THE ROLE OF TRANSFORMATIVE MEDIATION IN FAMILY BUSINESS DISPUTES Jacob Lebovics* I. INTRODUCTION Two of the most important requirements for an individual’s emotional stability and well-being are a supportive and cohesive family unit and stable financial security. Unfortunately, all too often when family and employment converge in the form of a fam- ily business 1 they cause instability to one another. 2 This note will propose that many facets of the method of mediation called “trans- formative mediation,” as laid out by Robert A. Baruch Bush and Joseph P. Folger in their highly influential work, The Promise of Mediation, 3 can play a crucial role in resolving family business dis- putes while enabling family cohesion moving forward. Family businesses are an incredibly common business struc- ture. One study found that, in the United States, there are 5.5 mil- lion family businesses which make up 75% of all the country’s jobs, about 64% of the Gross Domestic Product, and 60% of its publicly held businesses. 4 Another study asserted that as many as 90% of all businesses in the United States have been family-owned or con- * Notes Editor, Cardozo Journal of Conflict Resolution; J.D. Candidate, 2019, Benjamin N. Cardozo School of Law. The author would like to thank his family, friends, and mentors for their support and encouragement. In addition, he would like to thank Professor David J. Weisenfeld for his invaluable insight and guidance in drafting this note. 1 See generally R. A. Litz, The Family Business: Toward Definitional Clarity, 8 FAM. BUS. REV. 71 (1995) (noting the different definitions of “family business” and attempting to find a clear definition). This article does not attempt to follow a specific definition but focuses on the relational aspect of a family business which is present primarily in closely held family entities. The nature of the businesses that can benefit from this article’s analysis may range from mom- and-pop storefronts to family dynasties that control multinational enterprises. 2 Steven C. Bahls, Judicial Approaches to Resolving Dissension Among Owners of the Fam- ily Farm, 73 NEB. L. REV. 14, 21–22 (1994). 3 ROBERT A. BARUCH BUSH & JOSEPH P. FOLGER, THE PROMISE OF MEDIATION: THE TRANSFORMATIVE APPROACH TO CONFLICT (John Wiley & Sons, 2d ed. 2004). 4 Family Enterprise USA, Family Enterprise USA Appoints New Executive Director, PR NEWSWIRE (Sept. 17, 2013), https://www.prnewswire.com/news-releases/family-enterprise-usa- appoints-new-executive-director-224082351.html. These numbers are based on the Family Enter- prise USA’s (“FEUSA”) definition of what constitutes a family business. However, there have been a number of suggested definitions for “family business.” See generally Litz, supra note 1. 471
THE ROLE OF TRANSFORMATIVE MEDIATION IN FAMILY BUSINESS DISPUTES
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THE ROLE OF TRANSFORMATIVE MEDIATION IN FAMILY BUSINESS DISPUTES
Jacob Lebovics*
I. INTRODUCTION
Two of the most important requirements for an individual’s emotional stability and well-being are a supportive and cohesive family unit and stable financial security. Unfortunately, all too often when family and employment converge in the form of a fam- ily business1 they cause instability to one another.2 This note will propose that many facets of the method of mediation called “trans- formative mediation,” as laid out by Robert A. Baruch Bush and Joseph P. Folger in their highly influential work, The Promise of Mediation,3 can play a crucial role in resolving family business dis- putes while enabling family cohesion moving forward.
Family businesses are an incredibly common business struc- ture. One study found that, in the United States, there are 5.5 mil- lion family businesses which make up 75% of all the country’s jobs, about 64% of the Gross Domestic Product, and 60% of its publicly held businesses.4 Another study asserted that as many as 90% of all businesses in the United States have been family-owned or con-
* Notes Editor, Cardozo Journal of Conflict Resolution; J.D. Candidate, 2019, Benjamin N. Cardozo School of Law. The author would like to thank his family, friends, and mentors for their support and encouragement. In addition, he would like to thank Professor David J. Weisenfeld for his invaluable insight and guidance in drafting this note.
1 See generally R. A. Litz, The Family Business: Toward Definitional Clarity, 8 FAM. BUS. REV. 71 (1995) (noting the different definitions of “family business” and attempting to find a clear definition). This article does not attempt to follow a specific definition but focuses on the relational aspect of a family business which is present primarily in closely held family entities. The nature of the businesses that can benefit from this article’s analysis may range from mom- and-pop storefronts to family dynasties that control multinational enterprises.
2 Steven C. Bahls, Judicial Approaches to Resolving Dissension Among Owners of the Fam- ily Farm, 73 NEB. L. REV. 14, 21–22 (1994).
3 ROBERT A. BARUCH BUSH & JOSEPH P. FOLGER, THE PROMISE OF MEDIATION: THE
TRANSFORMATIVE APPROACH TO CONFLICT (John Wiley & Sons, 2d ed. 2004). 4 Family Enterprise USA, Family Enterprise USA Appoints New Executive Director, PR
NEWSWIRE (Sept. 17, 2013), https://www.prnewswire.com/news-releases/family-enterprise-usa- appoints-new-executive-director-224082351.html. These numbers are based on the Family Enter- prise USA’s (“FEUSA”) definition of what constitutes a family business. However, there have been a number of suggested definitions for “family business.” See generally Litz, supra note 1.
