Moving from Arbitration to Mediation in Business Disputes

Hi, welcome to MediatorPodcast.com, a podcast and video series about mediation, negotiation and collaboration. My name is Melissa Gragg, and I'm a valuation expert and divorce financial mediator in St. Louis Missouri – specializing in divorce and partner disputes. 

Today we are talking about moving from arbitration to mediation in business disputes with Margeaux Thomas. Margeaux has worked for entrepreneurs and small business owners,  specializing in commercial landlord/tenant disputes, business partnership disputes, and contract disputes, including franchise, partner, shareholder, non-compete, and non-solicitation. She is located in the D.C area. Welcome, Margeaux.  

Transcript

Speaker 1: 0:00

Hi, welcome to mediator podcast.com, a podcast and video series about mediation, negotiation, and collaboration. My name is Melissa Greg , and I'm a valuation expert and divorce financial mediator in St. Louis, Missouri. I specialize in divorce and partner disputes, and today we're gonna be talking about business disputes. And Margot Thomas has worked with entrepreneurs and small business owners specializing in commercial landlord tenant disputes, business partnership disputes, contract disputes, franchises , um, partner issues, non-competes, non-solicitation. She's actually located in the DC area. And today we're gonna talk about moving from arbitration to mediation and business disputes. Welcome, Margot. How are you?

Speaker 2: 0:48

I'm doing good. Thank you for having me, Melissa.

Speaker 1: 0:50

Awesome. Okay. So I specialize mostly in divorces and business disputes where there is a valuation involved. And what we're gonna talk about today is really the fact that there's a ton of areas that are really ripe for maybe mediation in a business issue that business owners are just defaulting to arbitration or have contractual language around some of these issues. And I think that what we want here is a perspective to walk away after today with a perspective of how a business owner could use mediation or these alternatives to get through , um, some of their daily issues with suppliers, vendors, and really in some situations where you may not want to like sue somebody that you're working with, but you have to come to an agreement. Um, and quite frankly, when we first started talking about this with Margot, I really didn't know like what types of business issues she is seeing , you know, being on the east coast, kind of having your whole practice around this. Like what types of issues are you seeing come through mediation that involve businesses?

Speaker 2: 2:16

So we have seen just about every kind of issue go through mediation, but I think that the, the issue that is best suited for mediation is what we call business divorces. Um, business partners who are going their separate ways for one reason or another. And the reason that I think that those are so well suited for mediation is because there is a money aspect, there is a valuation aspect in every single one of those, but there's also , um, underlying issues that also need to be resolved in most of those cases. It is not like having a dispute with a supplier or a third party who you can just end the contract and go get another supplier. You never have to see this person again when you're dealing with a business partnership dispute. Most of the people that we deal with are siblings, their family members, their husband and wife, their cousins, you know, they have some, they've known each other for 20 years. That's why they went into business together. A lot of them do not have a lot of , um, they didn't hire a lawyer at the beginning to get an operating agreement or some type of foundational document because they know love or trust the other person that they're in partnership with, which makes the mediation a good avenue to try to work through a resolution because there are a lot of emotional factors at play. There's other family members who may not be in the room who may have an influence on that outcome. There may be things other than money who is gonna continue to run the business. Um, you know, what is the person who is gonna walk away from the business going to do , um, what are they gonna focus their efforts on? There's a lot of intangible things that need to be addressed in resolving the business partnership dispute. And a lot of those things can be addressed in mediation much better than they can in a courtroom, because in a courtroom they're gonna say, you know, let's sell the business. Let's break it up. Let's sell it to somebody. Let's split the proceeds. And, and you go in your separate ways. And that, that doesn't address all of those intangibles.

Speaker 1: 4:09

Well, and I think that, oops, one of the things that, you know, when, when we were first talking, whenever I first came on, even the podcast, you know, I typically deal with divorces, and divorces are gonna be two people kind of separating. Now you said a term which we actually use very regularly, right. In business and this business divorce. And let's just, and I think you've kind of talked about it in general, but there is, you know, like this is normally gonna be what we think as a regular partner dispute, where you either have multiple partners and you're buying one in or out, you're going apart, but you could also be coming together, like you could be pulling things together as well. So in a business divorce, which is kind of a term that you know, is loosely used, right , um, we're really talking about all aspects . Like if they own property, right, if they have land together, if that business contracts together, like this is also like your firm also deals with a lot of the legal aspects. Like it's not just a financial aspect, but it's the unwinding as well and negotiating because not always do they have money <laugh> , like, and then somebody's wanting to be left. Well, well , I want the website, well I want the logos, the name, and things like that. So talk to us a little bit more about, you know, how you're seeing people kind of in this space.

Speaker 2: 5:41

Yeah, I think it's a very difficult situation to deal with because like I said before, it's someone that you've known for a long time and now you're at an impasse. And that impasse usually results from some type of communication issue. You have differences on how the business should go forward. You have differences on how much you put in versus the other party. You don't value their contributions as much as your own. Um, we have theft issues. We, I mean, there anything under the sun we have seen when it comes to a business divorce, there are all types of reasons , um, why people are at this impasse. But I can say that a lot of the times it, it comes down to expectations and communication and there's some , um, miss mal-alignment there with those. So, and I think you hit on a key point. I mean, it's not just about the business being separated, but a lot of those businesses own real estate and that needs to be there , there are loans associated that with that, there are guarantees associated with that , um, people's credit or is tied into that. So there's a lot of unwinding that needs to be done. And there's cases that involve ip, there's products, there's trademarks, there's, I mean, it, it touches on a lot of different areas of law depending on the type of business. And the issues tend to be the same, but they can relate to whatever type of business people are in. I mean, we've done hyperbaric chambers to dental offices, to doctors, to lawyers, to law firms. I mean, there's a lot of , um, intricacies to being in a situation where one or more people need to go their separate ways and, and the businesses have been successful. So there's something to break up. And a lot of people feel very close to, it's almost like having another child to the business that they built from nothing. And it's now turned out to be very successful. So they have , um, an attachment to, to the business that makes it very difficult to get past this or, or overcome the impasse and , and walk away or take over something that they haven't never run in this capacity before.

