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Mediating Business Conflicts

07.16.2015

July 2015

Mediation is a tool for resolving conflicts, without litigation, through an impartial mediator. It has achieved prominence in recent years because: (i) who wants to pay legal fees of $X for a lawsuit and (ii) who wants to air financial problems or internal squabbles in a public lawsuit?

We’ve been mediating conflicts for our business clients for decades. Actually, we do a variation on the entirely-neutral mediator role by helping clients identify and pursue the best interests of their business in the conflicts resolution process. We call this "informal mediation," which is distinctly different from our "formal mediation," in which we help litigants settle their lawsuits.

Our informal mediation efforts might not be widely known because they occur behind the scenes and outside of the public eye. There is no public acclaim for successes because the services are rendered quietly and with the express purpose of maintaining confidentiality. And we are proud of our many achievements in resolving conflicts while keeping private things private.

Here’s an example: Client is struggling financially from an economic downturn in its industry. Creditors are circling. Bankruptcy is a serious option. We help client evaluate options and chart a course through the financial difficulties, which may include a threat of a specific bankruptcy plan. Here’s a general observation: if a credible Chapter 11 plan strategy can be developed and explained to creditors, the creditors will usually agree to an out-of-bankruptcy proposal they view as better than the bankruptcy strategy for them. Accordingly, we avoid bankruptcy for this client. Friends have joked: "You’ll never be a bankruptcy attorney, Don, if your clients don’t file bankruptcy" (at least, I’ve always thought that was a joke). But helping a client resolve financial conflicts quietly and without filing bankruptcy (when possible) has always been the more satisfying result.

Another example is a family business client navigating a years-long leadership transition from older generation to younger. Conflicts arise over the direction of the business and transition details. For the business to prosper, the conflicting parties must work together over an extended period of time. A past due debt, by contrast, can often be solved in one settlement stroke – by paying the debt. This contrast reveals a mediation distinction between (i) a problem to be solved and (ii) a tension to be managed. "Why can’t we get this problem solved?" may often be a good question for a past due obligation. But for inter-generational leadership conflicts the better question is probably, "How do we deal with day-to-day tensions on appropriate levels of consultation, authority, and respect?" Or, more simply, "How can we prevent a family blowup?"

A third example is this: Client is facing regulatory pressure, and conflicts arise on two levels – with regulators over compliance details and internally over reasons for the regulatory problems. It must be noted that regulatory "compliance" does not necessarily mean a business is operating well (see, e.g., Bernie Madoff investment businesses), nor does non-compliance mean a business is operating poorly. But businesses with serious and continuing compliance problems often evaluate why this is happening – which is, of course, a recipe for conflict. These are the types of conflicts a business cannot afford to ignore or evade.

Informal mediation can serve an important role in helping businesses address conflicts without litigation. If you would like to discuss further the benefits of informal mediation as a means to resolve conflicts or disputes, please call us.

About the Author: Don serves as Chair of the Nebraska Bankruptcy Court Mediation Committee and is a Court-approved mediator in both the U.S. District Court and the U.S. Bankruptcy Court for the District of Nebraska.

by Donald L. Swanson

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