Mediation is a tool that parties can use to resolve disputes. The sides jointly select an independent person, often a lawyer or a retired judge to serve as the mediator; they then meet on the same day with the mediator, and the mediator runs shuttle diplomacy between separate conference rooms to listen to the positions of the parties and their attorneys. Good mediators will point out the strengths and weakness of what they are hearing, and work to try to get the parties to understand how the risks, expense and stress of litigation might be avoided through a compromised resolution that the parties can control. Once a lawsuit is filed, control is lost.
In the legal profession, we say that a good mediator can get the parties to agree to a resolution that neither of them likes. Both sides leave unhappy because they had to compromise on something that is essential and important to them.
Everyone knows there is a monetary price to pay for litigation. Filing fees, attorney fees, deposition costs, third-party copying expenses, court fees, etc., etc. Settlement and resolution also have a price or value, but the value of resolution is impossible to quantify because of the uncertainty of litigation. But, there is a value to resolution and avoiding litigation. Combatants pay this price in mediation through compromise. Finality and peace of mind that the dispute is done and over often times has a very high value, and a strong mediator can help parties see and understand this on a logical and emotional level.
I am a big believer in mediation. I've seen it work countless times. I'm happy to sue and litigate as well when the stakes are high and litigation is the right business decision, but I try to use mediation as a step before litigation, and I write mandatory mediation clauses into most of the contracts I write.
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