7 Steps to Mediation of an MLM Legal Dispute

Posted by David G. Eisenstein on Jun 27, 2017 5:38:32 PM


     This mediation blog explores the highly specialized field of direct sales, also known as MLM and network marketing, in which a complex commercial litigation dispute focuses on the mlm legal and factual issues raised in the network marketing litigation, and which often takes the form of a network marketing lawsuit presided over by a Judge (sitting with or without a jury) or arbitration (also known as alternative dispute resolution, adr) presided over by an attorney arbitrator--which are two very expensive means of resolution by third parties.  

     However there is another much less expensive means of  compromise and settlement of mlm litigation which can be accomplished by the parties  themselves facilitated by a dispute or lawsuit mediator.  With an attorney-mediator experienced in mlm mediation, that mlm mediator and the parties can accomplish a mediation agreement in one day at less than 10% of the costs incurred by the parties for weeks and months of expensive discovery and lengthy trials or arbitrations--just one of many reasons to mediate toward the goal of receiving an acceptable offer of settlement, and making a compromise deal, threeby enabling the parties to avoid a full-blown mlm trial in their direct sales case.

Step #1 Find and Retain a Qualified Mediator

    All mediators are not created equal.  In an MLM legal dispute, an attorney-mediator with a background in MLM legal issues and litigation should be of utmost importance in selecting the right person to mediate the controversy.  A convenient date for the mediation will be selected by the parties, their attorneys, and the mediator.  Location of the mediator is not usually a very important consideration due to the nationwide nature of the network marketing industry.  In most cases, a highly qualified mediator is also a well-travelled attorney-mediator-one who is willing and more than likely, expecting, to make a trip away from his or her home base due to the nature of the industry being comprised of networks of people which are built by the company and its key distributors, requiring significant travel by many of the company's executives and key distributors in order to be in contact with active members of their teams.  

     However, the company executives involved in an MLM legal dispute will expect and possibly insist that the mediation be conducted in the city where the headquarters of the network marketing company is based.  Both sides must  include as participants in the mediation those on each side who have the power to make the ultimate decision on any settlement offers that are made during the course of the mediation.  The lawyer-mediator will most likely be happy to travel to any  location both sides can agree on, but will expect the travel and lodging expenses for purposes of conducting the mediation there to be borne by the parties to the mediation.

Step#2 The Counsel for both Sides will Need to Submit a Mediation Memorandum

     Although they should not be as formal or detailed as briefs filed in a court or arbitration, The length of the Mediation Memorandum will vary depending on the length of time the controversy has been brewing, the complexity of the factual and legal issues involved, and the importance of the issue at stake, which varies as to how much money is realistically in contention or the criticality to the parties of other issues at the core of the controversy.

     Again, the Memorandum should be concise and to the point, setting forth the main issues which exist between the parties, the key documents which will play a role in the mediation of the legal dispute, an indication as to whether or not the attorney submitting the memorandum has an expectation that the memorandum or parts of it will be shared with the other side, the settlement offers--if any--to date, and the client's settlement position for purposes of the mediation.     

Step #3 Bring the Key Documents to the Mediation

     If you and your attorney don't bring the documents which are the heart of the controversy and/or which hold the key to resolution of the dispute, that's like heading out to play basketball without the basketball and/or the basketball court including hoop(s).  Those are the essential elements of the game of basketball and must be there or that guy or gal is just going to be "dribbling around," not unlike when someone goes to a mediation without the essential documents and is left with  "drivelling on" without the rudder a key document can easily provide.

Blue Office Folder with Inscription Legal Documents on Office Desktop with Office Supplies and Modern Laptop. Legal Documents Business Concept on Blurred Background. Legal Documents - Toned Image. 3D..jpeg

     In an MLM legal dispute, the key documents often include the distributor agreement, the company's policies and procedures, the genealogy of a party's downline organization, as well as the commissions or bonuses paid to the date of the mediation or claimed to be owed.  Sometimes, in the case of a claim of wrongful termination of a distributor, the correspondence between the company representatives and the distributor including emails should be available for the parties and the mediator to discuss at the mediation as well.

