resolving disputes using principle-based mediation
TRANSCRIPT
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Resolving Disputes UsingPrinciple-Based Mediation
Foundation Performance AssociationAugust 9, 2006David T. Dorr, BSCE, MSE, JD, PE
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Executive Summary
Benefits of Mediation
Mediation Method (Principle-Based)
Mediation Settlement Analysis
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P’s Prospective D’s Prospective
Dispute
Minimize ExposureMaximize Recovery
Slow ResolutionFast Resolution
ConfidentialPublic
Minimize Resolution CostsMinimize Resolution Costs
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Dispute Resolution
Method 1: Litigation
Method 2: Arbitration
Method 3: Mediation
123
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Method 1: Litigation
US Constitution – Amendment VII
Texas Constitution – Article 1 Section 15
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Method 1: Litigation
ReviewableFairEstablished Rules
ExpensiveSlowJury/Judge Decides DestinyNot Final
Advantages Disadvantages
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Method 2: Arbitration
Federal Law - 9 U.S.C.A. § 1-15 (West 1970 and Supp. 1990)
Texas Law – Tex. Civ. Prac. & Rem. Code Ann. §154.023
Texas Residential Construction Commission (TRCC)
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Method 2: Arbitration
FinalFaster
ExpensivePerceived BiasCan be non-reviewableArbitrator Decides Destiny
Advantages Disadvantages
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Method 3: Mediation
Mediation is a forum in which an impartial person, the mediator, facilitatescommunication between the parties to promote reconciliation, settlement, orunderstanding among them. See Civ. Prac. Rem. & Code Ann. §154.023.
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Method 3: Mediation
InexpensiveFastFinalParties Decide DestinyNarrow the issues
Advantages DisadvantagesCan be wastefulBad faith participationIneffective
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Benefits of Mediation
$$$$$ $$$$ $$Cost
Litigation Arbitration Mediation
Slow Faster FastTime
Yes No -Review
No Maybe YesConfidential
Jury Arbitrator PartiesDestiny
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PurposeSteps1. Opening Statements
2. Discussion
3. Problem Statement
4. Brainstorming
5. Resolution
6. Writing
Principle-Based Mediation Model
Purpose: Mediator is a“facilitator” that attempts tohave each Party express theircase in a manner that the othercan comprehend
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Step 1: Opening Statements
PreparedShort StatementConciseDesire to Resolve
Key TermsOpeningOpening statements provideeach side with an opportunity toidentify purpose
Nature of claimTypes of damagesWhat they hope toaccomplish
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Position PrincipleCompensation$1000
ResponsibilityNot me
FairnessQuality
Step 2: Discussion – Identify the “Principles”
Purpose: Party explains their case to opposing partyMediator “translates” the case to neutral languageMediator identifies principles
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Key TermsPurpose
Step 3: Problem Statement
After discussing the issues, theMediator, states the principlesin the form of a question, withthe answer being the resolution
Example:
How can A be compensated at a price that is fair to B?
Written on blackboardIdentifies principlesAddresses both sidesConciseSolution is resolution
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Key TermsPurposeThe Parties indicate possiblesolutions to the ProblemStatement
Mediator writes optionsbelow PSNo discussionPositions
Step 4: Brainstorm
Continue until all possible solutions are exhausted
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Key TermsPurposeAfter brainstorming, the Partiesdiscussion the possibleresolutions
Mediator refrain fromtalkingUse silence
Step 5: Resolution
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Step 6: Writing
Payment TermsReleaseLitigation IssuesConfidentiality
The “settlement agreement” isreduced to a written contract.Upon execution, the contract isenforceable in Court (withexceptions)
Key TermsAgreement
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Few Words on “Caucus”
Embarrassing IssuesUnperceived weakness incaseRude/Obnoxious PartySignificant PowerDifferential
Caucus is a private discussionwith a Party and the Mediatoroutside the presence of theother Party
When to Caucus
General Guidelines for Caucus:No information is confidential unless the Party specifically states that theinformation is confidentialPrinciple-Based Mediation avoids CaucusContinue group discussion (if possible)
“Caucus”
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Pre-Suit Mediation Clauses
“In the event that any dispute arise between the Parties relating to orconcerning this Agreement, the Parties hereby agree to first mediatetheir dispute prior to filing any legal action.”
“In the event that any dispute arise between the Parties relating toor concerning this Agreement, the Parties hereby agree to firstmediate their dispute prior to filing any legal action. The mediatorshall be David T. Dorr.”
“In the event that any dispute arise between the Parties relating toor concerning this Agreement, the Parties hereby agree to firstmediate their dispute prior to filing any legal action. The Partiesshall first submit their dispute for resolution by the DisputeResolution Center of Harris County.”
