There comes a time in many class actions when the parties agree to mediate. Like class litigation, the mediation of class actions, whether pre-certification or post-certification, is more complicated than the mediation of individual cases. Here are a few tips for making the most of the experience.
- Choose the right mediator. Not all mediators have class action experience. While the lack of such experience should not be a disqualifier, the procedural peculiarities of class settlements make it a significant factor to consider in selecting a mediator. Other important characteristics for class action mediators are experience resolving or adjudicating complex business disputes, a general understanding of the business implications of substantial settlements and of corporate decision-making processes, the ability to stay organized with respect to complicated settlement proposals, and the absence of any perceived biases or predilections.
- Don’t waste time arguing the case. This is not to say that discussions about the merits or about the likelihood of class certification have no role in class mediations; they do. But oral presentations should not occupy the same amount of time as they do in individual mediations. Lawyer arguments are generally presented in two ways at mediation: in the written submissions the parties exchange and provide to the mediator, and in an oral presentation during a joint session at the outset of the mediation. There are three audiences each party wants to reach in the joint session: the mediator, opposing counsel, and the opposing counsel’s client, who ordinarily is the ultimate decision-maker. What sets class mediations apart is that, while named plaintiffs ultimately need to understand and make decisions with respect to any settlement reached, they will rely heavily on class counsel to negotiate the settlement and protect absent class members. For this reason, they often don’t attend the mediation sessions. That leaves only the mediator and opposing counsel as the target audiences for formal presentations, but they will already know your arguments before the mediation begins. It likely will be necessary to remind them of your arguments as negotiations progress, but time spent needlessly arguing your case at a joint session is time taken away from more pressing matters.
- Anticipate objections. If you are able to arrive at a class settlement, you will need to have it approved by the trial court, and if there are objectors, possibly by an appellate court. It takes a lot of time and money to get from the mediation to final approval of the settlement, and the last thing you want is to have the settlement rejected after all those resources have been spent. It is therefore important to enter the mediation with a good understanding, both from experience and from familiarity with precedent, about what objections the settlement might invite so that you can structure the settlement to avoid them. Careful attention to such issues as the value provided to absent class members, the reasonableness of named plaintiffs’ service fees and class counsel’s attorneys’ fees, the appropriateness of any cy pres relief, and the quality and manner of notice and procedural rights afforded absent class members can help you craft a settlement that will survive objectors’ challenges.
- Be patient. Class settlements are complicated. To achieve fairness, some settlements may involve various levels of relief to take into account differences among categories of class members. It can take many hours to come to agreement on class relief, even before wading into the treacherous waters of attorneys’ fees. Although settling the case on the first day of mediation may be the goal, it is seldom achieved. It is best to enter the mediation expecting to make substantial progress on the first day, with the understanding that additional formal sessions or informal communications will be necessary to reach a deal.
- Be prepared to end the mediation. As with any case, the ability to settle will depend on the reasonabless and flexibility of all parties. If your opponent is unreasonable, be prepared to walk out. I don’t say that lightly. If you have committed to mediate, you have committed to negotiate in good faith. You owe it to your client and to all concerned to work long and hard to bridge the gap that separates the parties. But you also owe it to your client not to let it be held hostage to unreasonable demands. If the goal is to achieve a fair settlement, it should be fair not only to the plaintiffs and to absent class members, but also to your client and its shareholders.
- Write it down. If the mediation produces a settlement, ask the mediator to help you prepare a term sheet outlining its key provisions. A term sheet can prevent disputes as the parties prepare the formal settlement agreement, and keeping the mediator involved can help resolve any disputes that threaten to derail the settlement.
Written by former litigation partner, Donald R. Frederico.