Step #4 Check your Attitude (and maybe your Ego too) at the Door to the Mediation Room

    Remember you'll probably spend a good part of the day (and in some cases, of the evening too) with your opposition.  The mediator will do her or his best to set the right tone at the beginning of the mediation.  But respect for the others involved in the mediation process is as important to the success of the mediation as any other factor.  You don't have to be or become anybody's "best friend" but it would help to be friendly, even if you "hate the other side's guts."  An occasional smile in the direction of the other side wouldn't hurt the process either.

     Patience is a very real virtue at a mediation.  Any resolution of the dispute is going to take time because it requires changes in the parties' positions vis-a-vis the case.  Usually, both sides believe their position is the right one and their opponent's position is the wrong one.  Therefore, a bonafide attempt at understanding the other side's position and communication to them that you do understand their point of view in the matter is also important.  Some empathy goes a long way in mediation situations.

Step #5  Keep in Mind What Your Interests at Stake are and also What the Interests of the Other Side are

     What is really important to you?  What is really important to them?  Remember, even though the goal of the mediation may be to arrive at a dollar settlement figure, the mediation concerns much more than that.  

     For example, a company's representatives may have an interest in not setting an unfavorable precedent by settling a case in a mediation, preferring in some ways to make an example out of what they see as an errant distributor.  So, in order to pay money to settle the case their attorney will insist on a settlement agreement which requires that the settlement be confidential.  Often, the company's attorney will want to have the agreement provide that the distributor not disparage the company, its representatives, or other distributors of the company.

     By the same token, the distributor may also want that there be no disparagement by the company and its representatives and may have an important interest in laying out exactly what can be said about the former distributor and the results of the mediation, if anything, in future communications by the company to its field of distributors, as well as to members of the press and public.

     Both sides are going to have a vital interest in their abilities to continue to do business after the mediation is over and so each will insist on language in their mediation settlement agreement which will protect their interests in that regard.

Step #6 Help to Find the Settlement "Sweet Spot" by Putting Ideas on the Table for Consideration by all 

     The more ideas for how to make a deal that works for both sides and to structure a settlement between the parties that are discussed at the mediation the higher the liklihood that the mediation will be successful.  If offers are made in good faith, they deserve thorough consideration by the other side and discussion should also ensue with the mediator about each offer being considered.

Sharing ideas oh how to structure a mediation settlement

     There is no such thing as a "stupid question," and the same could also be said for ideas that are put on the table at a mediation, whether they be suggested by one of the parties or by the mediator as the facilitator of the parties.  Much as happens in a "brain storming" session, you never know when the seeds of a successful mediation will be contained in one simple idea which is built upon by another and then another, so on and so forth.

Step #7 Expect to Undergo Some Painful and Frustrating Moments

     It is generally crucial to the success of a mediation that the process, be it ever so brief, of getting stuff "off his chest" by a party to a mediation, is a true turning point in the mediation as it frees that person to get past his or her own anger and see the other side's point of view, which in turn, makes a change in position possible. Remember, if the parties were all in agreement before the mediation, there would be no need for the mediation in the first place.  No, a successful mediation almost always requires that both sides change their view of what an acceptable resolution of the controversy would be,  That requires that there be a catharsis of feeling on the part of both parties in order for them to get past the impasse that accompanied them into the mediation.

     Catharsis is defined as, "The process of releasing, and thereby providing relief from, strong or repressed emotions." Emotions such as anger, fear, hate, while difficult to hear and/or watch while being displayed in our presence, to an extent are purged through "soul baring" "tell it like it is" "tell us how you really feel" moments at mediations, and have much the same effect as getting your "day in court."  Unbound from the emotions, the person is freer to empathize with the other side and reach a deal that works for both sides.

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     Mediations, while less formal than court trials and arbitrations, are still opportunities for attorneys for the parties to summarize the important factual considerations, and even some abbreviated legal arguments.


  • The attorneys need to have some knowledge of the network marketing industry in order to be effective in mediations
  • The mediator should be well-informed on MLM issues as well so he/she can facilitate the parties reaching a settlement 
  • To see more timely blog articles about the MLM industry, the legal issues that face it, as well as the value and methods of mediation toward a resolution of a network marketing legal dispute,subscribe to this blog and we'll keep you regularly informed and updated!



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