471
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trolled.5 Family businesses are particularly prone to conflicts, since disputes can be stimulated by a variety of factors, including sibling rivalry,6 prior unrelated history,7 children vying for parents’ atten- tion,8 children’s desire to differentiate themselves from their par- ents,9 and parents’ reluctance to turn over the reins of the business that they started.10
Transformative mediation is a method that focuses on mend- ing the underlying relationship between the parties in dispute,11
while the mediator allows the parties to take control of the talks, fostering empowerment and recognition between themselves.12
This method is very well suited to disputes within families where the parties have a predilection and interest to preserve their relationship.13
In Part II, this note will attempt to lay out the benefits and detriments of approaching family business disputes through litiga- tion, alternative dispute resolution, and various methods of media- tion, with a goal of explaining how transformative mediation relates to other approaches of resolving conflict. Part III will dis- cuss the unique issues that apply to family business conflicts and how concepts from other disciplines of study can be utilized to help best achieve the goals of a family business. Part IV will propose how transformative mediation is well suited to address these con- flicts and what form of transformative mediation would reach the optimal results. Part V will reiterate the conclusion of the note and indicate steps that can be taken for their practical application.
5 W. GIBB DYER JR., CULTURAL CHANGE IN FAMILY FIRMS: ANTICIPATING AND MANAG-
ING BUSINESS AND FAMILY TRANSITIONS 3 (John Wiley & Sons, 1986). 6 KENT RHODES & DAVID LANDSKY, MANAGING CONFLICT IN FAMILY BUSINESS: UNDER-
STANDING CHALLENGES AT THE INTERSECTION OF FAMILY AND BUSINESS 40 (2013). 7 See id. at 42. 8 See id. at 40. 9 Id.
10 See id. at 44. 11 Heidi Burgass, Transformative Mediation, https://www.colorado.edu/conflict/transform/
tmall.htm (last visited Jan. 17, 2018). 12 Id. 13 Paul Sullivan, Squabbles Over the Family Summer Home? Don’t Hire a Lawyer Just Yet,
N.Y. TIMES (Aug. 17, 2017), https://www.nytimes.com/2017/08/18/your-money/squabbles-over- the-family-summer-home-dont-hire-a-lawyer-just-yet.html?_r=0). See also Karen LaRose, Fam- ily Business Conflict: Flexible Solutions, MEDIATE.COM (Dec. 2012), https://www.mediate.com/ articles/LaRoseK1.cfm (finding that transformative mediation is a good fit for family business disputes but arguing for a more flexible approach by the mediator combining ideas from facilita- tive and evaluative mediation throughout the process). This note will discuss LaRose’s approach in detail in Section IV.D infra.
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II. BACKGROUND
A. Possible Methods to Resolve a Dispute
For a variety of reasons, the last thirty years have seen a rise in Alternative Dispute Resolution (ADR) as an alternative to litiga- tion.14 Litigation is increasingly seen as a last resort that looms in the background of other more efficient methods to resolve con- flicts.15 This is attributed to disadvantages of the system of litiga- tion including the increasing expense and the prolonged time it takes to resolve disputes.16 ADR is often more flexible in its method which allows for more creative solutions closely adapted to the demands of the type of conflict that it seeks to resolve.17 Liti- gation is formulaic and its procedural formalities can lead to results that are viewed as less just.18 It can also be less useful since it is not flexible enough to tailor to parties’ actual needs.19 The adversarial nature of litigation can lead the parties to become more relentless in their positions and poison any possibility of future relation- ships.20 Also, some judges have joined the push to utilize ADR in order to lighten the load of heavy dockets.21 Congress recognized the need for ADR and passed the Alternative Dispute Resolution Act in 1998.22 In its congressional findings, Congress specifically mentioned benefits like “greater satisfaction of the parties, innova- tive methods of resolving disputes, and greater efficiency in achiev- ing settlements.”23 Congress also recognized that certain forms of ADR can “reduce the large backlog of cases” pending in federal courts “thereby allowing the courts to process their remaining cases more efficiently.”24
14 John M. Barkett, Tipping the Scales of Justice: The Rise of ADR, 22 NAT. RESOURCES & ENV’T 4 (2008).
15 See generally Judy Gutman, Litigation as a Measure of Last Resort: Opportunities and Challenges for Legal Practitioners with the Rise of ADR, 14 LEGAL ETHICS 1 (2011).
16 JAY E. GRENIG, ALTERNATIVE DISPUTE RESOLUTION § 1:2 (4th ed. 2016). 17 Id. 18 Id. 19 Id. 20 Id. 21 See generally Richard A. Enslen, ADR: Another Acronym, or Another Viable Alternative
to the High Cost of Litigation and Crowded Court Dockets? The Debate Commences, 18 N. M. L. REV. 1 (1988).
