If you and the opposing party can't seem to resolve matters one on one, mediation is the next best settlement technique. Mediation is a procedure in which the disputants voluntarily meet with a neutral third party who helps them discuss the issues and arrive at their own solution. For small claims disputes, mediation is available right in the courthouse in many counties. In others, it's provided by community-based mediation programs.
Many people ask why they should waste any time at all mediating with an opponent who they believe is unreasonable. My best answer is that when the parties to a small claims court case voluntarily agree to mediate, the majority of disputes are settled. Settlement is especially likely when, deep down, one or both parties realize they have an interest in arriving at a solution that's at least minimally acceptable to the other party. This is particularly common in disputes between neighbors or businesspeople who live or work in the same geographical area and who really don't want the dispute to fester.
Studies have shown that people who agreed to have their cases mediated were more likely to be satisfied with the outcome of the case than litigants who went to trial. One reason for this is that people who arrive at a mediated settlement are more likely to pay up than are people who have a judgment imposed on them after losing a contested trial.
Is entering into mediation always a good idea? No. If you are determined to get the total amount you are asking for, and you will have no ongoing relationship with the other party (for example, your dispute is with a large corporation or government agency), bypassing mediation and going directly to court makes more sense.
EXAMPLE: John rented an apartment from Frontier Arms, Inc. When he moved out and left the unit undamaged and spotless, the Frontier Arms manager made up a bogus reason to avoid refunding his $1,500 deposit. John decided that proposing mediation was a waste of time, because he was pretty sure a judge would enter a judgment for his entire $1,500, plus $3,000 punitive damages as provided by his state's law when a landlord keeps a tenant's deposit without a good reason.
In addition to mediation, a few states also offer binding arbitration before a volunteer lawyer as an alternative to having a case heard in small claims court. Typically, the arbitrator and the parties sit down at a table and discuss the case. If the parties don't arrive at their own solution, the arbitrator renders a decision just as a judge would. The only advantage of arbitration over going before a small claims judge or a commissioner is that, in some areas, it's faster to meet with the arbitrator.
Unfortunately, arbitration also comes with a big built-in disadvantage: The arbitrator is likely to be a volunteer lawyer, who is far less knowledgeable than a judge about the broad range of laws that apply to consumers and small businesses.
New York Note. In New York state, where volunteer lawyer arbitrators are routinely used, this disadvantage is compounded by the fact that you can't appeal from the decision of an arbitrator as you could from a judge's decision.
Nonbinding Arbitration. In a few areas, a procedure called nonbinding arbitration is available. This is much like mediation, in the sense that both parties must agree to any settlement. The only difference is that, unlike a mediator, who doesn't make a formal recommendation, the arbitrator will recommend–but not compel–a solution. Especially if it's more easily available than mediation, it's often a good idea to try nonbinding arbitration; the arbitrator's recommendation can be a pretty good indication of what will happen if the case ends up going to court.
How Does Mediation Work?
A small claims mediation session typically lasts between 30 minutes and three hours. Although many mediators are ex-attorneys or even ex-judges, they have no power to impose a decision on you. The result is that mediation sessions tend to be much more relaxed than court proceedings, and they often result in compromises that both parties are better able to live with.
You can't force the other party into mediating–both of you must agree to engage in the process. However, many states now "strongly encourage" small claims litigants to mediate before they head into the courtroom, including telling them that the judge may look more favorably upon parties who willingly try to mediate. Your small claims court appointment may even be scheduled to include an extra block of time before the hearing so that you and the other party can meet with the mediator. Your discussions during the mediation session are confidential–if the mediation fails, the judge won't be told what went on.
Although it makes sense to approach mediation with an open mind and be ready to agree to a reasonable compromise, nothing requires you to agree on anything at this stage. It's your right to have your case presented to a judge if you wish. You can even call off the mediation in the middle, which is particularly appropriate if, despite your spirit of compromise, the other party refuses to realize that he or she is in the wrong or will only settle for an amount you can't possibly accept. Also watch out for result-oriented mediators who make you feel like you have to give up a large chunk of your claim just to reach a settlement. Being reasonable doesn't mean giving away the farm.
