After 113 days, the NHL lockout ended with the NHL and its players association reporting that they have reached a tentative deal.  Although they say that a lot of i's need to be dotted and t's need to be crossed, it looks as if North America's hockey fans will get to watch hockey again this winter. 

By all accounts, federal mediator Scot Beckenbaugh, played a significant role in helping the parties break their stalemate, and it only took him six weeks to do it!  That's right.  On the 72nd day of the lockout, the NHL and its players association agreed to mediation in an effort to break their stalemate.  By that point, the parties had seen millions of dollars in revenue go down the drain.  In fact, the NHL is rumored to have thought the lockout would never get this far because the difference in the parties' positions reportedly translated to the amount of money the players lost after being locked out for eight games.  Now, three months into the hockey season, it appears that hockey's 82 game season will be reduced to 48 or 50 games at best.

What has been the toll?  The players lost their livelihood in the interim.  The NHL's image has been tarnished, and it remains to be seen whether fans will return to a sport that has enjoyed a surge in popularity over the last few years.  In addition, the relationship between the players and the owners has been strained to say the least. 

What does all of this have to do with mediating non-compete disputes?  Probably not much.  But as a hockey fan and non-compete mediator, let me attempt to draw a correlation.

The dispute between the NHL and its players lasted 72 days before a mediator got involved.  It took another 41 days for the mediator to bring the parties to an agreement in principle.  During that time, the mediator faced a mountain of obstacles, some of which are present in every dispute, and some of which arise when parties to a hardened dispute fail to get a mediator involved early on. 

First, when the mediator arrived on the scene, the parties already had lost a lot of money.  Second, their emotions began to shape their negotiations sometimes resulting in offers that were more about punishing the other side than about addressing the offeror's interest.  Third, the longer the dispute dragged on, the more the resolution became hostage to negotiating conventions rooted in the ritual of exchanging offers and counteroffers (more on this below).  Fourth, the owners made a severe miscalculation.  They incorrectly believed that the players would fold quickly because they stood to lose more the longer the lockout lasted. Fifth, each side suffered from principal/agent problems.  The players wondered whether Gary Bettman truly had the support of the owners, and the owners likewise second guessed whether the players' trust in Donald Fehr would continue.

And there you have it.  The lockout lasted as long as it did in large part due to emotions, each side's desire to punish the other, mounting sunk costs, a mistaken belief that negotiations must always adhere to an offer/counteroffer process instead of mutual problem solving, clashing personalties not trusted by either side, and initial miscalculations which exacerbated all of the problems discussed above.

Enter the mediator.  It is hard to envy a mediator who had to step into the middle of this mess after parties had become entrenched both in their positions and processes.  But it is easy to see how a mediator's involvement from the outset could have shortened the life -- and therefore the expense -- of this dispute.

First, what is a mediator's job?  To help the parties negotiate an agreement?  Well, sort of.  A mediator's task is to help the parties determine whether an agreement as possible, and if so, to help them achieve that agreement.  But not just any agreement.  The agreement must be durable, and it must be mutually acceptable to the parties.

Second, much has been written about whether mediators should be facilitative or evaluative.  Facilitative mediators help the parties reach an acceptable resolution by listening to everyone and helping them analyze the issues and explore options.  A facilitative mediator does not recommend a solution, but he or she may share his or her opinion.

In contrast, an evaluative  mediator behaves more like a judge in a settlement conference by exploring weaknesses in each side's arguments and emphasizing each side's alternative to a negotiated resolution.

So is one approach better than the other? Or perhaps a combination of both? Just as a carpenter seeking to attach two pieces of wood may realize that he can do so by using a hammer and a nail, a screwdriver and a screw, velcro, glue, tape, or any other number of adhesives, a good mediator too must be open to using all of the available tools at his or her disposal.  A good mediator brings to the table an independent perspective. Not just a perspective independent on the merits, but independent in terms of the path to a successful resolution.  A good mediator sees potential solutions where parties see conflict.  And this is where we see the lessons that non-compete and trade secret disputants may take away from the NHL lockout negotiations.