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Dispute Resolution Center of Harris County49 San Jacinto, Suite 220
Houston, Texas 77002-1233
(713) 755-8274
Free to Citizens of Harris County, nominal fee otherwise
Three or less Parties
Total claim less than $100,000
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Mediation Settlement Theory
How much should I settle for?
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Mediation Settlement Analysis
1. Identify Possible OutcomesHigh-Low
Win-Lose
Look at the pleadings/discovery
Strengths/weaknesses in case
Experience
2. Assign Probabilities to Possible OutcomesExperience
3. Calculate Expected Value, Standard Deviation, and Ranges
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Attorney Fees only($5,000)
$10,000 ExpectationDamages $5,000 Attorney Fees
Counter ClaimClaim
Example 1: Breach of Contract
Total: All or nothing recovery, no partial recovery = $15,000
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Example 1: Assumptions
80% chance of total recovery: $15,000
Nothing in litigation is 100% certain. Make the followingassumptions for this example*:
15% chance of no recovery: $0
5% chance of payment: ($5,000)
*Actual values may vary depending on the nature of each claim and/or defense.
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Example 1: Probability Distribution
0%
20%
40%
60%
80%
100%
$(10,000) $(5,000) $- $5,000 $10,000 $15,000 $20,000
Recovery ($)
Pro
ba
bil
ity
Expectation
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Example 1: Expected Value
= (0.05)*(-$5000) + (0.15)* ($0) + (0.80)*($15,000)
= -$250 + $0 + $12,000
= $11,750
!"
#==Dx
x xpxXE )()( µ
E(X)
= Claim – Expected Value
= $15,000 – $11,750
= $3,250
Delta
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Example 1: Variance and Standard Deviation
! "#=D
xpxXV )()()( 2µ
2)( !=xV
= (0.05)*(-$5,000-$11,750)2 + (0.15) *(0-$11,750)2 +(0.80)*($15,000-$11,750) 2
= (14,028,125+ 20,709,375 + 8,450,000)
= 43,187,500
V(X)
= $6,571.72SD
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Economic costEmotional costTime-value of moneyPayment AssuranceFinalityConfidentiality
Total Claim: $15,000Expected Value: $11,750Delta: $3,250Standard Deviation: $6,571Range: $5,178 (low) to$15,000 (high)
Settlement ValueClaim
Example 1: Settlement Value
2)( !=xV
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No counter claim$10,000 Medicals$ Unknown Pain andSuffering (capped at 3x)$40,000 total claim +/-No attorney feesNo Punitive D
Counter ClaimClaim
Partial Recovery Possible
Example 2: Personal Injury
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Example 2: Assumptions
Nothing in litigation is100% certain. Make thefollowing assumptions*:
Amount Med P/S
-$ 10% 10%
5,000.00$ 10% 30%
10,000.00$ 80% 35%
15,000.00$ 0% 12%
20,000.00$ 0% 8%
30,000.00$ 0% 5%
100% 100%
*Actual values may vary depending on the nature of each claim and/or defense.
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Example 2: Probability Distribution
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
$- $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000
Amount
Probability
Med
P/S
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Example 2: Expected Value
!"
#==Dx
x xpxXE )()( µ
Meds
P/S
Expected Value: $18,400
= (0.10)*(0) + (.10)*(5,000) + (.80)*(10,000) + …
= $8,500
!"
#==Dx
x xpxXE )()( µ
E(X)
= Claim – Expected Value
= $15,000 – $11,750
= $3,250
Delta
= (0.10)*(0) + (.30)*(5,000) + (.35)*(10,000) + …
= $9,900E(X)
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Example 2: Variance and Standard Deviation
! "#=D
xpxXV )()()( 2µ
2)( !=xV
= $7,965SD
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Economic costEmotional costTime-value of moneyPayment AssuranceFinalityConfidentiality
Total Claim: $40,000Expected Value: $18,400Delta: $21,600Standard Deviation: $7,965Range: $10,434 (low) to$26,365 (high)
Settlement ValueClaim
Example 2: Settlement Value
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Recap
Benefits of Mediation
Mediation Method (Principle-Based)
Mediation Settlement Analysis
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Suggested Reading Materials
Report to Texas Residential Construction Commission and the 79th Legislature,
Arbitration Task Force, January 2005
The Consumer Pitfalls of Binding Arbitration, a report by the Texas Watch
Foundation
Report by Carole Keeton Strayhorn, Texas Comptroller of Public Accounts, to
Honorable Todd Smith, Texas House of Representatives, January 23, 2006.
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Your Questions & CommentsDavid T. Dorr, BSCE, MSE, JD, PE
Law Office of David T. Dorr, PC
2020 North Loop West, Ste 230Houston, Texas 77018
(713) 957-4413 TelephonePO Box 920907
Houston, Texas 77292-0907(713) 957-8297 Facsimile
Email: [email protected]