How to Prepare for Mediation in a Business Dispute

Start with the number, not the grievance

The question a mediation answers is not who was right. It is whether a certain payment today is better than an uncertain judgment later. So the first task is to value the case the way a litigator would, in writing, before the day:

• the realistic range of recovery if you win at trial, by claim, including interest and any attorney's fees a contract or statute lets you recover;
• your honest probability of winning on each claim and each defense, after discovery has shown what the documents and witnesses actually say;
• the fees and costs still to be spent from today through trial and any appeal, which are not recoverable in most Texas business cases unless a statute or contract shifts them;
• the time to judgment and the time to collect, and whether the other side will be able to pay when you get there; and
• what the dispute costs the business while it runs: management attention, strained customer or lender relationships, the public record.

From those numbers comes a walk-away figure, the point at which trial is the better bet. Write it down with its reasons. The day will test it, and a number with reasons survives the test; a number picked from anger does not. The underlying evaluation is the same one covered in how a litigator evaluates a case, now with the benefit of discovery.

Then do the same arithmetic for the other side

Estimate their exposure, their fees to trial, their collection risk if they win a counterclaim, and their non-monetary pressures: a lender covenant, an insurer with a say in the settlement, a pending sale of the company, an owner who wants the matter gone before year end. Their number is set by their arithmetic, and the mediator will be probing it. The side that has thought about both columns moves the day.

Decide who attends, and with what authority

Most court orders and mediation agreements require a representative with full settlement authority. Make that real. A representative who must call an absent decision-maker for each new number slows the process and tells the other side the real principal is not committed. If an insurer is funding the defense, confirm that an adjuster with authority will attend or be reachable. Decide in advance who in the room speaks, and agree that the owner does not argue the facts with the mediator; counsel does that.

The mediation statement

Most mediators ask for a confidential written statement a few days ahead. A good one is short and candid: the facts in a page, the claims and defenses, a damages table with the math shown, the key documents attached, the history of offers, and a frank paragraph on what you need and what you fear. It may say things the other side will never see, such as which witness worried you at deposition. Some mediators also want a version exchanged with the other side; keep that one to the facts and the strengths. The mediator reads both files the night before and will spend the morning testing what each side has not faced. The statement is where you show you already have.

List the terms that are not money

A judgment can only award money or, rarely, an order to perform. A settlement can do more, and the non-monetary terms are often where a stuck negotiation moves. Before the day, list what matters and what you could give:

• payment timing and security: installments, a personal guaranty, a confession of judgment, a letter of credit;
• the release: mutual or one-way, which claims and which affiliates it covers, whether unknown claims are included;
• confidentiality and non-disparagement, and what each side may say to customers;
• return of property, transition services, a license, a non-solicitation period;
• dismissal with prejudice, an agreed judgment, or a consent order the court will enforce;
• who bears the mediator's fee and court costs.

The drafting of those terms has its own article: structuring a business settlement. For preparation, the point is to know your list before the mediator asks.

Know what is protected and what is not

Section 154.073 of the Civil Practice and Remedies Code makes communications by a participant in mediation confidential and inadmissible as evidence against the participant in any judicial or administrative proceeding, and Tex. R. Evid. 408 separately bars using offers of compromise and statements made in compromise negotiations to prove the validity or amount of a disputed claim. That is why you can put a candid number on the table. Two limits matter for preparation. Under § 154.073(c), a document that is admissible or discoverable independent of the mediation stays so; handing the other side a damaging internal email at mediation does not cloak it. And the written agreement you sign is a contract, enforceable on its terms. For the full edges of the privilege see whether mediation and settlement talks are confidential.

Decide in advance what you will not disclose: a witness problem, a document gap, a business reason you need the matter closed by a date. The mediator can be told some of these in confidence under § 154.053(b), which bars the mediator from passing on information given in confidence. Decide which.

Bring the paper

If a lawsuit is pending, Tex. R. Civ. P. 11 provides that no agreement touching the suit is enforceable unless it is in writing, signed and filed with the papers of the case, or made in open court and entered of record. Section 154.071 makes a written settlement agreement reached in mediation enforceable as a contract. The practical rule is that the deal is signed before anyone leaves the building. Bring a draft term sheet with the fixed terms already filled in and blanks for the numbers, so that the last hour is spent on the price and not on drafting a release from scratch. The long-form agreement can follow; the signed term sheet is what holds. Why that matters is set out in whether a party can back out of a mediated settlement.

Example

Suppose a Dallas distributor is suing a former sales manager and his new employer for taking customer accounts, with trial five months away and mediation ordered. Before the day, counsel's model shows a probable recovery range, fees through trial roughly equal to the low end of that range, and a defendant who could pay perhaps half of a large judgment. The walk-away number is set accordingly. The non-monetary list includes a 12-month non-solicitation of six named accounts, return of the pricing spreadsheet, and a mutual non-disparagement term. The confidential statement tells the mediator that the distributor's biggest customer has said it will not testify. On the day, the money gap closes slowly; the non-solicitation term closes it. The term sheet, drafted the week before, is signed at 5:40 p.m.

The day itself

• Clear the whole day. Most movement happens in the last two hours, and a party with a flight at four will leave without a deal.
• Let the first offers be what they are. Opening positions are far apart by design; the mediator is managing the pace.
• Do not negotiate against yourself. Each move should answer a move.
• When the mediator asks what you need, answer the question asked, not the one about what you deserve.
• Read every word of the term sheet before signing. It is the contract.

How the day is structured, from caucus to mediator's proposal, is described in what business mediation is and how it works. Tina Wysk prepares Dallas business clients for mediation and represents them at the table, in court-ordered and private mediations alike.