First, just as the lockout got expensive fast, so too can non-compete and trade secret litigation.  Of course, all litigation can be expensive, but non-compete and trade secret disputes have all of the hallmarks of litigation compressed into a short, expedited, emotionally driven timeframe.  Consequently, the parties may quickly reach the conclusion that they have sunk too much investment into the litigation to settle.  With each dollar spent, the range of acceptable solutions short of litigation tends to shrink.

Second, emotions often run high in non-compete and trade secret disputes.  Plaintiffs often feel betrayed, and their perspective may be colored as much by a desire to punish as it is by a desire to be made whole.  Defendants feel that their livelihoods are on the line, and they see plaintiffs as overreaching.  

Third, mediators can bring creative solutions to the table that are tailored to meet the interests of the respective parties.  This is particularly true in these types of cases because courts have wide discretion to fashion equitable remedies.  Parties can be equally creative in mediation.

Fourth, mediators with subject matter expertise are essential.  The NHL and its players association chose Beckenbaugh to serve as their mediator for a reason.  During the 2004-2005 NHL lockout, he served as their mediator.  Consequently, he had a heightened familiarity with the issues between the parties.  Using a mediator with significant experience in non-compete and trade secret litigation is essential.  These cases are often like snowflakes.  Although they appear to be similar upon quick review, no two cases are alike.  The outcome of each case is driven by a panoply of factors ranging from the judge assigned to the case, the applicable state law, and the individual facts and circumstances.  Moreover, the path to resolution can vary significantly just as courts have wide discretion to determine the procedures to be used (e.g., whether a motion for injunctive relief will be resolved on the papers or after presentation of live testimony; whether expedited discovery will be permitted; etc.).  It is essential that the parties choose a mediator who has significant experience in non-compete and trade secret litigation so that the mediator can quickly and incisively cut through the issues.  It will also ensure that the mediator can help to craft and propose enforceable and creative non-monetary solutions to the extent appropriate.

In short, mediating a non-compete and trade secret dispute is different than mediatiing general commercial disputes.  Early involvement by a mediator experienced in such cases can go a long way toward saving parties time, money and anxiety.

Michael R. Greco is a partner in the Employee Defection & Trade Secrets Practice Group at Fisher & Phillips, and he received his mediation training from the Center for Dispute Settlement in Washington, D.C.  To receive notice of future blog posts either follow Michael R. Greco on Twitter or on LinkedIn or subscribe to this blog's RSS feed.

Mediation Information.pdf (1.24 mb)

This week, the U.S. Supreme Court issued a ruling in a non-compete case -- a type of dispute that rarely finds its way to the high court.  See Nitro-Lift Technologies v. Lee, 568 U.S. --- (2012).  The issue that brought this case to the Court was arbitration, a topic the high court has ruled on a number of times in recent years.  The Supreme Court reaffirmed what most employers have believed for quite some time:  if you include an arbitration clause in your employment agreement, you can count on being able to enforce the agreement to arbitrate.

In Nitro-Lift, the Oklahoma Supreme Court had ruled that the state court could rule on the enforceability of -- and ultimately invalidate -- an employee's confidentiality and non-compete agreement with his former employer even though the employee's contract had a clear arbitration clause stating that "[a]ny dispute . . . between Nitro-Lift and the Employee . . . shall be settled by arbitration. . . ." (slip op. at 1).   The case began when Nitro-Lift served its former employee with a demand for arbitration, claiming he was violating his non-compete agreement.  The former employee responded by filing a preemptive strike lawsuit in Oklahoma state court, asking the court to (a) declare the covenants unenforceable under Oklahoma law, and (b) enjoin their enforcement.  The trial court dismissed the action, finding that the arbitration clause required the dispute about enforceability be submitted to an arbitrator, rather than the court (slip op. at 2).  But when the employee appealed, the Oklahoma Supreme Court declared the agreement null and void under Oklahoma non-compete law and refused to stay its hand in favor of arbitration.  The state Supreme Court's core ruling was that, "the existence of an arbitration agreement in an employment contract does not prohibit judicial review of the underlying agreement." Howard v. Nitro-Lift LLC, 2011 OK 98, par. 15 n.20 (2011). 