Assuming you do want to mediate, how can you get a reluctant opponent to the table? Often you can get help from your local court-sponsored or community mediation program. Typically, as soon as you notify a mediation program that you have a dispute and would like to try mediation, an employee or volunteer with the mediation program will contact the other party or parties and try to arrange a mediation session.
If you and the other party agree on a mediated settlement, it will normally be recorded by the mediator on a form called a "Mediated Agreement," or something similar. The agreement, signed by both parties, will spell out the terms of the settlement and the deadlines for payments or other actions. If the mediation occurs after the plaintiff has already filed a small claims case, some counties will add the agreement into the court record in a sealed envelope.
Should Defendants Mediate?
Suppose now that you are a defendant in a small claims case or have received a letter threatening a lawsuit. Should you ask for mediation? The answer is almost always a resounding yes, assuming you have a defense to all or part of the plaintiff's claim or believe the plaintiff is asking for too much money even though it's a decent case. Mediation will give you a great opportunity to present your side of the dispute and try to arrive at an acceptable compromise. It can also allow you to bring up other issues that may be poisoning your relationship with the plaintiff but would not be considered relevant in court.
Learn to be a good mediator. People who are well prepared to engage in mediation are likely to achieve far better results than those who take a more casual approach. The best source of information on how to mediate successfully is Mediate, Don't Litigate: Strategies for Successful Mediation, by Peter Lovenheim and Lisa Guerin, available as a downloadable eBook at www.nolo.com. If you read it before you mediate, you will almost certainly achieve better results than would have been possible otherwise.
Assuming both parties honor the agreement you reached in mediation, that's the end of the case–no court judgment is ever entered by the judge or reported to a credit agency. Some states will automatically set a second court date in case the agreement isn't honored. If your agreement is honored, however, then you can either advise the court to cancel the second date or simply not show up.
If your opponent doesn't honor his or her obligations under the mediated agreement by the deadline, you must go back to court and obtain a judgment. That's easy in the states where a second court date was scheduled automatically. In other states, you will need to request a new court date or simply request a judgment, either of which can often be done by mail. Ask the court whether they have forms for such follow-up–if not, write a letter similar to the sample letter requesting judgment, shown below.
In case the mediated settlement agreement is broken, protect your right to ask for the full amount. Most disputes that are successfully mediated result in a compromise, as would occur where A sues B for $2,000 and agrees to accept $1,200. But if B fails to pay within the time allowed by the written mediation agreement, A may want a judgment for the full $2,000. After all, A no longer has an incentive to compromise if B isn't willing to end the dispute without a day in court. Add a sentence or two to your mediated agreement stating that if the other party doesn't meet the settlement obligations, you reserve the right to make your full, original claim in court. Even if you forget to add this, ask the judge for the full amount when you write your letter requesting judgment or when you get to court.
EXAMPLE: Elena rents a filthy apartment from MNO Realty. She does her best to clean it up, but after two months decides the place is hopeless. She provides a proper 30-day notice and moves out. MNO refuses to refund her $1,000 security deposit, claiming the unit is dirty. Elena sues in small claims, asking for $3,000, the extra $2,000 being for punitive damages. The day of the court hearing, she and MNO's owner agree to mediate. Worried that she may have trouble proving that she left the apartment cleaner than when she moved in, Elena agrees to accept her $1,000 deposit back with no damages. In the Mediation Agreement, the parties forget to specify what happens if MNO fails to pay. When MNO does, in fact, fail to pay Elena under the terms of the mediation agreement, she sends a short letter to the court, as follows:
Sample Letter Requesting Judgment
Patruska vs. MNO Realty
Small Claims # ________
I sued MNO Realty for failure to return my security deposit after I moved out of their duplex at 111 Maple Street, Santa Cruz, California, giving proper 30-day notice and leaving the unit cleaner than when I moved in. It has now been more than six months since I moved out. On November 23, 20xx, Peter Vargas of MNO and I participated in a mediation conference at Santa Cruz Small Claims Court, at which I agreed on a compromise settlement of $1,000. I did this primarily to get the case over with and to receive my $1,000, which I badly need. Had I realized that MNO would not pay me, I would never have agreed to waive the $2,000 punitive damages to which I believe I am fully entitled.
Accordingly, I am requesting that you enter a judgment for the $3,000 I sued for, not just the $1,000 I agreed to in mediation.