Speaker 1: 7:51

Well, and one of the things that I think we'll talk about are some of the benefits that we see in mediation, but one of the benefits I wonder, and, and you would know more than I would, is when you're getting into these mediations and you have two partners coming in, and now they're actually communicating. Now they're actually talking about at least what they're gonna do to separate. Do you ever see them come back together? Like it's like the mediation kind of jumpstarted them to go back together? Or for the most part, are they ending that relationship?

Speaker 2: 8:27

People do not come to our firm until it's the last straw <laugh> in 99% of the situation. If they could work it out and we're going to like , uh, get past this and move forward, they would not be knocking on our door. Okay. Um , and mediation does not mean that they're not in litigation. We have, most of our cases there has been litigation filed , and they're at a point in the lawsuit where they wanna pursue what we call alternative dispute resolution, a way to resolve the litigation while it's going on. So there may be motions being filed, the case is going forward, but the parties have voluntarily agreed to, to engage in the mediation process and go , um, meet with a third party to try to resolve it. So , um, there's usually a lot at stake. And , um, yeah, it is , I mean, it, it's somewhat sad when you think about it because a lot of these people we've had , um, one case in particular was a grandmother and her grandson, and they were in a very , um, contentious dispute that ended up going to trial and getting appealed and went along for many years and they never spoke again. And they were family members . I mean, she, she had raised this child as her own child and they never spoke again. So there are a lot of people who, this is not something that is going to, you know, be unicorns and rainbows. They're gonna work through it. I mean, that's not where they're at in this process. The business is gonna be separated one way or another. The parties want freedom from each other. Um, it's not that type of situation, unfortunately. That's, that's not really what we see.

Speaker 1: 9:58

Yeah. And, and I think that what we have seen is that , 'cause I would say for the most part, most people start in litigation and then they kind of are like, there's gotta be some other options. So we move towards mediation even as a professional. Right. But also in general, like when you're running a process, I feel like you can run both of them. Like you can have your litigation process kind of working in the background to keep your deadlines and keep everybody moving forward. But the reality is that most states, most jurisdictions , um, you know, are starting more in the family law arena, but I think are going into a lot of , uh, other issues that they're requiring mediation at the beginning of a , uh, of a situation, like at least due two to four hours with somebody , um, in order to see if you can figure this out because you have more control. And control is one of the benefits of mediation. But talk more about that because I think that people say, oh, you have more control over the situation. That's not really true. You, you have more control over the input into a solution. But, you know, where does some of the benefits, like your favorite benefits of, of, you know, minor control and privacy and confidentiality I think are big issues that I see benefits for mediation. What are some of yours?

Speaker 2: 11:22

I think the biggest benefit is time. I think that people undervalue the emotional investment that goes into being involved in litigation. I mean, they're up at night thinking about it, you know, there's anxiety involved in that and most of these people are still running a business. So the emotional energy that you're taking out of your business and devoting to this dispute can't be replaced. So I think that that means a lot. And being able to put this behind you and move forward without this hanging over your head, I think makes you a more productive business owner. And, you know, I see people who are tied up in litigation for years and you can't get that time back. And there, there are a lot of, what is the word? Um, I would just say that they're giving a lot to the process. And I think that people just don't see how much, you know, time and energy and thought and, you know, that they're dedicating to meeting with their attorneys and coming up with the next motion and strategy and discovery. <laugh> , just the word discovery. When you need to produce documents, years of documents of finances and what every dollar that has come in or go gone out of the business and how this was a business expense and you know, how the taxes were. I mean, the, the scope of discovery and court these days is very expensive . And the amount of time that clients spend compiling that information and being involved in discovery disputes about pieces of paper that are lost or weren't given or redacted or whatever the case may be, I mean, just takes a lot out of people. And, you know, I think that that is one of the biggest benefits of mediation. If we can meet over a couple of days with a third party and reach a resolution that will put this entire matter behind you forever. I mean, that is a , a huge advantage. Um, but I , I think there's also a lot to be said about the types of resolutions. There's flexibility in mediation that, you know, the court and , and most of the cases that go to court, there's what's called a receiver that is appointed. It's basically kind of like a judge, but usually an attorney. And they get involved in how the business is gonna be split up. Um, they can bring in evaluator, they can bring in a forensic accountant, they can look at the finances, they can, you know, depose parties. They can go to the facilities to see how the business is run, but they're basically gonna figure out how do we sell this business for pieces and separate the money between the people. Um, it's a very expensive process. It's a time consuming process and um, most of the time the business owners have a very good awareness of, you know, what they need to get out of this to walk away and, you know, what the bottom line is or what the best and final, you know, proposal they would take. And they can do that without having a third party impose that solu resolution on them . Um, a lot of the resolutions that are reached between the parties and a third in a mediation are more favorable in my opinion, because there is some buy-in by the business owners themselves.

