DEFINITION of 'Mediation'

Mediation is an alternative dispute resolution method that allows parties to negotiate a settlement without going to trial. Mediation is typically less expensive than trying a case in court.

BREAKING DOWN 'Mediation'

When a dispute arises, say over the terms of a contract, the parties involved have several options for resolving their issues. They can choose to go to trial, present their cases in court, and have a judge issue a verdict that will either clarify where the rights of the two parties stand or provide compensation to one of the parties for damages.

Taking a dispute to trial can be very expensive, as the parties have to pay for attorneys and court fees. The amount of time that trials take also carries with it a cost, as neither party may see a resolution to a potentially pressing issue for weeks, months, or even years. For example, if two parties are in dispute over a contract, relying on the court system may lead to missed deliveries and lost sales.

While some disputes should be settled in court, others can be settled through alternative dispute resolution (ADR) methods. Mediation is an ADR in which a third-party, a mediator, helps the disputing parties resolve their differences through a structured process. This process is typically less formal than arbitration or a court case, with discussions taking place in an out-of-court setting. Mediation sessions can be scheduled whenever it suits both parties, and can be resolved in a matter of days. In some cases, mediation is court-sponsored. Agreements reached in mediation are not binding.

What Happens During Mediation?

Both sides are encouraged to communicate during mediation, with particular emphasis placed on what each party’s interests in the dispute are. The mediator seeks to find common points of agreement and keep the proceedings from becoming adversarial, which can be helpful for disputing parties that may work with each other in the future. The goal of seeking common ground and avoiding acrimony in mediation is starkly different than what can happen during a trial, as trial attorneys are much more adversarial.

Settling a dispute via mediation also allows the parties involved to keep what is said during proceedings private. When disputes are taken to trial, what is discussed – including trade secrets and business practices – is done in public unless the judge seals the case. Keeping mediation discussions private also has the effect of cooling each party off, which makes them more open to seeking a resolution.

Example of Settlement Through Mediation

In 2011, a number of former NFL players accused the league of withholding information about the dangers that concussions posed to their long-term health. They allege that this created a situation in which players were not aware that continuing to play after receiving a concussion was much worse than they were led to believe. The players sued, and the case reached federal court. In 2013, a federal judge ordered the two parties to go to mediation, and indicated that no ruling on the case would be made until the mediator had time to bring each of the parties to a solution. Both parties reached a $765 million mediated settlement over the league's poor handling of head injuries among its players.

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