Because a party can never be forced to settle, courts struggle with what constitutes “bad faith” in mediation. In Lea v. PNC Bank, No. 15-776 (W.D. Pa. 2016), after the court ordered mediation, Defendant’s counsel told Plaintiff’s counsel that the mediation would be more productive if Plaintiff made a demand before the session. Plaintiff complied, but Defendant did not respond with a counter-offer before the mediation. Even at the mediation, no counter-offer was conveyed to Plaintiff. While defendant apparently proposed a counter-offer in a private caucus with the mediator, the mediator determined that relaying that offer to Plaintiff would not be productive, presumably because it was so far from Plaintiff’s demand.
Having attended a mediation at which it did not even receive an offer, Plaintiff moved for sanctions. The court agreed that Defendant had violated a local rule requiring the parties attending a mediation to act in good faith, which meant avoiding a waste of time and resources. The court ruled that “after counsel for Defendant recognized the Plaintiff’s demand was well beyond an amount to which his client might be agreeable, he had a duty to reach out to the Plaintiff’s counsel to discuss the issue.” The court did not, however, award attorneys’ fees, but rather only the half of the mediator’s fee that Plaintiff had paid.
While one can understand the frustration of the Court and Plaintiff, there is a problem with the court’s decision because it assumes that the parties or the mediator can determine, based on pre-mediation offers, that a settlement is not possible. Most mediations start with a large gap between the parties, but it is only during the mediation session that one finds out if these positions are firm or not. For this reason, other courts have taken a purely procedural approach to determining bad faith, under which if a party shows up to a mediation, and has full authority to settle, there is never bad faith, regardless of the settlement position taken by that party.