Speaker 1: 14:35

Well, and that , I think that all of those points, you know, like I could belabor all of them because I think that those are all important. Um, the emotional attachment, I think it's a big deal. I think it also is some of the components of what would prevent a mediation from being hyper successful. If you have just people that are so locked in and can't see any other options. But you're right at the, at that point that they're coming to you, they're, they've tried all of the other options, you know, they've, they've looked at other options and a lot of times people are looking or, you know, a lot of contracts that we, you know, I have the benefit of looking at a million contracts a day with business owners, operating agreements, you know, shareholder agreements and most of them, and you know, any sort, anytime you sign anything to purchase something or you know, it's always got a clause of you, even my contracts like, you can't take me to court, but you can take me to arbitration in the state of Missouri. And things like that are , uh, you know, arbitration and mediation kind of originated as legal concepts if you will. They kind of like fell from the legal system. So tell us more kind of from that framework, like have you seen people shift from arbitration to mediation or is that still the first place? Like if you have a multimillion dollar business divorce, you know, like a $50 million, even a $1 million, like, are you seeing people still go that route of arbitration and what does that look like? Or are you seeing them shift just straight to mediation? 'cause there's maybe less barricades involved in it ? <laugh> .

Speaker 2: 16:24

So I think that for a long time arbitration was just the go-to business attorneys would put an arbitration clause in just about every ar operating agreement or other contract. And it said that the parties agree a binding arbitration, and it was either with AAA or Jams and there would be maybe a panel of a couple arbitrators, and that's how this dispute was going to be resolved. I think there has been a shift , um, to take arbitration clauses out of contracts because it is an extremely expensive process and it , I'm not sure a lot of people appreciate the nuances or differences between arbitration and mediation, but basically arbitration is binding. It's like going to court. There's going to be a person who says, you know, you're right or you're wrong, or you owe this much money, or this is how we're gonna resolve this, and you are bound by it. And there's usually very little appeal opportunities after they come up with an outcome, which means that if they come up with the wrong outcome or they don't, you know, review the facts, there's not much you can do about it. Which is, I guess, good to the , to some people, I mean, if you're winning, but you know, there are people who wake , you know, judges have bad days and they make mistakes. And arbitration can be a difficult process because there aren't a lot of options if you are on the short end of that stick and do not get the outcome that you want. Um, but it's also very expensive because when people go to court, your tax dollars are usually paying the judge's salary. But in arbitration you're paying an hourly rate for the judge, and the judge is usually very expensive. So , um, and that judge is going to be involved in every aspect of the case. So , um, every motion, every discovery dispute, the scheduling order, and then there's also this administrative body that helps facilitate arbitrations that you have to pay for as well. And there's like a arbitration coordinator on every case that just makes sure that things flow smoothly and everybody gets the information you need. You pay for them too. So it becomes very, very expensive. Um, there's a sliding scale based upon how much is that is in dispute of how much you even have to pay to initiate an arbitration. So you could have to pay $5,000 to even get into arbitration, whereas the filing fee for a federal court complaint in Virginia is like $400. So it is a huge difference in the amount of money that is spent in arbitration. So I think that there has been some shift in understanding of the disadvantages of arbitration. So people are , are leaning away from that and mediation is a voluntary process. There's nobody is gonna come in and say, you have to do this, you're not gonna be bound by it. You have to reach an agreement that you are okay with. Both sides have to sign on the dotted line. The, the mediator has no ability to force an outcome on any of the parties. Um, and that's why the parties need to be involved in that. In good faith, they want to have to be there. I mean, they, they need to be there wanting to reach a resolution and put this behind them. If one of the parties is not and has some ill motive, then it is not gonna be successful. But , um, so a lot of the agreements we see now, especially operating agreements, say that before you can go to court and file your lawsuit having anything to do with the business or your business partner or whatever your dispute is, you need to try to mediate the issue. And I think that that is it . It's called , uh, a precondition before you can file your lawsuit. So you have to check this box. And , um, you know, some people would say forcing people into a voluntary process is not a great idea because if they're not really doing it because they wanna be there, how successful is it gonna be? But in my experience, it has been very successful because a lot of people don't want to be engaged in litigation. No ma matter how much they hate their business partner or, or want to be away from them. Um, they usually do go into mediation with , um, good intentions and good faith and, and we have had experiences with a lot of very good mediators who can get to the brass tacks of the situation and figure out, you know, what are the real motivating factors here and save the parties a lot of time and expense before me before , um, a lawsuit is filed. So I would say that compared to 10 or 15 years ago, the number of mediation clauses that I see in operating agreements has increased tenfold.

