Mediating Complex Multi-Party Disputes
Note: the article below originally appeared in the September 2024 issue of Dispute Resolution Magazine, the publication of the American Bar Association Section of Dispute Resolution. It is reprinted with their permission here. You can see this article as it originally appeared on the American Bar Association's website.
Over the past few decades, our civil justice system has experienced an explosion of complex, multi-party and multi-jurisdictional litigation. Class actions arising out of product defects, mass torts involving catastrophic airline and construction accidents and sexual abuse claims by parishioners, athletes and patients now represent a significant share of state and federal court dockets.[1] Counsel and ADR practitioners are being called upon to manage the settlement process of these multi-party disputes that often present claims in the hundreds of millions, if not billions of dollars.
While the broad issues of liability, damages and valuation of injuries are the same in all tort cases, complex multi-party claims present their own set of unique challenges in terms of devising a mediation process that allows for the efficient and fair settlement of claims. My experience in successfully mediating mass tort and class action matters has taught me, often after a process of trial and error, that it is essential for mediators and counsel to undertake a systematic approach to designing a settlement process that maximizes the potential for a successful outcome.[2]
If, as the old adage goes, the best way to get to Carnegie Hall is to “practice, practice, practice,” the key to the successful resolution of complex, multi-party claims is to “plan, plan, plan.” Significant up-front time needs to be spent with counsel, carriers, and client representatives long before the substantive settlement discussions commence. Most counsel and mediators have had the unfortunate experience of attending a mediation involving complex claims only to discover that the matter is not ripe for settlement for want of necessary parties and essential fact gathering. Because mediation is intended to be a collaborative process, a well-devised and inclusive planning process should build the parties’ and counsel’s confidence that a fair resolution of the dispute is obtainable.
Answering the Essential Questions First
Before convening substantive discussions, the mediator and counsel should address a number of preliminary questions, the answers to which often raise subsidiary questions. The first is whether all necessary participants — including actual and potential defendants, defense and coverage counsel, insurance carriers and decision makers — have been invited to participate in the mediation. If all the necessary participants are not “at the table,” the mediation will surely fail. I witnessed this firsthand, in a matter involving a construction site explosion resulting in multiple fatalities and devastating injuries. The mediation process was delayed because the workers' compensation carriers, who faced significant exposure, were not initially present at the mediation.
It is often tricky to identify potential sources for funding a settlement pool. Determining all funding sources requires an understanding of the availability of insurance and the total potential limits of coverage from all policies combined. Closely related, potential coverage issues may also exist, such as exclusions for intentional torts, sexual abuse, or reckless conduct that will limit or defeat coverage. Additional issues that should be vetted concern which policies, if any, are primary, and which are excess, as well as the amounts in each tower and whether any of the policies are eroding, such that the limits of coverage are reduced by attorney’s fees and litigation costs. Counsel and ADR practitioners should also know whether some or all defendants are likely to seek indemnification from their co-defendants, thus inceasing the complexity of the relationships between the parties.
My experience teaches that asking and answering these obvious, but essential, questions early will avoid delays in the mediation process and attendant frustration by parties, counsel, and decision makers. For example, I mediated a matter involving hundreds of claims of sexual abuse of adolescent patients. It became clear from the outset that because of sexual abuse and intentional tort exclusions and disputes over which towers of coverage were triggered by the forty-plus years of abuse, it would not be productive to commence substantive settlement discussions until these essential predicate questions were resolved. Those coverage disputes were resolved in a “pre-mediation,” allowing the defendants and their carriers to assemble a significant settlement fund.
Likewise, in a matter involving a catastrophic accident, available insurance was inadequate to fairly compensate the victims. Once that shortfall became evident, a “mini-mediation” with the owner of the defendant company resulted in a significant settlement contribution that augmented the limited insurance coverage. Without that personal contribution, the mediation would have failed.
Understanding Claims and Liabilities
An analysis and robust discussion of potential liability issues is critical to any successful mediation. Are the plaintiffs’ allegations likely to be contested? If so, is liability denied because of an absence of proof against a defendant or because of the plaintiff’s own conduct? Related, are the defendants themselves in disagreement as to which of them, if any, are responsible? Is there likely to be “finger-pointing” at each other by co-defendants? Additionally, close attention should be paid to claims alleging recklessness or other theories of liability that may expose the defendants to punitive damages and attorney fees, and which may create both insurance coverage issues and individual exposure to the defendant.
The ultimate goal of a detailed liability analysis is to obtain clarity on the following questions: Is there potential for identifying a hierarchy of liability, such that one or more defendants emerge as potential responsible parties, while others play a more peripheral role? Can rough percentages totaling 100% in the aggregate be assigned to each defendant? Are there potential aggravating factors that may give rise to claims for punitive damages and/or attorney fees? If so, how do these claims impact coverage analysis and policy exclusions that may limit the amount of available insurance?
