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Successful Mediation of Leasing Disputes
Many leasing attorneys object to mediating lessor'lessee disputes. Some feel that the law is clear enough in favor of the lessor or lender to result in a quick victory in court. Others fear that a mediator will “split the baby” rather than give the lessor its due.
Before turning their backs on mediation, equipment finance lawyers should recognize that leasing disputes are not always clean and simple. Disputes involving maintenance and return issues and such well-worn phrases as “reasonable wear and tear” or “surplus to lessee's needs” can make for complicated issues unfamiliar to most judges and virtually any jury.
In addition, not all disputes are between lessee and lessor. Lessee-vendor disputes often involve parties that want to continue a mutually beneficial relationship while resolving a specific argument. Lessors and lease originators often find themselves at odds over issues that may be complex and rely on industry standards and practices rather than clear legal issues.
In all of these cases, the parties often want a quick resolution and to avoid public embarrassment or competitive disadvantage by keeping the negotiations private. It is not uncommon for one side or the other to think it will prevail if it can just find an independent third party knowledgeable in the industry to explain the law to a less-sophisticated foe.
This article examines some of the key issues involved in a successful mediation. The article is framed as a conversation between lawyer and mediator.
Selection of Mediator
Lawyer: From my perspective, the selection of the mediator is often as important as any other issue. A good mediator understands the equipment leasing industry and practices with specific reference to the matter at issue. Many lawyers who are very experienced in large-ticket transactions would find themselves lost dealing with a typical broker-lessor dispute.
Of course, the mediator must be someone who is unbiased and is capable of seeing both sides of the question.
It also helps if the mediator has some standing in the industry, but it is more important that the mediator have experience. Even a layman or one who knows very little about leasing can do a good job if he or she can facilitate the resolution of arguments and speak convincingly as to what is likely to happen should the matter go to trial, a situation both sides want to avoid.
From your perspective, how important is experience in a given industry, as a mediator overall, and do you think there are other things we should look for?
Mediator: I agree that the selection of the mediator is very important, but I do not think that the mediator must have particular subject-matter expertise in order to successfully resolve a dispute. Remember that the mediator's purpose is to resolve the instant dispute, not to determine who is correct under the law. So a mediator who, while unfamiliar with leasing or financing issues, is able to engage the parties and inspire their trust and creativity is likely to be more successful than an equipment leasing expert to whom none of the parties can relate. I would concede that a mediator with “credentials” in the equipment leasing field may be more readily accepted by the parties at the outset, but I do not believe that this experience necessarily leads to a better result. You should look for a mediator who is intelligent, persistent and optimistic, and one who is able to assist the parties in evaluating their respective needs and the relative strengths and weaknesses of their positions.
Preparation
Lawyer: I find that if my side has practiced what is going to be said and selected who will do the speaking, much of the preparation handles itself. It is important to have the actual decision maker present (mediators insist on it) or at least be able to get to the right person quickly. In most instances, I like to do the talking, but sometimes it is better to have the initial statement made by a non-lawyer to establish how important the matter is to the actual party involved. On some occasions, it is good to have a carefully orchestrated statement made by the client to the mediator to be sure that we are able to convince the mediator that there is no bluff and the party is serious.
Also, preparing the client is as important as anything. The client must understand that a mediation is (from my perspective) an enhanced settlement negotiation. There will not be a clear 100% winner walking away with all the marbles. If a client is not ready for this process and to concede some issues, I try to avoid or delay mediation.
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