22 See Alternative Dispute Resolution Act, 28 U.S.C. §§ 651–658 (1998). 23 Alternative Dispute Resolution Act, 28 U.S.C. § 651 note (2003) (under Congressional
Findings and Declaration of Policy). 24 Id.
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Within ADR, there are many methods with benefits and detri- ments of their own. Arbitration is one way in which disputes can be adjudicated without some of the disadvantages of litigation. A private arbiter does not have all the formalities of the judicial sys- tem and may be faster and cheaper. However, there has been some doubt about whether arbitration is faster, cheaper, or better than litigation.25 Arbitration is fundamentally similar to litigation in the sense that it is an adversarial process that does not lead to a preservation of the relationship between the parties. One impor- tant benefit that arbitration has over litigation is its ability to keep proceedings and outcomes confidential.26 This allows the parties to maintain their public reputations.
Mediation is a non-adversarial method of dispute resolution where the parties go before a third-party conciliator with a goal of coming to a mutual agreement. Advocates of mediation—particu- larly in the business community—endorse this non-adversarial method because they view it as a “win-win” for both parties.27 Un- like arbitration, the settlement is ultimately in the hands of the par- ties in mediation and the third-party is not authorized to make a ruling.28 It has some similar benefits as arbitration in that it is con- fidential and even more flexible. Mediation is perhaps the most popular form of alternative dispute resolution.29 Congress has rec- ognized that certain mediation programs can be “equally effective in resolving disputes as federal trial courts,” and therefore urged district courts to “include mediation in their local alternative dis- pute resolution program.”30
Even amongst mediators, there are major differences in ap- proach.31 Historically, the only form of mediation was a “facilita- tive mediation,” where the mediator assisted with clarifying the views of the parties, helped the parties find common ground, and explored options for resolution without offering any advice or
25 Mike Gaddis et al., Arbitration Risks: Why Arbitration is Not Necessarily Better, Faster, or Cheaper Than Litigation, LEXOLOGY (Nov. 30, 2016), https://www.lexology.com/library/de- tail.aspx?g=do9fdf94-5789-47bf-b728-c6316a7c35da. See also Richard C. Reuben, The Lawyer Turns Peacemaker, 82 A.B.A. J. 55, 58 (Aug. 1996).
26 See GRENIG, supra note 16, § 1:2. 27 Deborah R. Hensler, Our Courts, Ourselves: How the Alternative Dispute Resolution
Movement is Reshaping Our Legal System, 108 PENN. ST. L. REV. 165, 183 (2003). 28 Jim Melamed, What is Mediation?, MEDIATE.COM, https://www.mediate.com/articles/
what.cfm (last visited Jan. 17, 2018). 29 See GRENIG, supra note 16, § 1:2. 30 Alternative Dispute Resolution Act, 28 U.S.C. § 651 note, supra note 22. 31 See O. RUSSEL MURRAY, THE MEDIATION HANDBOOK: EFFECTIVE STRATEGIES FOR LITI-
GATORS 30–36 (Rev. ed. 2010).
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opinion in order to remain impartial. The mediator was in charge of the process while the parties were in charge of the outcome.32
This remains a widely practiced method. However a more recent trend has started to use “evaluative mediation”33 where the media- tor will take a more proactive role offering his or her opinion on the likely outcome of litigation, pointing out weaknesses in a party’s case, or recommending an outcome based on their expert opinion and view of what would be fair based on legal concepts.34
This process assumes that the mediator is an expert in the field and that evaluative mediation is modeled after the process seen in set- tlement conferences held by judges.35
Mediation does not have many of the disadvantages described previously about litigation or arbitration. It is not adversarial, so it can preserve a relationship between parties; it is even more flexible than arbitration, since the parties have ultimate control over how to resolve the dispute36; and it is confidential, so the parties can maintain their public reputation. Most mediation is not mandated. Rather, the parties choose to try to resolve the conflict. Media- tions are not even governed by a general principle developed by a third-party. There are no general rules for mediation that equate to the role that rules of civil procedure play for litigation.37 An- other appealing part of mediation is that it often provides a forum where the parties feel comfortable having sincere and candid con- versations.38 It can be a “safe space” with an “energetic, yet calm- ing, optimistic intervenor.”39 This makes mediation most attractive in situations where the parties have strong incentives to come to an agreement and mend their relationship.
32 Zena Zumeta, Styles of Mediation: Facilitative, Evaluative, and Transformative Mediation, MEDIATE.COM, https://www.mediate.com/articles/zumeta.cfm (last visited Feb. 3, 2019).
33 See Leonard L. Riskin, Understanding Mediators’ Orientations, Strategies, and Techniques: A Grid for the Perplexed, 1 HARV. NEGOT. L. REV. 7 (1996) (discussing the debate between facilitative and evaluative mediation).
34 Id. 35 Id. 36 See Leonard L. Riskin, Mediation and Lawyers, 43 OHIO ST. L. REV. 29, 34 (1982). 37 Id. Although Riskin explains that mediation is subjected to the general assumptions of
“mutuality, cooperation, and fairness.” 38 Lela P. Love & Joseph P. Stulberg, The Uses of Mediation, in THE NEGOTIATOR’S
FIELDBOOK: THE DESK REFERENCE FOR THE EXPERIENCED NEGOTIATOR 573, 576 (Andrea Kupfer Schneider & Christopher Honeyman eds., 2006).
