Mediation Message No. 122

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 122

BINDING MEDIATION

Binding mediation is a procedure in which a mediator, if the mediation is not successful, can become an arbitrator. It can occur in two ways: the parties select the neutral beforehand to mediate the dispute and, if the dispute is not resolved, agree that the neutral can render a final and binding award. Alternatively, the parties may choose, after the mediation process has broken down, to have the neutral issue an award.

The benefits of binding mediation are that mediators have more leverage than usual during the mediation phase because they will be making the final decision if a settlement is not arrived at. Binding mediation is also less costly and more expeditious than a subsequent, full-blown arbitration because the mediator, and now arbitrator, has heard much of the background facts and legal argument. For that reason, this process is more appropriate for the less complex matter. Binding arbitration also allows for partial settlement of some claims at mediation with arbitration being utilized for unresolved disputes. For example, the parties can agree on liability at mediation but use the second phase to decide damages. The parties can also design the procedure of the binding mediation. In Bowers v. Lucia (2012) 206 Cal.App.4th 724, an agreement allowing the mediator to choose the low offer of $100,000 or the high demand of $5 million (known as baseball arbitration), without any additional evidence, was upheld as mutually agreed upon and sufficiently certain. (Id. at p. 736.) On the other hand, the parties can be more exacting and require that any phase after unsuccessful settlement efforts shall include, inter alia, sworn testimony, cross-examination, the right to object to evidence and the opportunity to provide rebuttal evidence and final argument.

There are also several drawbacks to binding mediation. Mediators, if they know from the beginning that arbitration is an alternative, may be more inhibited or less involved in the mediation process because they do not want to reveal their inclinations or thinking. For the same reasons, the parties may be less likely to participate fully in the mediation. Binding mediation, as contrasted with a more formal arbitration, also has fewer safeguards – generally, few if any witnesses are sworn or testify; cross-examination, if it exists at all, is probably perfunctory and there is no opportunity to object to inadmissible evidence.

Regardless, of the nature of the binding mediation agreement, whether it be very general as in Bowers v. Lucia or much more specific, the parties must also waive in writing any conflict that may (and probably will) exist by allowing the mediator-arbitrators to rely on ex parte communications and inadmissible evidence for their final and binding award. (See Rule of Court 3.857, subd. (g) providing that mediators who, with the consent of the parties, shall arbitrate a matter which has not settled, should have the parties consent in writing to that process.)

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, May 2016

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