Speaker 1: 20:47

Well, I think that mediation clause that you just said, or even anything is way more brilliant than just forcing to arbitration because, and I can only say from a perspective of understanding , you know , like I do a lot of business divorces, but I do a lot more independent, you know, individual divorces and we also have collaborative divorce where you're signing an agreement and you're gonna be a part of it. And with arbitration you're signing an agreement and you're gonna agree that, that you're bound by those decisions. The problem is in some capacity is that we as humans want control over what we're gonna have to be part of. And like you said, it, you, I think you said it earlier, is the , the buy-in. If you, if you don't have both sides saying, Hey, we're probably gonna have to come to an agreement that's not the best for either one of us, right? But we're going to have to get out of it. I think that for the most part, people don't wanna be bound to a system, be it court, be it arbitration, be it any system that requires them to take spoonfed what a third party is going to say about that dispute. And that's how mediation is also different from some of those is that yes, nothing's gonna bind you to do it, but also the fact that, you know, it's like even working with kids, like if both of them , uh, come up with the solution, the odds are they're gonna champion that solution to the end. And there are steps you're gonna have to like change the, you know, like all of these things that take additional time that aren't solved in like in , in the, even in the arbitration, they would just say, okay, great, split this and you keep this and you keep that, then you have to go for months and unwind those things legally. Whereas if you go to the right, and, and this is one of the things that maybe we could talk about a little bit, but you know, it really does mean that you need to go to the right mediator. And I think that everybody in business or in the world thinks that mediation is like the same thing. You know, like it's just like, and it's in a black box. So I really don't know what it is, but I know it's all the same. The reality is it's very different for all of these purposes. I mean, you even have like people who are just doing labor disputes, people who are just doing landlord tenant disputes, you know, like you really have to find the right connection. But as a business owner, you know , like if, if we are not getting along, and maybe it doesn't have to be to the point of like, I hate you and I don't wanna be partners with you, but like, we just need to go our separate ways. We have two great ideas for the future. We don't totally don't get along, but that conversation's uncomfortable 'cause we're friends, our families hang out together. We don't wanna ruin this relationship. A lot of times this is to prevent the ruining of that relationship because you have the mediator that's asking those hard questions. Right. But in general, what do you think a business owner would need to do to even consider? 'cause I wanna step back like, hey, you and I are, we're just not jiving like we were and we've been partners for a long time, we have some stuff to separate. We think we could do it, but we don't know if it's fair. We don't know if it's reasonable. Um, then what would they first do? Do they need to first contact you? One of them or both of them? Like how do they even get ready for this process and have it be very transparent?

Speaker 2: 24:20

So I think the process is the most productive when there is sufficient preparation. And I have a athletic background, so it's similar to just, you know, you wouldn't go join a basketball team and show up for the first game without learning the rules, you know, talking to the coach, going to a practice and some people just feel like, I'm just gonna show up and whatever happens, happens. And I do not agree that that is going to be a very productive way to, I mean, there's a lot of preparation that goes in and there's a lot , um, kinda like therapy. I mean, you really need to think about what it is that you need to get out of this. Like what, so the legal or negotiation terms for this are bota and wna , right? What is your no deal option? If I do not reach a resolution at this mediation, what's the worst thing that's gonna happen? Or what is the best thing that's gonna happen? Because you need to have some parameters walking into it about, you know, this is a good deal because this could happen if I don't take this deal. And if you do not think through those scenarios and try to figure that out before you step in the room, how do you know that the deal that you agree to is a good one? And it also leads to buyer's remorse because you wake up the next day and say, why did I agree to that? You know, I mean there's a lot of , um, pressure to an extent. I mean, you may be in a unfamiliar environment, I mean, so there's a lot more virtual mediations now, but um, there are also a lot of in-person mediations where you're in a room that you've never been in for a very long amount of time , um, you know, whether you have dinner on time, whether you've been there 12 hours, you know, you're getting tired. There's all kind of like , uh, environmental elements that are at play. And to the extent that you are very clear on what it is you need to walk away with for this to be a good deal. I mean, that means to be set in stone before you walk into the room. And I've just seen too many people just , or lawyers just, you know, we'll just figure it out. That's, this is not the situation where you get there and try to figure it out. Just like any sport, like this is not where you just, you know, jump in the pool and say , I'm gonna swim a 500 meter race. This is not that. There's a lot of preparation that goes into just thinking about those scenarios and calculating and that that may be a math calculation. You know, what is the business worth? Let's look at the numbers, you know, how much do I need to walk away with , um, to feel like, you know, I got, you know, what I deserve in this situation. Um, a lot goes into picking the mediator. I say a lot, just because it's a good attorney does not make them a good mediator. Just because they're a good judge does not make them a good mediator. A mediator has a specific set of qualifications that I think make them really good. Um, there are two things that they have to be able to do, and there's two hats I should say that they have to be able to wear. One is a facilitator of information and other is an evaluator of information. And they have to switch between these two things at the right time during the mediation. So there are points in the mediation where they need to say, look, you have a bad, you know, your , your case is not that good. <laugh> like that is not gonna be that persuasive. Or, you know, your credibility on that issue is not the best because of these other things that you've done that kind of conflict with what you're saying right now. And they need to be able to do that in a way without making the person feel bad, right? They cannot beat up on the person and then expect them to, you know, engage in this voluntary process and , and really get the outcome that they want. So I think that really good mediators have a way of delicately saying that, but allowing the person in the room to, to understand what they're saying, right? And there are people who just wanna force information down their throat or say, look, if you go to court, you're gonna lose. Like, that's, that's not the way to get people to buy into the solution that they need. And I think that good mediators recognize that, and they're very good at , um, allowing people to feel heard, but also evaluating the merits of what their position is in a neutral way. Um, so the person doesn't feel like they're taking sides or against them. Um, but, but moving the parties to, to a solution. I mean, the, the mediator is going to have to go into one side or the other and say , look, your portion is not worth what you think it's <laugh> like that , that's an inevitable conclusion because in every business of worse , we handle, I call it, it's called the Ikea effect. If you build something from ikea, you feel like it's worth more than what you bought it for because you put your hard earned , you know, work and effort into doing it, you just feel like it's worth more. Now you have a story to tell about it. I was like, putting this together all night, like now it's worth more. It's the same thing with the business. Like you put your sweat and tears and time into this business, even if you are 50 50 partners, inevitably one partner is going to believe that their portion is worth more. And, and that's just human nature because you feel like the other person isn't doing half as much as you are, right? Right. But the mediator has to be able to come in and say, look, but this is a mathematical, you know, you know, we can look at time, we can look at, you know, how much the business is worth. We can look at, you know, what your roles are. I mean, there is a way to, to logically , um, figure out exactly what your portion is worth. And some people do not want to hear what that is. So I think that a good mediator is able to communicate that information in a way that the person does not feel defensive or attacked or, you know, like , uh, I think that that's the key. So I think that that is more important than the mediator having a wealth of knowledge in the area. Um, it could, you know, you could have some very complicated IP dispute and yes, the mediator could have like 20 years of education and, you know, mediated all types of disputes or been a judge that just specifically did trademarks for, you know, decades. But that is not the skill that I think is the most important when choosing a mediator. So in preparation for a mediation, I like to reach out to other people who have used that mediator , um, or preferably use the mediator that we already have used <laugh> that we know that is gonna be very good. Um, and, and ask that question, you know, and it's, it's not about what the mediator's resume is, it's about what are their statistics on resolution. And, and I think that that goes a long way. There are mediators, 95% of the time they reach a resolution, and that's not because they know the ins and outs of every practice area and issue that comes before them . So , um, so I would say the big things in some are, are the mediator preparing, selecting a mediator that that is gonna be good, that has some knowledge about the practice area, but really is, is a persuasive , um, individual that is able to, to wear those hats at the right times. Um, thinking about the, the best case and the worst case , um, I think environment is important. If there's a way that we can do it, I say home court advantage, let's do that. So I offer my office to the extent we can, let's have it here so the client can, you know, they've seen it, they've been there, that , that plays a lot into, you know, success in people's comfort levels. So , um, virtual , um, can be preferred where people can be at home and in their own element. So that's important. Um, you know, I think those are, are are the big ones. There's a lot goes into preparation though, so