It is often the case that damages may be significant because of deaths, catastrophic injuries, emotional pain and suffering, and the aggravating nature of defendants’ conduct. What type of process can be devised to fairly evaluate physical and emotional injuries and economic and non-economic damages from both an individual and global perspective? Can this inquiry be conducted according to a process that respects the defendants’ need to obtain essential information while also respecting the plaintiffs’ desire to avoid a protracted discovery process that may defeat the goal of mediation to resolve disputes in a timely and economically sensible manner?
Depending on case specifics, I have found the following approaches to be enormously helpful in assessing the merit and value of plaintiffs’ claims, especially when the processes are jointly agreed to by counsel, carriers, and parties:
The first priority is to develop a methodology for obtaining basic information about individual clients without embarking on full-blown discovery. Devising a uniform questionnaire to be completed by plaintiffs can be a useful first step. Often, such questionnaires elicit basic biographical information, a summary of injuries, past and future damages, and a description of the impact of the accident or incident on claimant and loved ones.
Next, the mediator and counsel may consider devising an informal interview process, in lieu of sworn depositions, that will allow defense counsel to obtain a preliminary sense of the strength of the plaintiffs’ claims. I have worked closely with counsel to formulate a uniform set of questions that would be asked of the claimants. Frequently it is agreed that the mediator will conduct the interview in the presence of designated plaintiff and defense counsel with a limited opportunity for counsel to ask follow-up questions. In one case involving a catastrophic work site explosion that resulted in significant claims of post-traumatic stress disorder, the parties’ respective psychiatric experts were engaged in formulating questions so that information relevant to those claims could be meaningfully developed. Those experts were also allowed to monitor the interviews to assess first-hand the emotional distress claims.
Building Trust and Consensus
The parties and mediator should also consider establishing a process for the mediator to meet with individual plaintiffs and their counsel. The purpose of these interviews is to introduce the plaintiff to the mediation process, develop a rapport with the mediator and confidence in the settlement process, and, perhaps most important, to allow the plaintiff to “have her day in court” to explain the physical and emotional aspects of the injuries to the victim and family. Such direct outreach by the mediator is often critical to the success of the mediation.
Similar meetings should be set up with defendants and carrier representatives. In one matter, I met with the president of a large carrier that was locked in a heated battle with another carrier. As a result of that meeting, the president pledged that his company would cooperate fully in the mediation and defer the coverage dispute to post-settlement proceedings because the carrier “was committed to doing the right thing for the victims” by not commencing a protracted and divisive coverage litigation during the mediation.
Another device that I have used successfully is a simple grid that allows both defense and plaintiff counsel and the mediator to confidentially rate the claims. On one axis, using a scale of 1 to 5, each rates the strength of the liability claim and on the other axis, the strength of the injury/damages claim. I have found that when urged to complete these evaluations without posturing, counsel agree in far more instances than they disagree. This technique was utilized in a sexual abuse claim involving hundreds of claimants. I was amazed and grateful at the high degree of overlap between plaintiff and defense ratings for the individual plaintiffs. Later in the process, we referred to the grid while devising five separate groupings of claims, each bearing a settlement value range. (I frequently refer to the various groupings of claims, based on descending order of value, as “Group A, Group B and Group C, etc.”) That, in turn, allowed us to accurately project the range of a settlement fund that would allow all claims to resolve fairly.
If done successfully and conducted in good faith by parties and counsel, the above preliminary planning exercises should allow for a substantive mediation to then be scheduled.
Multi-party negotiations are never easy, but this roadmap to organizing and structuring mediations of these complex disputes should help prepare ADR practitioners, counsel, and clients for as smooth a process as is possible.
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Judge Robert Holzberg (ret.) leads the ADR practice at the law firm Pullman & Comley following 22 years as a Connecticut Superior Court Judge. Pullman & Comley has offices in CT, NY, MA and RI. The firm’s ADR practice consists of four retired judges and six AAA certified attorneys and was named New England’s “2023 ADR Practice of the Year” by ALM.
[1] Morris, D. (2024) Class Action Review 2024, 34. Boston: Duane Morris, LLP.
[2] While this article discusses effective mediation techniques for large, multi-party disputes involving claims that may range in the millions of dollars which would likely be funded by insurance and corporate assets, the same principles can effectively govern other matters in which the dispute does not focus primarily on monetary damages. For example, it is easy to imagine a complex boundary dispute in which multiple parties contest the legal configuration of the property in question, or a multi-party estate dispute in which multiple family members and /or organizations are battling over the distribution of the decedent’s assets. In these cases, as in the ones described in the text accompanying this note, effective pre-planning, assessment of potential settlement outcomes, and initiation of a structured dialogue between the parties prior to the actual mediation are critical steps to a successful settlement.