This would have made for a rather mundane court case, except for the fact that the two doctors are neighbors in La Jolla who belong to the same synagogue and have the same friends. In fact, they emigrated to the United States from the same African country. They understood that a lengthy legal battle would drain them financially and emotionally, and would poison their social circle.

Rather than hire an arbitrator to render a legal decision, the partners engaged a mediator to negotiate a nonbinding settlement. “People often pursue litigation, even when it’s not in their best interest,” says Robin Seigle, director of the Business Center of the National Conflict Resolution Center in San Diego and the mediator who handled this dispute. “Still, if you ever plan to have a relationship with this person again, you should at least try mediation.”

In a single afternoon, the doctors created an agreement to parse the remaining assets in their partnership, but they were still arguing over money. They remained stuck on this point until Seigle asked if the first doctor would make a donation to their synagogue in the amount that the second doctor was seeking. She then asked the second doctor if he would accept this gesture as a compromise. Both agreed.

Seigle, who has been a mediator for 20 years and has resolved more than 300 business and contract disputes, points out that her proposal was not a solution that a judge or arbitrator could have suggested. “You’re not just using the legal parameters to define a case. You have other choices beyond those,” she explains.

Countering Conflict
When a lawyer or a judge suggests mediation as an alternative to litigation, he or she usually means “evaluative” mediation, sometimes known as a settlement conference. Evaluative mediators are often former judges who tend to offer opinions about how the courts would view a dispute; they also offer their own opinions about what settlement would be fair. This type of mediation works well between strangers in conflicts over factual issues or case law. Yet forcing a settlement between siblings arguing over an estate, or between majority and minority owners in a family business, can severely damage relationships and the assets in dispute.

Many mediators are moving toward a newer form of conflict resolution called “facilitative” mediation to decide more sensitive cases involving estate plans, family business disputes or conflicts between trustees. Facilitative mediators do not offer an opinion as to how a court would view a dispute. They do not force a settlement, but rather ask for suggestions from the parties and their lawyers, as well as any experts the parties want to bring into the discussions.

“The parties understand the complexities of their own estate and of their own business, so rather than having someone come in and hear about the dispute for a couple of weeks and then make some kind of judgment that will change their lives forever, the parties may want to take control of their dispute,” says Natalie Nelson, an independent divorce financial advisor who also works as a mediator in Colorado, a state that mandates mediation for couples seeking a divorce.

Roselyn Friedman, an attorney and professional mediator with Sachnoff & Weaver in Chicago, recently refereed a dispute between a young widow and her father-in-law. The widow and her children were beneficiaries of her late husband’s estate. Before he died, the husband had asked his father to act as his trustee, leaving the father in charge of his wife’s finances. Unfortunately, the widow had always had a strained relationship with her in-laws, and resented having to ask her father-in-law for money.

Friedman invited the parties into the same room and listened to each side. Then she split them into different rooms and listened to each side separately. In those caucuses, she heard that the widow wanted an ongoing relationship with her in-laws for the benefit of her children. While she also wanted help managing the estate, she did not want to have to ask her father-in-law for money. In a separate caucus, the father told Friedman that he wanted to reduce his work obligations and enjoy his retirement. He had never wanted to be a trustee, but felt obligated to honor his son’s wishes. Friedman suggested the wife choose another trustee, subject to her father-in-law’s approval. They agreed and the dispute ended.

Although that disagreement would probably not have ended up in court, the resentment on both sides could have simmered for years and ruined the relationship. “The lawyer for the estate had no way of managing this relationship,” Friedman contends. “Lawyers are good at managing tax issues, minimizing taxes and that sort of thing. They aren’t so good in sensitive, nonfinancial issues.”

Not every mediation is so successful. Divorce settlement negotiations can be both bitter and punitive, which makes them ill suited for mediation. Nelson recently served as an advisor in a divorce settlement that required multiple mediation sessions. An heir to a large multinational family business filed to divorce his wife of 15 years. The settlement discussions had become acrimonious by the time the couple attended their first court-ordered mediation session.

“In any family estate dispute, you find that there are people at the negotiating table who are not in the room with you,” Nelson says. “Parents, siblings, other trustees have a stake in what gets decided, and you have to listen carefully to what’s being said to find out what these other parties want as well.” In this case the heir’s parents pressured him to settle quickly, so that their business would not be mired in a long legal battle. But the heir claimed to want a lengthy, expensive fight. To no one’s surprise, the couple’s first attempt at mediation failed, and each spent the next 18 months building a case against the other.

Unfortunately, these machinations were all in the public arena, embarrassing the family. Confidentiality is often the highest priority for people who choose mediation over litigation. The revelations made during mediation are generally protected as private, even if the dispute eventually ends up in court.

After spending 18 months and hundreds of thousands of dollars, the couple headed back to mediation. The parties talked about the emotional issues surrounding the divorce and why each believed his or her position was correct. In carefully negotiated sessions, the two came up with an agreement that covered alimony and the division of assets.

According to Jim Robinson, a partner at the Florida accounting firm of Gerson, Preston and Robinson who has served as an expert in hundreds of mediations, most divorces require multiple sessions, separated by litigation. “The early session fails, then as the suit wears on, you get tired; the emotion goes out of it. Then you realize how much the lawsuit is going to cost in stress and money. Then when you go back to mediation, you’ll have better luck,” he says.

Deceptive Audience
Facilitative mediation is not always the best way to handle disputes, particularly those involving openly hostile parties. Disputes in which there are severe disagreements over facts also tend to break down in mediation. “One client said to me, ‘As a result of mediation, I think we have set back our resolution of differences by 180 degrees,’” says divorce lawyer Bob Nachshin of Nachshin & Weston in Los Angeles. Unlike court cases, in which strict evidentiary rules cover the introduction and evaluation of claims, a mediator depends only on the honesty of both parties and their willingness to settle. Under these conditions, many people find this is a risky arena for deciding their financial futures.

Nachshin stresses that mediation is nothing more than a discussion facilitated by a neutral party; the mediator has no legal power. Like many lawyers who try contentious cases, he feels that the best mediators lean toward an evaluative approach that allows the mediator’s opinion to lead discussions. “The best mediator I’ve seen in Los Angeles is a retired judge who is very aggressive and opinionated and so well thought of that she’s booked four to six months in advance. Most other mediators are available next week,” Nachshin says.

Other critics suggest that mediators who rely on the parties to negotiate a settlement are allowing the stronger party to crush the weaker party, and because of that, mediated agreements can be grossly unfair. Nelson agrees that people in mediation need proper representation by an attorney, even if they commit to settlement negotiations. “You don’t get what you deserve in mediation,” she says. “You get what you negotiate. You are still putting a lot of trust in other people’s hands.” And unlike a court case or an arbitration hearing, in which participants are bound by the outcome, a mediation is a take-it-or-leave-it proposition. “If you don’t like the settlement, you can walk away,” says Friedman. “Ultimately, both sides have to believe that their settlement is better than going to court. Otherwise, don’t settle.”

Michelle Seaton’s work has appeared in Robb Report, Yankee, Reader’s Digest and on National Public Radio. mdseaton@hotmail.com