39 Id.
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B. The Theory of Transformative Mediation
The latest method of mediation to emerge, called “transforma- tive mediation,” has received increasing attention and support since initially laid out in 1994 by Robert A. Baruch Bush and Jo- seph Folger in the first edition of their book, The Promise of Medi- ation.40 Their method is based on a philosophy of conflict, backed up by cognitive and social psychology,41 that the primary functions of dispute relate to the parties’ human interaction rather than the “violation of [their] rights” or “conflicts of interest.”42 Specifically, the parties are most bothered by their states of powerlessness and alienation. These characteristics reinforce each other and create a “negative conflict spiral” which leads to additional conflict.43 The theory is that what the parties require most is the reversal of the spiral, which is best enabled by the mediator strengthening their feelings of “empowerment” and “recognition.” This can best be achieved when the mediator allows the parties to take an active role in both the process and the outcome.44 Strengthening their feelings of empowerment and their ability to recognize each other’s feelings and point-of-view can mend the underlying relationship and resolve the conflict in the most permanent and effective way.45
This form of conflict resolution takes advantage of a dispute and transforms the social interaction to be constructive in nature.46
Some mediators will pick out aspects of different methods of mediation based on the needs of their parties,47 the nature of the conflict, and the mediator’s individual style.48 Purist backers of
40 BUSH & FOLGER, supra note 3, at 23, 99. 41 Id. at 48. 42 INSTITUTE FOR THE STUDY OF CONFLICT TRANSFORMATION, The Transformative Frame-
work, http://www.transformativemediation.org/about/mission/the-transformative-framework/ (last visited Jan. 17, 2018).
43 BUSH & FOLGER, supra note 3, at 50. 44 Id. at 56 (“The keys to this transformation of conflict interaction are the empowerment
and recognition shifts that the parties themselves make.”). 45 Id. at 37 (“But when parties are helped to change the quality of conflict interaction itself,
so that when conflict arises people are more able to respond with self-confidence and empathy, it is possible to imagine fuller and fairer satisfaction of needs becoming a permanent condition.”) (emphasis added).
46 Id. at 14, 21. 47 Isabelle R. Gunning, Know Justice, Know Peace: Further Reflections on Justice, Equality,
and Impartiality in Settlement Oriented and Transformative Mediation, 5 CARDOZO J. CONFLICT
RESOL. 87, 88–89 (2004). 48 This author’s discussion with Robert A. Baruch Bush further clarified Bush’s stance on
this notion. Bush believes that transformative mediation is well suited for all forms of disputes. While he agreed that family business disputes are a paradigmatic case for transformative media-
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transformative mediation consider their method fundamentally at odds with evaluative and even facilitative mediation, since any di- rection in the process that comes from the mediator precludes the feeling of empowerment that the parties may develop when taking the process into their own hands.49
An added benefit of the hands-off approach that transforma- tive mediation values is that it prevents any conscious or subcon- scious bias that the mediator may have from affecting the direction of the resolution talks.50 While exhibiting no feelings of bias at all may be an impossible endeavor for a mediator, striving to be as neutral as possible is considered an important value for mediators who subscribe to many different approaches.
Some scholars criticize the transformative mediation model saying that it takes too long and often does not end with an agree- ment.51 They point to parties’ increasing demand for evaluative mediators as proof that it is a better system.52 Proponents of trans- formative mediation, however, tell us to look to the success of the REDRESS53 program used by the United States Postal Service (“USPS”),54 to see how successful the transformative mediation can be in practice.55 REDRESS is the largest employment media- tion program in the world,56 and it has demonstrated that despite the fact that transformative mediation focuses less on the settle- ment, closure rates have risen from normal rates when transforma-
tion’s use due to the often inherent need for an ongoing relationship, he argued that it works well with divorces as well, even though the relationship is in the process of being terminated. Bush said he added to the second edition of his book that he and Folger conceded that there is a need for other methods besides transformative mediation, but that those methods are primarily useful for parties who have no interest in mending their human interaction, such that transform- ative mediation would not be effective.
49 BUSH & FOLGER, supra note 3, at 45 (“Even though each of the different theories of conflict and mediation may be valid—including the transformation theory—we do not believe that they can be combined or integrated, at either the theoretical or practical level.”).
50 BUSH & FOLGER, supra note 3, at 16. See also Gary L. Welton & Dean G. Pruitt, The Effects of Mediator Bias and Disputant Power, MEDIATION PROCESS (1987); Andrew Kydd, Which Side Are You On? Bias, Credibility, and Mediation, 47 AM. J. POL. SCI. 597 (2003).
51 See Zumeta, supra note 32, at 2. 52 Id. 53 REDRESS is the acronym for “Resolve Employment Disputes, Reach Equitable Solu-
tions Quickly.” 54 U.S. POSTAL SERVICE, https://about.usps.com/what-we-are-doing/redress/welcome.htm
(last visited Jan. 24, 2018). 55 See generally Tina Nabatchi et al., Evaluating Transformative Practice in the U.S. Postal
Service REDRESS Program, 27 CONFLICT RESOL. Q. 257 (2010). 56 Id. at 258.
