Wednesday, April 16, 2008

Good Faith in Mediation ?

A recent business court decision is one to watch for North Carolina mediators. In Harco National Insurance Co. v Grant Thornton, LLP, Judge Ben Tennille ordered that “the parties are required to engage in mediation in good faith.” Discovery was the issue in Harco with the Court explaining that accurate information was needed about insurance coverage in order to allow for “realistic” settlement negotiations.

In Harco, the plaintiff sought policy information prior to mediation and the defendant refused. Plaintiff filed a motion to compel. In my first reading of the case, I considered that Judge Tennile was using his “plenary power” as the Judge to order “good faith” negotiations. However, his specific reference to “engage in mediation in good faith” is troubling because there is no such requirement in the enabling legislation nor in the Court rules for mediation.

I was part of the North Carolina Bar Association committee that drafted the legislation and initial court rules for the Superior Court mediation program in the early 1990’s. At that time, we looked closely at States with mediation programs, including Florida. Florida started mandatory mediation in the late 1980’s and some judges had ordered participants to “negotiate in good faith at mediation” which was contrary to the mediation rules and, as a result, several second generation lawsuits made their way through the Florida Courts. We decided not to include a “good faith” requirement in the statue or rules and to instead focus on attendance requirements. We believed that with the right people attending, the mediation process would do its work and the results would follow.

While in mediation I often hear counsel say, “they are not negotiating in the good faith,” I usually reply that “good faith” depends on which chair you are sitting in. Participants do not have to settle their case in mediation and do not even have to make an offer or counter offer; however, the process works and usually there is an effort made to get the case settled. Today, after almost 17 years of court mediation experience it seems clear that the program as devised works. Over 50% of Superior Court mediations settle at mediation and many more settle after the mediation and before trial. We don’t have second generation litigation as to “good faith” in mediation and only a few cases have made it to our appellate courts concerning the enforcement of mediated settlement agreements. We did not want to second guess mediation participants around “good faith negotiation” in 1991 and we should not do so now.

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