Alternative Dispute Resolution
Jul. 16, 2025
The hidden power of mediating early
Mediation timing is about more than readiness -- it's a strategic balance of opportunity and risk that today's practitioners must navigate with greater precision than ever before.





Michael A. Jacobs
Arbitrator, Mediator, Special Master/Referee, and Neutral
JAMS
Yale Law School; New Haven CT

When should we
mediate? Parties often assume that extensive discovery is necessary for
effective settlement negotiations. But mediation timing is fundamentally about
balancing opportunities against risks. Early mediation offers the opportunity
to resolve disputes before incurring substantial costs, but it carries the risk
of settling without complete information. Late mediation provides comprehensive
case knowledge, but it risks escalated costs and hardened positions. Today's
practitioners must navigate this balance more strategically than ever before.
The early
mediation landscape
Seeking to promote
wider use of early settlement efforts, courts have experimented with early
dispute resolution for decades. The Northern District of California's Early
Neutral Evaluation program, launched in 1985 and made permanent after
demonstrating "considerable evidence" of its effectiveness, provides
the most compelling institutional proof that early settlement intervention
works. In that program, an experienced neutral -- often a practicing
lawyer--provides a case evaluation shortly after all pleadings have been served
and then offers to serve as a mediator in an early settlement negotiation.
Beyond
court-mandated programs, sophisticated parties increasingly initiate mediation
before filing suit or in litigation's early stages.
Business drivers often compel this approach, preserving ongoing relationships,
avoiding negative publicity and preventing disruption to operations. The period
immediately after a dispute emerges but before formal legal positions are
staked out provides a unique opportunity for creative problem-solving that may
no longer be available once the litigation machinery begins operating.
The litigation
funding game-changer
Third-party
litigation funding has fundamentally altered dispute resolution economics and creates powerful incentives to attempt early case
resolution. Typical funders require a three- to five-times return on
investment, creating mathematical constraints that can make otherwise
reasonable settlements impossible.
Consider this
concrete example: A commercial dispute with $5 million in potential damages
might reasonably settle for $3 million in early mediation, representing a 60%
recovery that accounts for litigation risks and anticipated costs. However, if
the plaintiff secures $500,000 in litigation funding at 4x return terms, a $3
million settlement leaves only $1 million for the client after the funder
receives its $2 million return. The settlement that once made economic sense
for both parties has now become economically impossible--not because of changed
case dynamics, but because of the funding burden the case now carries.
This "funding
trap" occurs when significant capital has been deployed
and funder economics begin dominating case strategy. The early mediation window
is critical because it represents the period before funding commitments have
dramatically altered the settlement landscape.
Strategic
benefits of early mediation
Early mediation
offers compelling economic advantages beyond simple cost avoidance. Litigation
expenses in complex cases can easily reach six or seven figures, but the time
value of money and opportunity costs extend beyond direct legal fees. Management attention, document preservation
requirements and strategic uncertainty can impair business operations in ways
that dwarf direct litigation costs.
Relationship
preservation often represents the most significant but least quantifiable
benefit. Before litigation hardens positions and creates personal animosity,
parties retain flexibility to craft solutions accounting for ongoing business
relationships, family dynamics or community connections. Creative solutions
remain available before legal precedents and formal positions lock parties into
narrow remedial frameworks.
For
reputation-sensitive businesses, early private resolution may be essential
regardless of merits, as public court filings and media attention can create
damage exceeding the underlying dispute.
When early mediation
faces challenges
Early mediation
confronts genuine limitations that skilled mediators must navigate carefully.
Information deficits present particular challenges. Damages calculations, in particular, may require detailed forensic accounting,
expert analysis or extended observation of business
impacts. However, experienced mediators can often bridge these gaps through
creative information-sharing protocols, structured evaluation processes or conditional settlement arrangements that
account for unknowns.
The mediator's role
becomes especially critical in early settlement because parties must make
decisions with incomplete information. Skilled neutrals can help parties assess
risks realistically, explore creative solutions that traditional litigation
cannot provide and structure agreements that
protect against information gaps. The mediator's subject matter expertise and
ability to facilitate a productive information exchange often determine whether
early mediation succeeds despite inherent uncertainties.
Late mediation:
The information advantage
Late mediation
offers distinct advantages when complete information is essential for informed
decision-making. Post-discovery, pretrial timing provides maximum information
availability, though at a significantly higher cost. Expert reports, depositions and document discovery enable settlement
calculations based on developed evidence rather than preliminary estimates.
Judicial guidance
through motion practice may resolve key legal
issues that frame settlement discussions. Summary judgment rulings or
evidentiary decisions can eliminate uncertainty about liability theories,
making subsequent mediation more focused and productive.
The litigation
process itself educates clients about case realities in ways that lawyer
explanations alone cannot achieve. Depositions, expert reports
and court rulings provide credible third-party validation that clients
sometimes need before realistically assessing their positions.
Strategic framework
for timing decisions
Early mediation
indicators include clear liability with quantifiable damages, ongoing business
relationships worth preserving, high litigation costs relative to likely recovery and third-party funding considerations.
Time-sensitive business considerations may compel early resolution when
litigation uncertainty impairs strategic decision-making or operational
planning.
Late mediation
indicators include complex factual disputes requiring extensive discovery,
novel legal issues needing judicial development, significant information
asymmetries and cases where a deterrent effect is important beyond immediate
resolution. High-stakes cases where precise valuation is crucial may also
benefit from full development before settlement
discussions.
Practical recommendations
for early mediation success
Early mediation
requires careful mediator selection, with preference for neutrals holding
subject matter expertise to help parties navigate information gaps and assess
risks without complete discovery. The mediator's ability to facilitate a
structured information exchange, guide realistic risk assessment and craft
creative solutions often determines success when parties face inherent
uncertainties.
Front-loading case
development can maximize early mediation value by investing in targeted
investigation before the process begins. Strategic information-sharing
protocols can address critical gaps through agreed document exchanges or joint
expert consultation. Conditional settlement structures allow parties to resolve
disputes while protecting against unknown variables through agreements that
adjust based on future developments.
The funding factor
requires early assessment before entering agreements that might constrain
settlement flexibility. Practitioners must counsel clients about litigation
funding's economic realities and how arrangements can affect both settlement
calculations and decision-making authority.
The art of strategic
timing
Modern dispute
resolution requires moving beyond knowing when mediation is required to understanding when it is optimal. This
demands
considering the complex interplay between information development, cost
escalation, relationship preservation and economic
incentives that determine mediation effectiveness.
Litigation funding's
growing importance represents perhaps the most significant change in dispute
resolution economics in decades. Early mediation can provide a competitive
advantage in an increasingly expensive litigation landscape, but only when
deployed strategically rather than reflexively.
The imperative for
practitioners is incorporating a sophisticated timing strategy into dispute
resolution planning from representation's outset. Timing decisions deserve the
same careful analysis routinely applied to legal theories or discovery
strategies. In an era of escalating litigation costs and complexity, strategic
mediation timing may represent one of the most important skills for effective
legal representation.
Submit your own column for publication to Diana Bosetti
For reprint rights or to order a copy of your photo:
Email
Jeremy_Ellis@dailyjournal.com
for prices.
Direct dial: 213-229-5424
Send a letter to the editor:
Email: letters@dailyjournal.com