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tive mediation was implemented.57 One mediator shared that after the first two years of full implementation of the transformative me- diation program at the USPS, 80% of the mediations closed after their first attempt with transformative mediation thereby leaving only 20% of the disputes to continue in the formal complaint pro- cess.58 This dwarfs the rate of 44% of disputes that did not join the mediation program and continued through the complaint process after the first attempt to settle the dispute.59 In a formal study con- ducted on the REDRESS program that used questionnaires to de- termine the results of transformative mediation, the feedback was staggering. The study stated:
About 99% of mediators indicated that in a more transforma- tive mediation session a participant would say “I learned some- thing new about the other person’s point of view” while about 78% of mediators indicated that in a less transformative media- tion setting a participant would say “I didn’t learn anything new in the mediation.” Likewise, approximately 98% of mediators indicated that in a more transformative mediation participants would say ‘The other person listened to my views,’ while around 83% of mediators indicated that in a less transformative media- tion a participant would say “The other person didn’t even listen to me.”60
C. The Theory of Activist Transformative Mediation
Upon the growth in influence of transformative…
THE ROLE OF TRANSFORMATIVE MEDIATION IN FAMILY BUSINESS DISPUTES
Jacob Lebovics*
I. INTRODUCTION
Two of the most important requirements for an individual’s emotional stability and well-being are a supportive and cohesive family unit and stable financial security. Unfortunately, all too often when family and employment converge in the form of a fam- ily business1 they cause instability to one another.2 This note will propose that many facets of the method of mediation called “trans- formative mediation,” as laid out by Robert A. Baruch Bush and Joseph P. Folger in their highly influential work, The Promise of Mediation,3 can play a crucial role in resolving family business dis- putes while enabling family cohesion moving forward.
Family businesses are an incredibly common business struc- ture. One study found that, in the United States, there are 5.5 mil- lion family businesses which make up 75% of all the country’s jobs, about 64% of the Gross Domestic Product, and 60% of its publicly held businesses.4 Another study asserted that as many as 90% of all businesses in the United States have been family-owned or con-
* Notes Editor, Cardozo Journal of Conflict Resolution; J.D. Candidate, 2019, Benjamin N. Cardozo School of Law. The author would like to thank his family, friends, and mentors for their support and encouragement. In addition, he would like to thank Professor David J. Weisenfeld for his invaluable insight and guidance in drafting this note.
1 See generally R. A. Litz, The Family Business: Toward Definitional Clarity, 8 FAM. BUS. REV. 71 (1995) (noting the different definitions of “family business” and attempting to find a clear definition). This article does not attempt to follow a specific definition but focuses on the relational aspect of a family business which is present primarily in closely held family entities. The nature of the businesses that can benefit from this article’s analysis may range from mom- and-pop storefronts to family dynasties that control multinational enterprises.
2 Steven C. Bahls, Judicial Approaches to Resolving Dissension Among Owners of the Fam- ily Farm, 73 NEB. L. REV. 14, 21–22 (1994).
3 ROBERT A. BARUCH BUSH & JOSEPH P. FOLGER, THE PROMISE OF MEDIATION: THE
TRANSFORMATIVE APPROACH TO CONFLICT (John Wiley & Sons, 2d ed. 2004). 4 Family Enterprise USA, Family Enterprise USA Appoints New Executive Director, PR
NEWSWIRE (Sept. 17, 2013), https://www.prnewswire.com/news-releases/family-enterprise-usa- appoints-new-executive-director-224082351.html. These numbers are based on the Family Enter- prise USA’s (“FEUSA”) definition of what constitutes a family business. However, there have been a number of suggested definitions for “family business.” See generally Litz, supra note 1.
471
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trolled.5 Family businesses are particularly prone to conflicts, since disputes can be stimulated by a variety of factors, including sibling rivalry,6 prior unrelated history,7 children vying for parents’ atten- tion,8 children’s desire to differentiate themselves from their par- ents,9 and parents’ reluctance to turn over the reins of the business that they started.10
Transformative mediation is a method that focuses on mend- ing the underlying relationship between the parties in dispute,11
while the mediator allows the parties to take control of the talks, fostering empowerment and recognition between themselves.12
This method is very well suited to disputes within families where the parties have a predilection and interest to preserve their relationship.13
In Part II, this note will attempt to lay out the benefits and detriments of approaching family business disputes through litiga- tion, alternative dispute resolution, and various methods of media- tion, with a goal of explaining how transformative mediation relates to other approaches of resolving conflict. Part III will dis- cuss the unique issues that apply to family business conflicts and how concepts from other disciplines of study can be utilized to help best achieve the goals of a family business. Part IV will propose how transformative mediation is well suited to address these con- flicts and what form of transformative mediation would reach the optimal results. Part V will reiterate the conclusion of the note and indicate steps that can be taken for their practical application.