Nitro-Lift petitioned the U.S. Supreme Court for certiorari, asserting that the Oklahoma Supreme Court had ignored controlling decisions of the U.S. Supreme Court under the Federal Arbitration Act, 9 U.S.C. sec. 1 et seq.  The U.S. Supreme Court granted certiorari and promptly vacated the Oklahoma Supreme Court's decision on the grounds that the Oklahoma court had failed to apply the federal law of arbitration as reflected in the FAA and the Supreme Court's decisions interpreting the statute, and had violated the Supremacy Clause of the U.S. Constitution by asserting that Oklahoma's restrictive covenant jurisprudence controls the issue, rather than the federal arbitration law (slip op. at 4-5). 

The U.S. Supreme Court's ruling rested on a body of well established Supreme Court case law upholding arbitration clauses against myriad challenges from lower court rulings that reflect a "judicial hostility to arbitration" that is contrary to the dictates of the FAA (slip op. at 5, quoting AT&T Mobility v. Concepcion, 563 U.S.___, ___ (2011) (slip op. at 8).   In that sense, there is very little new in this opinion for employers, except that employers can take heart that the Supreme Court has further reaffirmed that valid arbitration clauses will be enforced, including in the context of employment relationships.

Christopher P. Stief is the chair of Fisher & Phillips' Employee Defection & Trade Secrets Practice Group.  To receive notice of future blog posts either follow Christopher P. Stief on Twitter or on LinkedIn or subscribe to this blog's RSS feed.

Mediating a non-compete and trade secrets dispute is different than mediating general commercial disputes. This is particularly true early on in litigation. Non-compete cases are front loaded by nature and get expensive very quickly.  The associated expenses are often beyond a party's control. Here are five things to keep in mind as you consider whether and when to mediate a non-compete and trade secrets case:

1. Consider mediating early, and be prepared to do so rapidly.  The conventional wisdom when it comes to mediation is that the parties should not do so until they have had a chance to conduct discovery. More often than not, this advice is right on the money.  But the nature of a non-compete case is different.  These cases require rapid attention, and that is equally true in mediation. 

2. Be prepared and willing to disclose information. This runs counter to a commonly utilized approach where parties are discouraged from using mediation as a substitute for discovery.  In ordinary litigation, where costs are likely to be strewn out gradually over time, parties are understandably reluctant to disclose facts that won't be learned by their opponents for some time.  But in non-compete disputes, discovery is likely to be swift in coming, and instantly expensive upon arrival.

3. Choose a mediator well experienced in non-compete and trade secret litigation.  This can mean the difference between a successful and unsuccessful mediation.  The fact that a party has successfully obtained a temporary restraining order does not necessarily mean it will obtain a preliminary injunction or damages.  The opposite is also true. Denial of a temporary restraining order does not automatically mean recovery of damages is foreclosed. Using a mediator who has litigated non-compete cases will translate into credibility for the mediator, which is essential.  It will also ensure that the mediator can craft and propose enforceable and creative non-monetary solutions if necessary.
 
4. Be open to creative solutions.  Courts have discretion to fashion equitable remedies.  Parties should be equally creative in mediation.  This can be particularly essential when a defendant lacks deep pockets.

5. Bring persons with authority AND emotion.  It is obvious that a mediation will not succeed if the parties in attendance lack authority and are mere designees with pre-set bottom lines. But of equal importance, non-compete disputes are driven in large part by emotion.  Parties feel betrayed by their opponents' misconduct, which is frequently fresh in their minds.  Providing them with an opportunity to speak their mind (in a respectful way) can be cathartic and productive.

Michael R. Greco is a partner in the Employee Defection & Trade Secrets Practice Group at Fisher & Phillips LLP.  He is also a trained mediator of non-compete and trade secrets disputes.  To receive notice of future blog posts either follow Michael R. Greco on Twitter or on LinkedIn or subscribe to this blog's RSS feed.