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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

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The hidden power of mediating early
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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.

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