5 W. GIBB DYER JR., CULTURAL CHANGE IN FAMILY FIRMS: ANTICIPATING AND MANAG-
ING BUSINESS AND FAMILY TRANSITIONS 3 (John Wiley & Sons, 1986). 6 KENT RHODES & DAVID LANDSKY, MANAGING CONFLICT IN FAMILY BUSINESS: UNDER-
STANDING CHALLENGES AT THE INTERSECTION OF FAMILY AND BUSINESS 40 (2013). 7 See id. at 42. 8 See id. at 40. 9 Id.
10 See id. at 44. 11 Heidi Burgass, Transformative Mediation, https://www.colorado.edu/conflict/transform/
tmall.htm (last visited Jan. 17, 2018). 12 Id. 13 Paul Sullivan, Squabbles Over the Family Summer Home? Don’t Hire a Lawyer Just Yet,
N.Y. TIMES (Aug. 17, 2017), https://www.nytimes.com/2017/08/18/your-money/squabbles-over- the-family-summer-home-dont-hire-a-lawyer-just-yet.html?_r=0). See also Karen LaRose, Fam- ily Business Conflict: Flexible Solutions, MEDIATE.COM (Dec. 2012), https://www.mediate.com/ articles/LaRoseK1.cfm (finding that transformative mediation is a good fit for family business disputes but arguing for a more flexible approach by the mediator combining ideas from facilita- tive and evaluative mediation throughout the process). This note will discuss LaRose’s approach in detail in Section IV.D infra.
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II. BACKGROUND
A. Possible Methods to Resolve a Dispute
For a variety of reasons, the last thirty years have seen a rise in Alternative Dispute Resolution (ADR) as an alternative to litiga- tion.14 Litigation is increasingly seen as a last resort that looms in the background of other more efficient methods to resolve con- flicts.15 This is attributed to disadvantages of the system of litiga- tion including the increasing expense and the prolonged time it takes to resolve disputes.16 ADR is often more flexible in its method which allows for more creative solutions closely adapted to the demands of the type of conflict that it seeks to resolve.17 Liti- gation is formulaic and its procedural formalities can lead to results that are viewed as less just.18 It can also be less useful since it is not flexible enough to tailor to parties’ actual needs.19 The adversarial nature of litigation can lead the parties to become more relentless in their positions and poison any possibility of future relation- ships.20 Also, some judges have joined the push to utilize ADR in order to lighten the load of heavy dockets.21 Congress recognized the need for ADR and passed the Alternative Dispute Resolution Act in 1998.22 In its congressional findings, Congress specifically mentioned benefits like “greater satisfaction of the parties, innova- tive methods of resolving disputes, and greater efficiency in achiev- ing settlements.”23 Congress also recognized that certain forms of ADR can “reduce the large backlog of cases” pending in federal courts “thereby allowing the courts to process their remaining cases more efficiently.”24
14 John M. Barkett, Tipping the Scales of Justice: The Rise of ADR, 22 NAT. RESOURCES & ENV’T 4 (2008).
15 See generally Judy Gutman, Litigation as a Measure of Last Resort: Opportunities and Challenges for Legal Practitioners with the Rise of ADR, 14 LEGAL ETHICS 1 (2011).
16 JAY E. GRENIG, ALTERNATIVE DISPUTE RESOLUTION § 1:2 (4th ed. 2016). 17 Id. 18 Id. 19 Id. 20 Id. 21 See generally Richard A. Enslen, ADR: Another Acronym, or Another Viable Alternative
to the High Cost of Litigation and Crowded Court Dockets? The Debate Commences, 18 N. M. L. REV. 1 (1988).
22 See Alternative Dispute Resolution Act, 28 U.S.C. §§ 651–658 (1998). 23 Alternative Dispute Resolution Act, 28 U.S.C. § 651 note (2003) (under Congressional
Findings and Declaration of Policy). 24 Id.
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Within ADR, there are many methods with benefits and detri- ments of their own. Arbitration is one way in which disputes can be adjudicated without some of the disadvantages of litigation. A private arbiter does not have all the formalities of the judicial sys- tem and may be faster and cheaper. However, there has been some doubt about whether arbitration is faster, cheaper, or better than litigation.25 Arbitration is fundamentally similar to litigation in the sense that it is an adversarial process that does not lead to a preservation of the relationship between the parties. One impor- tant benefit that arbitration has over litigation is its ability to keep proceedings and outcomes confidential.26 This allows the parties to maintain their public reputations.