Speaker 1: 31:48

Well, and I think that

Speaker 2: 31:49

All of those things kind of go to preparation

Speaker 1: 31:50

When I ask somebody, you know, like I'll say, oh, did you prepare for that mediation? And they'll be like, no. And I'm like, okay, well then in , in those cases where I know the other side has not prepared, like, I will always win, I will always get over in some capacity because you don't know the numbers. And so, and you're making decisions in real time , which is hard for some people, you know? So if it's hard for you to make a decision in real time , you practice the decisions beforehand, you say, okay, what would I say? You know? 'cause it's really like, would I say yes to that or would I say no to that? And you have to be clear. Like sometimes you don't know what you'd say yes to, but you know, what you would say no to. And even having that understanding. But one thing that I think that people , um, get a little confused that you can maybe fix a little bit is that I think one of the reasons why they don't prepare for mediation is because they think they're going into the mediation and the mediator is going to save the day, come up with the perfect solution and tell them what to do. Like it is a judge. And so they're kind of like, well, I mean, they know what to do. I don't, I'm just there for the ride. You know, like, I think that that is a huge misconception and that if you're not planning ahead, if you're not preparing, if you're, and , and quite frankly, there might be other people, like you could go into mediation and you could have your own valuation person, you could have your own ip, you know, expert. You could have some of, or these people might already be in your company, you know, like you might be just talking about these things and getting feedback from the mediator, but the mediator kind of gives you a view of what somebody is gonna look at from the outside of the situation and give you an honest opinion. But don't you think that a lot of people come into mediation planning, like, okay, well what's your solution kind of situation?

Speaker 2: 33:54

I think so, and as an attorney from my vantage point, there should be nothing that the mediator says during this mediation that you haven't heard, right? But there are situations where I know that the opposing counsel has not told their client a huge issue with their case or has not conveyed it to them in the way that they need it to be conveyed, right? And so my job is to come in and convince the mediator of how big a weakness this is to their case, and to get the mediator to go into the other room and say something to the other person's client that they have not heard or haven't heard in that way, right? So I think a lot of people also think, well, it's just neutral and they're just moving information back and forth and they're just shuttling stuff. And no, we want most of the mediator's time to be in the other room, <laugh>, you know, trying to get them to come to the number or whatever the solution is that, that, you know, there's gonna be some compromise for sure. But we wanna know what that realm of compromise is, and we want to be prepared. You know, I will go into a mediation and say, look, we know this is our weakness. I will say that to the mediator. You do not need to tell my client the weakness. We know what the weakness is, but you know, this is what we need them to focus on. And I think that mediators appreciate that because they're not gonna spend 25 minutes telling my client that, you know, this is a weakness that we know we know, but we need to focus on these things to get to this number. And I think that , um, people, I , I don't know why. We'll just, you know, just, we'll, we'll see what happens, attitude. And I, I think that that is a losing proposition <laugh> . So , um, if you have a media , uh, lawyer who just says, all right , well, we're just gonna show up and see what happens. If it doesn't settle, we'll just go to trial and, you know, we'll just keep it moving, then I don't think that they're really, you know, giving mediation the, the time and energy that would make it effective.

Speaker 1: 35:52

Well, and I think you've already even talked about one strategy of how to use , um, you know, mediation to your advantage. I think the preparation is a piece of it. It it gets you very clear. Um, I typically tell people that the mediator is not your therapist. You should not tell them everything. That you should really be telling them your best version of this story in order for them to take that to the other side and be like, okay, well here's where they're coming from. Right? I also, like, one of my little fun things is I create kind of a , a , uh, cheat sheet that I'm more than willing to be. You know, like sometimes mediators will request information. Maybe you can talk a little bit about that, that a lot of times mediators will want some information upfront , so you would need to be prepared for this. Um, but, but also having your own cheat sheet so that you stay focused, you stay, you know, concerned about the big points in mediation , um, and you're not getting all distracted by all the minutiae, right? Which could take time , you know, like if you have to describe an event that happened five years ago, and it takes a half an hour to tell the story, you're losing some time where you could talk about the really big issues . So what are some other strategies that you think you know, and can you gain an advantage? Like should you be manipulating the system and things like that? So, so what are you , some of your , uh, super tricks?

