Deciding to mediate or to litigate is one of the toughest decisions your legal team may have to make. Many factors play into this choice. Below are several fundamental considerations to streamline the decision-making process.
The first factor to consider is the financial toll of a battle. The cost of outside counsel and experts are certainly relevant, but consider too the impact of losing. If your team is unable to afford an adverse outcome, then the situation boils down to risk mitigation. Litigation, like binding arbitration, can cost you control over the outcome. In instances where you cannot afford to lose, mediating is likely the better option. Of course, not litigating publicly may, in certain circumstances, increase your costs over time. For example, in the context of mass torts or other disputes with large quantities of potential plaintiffs, choosing not to pursue a public judgment may embolden other claimants to file. In these cases, a public defense could prevent further legal battles.
Another important consideration is your opposing party’s nature. For example, ask whether adversarial activity is fundamental to the other party’s long-term strategy. If the adverse party is a well-capitalized competitor leveraging a conflict as growth tactic, pursuing mediation may be a fool’s errand. If the opposing party is merely trying to rectify a perceived loss with an eye to long-term success in an otherwise conflict-free marketplace, mediation may be most likely to result in a mutually beneficial outcome at the lowest cost.
If the adverse party is a well-capitalized competitor leveraging a conflict as growth tactic, pursuing mediation may be a fool’s errand.
Another factor to consider is what type of signal you send by proposing or accepting a particularly path. Offering to mediate or to pursue a non-binding arbitration may come off as weakness or fear of an unfavorable outcome. By contrast, litigating may show confidence that speeds that path to settlement. Your willingness to go the distance in court may increase your leverage with a counterparty that engages in early saber rattling.
Litigating may show confidence that speeds that path to settlement.
There are a variety of factors that influence a GC’s decision whether to litigate or mediate. However, by considering several threshold questions about their opposing parties and their own companies’ interests, GCs can move efficiently toward a path most likely to yield the optimal outcome.