Draft contract clause calling for mediation then litigation

(Using negotiation between senior executives, followed by mediation, followed by litigation.)

(a) The parties will promptly seek to resolve any Dispute by negotiations between senior executives of the parties who have authority to settle the controversy [and who do not have direct responsibility for administration of this Agreement]. When a party believes there is a Dispute under this Agreement, that party will give the other party written notice of the Dispute. Within twenty days after the date of such notice, the receiving party shall submit to the other a written response. The notice and response shall include (1) a statement of each party's position and a summary of the evidence and arguments supporting its position, and (2) the name and title of the executive who will represent that party. The executives shall meet at a mutually acceptable time and place within thirty days after the date of the notice and thereafter as often as they reasonably deem necessary to exchange relevant information and to attempt to resolve the Dispute. If a negotiator intends to be accompanied at a meeting by an attorney, the other negotiator shall be given at least three working days' notice of such intention and may also be accompanied by an attorney. All negotiations pursuant to this Article [Section, Paragraph] are confidential and shall be treated as compromise and settlement negotiations for the purposes of the Federal Rules of Evidence and state rules of evidence.

(b) If the Dispute has not been resolved within sixty days after the date of the notice given pursuant to subparagraph (a), or if the party receiving such notice will not meet within the time periods set forth in that subparagraph, either party may initiate mediation of the Dispute by sending the other party [parties] a written request that the Dispute be mediated. The party [parties] receiving such a written request will promptly respond to the requesting party so that all parties can jointly select a neutral and impartial mediator and schedule the mediation session. The Mediation contemplated by the parties is intended to be a voluntary process in which a neutral third party, who has no power to decide the outcome, facilitates communication among the parties to promote understanding among them and, where possible, to arrive at a mutually acceptable resolution of their Dispute. The Mediator will not have the authority to impose a settlement on any party. No formal rules of evidence apply to the mediation, and there will be no stenographic record of any mediation meeting. A party may withdraw from the mediation at any time. It is expected that in the Mediation each party will have a representative who is not acting as legal counsel and who is authorized to make the decisions which are part of the mediation process. Although legal and other consultants may participate in the mediation sessions, the communications in the mediation are intended to principally be among party representatives and the Mediator. During the Mediation, party representatives, rather than legal counsel, should speak for the parties and explain the parties' interests and needs. The mediation process is confidential, and the parties and the Mediator will not disclose confidential information regarding the process to third parties. The information which is confidential includes, but is not limited to, all statements or communications made in the course of and relating to the subject matter of the mediation and which is made to or in the presence of any party Representative or participant, Mediator or other person. All such confidential information will be treated as compromise and settlement negotiations for the purposes of the Federal Rules of Evidence and state rules of evidence. The parties will jointly share the mediation's compensation.

(c) If the Dispute has not been resolved pursuant to mediation within sixty days after the initiation of such procedure, or if either party will not participate in mediation, either party may initiate litigation in [state] in the courts described below upon [00] days' written notice to the other party. For the purpose of litigating any Dispute and subject to the jurisdictional limits of such courts, the parties consent to the exclusive jurisdiction and venue of the United States District Court for the ________ District of _____ or any __________ state court, and agree that an action regarding a Dispute will not be brought in any other court.

(d) All deadlines specified in this Article may be extended by mutual written agreement.

(e) Each party is required to continue to perform its obligations under this Agreement pending final resolution of any Dispute.

(f) The procedures specified in this Article shall be the sole and exclusive procedures for the resolution of Disputes between the parties arising out of or relating to this Agreement; provided, however, that a party may seek a preliminary injunction or other preliminary judicial relief if in the judgment of that party such action is necessary to avoid irreparable damage or to preserve the status quo. Despite the initiation of any such judicial proceedings, the parties will continue to participate in good faith in the procedures specified in this Article. As between the parties, all applicable statutes of limitation shall be tolled while the procedures specified in this Article are pending; the parties will take all actions, if any, required to effectuate such tolling.

Modified form of a clause in Alternatives, Vol 8, No 10, October, 1990