Speaker 2: 37:23

So before the mediation starts, there's usually a meeting with the attorneys and the mediator to discuss the framework of the mediation. And at that meeting, the mediator sets a deadline for the parties to submit a statement. And that statement is very important. I mean, that's, that's the opportunity for you to basically give your opening statement to, to outline the strengths and weaknesses, to give a analysis of what settlement discussions have occurred and why they haven't been productive to lay out, you know, the issues that you need the mediator to step in on and evaluate or help facilitate a resolution of. And I think that that is a persuasive piece. And I think that some people would view that as just some type of informational document. It is not, in my opinion, this is your first opportunity to convince them that, you know, your client is entitled to X and it needs to be written in that way. Our client is entitled to X because they did these things, you know, and, you know, these are the documents that support that. Um, I see a lot of attorneys write a book, like a , a novel on, you know, no mediator wants to read your novel. You need to, you know, this is short, sweet, to the point. Like, let's summarize. Like, this is not the time to attach the entire gear long litigation of pleadings. Like, there are some key points. We are about to argue this motion and our likelihood of success is X because of these two key things that are either gonna go our way or they're not. Like that's the summary that needs to be in here. And I think that the , an advantage, a huge advantage going into a mediation is , um, putting a lot of time and effort into making that very persuasive. We use a lot of charts, a lot of times. I was just in a mediation not too long ago, and there were a lot of parties involved, and all of the business names were very similar. It was like A, B, C , A, B, C, D, A, B, C, D, E . Like for whatever reason, they decided to name all these entities very confusing. And, and I , I don't know, it was just a mess. And I was like, for purposes of this statement, we are gonna change the names of all the parties to things that relate to, you know, memorable things. So all of these entities were tied to different properties, which were on specific streets. So I'm like, we're gonna call this one green 'cause this relates to this green property, you know, we're gonna call this one red, you know, so that, and the mediator was like, this makes so much sense, right? So in the mediation, the mediator starts then using the terms that we put in our document. And the other side, obviously this is a confidential document, so the other side is not seeing the document and they're like, you know, what, what are you referring to? And the mediator's like, well, it was so confusing with the names. And then, you know, this side decided to, you know, tie them to these specific things that make them very easy to understand. And they started using the language that we put into the statement. That's what you want. You don't want them to come in confused . And there's all , you know , like you want them to adopt the language. And those words mean a lot. I had another case, I'll just for an example where , um, they kept calling a , a third party who was involved like the fraudster or some kind of negative connotation to this person, and they put it in all their pleadings and they kept, oh no, it wasn't the, it was the whistleblower. That's what they kept calling this person, right? And I was like, this, we have to change the terminology that we are gonna use to refer this person because that's not helping us, right? So we need to put into this statement, this person is not the whistleblower. We don't know why they keep calling them that they're a third party witness. They have this information. We're not gonna call them that in this mediation because that's not, I mean, that's framing the issue in a way that benefits them. And I want to make that apparent that that is what they're doing. We don't want this to just, you know, people will start using words and not even understand the association that they have with those words . So we want to make this statement persuasive in a way that benefits us. And that I think helps the mediator walk into the mediation , um, in a more favorable position to our client. And I think that that is an undervalued , um, tactic. I I think a lot of people spend 10 minutes on this statement and then just say, we'll see, you know , we'll just talk about it when we get there. I , I don't think that that helps anybody gain an advantage to the media issue . I think that's a key indicator.

Speaker 1: 41:50

And one of the things that I'll kind of go through as we prep the client for a mediation, especially when we're talking about numbers, is I want them to know the numbers, right? But I also want everybody to understand the cadence of the mediation and the cadence and who's speaking and who's, you know, especially if you have clients and everything involved, you want them to understand like when they should speak and when they shouldn't. But I try to get them to focus on like three to five central points and that we will always like a mantra kind of go back to like, we're here for this and this and this and, and, and then lump all of these other extra issues into one of those three categories. Because I think the client gets very distracted by the minutiae of the issue and the attorney, you know, like, 'cause there's a lot of different ways to do mediation, but if you know the parties are there and you have a mediator in the middle , um, you know, you're, you're really trying to containerize and summarize in a big picture to the mediator what those three points are. So if you can get those three points across, then when you pull in an ancillary issue, you're like, well, that does fall under, you know, the secondary point that we've always been talking about. And then you have kind of these things that you can continue tote, say, in a very consistent manner. Like I do that for testimony as well, but I think it's very helpful in a mediation because then everybody in the room is kinda like, oh, okay, yeah, these three points. These three points, right? And if the other side is all distracted by a hundred points, then again, you're getting the focus , uh, the attention of the mediator on your issues and maybe not on some of theirs. 'cause it's like, you know, you're , you're trying to collect rainwater here. Like, I don't know where you're going with this, but it's not very clear. But I think being understanding what the mediator requests and requires at the beginning is important. And understanding that if you have a lawyer involved, that sometimes they will put together too much. Like you might have to help them, even if you're the business owner, understand the three main business points, and then you combine them with the legal points, right? Because you could have financial issues and legal issues and all of that, but what are your central kind of concerns? Right?