Mediation is a non-adversarial method of dispute resolution where the parties go before a third-party conciliator with a goal of coming to a mutual agreement. Advocates of mediation—particu- larly in the business community—endorse this non-adversarial method because they view it as a “win-win” for both parties.27 Un- like arbitration, the settlement is ultimately in the hands of the par- ties in mediation and the third-party is not authorized to make a ruling.28 It has some similar benefits as arbitration in that it is con- fidential and even more flexible. Mediation is perhaps the most popular form of alternative dispute resolution.29 Congress has rec- ognized that certain mediation programs can be “equally effective in resolving disputes as federal trial courts,” and therefore urged district courts to “include mediation in their local alternative dis- pute resolution program.”30
Even amongst mediators, there are major differences in ap- proach.31 Historically, the only form of mediation was a “facilita- tive mediation,” where the mediator assisted with clarifying the views of the parties, helped the parties find common ground, and explored options for resolution without offering any advice or
25 Mike Gaddis et al., Arbitration Risks: Why Arbitration is Not Necessarily Better, Faster, or Cheaper Than Litigation, LEXOLOGY (Nov. 30, 2016), https://www.lexology.com/library/de- tail.aspx?g=do9fdf94-5789-47bf-b728-c6316a7c35da. See also Richard C. Reuben, The Lawyer Turns Peacemaker, 82 A.B.A. J. 55, 58 (Aug. 1996).
26 See GRENIG, supra note 16, § 1:2. 27 Deborah R. Hensler, Our Courts, Ourselves: How the Alternative Dispute Resolution
Movement is Reshaping Our Legal System, 108 PENN. ST. L. REV. 165, 183 (2003). 28 Jim Melamed, What is Mediation?, MEDIATE.COM, https://www.mediate.com/articles/
what.cfm (last visited Jan. 17, 2018). 29 See GRENIG, supra note 16, § 1:2. 30 Alternative Dispute Resolution Act, 28 U.S.C. § 651 note, supra note 22. 31 See O. RUSSEL MURRAY, THE MEDIATION HANDBOOK: EFFECTIVE STRATEGIES FOR LITI-
GATORS 30–36 (Rev. ed. 2010).
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opinion in order to remain impartial. The mediator was in charge of the process while the parties were in charge of the outcome.32
This remains a widely practiced method. However a more recent trend has started to use “evaluative mediation”33 where the media- tor will take a more proactive role offering his or her opinion on the likely outcome of litigation, pointing out weaknesses in a party’s case, or recommending an outcome based on their expert opinion and view of what would be fair based on legal concepts.34
This process assumes that the mediator is an expert in the field and that evaluative mediation is modeled after the process seen in set- tlement conferences held by judges.35
Mediation does not have many of the disadvantages described previously about litigation or arbitration. It is not adversarial, so it can preserve a relationship between parties; it is even more flexible than arbitration, since the parties have ultimate control over how to resolve the dispute36; and it is confidential, so the parties can maintain their public reputation. Most mediation is not mandated. Rather, the parties choose to try to resolve the conflict. Media- tions are not even governed by a general principle developed by a third-party. There are no general rules for mediation that equate to the role that rules of civil procedure play for litigation.37 An- other appealing part of mediation is that it often provides a forum where the parties feel comfortable having sincere and candid con- versations.38 It can be a “safe space” with an “energetic, yet calm- ing, optimistic intervenor.”39 This makes mediation most attractive in situations where the parties have strong incentives to come to an agreement and mend their relationship.
32 Zena Zumeta, Styles of Mediation: Facilitative, Evaluative, and Transformative Mediation, MEDIATE.COM, https://www.mediate.com/articles/zumeta.cfm (last visited Feb. 3, 2019).
33 See Leonard L. Riskin, Understanding Mediators’ Orientations, Strategies, and Techniques: A Grid for the Perplexed, 1 HARV. NEGOT. L. REV. 7 (1996) (discussing the debate between facilitative and evaluative mediation).
34 Id. 35 Id. 36 See Leonard L. Riskin, Mediation and Lawyers, 43 OHIO ST. L. REV. 29, 34 (1982). 37 Id. Although Riskin explains that mediation is subjected to the general assumptions of
“mutuality, cooperation, and fairness.” 38 Lela P. Love & Joseph P. Stulberg, The Uses of Mediation, in THE NEGOTIATOR’S
FIELDBOOK: THE DESK REFERENCE FOR THE EXPERIENCED NEGOTIATOR 573, 576 (Andrea Kupfer Schneider & Christopher Honeyman eds., 2006).
39 Id.
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B. The Theory of Transformative Mediation
The latest method of mediation to emerge, called “transforma- tive mediation,” has received increasing attention and support since initially laid out in 1994 by Robert A. Baruch Bush and Jo- seph Folger in the first edition of their book, The Promise of Medi- ation.40 Their method is based on a philosophy of conflict, backed up by cognitive and social psychology,41 that the primary functions of dispute relate to the parties’ human interaction rather than the “violation of [their] rights” or “conflicts of interest.”42 Specifically, the parties are most bothered by their states of powerlessness and alienation. These characteristics reinforce each other and create a “negative conflict spiral” which leads to additional conflict.43 The theory is that what the parties require most is the reversal of the spiral, which is best enabled by the mediator strengthening their feelings of “empowerment” and “recognition.” This can best be achieved when the mediator allows the parties to take an active role in both the process and the outcome.44 Strengthening their feelings of empowerment and their ability to recognize each other’s feelings and point-of-view can mend the underlying relationship and resolve the conflict in the most permanent and effective way.45
This form of conflict resolution takes advantage of a dispute and transforms the social interaction to be constructive in nature.46
Some mediators will pick out aspects of different methods of mediation based on the needs of their parties,47 the nature of the conflict, and the mediator’s individual style.48 Purist backers of
40 BUSH & FOLGER, supra note 3, at 23, 99. 41 Id. at 48. 42 INSTITUTE FOR THE STUDY OF CONFLICT TRANSFORMATION, The Transformative Frame-
work, http://www.transformativemediation.org/about/mission/the-transformative-framework/ (last visited Jan. 17, 2018).
