In family businesses, where many decisions are intermingled with emotions, conflicts are inevitable. However, conflicts do not have to lead to negative consequences—they are part of human interaction and can promote efficiency and growth when dealt with properly. This series on Dispute Resolution Methods is aimed at providing you with the tools to manage conflicts properly and avoid escalation.

Our first article in the series, on alternative dispute resolution (ADR), can be found here. The series continues by elaborating on a strategy introduced in that article: mediation. The process of mediation can play a vital role in resolving many family business conflicts, and is one of the fastest growing ADR options.

In mediation, a neutral third party called the mediator helps parties resolve their conflict amicably. Mediation enables parties to manage risk by removing the uncertainty and unpredictability of juries and judges in litigation. Mediation can also result in substantial cost savings and allow parties to obtain finality and closure, avoiding litigation or continued litigation and appeals.

Here are some keys for a successful mediation:

Entering Into Mediation

In some circumstances, mediation may be required. Certain state and federal courts require that the parties participate in a form of alternative dispute resolution prior to trial. Occasionally, contracts impose mediation as a mandatory preliminary step prior to filing suit.

Absent a court rule or contractual obligation, mediation cannot be compelled—the parties must agree to undertake such a process. It is important to bear in mind that mediation is not binding unless and until the parties reach an agreement to settle. End-of-mediation settlement agreements are discussed below.

Timing of Mediation

Mediation timing is an important decision. Attempting mediation without a basic knowledge of key facts on both sides may lead to unexpected revelations during the proceedings, which reduces the chance of a successful outcome. Mediation by parties not prepared for a settlement discussion can result in further delay and unnecessary cost.

On the other hand, cost savings are lost if mediation occurs too late, after parties have already spent considerable sums in litigation. Within a dispute, mediation has a better chance of success if it occurs prior to, but near, a significant milestone, e.g., before a lawsuit is filed in court, prior to a summary judgment hearing, or before trial.

Selecting the Mediator

Selecting a competent mediator is one of the most important factors impacting the success of the process. Mediation success is substantially influenced by the skills and experiences of your mediator.

Typically, each side in a dispute will propose suitable candidates. The parties will then seek to identify one who is mutually agreeable. It is worthwhile to seek out recommendations and references on mediators and review their websites or other published materials. You may also wish to interview a proposed mediator in advance.

It is paramount for the mediator to be neutral. A close prior relationship with the mediator can complicate the matters further and make the person’s job difficult. A mediator who is perceived to be one-sided may not be trusted by one side and could jeopardize a settlement.

While subject matter experience is useful (and may be a prerequisite in arcane or complex disputes), the best mediator is one who is experienced, has good "people skills," is a quick study, listens well, and is able to probe motivations and underlying values behind positions. Further, an appropriate mediator is someone who has insight into human nature, thinks of creative paths, and has both the energy and stamina to see the mediation through to a settlement.

Contact information of mediators with prior experience is available on many sources, including local providers, the Center for Public Resources, Judicial Dispute Resolution, LLC (JDR), Judicial Arbitration and Mediation Services (JAMS), and the American Arbitration Association (AAA). While mediators have different styles, you should make sure that they have experience dealing with the type of conflict that you are facing.

Establishing a Process

Once you have selected the best mediator, you must address procedural matters regarding the mediation. You should decide whether any pre-mediation communications will take place.

Private, pre-session conversations can be invaluable in any mediation. Unlike communications with judges or arbitrators, there is generally no prohibition against ex parte (one-sided) communications between a party and a mediator. They also allow the mediator to learn facts that the parties might not have shared with each other.

Next, determine who will attend the mediation; all decision-makers should participate. Individuals who can make settlement decisions or have the authority to negotiate within the business should be present. It is, after all, difficult to determine if a party will be satisfied by a solution if they are not present during the discussions.

The parties should consider, agree upon, and commit to the length of mediation. Generally, mediation sessions are day-long affairs. Many mediators will offer half-day sessions or multi-day sessions, which are not as successful.

Parties should also agree on the method and cost of mediation. In most civil cases, mediation fees are split evenly by the parties.

Finally, mediators can do their best job if the parties are honest with them. Honesty and candor are promoted through the assurance of confidentiality. Thus, it is important for the parties to agree on the confidentiality of the mediation process.

All states have enacted rules designed to protect mediation communications from disclosure in subsequent proceedings. What is said in mediation generally enjoys a privilege and cannot be disclosed or repeated in court.

Settlement at the End of Mediation

If the parties reach agreement in mediation, that understanding should be embodied in a written agreement to be enforceable.

It is often worthwhile to plan for a settlement prior to mediation. Mediation settlements often occur at the end of long mediation days. Both lawyers and their clients may be exhausted or weary and may not start drafting a settlement agreement until the end of mediation. It is often helpful to plan the agreement in advance of mediation.

Parties should survey all issues that may need resolution and prepare an initial settlement agreement outline or draft. This exercise has the added benefit of forcing the parties to consider everything that should be in a settlement. Sometimes, a party will not want to commit to a final agreement but will draft terms with the understanding that the parties will draft a final settlement agreement later.

However, doing so increases the possibility that a party will have a change of heart after mediation. It is important to recite that the parties intend to be bound by the agreement but be prepared to revise and edit settlement agreements in the mediation process.

It is not uncommon for the parties to provide that any post-settlement disputes will be decided in arbitration by the mediator. The parties are free to adopt an efficient, expedited, and economical process for the mediator’s resolution of post-settlement disputes in arbitration. Absent such a dispute resolution process, post-settlement disagreements may have to be resolved in court through a new lawsuit.

Investing Your Time

Mediation requires consenting adults on both sides of the conflict to resolve a conflict amicably. To achieve this goal, each party must have the chance to present its views.

Even though the parties are often aware of the details surrounding the conflict, the mediator will need to hear the background. When preparing to mediate, ensure that you are blocking out enough time to have a thorough discussion; it is better to overestimate the length of the mediation.


Mediators can help untangle complex conflicts. They can help parties direct their energy toward a common goal rather than personal grievances. As protecting and maintaining relationships is a necessity in a family business, a mediator can help both sides resolve the conflict and avoid ineffective methods of conflict resolution in the future.