Speaker 2: 44:08

That's a really good point . Um, I think that being a business owner and being involved with another person in a business or another couple people for years, there are a lot of issues. It's usually not, you know, this one big thing. I mean, there's different personalities, there's lots of decisions that need to be made. There's lots of feelings that you still harbor about decisions that have been made five years ago. So I think that your point about, you know, having those key points, like a theme helps keep things focused. Because I think that if you go off onto too many of those tangential issues, it can distract from reaching a resolution on the big, big ticket items that you're there to resolve.

Speaker 1: 44:48

Well, because even like conceptually, you know, I've talked to mediators that would say, I only do two hour mediations at a time, or you know, like if I'm gonna be talking about the valuation, I a two hour window for people to ask questions to go through it, it, it, it is still drinking from the fire hose . Like they are still taking in so much information that they're just overloaded at that point, right? But in mediations where we're dealing with that is one piece of it, and we have all these other pieces, it could be an entire day mediation. You know? So even preparing for that level of attention, you know, do you need fuel? Do you need food? Do you need liquids? Do you have the capability to sit in that capacity for that amount of time? You know? 'cause that puts stresses on the negotiations , right? So understanding what is involved, which kind of, I mean, I guess goes into a little bit of like, when you're looking for a mediator , um, and you have a very complex financial matter . You know , I I think a lot of it comes down to your specifics. Some people went in-person, some people went online. Some people want different types of situations. I don't think people understand that these mediation firms that are really coming about. And, and even if you are a mediator in space, you have other kind of people that are professionals in this mediation space, right? You have the accountants that understand it. You have evaluated , you have real estate appraisers, you have, you know, I , you have other attorneys that talk about like the IP and things like that. So it's not just looking for a mediator, it's also maybe looking for what their resources are or you know, like don't assume that just because they're one person that it's really one person. You know, like a lot of times the mediators will have staff and they'll have other people that they might pull in depending upon the issue. But what, what are you kind of telling people to look for and , and how are you guys kind of unique in that capacity?

Speaker 2: 47:04

Yeah, I think that is a really good point. I mean, a lot of times there are a number of experts that are required to speak to different issues, and there has to be a decision made about whether they need to be there on the day of the mediation, whether they can prepare something in advance that can be submitted to the mediator. Um, and, you know, those logistics can be specific to, you know, the situation that you're in. But , um, you know, know it is good. We, we use a mediation group here that has a lot of resources. Um, they have, it is a group of retired judges from, you know, federal courts, state courts, different states in our area. So, you know, they have people who have decided just about every case under the sun and, you know, have a lot of good statistics on their mediation success rates, which is something that we look for. So, you know, I, I think it's just important to have that conversation. Um, I see a lot of people just choose randomly mediators and not put any effort into who is gonna be, I think they think that the process is not gonna be that effective, so they don't want to invest too much time into it. But I think it's one of those things that the more time you invest into it, the more likely it is to be successful. So , um, I , I certainly don't look at it that way. And we have a very, we have had some very favorable resolutions for our clients in mediation. So I think it's just, you know, putting the effort in and , and the preparation in , you know, looking into the mediator's credentials and success rates and the resources and, you know, experts that may be needed and anything else. I think it's just all of that goes to preparation.

Speaker 1: 48:40

Yeah. And, and I think there's something to be said about, you know, we recently , um, hired a mediator in a case, and it was a very specific mediator that we knew from prior experience could effectively communicate what we needed, right? And it, it wasn't because like we would control them, it was that they had a way of kind of calming this chaos, right? That other people would all be very defensive, but their way is just beautiful. And I think that in some capacity, you know, the mediator is just a conduit, like the preparation that goes into, and, and realistically, if you wanna containerize any of the costs in this kind of process, especially because, you know, partner disputes, like, who's gonna pay for it? Is the company paid for it? Or are you individually paying for it? Right? When you get involved in the process and you're vetting the people and you're prepping some of the information and you are doing this, what is, what is your hourly rate zero? You know, like, yes, it's a cost benefit of pulling yourself from your business, but the more you know , like this is an opportunity for you to put your time and effort into finding something that you know, like even fits with you and your partner, right? Uh , uh, in , in the conversa. And , and then you talk around and say, okay, are they good at business? Have they done this? Have you seen success? What have they done? It's the same type of situation. It's not foolproof, but you can have a little bit more insight into it and understand, you know, from that capacity. So, and I, I think for the most part, if you're gonna go about mediation as a business owner, you have to know that you're gonna be part of that process. Like, not from a controlling standpoint, like you're gonna dictate it, but you are gonna be part of the creativity if there is to be any of how something, you know, like, oh, well, we can't just split this all up. It has to be, you know, protect this and protect that and do that, and don't worry about that. And what about the employees? You have that capability to protect all of those interests, but you are gonna have to put your time and effort into it as well. And that, and if you just wanted to be solved by lawyers and the court, then you go to trial and you let them deal with it. But the mediation is more like, Hey, I think if I am a part of this, I think we can get it resolved, right? Because I am the business owner, I am the creative person that, that thinks that they can come up with something. Um, but maybe you should tell us a little bit more about you, your firm, how you handle people, how you deal with people, and how you maybe came about to do , uh, mediation, because we all have a fun story about mediation, but maybe, maybe you have a fun one to tell <laugh> .

