Mediate Before You Litigate

Michael Lodge, NCPM, CRTP - Certified Business Mediator - Phone/Text: 818.252.5682 - www.lodge-co.com

Four years ago Christian (not his real name) and Tom (not his real name) formed a healthcare company that provided medical supplies and equipment to hospitals, skilled nursing facilities and private care. They spent a lot of time developing this business, they even went as far as getting it certified by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). I have gone through the accreditation process for my own firm and it can take a very long time to get everything ready, documented, procedures written, and then certified. My certification took about 6 months. But they got it done and they needed it in order to bid with JCAHO certified facilities.

As a lot of small startup businesses they needed capital to get everything done, buy the equipment they needed to provide to medical facilities. They went out and found nine investors to help them. An LLC was formed and became operational once the investor funds were available. However, there is always a however to every story. The nine investors saw that it was going to be a good business, everything had been formed and certified, so they started meeting to find a way to take over the business from the two founders. They came to me and asked for mediation.

As a mediator you have to find out if the remainder of the parties involved want to mediate. I got on the phone and got them all to agree to mediate. The focus of the mediation was not to keep the LLC together with the investors, it was to remove the investors and dissolve their relationship with the LLC. Now, I had never had nine people in one mediation, so this was a learning experience for me also as a mediator. My board room table thank goodness had enough seats for everyone.

As all good mediators do I opened up the mediation with an opening statement, the rules, and then allowed the two original partners present their concerns and their needs to take back the ownership interest of each partner. They did a very good job, they knew what they wanted to say and had gone over their presentation. It was very professionally done. The Mediator asked the followup questions. I then let the other nine, whoever wanted to present their side. They were all over the place, some wanted to continue, others wanted to leave. The most greedy ones wanted to leave and wanted their investment funds back. Finally, all nine agreed to leave the LLC and all funds were returned to the investors. Now, remember all these investors did was put money into the LLC with no participation whatsoever, but they smelled the money and in the end they all went out and started their own healthcare supply company, but it failed in the end.

This could have gone to court, but with mediation everyone sat down, acted like adults, and an agreement was done in one meeting with a mediator. I shutter to think what would have happened if it did become a litigation and nine attorneys got involved. Mediation was done in less then four hours at less the cost of court fees and attorney retainers. Mediate and resolve disputes in business.

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