Ask SmallBiz: Mediation Clause

Q: As I read through the fine print of our new office lease, I noticed it stipulated that mediation would be used in case of a dispute. Should I agree to this?

A. I think you should. In fact, this stipulation will likely save you money and ensure a faster, more equitable resolution to any dispute. When I graduated in 1989 with my J.D. degree from the UH Richardson School of Law, the legal process to resolve disputes was litigation. This is a court-supervised process with pre-set timetables and procedures that are designed to protect all parties. But, they can also add significant costs and delays.

During my career, I noticed mediation was taking off as an alternative form of dispute resolution and I preferred it to litigation. So, 17 years ago, I opened my mediation practice. Since then, mediation has grown dramatically as the courts have become so backlogged that it can often take years to resolve litigated disputes. By contrast, a mediated dispute can be resolved in a matter of weeks or even days.

Here’s how mediation works:

Both parties outline their claims to an independent mediator. Typically, the parties meet at the offices of the mediator, where he or she recaps each party’s position before directing them to separate meeting rooms. The mediator then goes back and forth, presenting possible settlements to each party, all the while bringing them closer together. The best mediator is one who is experienced and able to think outside the box so as to come up with a resolution that meets the needs of all parties.

It’s key that the decision-maker for each party be present at the mediation and prepared to settle the dispute that day. Once decided, the parties sign an agreement outlining the settlement. Payments for claims are often made within a few weeks.

Mediation is more certain than litigation, which can result in retrials, appeals and seemingly endless delays. Even if a party receives a favorable judgment, it doesn’t mean they’ll be able to collect on that judgment. The defendant may evade payment or have no funds.

Another attractive feature of mediation is that the process is not part of the public record. No notices will appear in the paper regarding the dispute or settlement.

An experienced mediator is the key to successful mediation. In Hawaii, mediators don’t need to be licensed, but choosing an attorney as a mediator helps ensure they know the relevant laws.

If you still have concerns, consider that most Hawaii judges urge parties to first seek mediation before they attempt litigation. Judges know the outcome will likely be better, faster and cheaper for all parties concerned.


Michael Nauyokas
Attorney, mediator and arbitrator

Categories: Small Business