Disputes…They Need Not End in Divorce

Once they fully understand the benefits, more and more business people will embrace this relatively under-utilized process as one of the best means to ensuring an equitable outcome.

By Russ Moserowitz and Bill Keeble

You walk into the room, fully prepared to engage in battle and decimate your adversary. A few hours later, however, you find yourself shaking hands and leaving the meeting with a completely new line of business—one you never anticipated. Rather than writing a large check and parting as enemies, you’ve just completed what you are now confidant will be a stronger and more prosperous business relationship than you ever previously enjoyed. Sounds pretty unlikely?

We all enter into our agreements with great plans of success and the best of intentions. And, as with any relationship, we occasionally run into the proverbial “rocky road.” Sometimes, this road ends up as a direct route to the courtroom. That trip is more than rocky; it is never pleasant and is always expensive. To put it in perspective, the American Arbitration Association (AAA) estimates that $200 billion to $300 billion will be spent on civil litigation alone each year.

Considering the controllable nature of such legal expenses, an increasing number of executives have opted for an alternative, eliminating the involvement of the courts. More than 230,000 Alternate Dispute Resolution (ADR) cases were filed with the AAA in 2002. That number is expected to grow as the vast majority of those who have engaged in mediation or arbitration have not only encountered favorable outcomes, but have also saved a great deal of time and money in the process.

The National Franchise Mediation Program

Fortunately, for those of us involved in franchising, a number of insightful franchise leaders, in conjunction with the CPR Institute for Dispute Resolution, a leading organization in providing resources to those involved in ADR, have developed a program specifically for franchising known as the National Franchise Mediation Program (NFMP). Noting a success rate of approximately 90 percent, in cases where the franchisee agreed to participate and where a mediator was needed, the NFMP, which has been endorsed by the International Franchise Association, seeks to resolve disputes between franchisors and franchisees fairly and amicably without the cost and time involved with litigation.

Mediation and other forms of ADR have long been thought of as an extension of the legal system and therefore not something that many business people have considered. Confronted, however, with even the prospect of litigation and given the option of the much less costly and intimidating mediation process, most will undoubtedly choose the latter. Once they fully understand the benefits, which go directly to the very high success rate of mediation, more and more business people will embrace this relatively under-utilized process as one of the best means to ensuring an equitable outcome.

So, what is it about mediation that has enabled so many potential combatants to come to agreements when their best negotiations previously failed? First, let’s understand how mediation differs from the other forms of ADR, such as arbitration. The primary difference is that the independent mediator’s role is not to rule on the facts or even to render an opinion. Rather, the mediator’s role is to help the parties better understand each other’s issues, differentiate between significant and expendable demands, uncover facts not previously shared and to gauge the receptiveness to settlement options. Resolution of the dispute rests solely with the participants. A skilled mediator will also help minimize an intangible but destructive component—emotion. Try as we might, even the most senior business executives can find themselves becoming emotionally involved when faced with a pending lawsuit.

Doing What Business People Do Best

Another very significant benefit of mediation is that it can be scheduled at the very early stages of a dispute. Even where an agreement specifically provides for arbitration, as many current contracts do, mediation may still offer a more attractive alternative. Since the parties come to a resolution themselves, they generally feel more comfortable and come away feeling that they have settled the dispute rather than accepting a decision that has been forced upon them. The result? Business people do what they do best; namely, come to a negotiated agreement that best fulfills their business objectives.

Typically, the “neutrals,” as they are referred to in the world of ADR, have been lawyers and retired judges and, frankly, that has scared some franchisees away from the process. However, business people with the requisite experience are also getting into the mix, a factor that may add to the appeal for others to take advantage of the benefits of mediation.

Skeptics are still going to say that mediation is a waste of time. However, those remaining skeptics will eventually change their minds. The only questions are: When? How much more money will they spend on litigation and how many relationships are they willing to abandon on the court house steps? Many forward-thinking attorneys are also endorsing mediation as an option to be utilized before engaging in a formal lawsuit. Rather than building their businesses by the old practice of maximum billable hours, they see mediation as a better solution, satisfying their clients’ needs and providing the opportunity to form more long-term relationships of their own. According to Jeffrey W. Lorell, senior litigation partner with Saiber Schlesinger Satz & Goldstein, LLC, “Early and creative ADR, particularly mediation, can often advance the client's ultimate business goals while simultaneously avoiding costly and destructive litigation. This, in turn, brings that satisfied client back to the lawyer who helps to achieve those goals time and again—a win/win situation for the lawyer and client alike.”

Anyone who has been through it will tell you: litigation is certainly not the answer to resolving disputes and maintaining business relationships. Mediation, a process with a proven track record of success, is a step in the right direction. Rather than contemplating a divorce of the relationship, leaving the meeting with a new line of business from a continuing customer can become your reality. Give it a shot.

Russ Moserowitz and Bill Keeble are the founders of Franchise Insights LLC, a company specializing in advisory and dispute resolution services to franchise companies and individual franchisees. They can be reached at 1-888-8-INSIGHT.