An Early Approach

Before becoming a mediator I ran my own law office for 20+ years.  My litigation cases were evenly split between plaintiff and defense work.

I usually started a plaintiff’s claim by filing a complaint.  This approach made sense:  Service on the defendant let them know we were serious.  The complaint framed the issues to be decided and the damages we were seeking. No muss. No fuss.

But sometimes I served an initial demand letter on defendants instead of filing a complaint. I once had a client who bought a new car that wasn’t “new.“ After a while the car started showing signs that  it had been seriously damaged, repaired and cleaned up before it was sold as “new.

Ouch. The client wasn’t happy about it.

I sent a demand letter to the manufacturer who had built the car.  In response I received a phone call from a paralegal.  She didn’t deny that the car had been seriously damaged before it was sold as “new.”  She didn’t challenge my client’s damages claim. Instead she said “How about we get your client a new car?”  Well, that sounded pretty good.  Her suggestion led me me to ask another very important question:

“What about my client’s attorneys fees?”

“We’ll pay those too.”

“All of them?”

“All of them.”

Next thing I know, my client is exchanging his old car for a brand new one and I’m opening an envelope containing a check for all of my attorneys fees.

No muss.  No fuss.

I have often reflected on the highly proactive settlement approach used by this car manufacturer.  They didn’t hire an attorney. They used an in-house paralegal. They paid zero outside counsel fees.  They accepted the return of an older car that had some resale value and parted with a new car (of which they had plenty.) Most significantly, they ended up with a super satisfied customer. That customer satisfaction resulted in increased brand loyalty, no adverse press, and no hard feelings to speak of.  A win-win.

As a mediator, I regularly settle cases pre-litigation. The types of cases I settle pre-litigation vary, including:

⁃ Real Estate Purchases gone bad.  The standard form of Residential Purchase Agreement from the California Association of Realtors requires that claimants mediate before filing suit.  If the claimant doesn’t mediate, they give up their right to recover attorneys fees if they win their lawsuit.

⁃ Uninsured and underinsured motorist cases.  In these cases a driver has paid for additional coverage with their own insurer.  If the driver is injured by an uninsured or underinsured driver, then their own insurer pays for their damages.  By statute these cases are decided by binding arbitration instead of through a conventional civil lawsuit.  Lots of these cases are submitted to mediation prior to arbitration.  These cases are supported primarily by medical records and a demand letter. Many of these cases settle pre-litigation without any arbitration proceeding.

⁃ Premises liability.  People (and customers) fall down for all kinds of reasons and when they do they get hurt – sometimes seriously.  Some large retailers have made a savvy decision to schedule these kinds of claims for short mediations (like an hour or two) where the retailer pays all of the mediator’s fees. The two sides show up and mediate for a couple of hours. If the parties settle, fine.  If they don’t, no harm done and the plaintiff files suit.  I settle a lot of these cases (in the alloted two hours or less).

Question:  Why don’t more cases settle pre-litigation?

Answer: It depends on the case.  In some cases, the plaintiff wants to file suit so they can send the defense a clear message that this is serious.

Sometimes depositions need to happen before a case can settle.  Sometimes a plaintiff needs to file suit so they can subpena documents from third parties. Oftentimes a complaint gets filed with no thought of trying to settle pre-litigation.

I suspect more cases – a lot more cases– could be settled pre-litigation.

If a plaintiff proposes pre-litigation mediation, will the defense think that plaintiff or their counsel is averse to litigation so that the defense will then refuse to make a reasonable settlement offer?  Possibly.  But that won’t happen in every case. I know because I regularly settle cases without litigation ever having been filed.  Whether a case is a good candidate for pre-litigation settlement depends on the specifics of each case.

Pre-litigation settlement may not be the answer in every case. But it is undoubtedly another significant tool in the litigator’s toolbox.