failed to take into account unexpected site conditions that drove up the price and extended the project schedule.

In the mind of the owner, the final chapter of the story ends with the contractor's insurance company writing a huge check; in the mind of the contractor, the owner recognizes that the defect claims are spurious and the owner writes the contractor a check for the contract balance plus attorney fees and costs.

It should be obvious that if there is to be a settlement of these conflicting claims, both stories will need to be rewritten at the mediation. The reason is simple: The two original stories cannot be reconciled and the expectations that are reflected in the original stories are wildly unrealistic.

At the mediation, certain realities begin to tell a different story. The mediation story reflects that the owner has hired a "mom and pop" contractor who has no real assets (in most cases, the contractor does business as a legal entity and not individually, so the contractor's personal assets, to the extent there are any, are usually not at risk). The next chapter reveals that the insurance provided by the contractor's commercial general liability policy excludes coverage for the contractor's own work product and limits coverage to the cost of repairing "resultant damage." Unless the house has suffered significant water damage, or unless the work of one subcontractor has damaged the work of another subcontractor, "resultant damage" may be limited. The chapter entitled "subcontractors" reveals that the various subcontractors, each of whom is also of the "mom and pop" variety, present the same problems with collectability and the same coverage issues. And, the chapter titled "Contractor's Affirmative Claim," shows that the sheer magnitude of the construction defect claim dwarfs the contractor's affirmative claim, leading to the very real possibility that if the case were to be tried, the owner would likely be the prevailing party. This chapter has an unhappy ending: We read that the contractor has very little leverage in negotiating payment of the unpaid contract balance.

The story that is written at the mediation is often one of painfully unrealized expectations. The owner will, shortly after starting the mediation, recognize that he or she is unlikely to collect from the contractor; the contractor will recognize that he or she is unlikely to be paid by the owner. Both the owner and contractor will realize that their original stories read more like fiction than fact.

How does the "mediation story" read? Usually, something like this: The mediator is able to cobble together sufficient funds from the contractor's insurance carrier and the subcontractor's insurance carriers an amount of money that will fix some, but not all, of the claimed defects. The contractor may have to abandon his or her affirmative claim. The owner will have to abandon his or her goal of repairing all of the defects and focus only those that are most egregious or may have to contribute out of pocket money to fix those defects and others if the owner so chooses.

The mediation story is, in essence, a palimpsest - a manuscript that tells a new story but reveals traces of earlier writings. There are traces of both the owner's story and the contractor's story, but the final version of the story is much different from both of the original versions written by the parties.

What is the importance of this when thinking about resolving cases in mediation and how can consideration of this concept increase the chances of reaching a settlement? The answer is that while every good lawyer knows that a clear, persuasive and compelling story is essential to success in a lawsuit, it is equally the case that you must be flexible enough in your approach to accept the notion that your story may need to be rewritten to achieve a settlement. Repeating the same story, or insisting that your story is the only one that can be told, does not assist in the settlement of a case. A willingness to adapt to the implications of the new story that unfolds at the mediation will, however, help you reach that settlement.

Part of the process of being able to set aside the original story and adapt to a new and different version is the ability to listen and process new facts. In other words, to have the ability to not just tell your own story but listen to another story that may be more compelling. The Dalai Lama was once quoted as saying: "When you talk, you are only repeating what you already know. But if you listen, you may learn something new." When you insist upon telling and retelling your story at mediation you are, in fact, just repeating what you already know. However, when you listen to new facts and arguments, and can process them and understand the implications that arise from them, you can learn something new that can, and almost always does, have a profound impact upon your negotiating position.