43 BUSH & FOLGER, supra note 3, at 50. 44 Id. at 56 (“The keys to this transformation of conflict interaction are the empowerment
and recognition shifts that the parties themselves make.”). 45 Id. at 37 (“But when parties are helped to change the quality of conflict interaction itself,
so that when conflict arises people are more able to respond with self-confidence and empathy, it is possible to imagine fuller and fairer satisfaction of needs becoming a permanent condition.”) (emphasis added).
46 Id. at 14, 21. 47 Isabelle R. Gunning, Know Justice, Know Peace: Further Reflections on Justice, Equality,
and Impartiality in Settlement Oriented and Transformative Mediation, 5 CARDOZO J. CONFLICT
RESOL. 87, 88–89 (2004). 48 This author’s discussion with Robert A. Baruch Bush further clarified Bush’s stance on
this notion. Bush believes that transformative mediation is well suited for all forms of disputes. While he agreed that family business disputes are a paradigmatic case for transformative media-
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transformative mediation consider their method fundamentally at odds with evaluative and even facilitative mediation, since any di- rection in the process that comes from the mediator precludes the feeling of empowerment that the parties may develop when taking the process into their own hands.49
An added benefit of the hands-off approach that transforma- tive mediation values is that it prevents any conscious or subcon- scious bias that the mediator may have from affecting the direction of the resolution talks.50 While exhibiting no feelings of bias at all may be an impossible endeavor for a mediator, striving to be as neutral as possible is considered an important value for mediators who subscribe to many different approaches.
Some scholars criticize the transformative mediation model saying that it takes too long and often does not end with an agree- ment.51 They point to parties’ increasing demand for evaluative mediators as proof that it is a better system.52 Proponents of trans- formative mediation, however, tell us to look to the success of the REDRESS53 program used by the United States Postal Service (“USPS”),54 to see how successful the transformative mediation can be in practice.55 REDRESS is the largest employment media- tion program in the world,56 and it has demonstrated that despite the fact that transformative mediation focuses less on the settle- ment, closure rates have risen from normal rates when transforma-
tion’s use due to the often inherent need for an ongoing relationship, he argued that it works well with divorces as well, even though the relationship is in the process of being terminated. Bush said he added to the second edition of his book that he and Folger conceded that there is a need for other methods besides transformative mediation, but that those methods are primarily useful for parties who have no interest in mending their human interaction, such that transform- ative mediation would not be effective.
49 BUSH & FOLGER, supra note 3, at 45 (“Even though each of the different theories of conflict and mediation may be valid—including the transformation theory—we do not believe that they can be combined or integrated, at either the theoretical or practical level.”).
50 BUSH & FOLGER, supra note 3, at 16. See also Gary L. Welton & Dean G. Pruitt, The Effects of Mediator Bias and Disputant Power, MEDIATION PROCESS (1987); Andrew Kydd, Which Side Are You On? Bias, Credibility, and Mediation, 47 AM. J. POL. SCI. 597 (2003).
51 See Zumeta, supra note 32, at 2. 52 Id. 53 REDRESS is the acronym for “Resolve Employment Disputes, Reach Equitable Solu-
tions Quickly.” 54 U.S. POSTAL SERVICE, https://about.usps.com/what-we-are-doing/redress/welcome.htm
(last visited Jan. 24, 2018). 55 See generally Tina Nabatchi et al., Evaluating Transformative Practice in the U.S. Postal
Service REDRESS Program, 27 CONFLICT RESOL. Q. 257 (2010). 56 Id. at 258.
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tive mediation was implemented.57 One mediator shared that after the first two years of full implementation of the transformative me- diation program at the USPS, 80% of the mediations closed after their first attempt with transformative mediation thereby leaving only 20% of the disputes to continue in the formal complaint pro- cess.58 This dwarfs the rate of 44% of disputes that did not join the mediation program and continued through the complaint process after the first attempt to settle the dispute.59 In a formal study con- ducted on the REDRESS program that used questionnaires to de- termine the results of transformative mediation, the feedback was staggering. The study stated:
About 99% of mediators indicated that in a more transforma- tive mediation session a participant would say “I learned some- thing new about the other person’s point of view” while about 78% of mediators indicated that in a less transformative media- tion setting a participant would say “I didn’t learn anything new in the mediation.” Likewise, approximately 98% of mediators indicated that in a more transformative mediation participants would say ‘The other person listened to my views,’ while around 83% of mediators indicated that in a less transformative media- tion a participant would say “The other person didn’t even listen to me.”60
C. The Theory of Activist Transformative Mediation
Upon the growth in influence of transformative…
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