When partners divorce

A business breakup turns messy with accusations of betrayal. They should have called the Middleman. A former judge, George Adams is the guru of mediation.

Karen Mazurkewich, Financial Post

In business as in love, breaking up is hard to do. Just ask Harry Stinson, the flamboyant Toronto property developer who is licking his wounds after a very public falling out with the partner of his dreams, theatre impresario David Mirvish.

As a multimillion-dollar downtown condo deal publicly unravelled this month, Mr. Stinson filed for bankruptcy protection, Mr. Mirvish summoned his lawyers and the two sides hurled accusations of bad faith across the canyons of Bay Street.

"Harry has never failed to disappoint me on every promise he has made," Mr. Mirvish told a reporter.

Beyond the bitterness of betrayal, there was much emotional talk between them that the other partner was -- wait for it --a bad listener.

The echoes of marital breakdown were hard to miss.

"The divorce happened, but the kids are still around," Mr. Stinson says, describing the experience as "very painful, like a marital breakup."

But the marital analogy doesn't go very far. In business, big or small, a breakup is not as simple as turning to a divorce lawyer or relying on the well trodden precedents of family law.

If you can't summon a social worker or book a marital counsellor when a multimillion-dollar partnership sours, who ya gonna call?

The traditional corporate impulse has been to litigate. Now, the alternative is to mediate.

Fighting it out in the courts or the media is increasingly seen as costly brinkmanship by companies, and they are turning to professional mediators to resolve disputes before they turn ugly.

"We are seeing an influx of mediators, says Mary Anne Harnick, executive director of the ADR Institute of Canada, who says applications are growing. The institute, which certifies training programs for mediation, has 600 members, 67 of whom have received certification by the institute after an extensive review process.

"Mediation has become much better known," says Brampton, Ont.-based mediator Colm Brannigan. "No one confuses it with meditation anymore."

The rise of mediation is due to a number of reasons. For one, people may feel more litigious but lawsuits are prohibitively expensive. Trying a business dispute case in court can cost a minimum of $35,000 and most lawyers discourage such battles unless the money at stake exceeds $250,000.

The time it takes for a trial to wind its way through court can also prove discouraging.

But the greatest reason for the increase is simply this: Mediated interventions are cost-effective and, more often than not, successful.

According to several studies in the United States, when the partners voluntarily agree to seek a resolution, the rate of success is 70% to 80%. Ontario cases that have already gone to court, but have been kicked back to mediators under the mandatory mediation program adopted eight years ago, have a success rate of 49% -- higher than originally anticipated.

The bottom line: "You aren't losing anything to try it out," says Mr. Brannigan. "It allows people to craft business solutions that you can't do in courts."

George Adams is the counsellor to the corporate giants. A former Supreme Court Justice, Mr. Adams has pioneered dispute resolution in Canada. He's handled complex cases ranging from the Algoma Steel restructuring agreement to the $12-million settlement between the Government of Canada and Maher Arar, the Canadian citizen who was wrongly imprisoned in Syria and later cleared of all terrorism related activities by a Canadian inquiry.

When Mr. Adams stepped down from the bench in 1997 to open his own mediation practice, colleagues thought he was crazy. Mr. Adams, however, was convinced he was on the cusp of a revolution in the business world.

"You see a lot of conflict when you are a judge, you just know the parties would be better served if they tried to solve the problem rather than trying to figure out who is right or wrong or who is the winner or loser," he says.

The former law professor and labour arbitrator believed he could put his problem-solving skills to better use. "That's the nature of law. You pick a principle and apply it to the facts and you have to drain the moral ambiguity and situational complexity from it," he says. By contrast, he says, "all the shades of grey can be accommodated in settlements."

Since he started work as a fulltime mediator, Mr. Adams has seen a transformation in the way lawyers work with each other. Increasingly, he fields calls from lawyers who've planned mediation with a third party even before litigation proceedings begin. "We've become more sophisticated in looking at how we can promote communication between people [who] are fighting and how we can get at psychological deterioration in a relationship sooner rather than later."

While Mr. Adams works primarily with clients who have already retained lawyers, more people are turning to dispute resolution before approaching legal counsel at all.

One year ago, Joe McCabe, president of LMS Prolink Ltd., a mid-size insurance broker, was in turmoil. One of his partners was attempting to force the sale of the company and an internal battle ensued.

For four months, Mr. McCabe dug in his heels and fumed at the aggressive tactics employed by his partner. "I thought we had the skill sets to figure this out ourselves," he says.

But the business conflict was becoming personal. "It was a 24- 7 preoccupation and distraction and it affected our business," he says. "It drained our psychic energy."

Finally, Mr. McCabe approached Michael Marmur, a Toronto-based business consultant. After a series of meetings that included separate consultations and group discussions, the company came to a mediated compromise. Mr. McCabe and a third partner decided the best solution was to buy out their disgruntled associate and keep the business going. The deal had happy consequences: The brokerage business grew 20% last year. "Michael helped us refocus

on what the goals were," says Mr. McCabe.

Rather than litigate to the tune of tens of thousands, the company only spent a few thousand dollars in mediation. The cost benefit, not to mention the emotional relief, was well worth it says Mr. McCabe.

So, what makes a good mediator? While every mediator has his or her own style, some psychological insight and the ability to read body language helps.

A good mediator must develop his own theory, says Stephen Morrison of Cassels Brock & Blackwell LLP. "Is it self-esteem, money or reputation? Once you've answered that question you can figure out the solution," he adds. "The trick is that you then have to get the partners to come up with the solution themselves and let them think it was their idea," he says.

Another tool of the trade is to let clients do most of the talking. Shut up the lawyers, says Mr. Morrison. They can be in the background to advise on legal issues, but the client needs someone "who gets it" and who can "talk in their language," he says.

Perhaps the most important element is that people have to want to settle, says Mr. Adams. "You can intervene too soon," he says.

You can also intervene too late. Sometimes disputes can take on a life of their own and wounds can fester.

"After a dispute develops, sometimes it takes time for people to be ready [to talk] again," Mr. Adams says.

But even the guru of mediation admits he can't solve all business breakups. The toughest cases to broker, he says, are the ones in which fraud or malpractice is involved.

Another nightmare is when the dispute involves a family business. Take the acrimonious battle between McCain Foods principals that began in 1990 or the lawsuit between the Pusateri and the Trozzos family over ownership of the families' stores in Toronto. Both disputes went to court.

Big egos are also difficult to mediate. "If you have people with relatively powerful positions, people with particular kinds of egos, it takes more time to get them to see what they need to see, and see past their own emotional needs," says Mr. Morrison.

But never say never. Mr. Stinson is adamant that his relationship with Mr. Mirvish is irreparable but he, too, is hoping the dispute will eventually be mediated outside the courtroom.

"This is a complex business situation and there is simply going to have to be a compromise business solution," he says.

© National Post 2007

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