Speaker 2: 51:41

Yeah, so I , um, we have a law firm in Northern Virginia, and I practice in Maryland, DC and Virginia. We help people , uh, build, protect, and resolve disputes concerning their business. Um, 99% of my practice is business divorces. So we handle lots of different situations that business owners face. And I think that what makes us uniquely qualified is, you know, I, I'm a business owner, so, you know, I <laugh> I get the struggles and the late nights and the, the commitment and energy that is required to, to build a business. And, you know, a lot of those things are at stake. And I think the, the biggest shift that, that we have to discuss with our client is, you know, they're successful business owners. And what makes this process hard is that there's an emotional aspect to it. If this was just a business decision, it would probably be very easy for them to do. But we appreciate the fact that this is not just about money. It's not just a business decision. There's a relationship that existed before the business that is influencing a lot of what's going on. So, you know, we have to, we have to be aware of that. We have to, to take that into consideration in our conversations. Um, even if that, that relationship is beyond repair, it is going to have an effect on our clients. And I think that, that people like working with us because we have empathy towards, towards that situation and , and understanding of, you know, that aspect of it. Um, there are certainly lots of lawyers who have experience in business and can value things and <laugh> , you know, give you an analysis of what it's worth. But, you know, there's in , in my opinion, more to it than that there's a, there's another aspect that that needs to be weighed. And I started with that, you know, there's, there's an emotional toll that these type of situations take. And, you know, you have to be cognizant of that if you gotta survive this and , uh, be healthy for yourself and your family. So, you know, we, we, it's our job to help you through that process. So I have been doing this for over 15 years and , um, you know, I really love it. I like working with , um, business owners who are brilliant individuals and, you know, help them, you know, tackle this problem and move on to other successful business ventures. So , um, or, or just running their business on their own. That's also a , a very big difficult step that some people have to take if you start something with other people and are now in a position where you're gonna have to do it yourself. I mean, that is a mindset shift as well. So, you know , um, we work with people in all stages of that process and walking them through that and helping them in that transition is really something that's very close to my heart. So that's what we enjoyed .

Speaker 1: 54:23

Well , I think that that is really impressive because that is, you know, if you go into mediation or litigation, or even I went into math , um, because I thought that numbers were more fun than emotions , um, then you have to be mindful that you can do everything right from a financial aspect and a legal aspect and a mediation aspect, but the emotions could still prevent the settlement. And so I think that you bring up a very valid point that, you know, it's about being unbiased, but it's not about being unemotional or unempathetic, it's about recognizing it. It doesn't mean that we have to go into it, but we can recognize it as a container, as a safe space in order to do some of this. But I also see people that are helping in mediation, lawyers, financial people, that we are that consultant, like we are helping you kind of efficiently go through this mediation process in a way that hopefully both parties, you know, come to a favorable decision. But in the long run, you're hiring kind of a consultant to help you in this process. And for the most part, it's a better process than litigation is. Um, it's a little bit more controllable, right? But there's room for all of them. What we've seen is to do a parallel as well. And so you would be doing a litigation strategy and a mediation strategy if you believe that that is what's necessary. So it is getting the right people in the right room to give you your options to allow you to have those decisions to be made , um, and to have a say at it. But we appreciate your time. Um, is there anything else you wanna kind of say about mediation that you think, you know, is really amazing? I mean, I talk about a lot. People kind of get tired of me saying it's the wave of the future. Like, you need to be a part of it. Like, it's so great, but, you know. Yeah . Do you have anything more to add? Yeah,

Speaker 2: 56:26

No, you know, I think we've covered it. I, I , I , I do think it is a great process. I think it's very beneficial and, you know, it doesn't solve every problem. Every case is not resolved in mediation. It's certainly not a slam dunk for all cases. But, you know , there are some very favorable outcomes that come from mediation and I'm certainly a huge proponent of, of trying it, giving it a try. I think it is worth the effort , um, and time involved in going through the process. So, you know, if you were to ask me, I would say yes, <laugh> , you should try mediation no matter what point you're in. Um, in your case it can be before a lawsuit is filed, it can be after a trial, while something is on appeal. We have, you know, mediation that's at all stages of cases and, and have been, I I am a huge proponent of it.

Speaker 1: 57:11

Yeah. And I think that the, the only thing that I'll say about finding somebody to work with, because again, since it's so new , um, newer from acceptance standpoint, from acceptance, you know, from business owners and courts and all of that , um, work with somebody who has a process. 'cause if they have a process, the odds are they've done this for more than just a year or two. You know, they've really cultivated how they can do it well. So , um, I appreciate all your knowledge and hopefully we'll have you back on to talk more about business divorces and, and how we do valuations. But we appreciate your time, Margo, and they can reach you if they have questions, right? Because you work around the country, it's not just in the east coast, right?

Speaker 2: 57:59

Yes. We consult on a lot of cases , um, around the country that involve business dis business disputes and business divorces. Yeah . So feel free to reach out. Um, I would love, you know, this is, this is my passion and I'd love to speak with anyone that we can help through this process.

Speaker 1: 58:16

Yeah. And I'd love to say that there are a lot of people out there like you, but there aren't <laugh>. And so, you know, I really think that this is a space that is gonna blossom and there will be more providers around the country. But for right now, you know, seek out some people that really know what they're doing. And Margot, I feel is one of them . So we appreciate you and we'll see you soon.

Speaker 3: 58:44

A huge thank you for tuning in to another episode of mediator podcast.com. All episodes are produced and edited by Ellie Marketing . If you're interested in starting your own podcast, head over to our website, ellie marketing.com. Thank you again, and stay tuned for more episodes.