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© 2019 by Jerome F. Rock

Case Study 4

Quick Overview
  • Indemnity Action against auto supplier resulting from Manufacturer Recall

  • Mediation provided opportunity for resolution of multiple unresolved claims and disputes

  • Creative Solution  provided “value” to each party sufficient to resolve litigation

Background on the Case:  Plaintiff, a lower tier manufacturer of a pump assembly, filed an action for Indemnity against the manufacturer of a hose incorporated into the pump assembly, alleged to be the “Root Cause” of the assembly failure. The claim flowed from an Auto Manufacturer’s Warranty /Recall of the vehicles using the faulty pump assembly.  Extensive discovery took place, and each side stood firmly behind its own Expert Engineering Reports. The Court ordered the Mediation.

Leadership by the Mediator:  The Mediator held separate meetings with each side prior to the scheduled Hearing (the Mediator refers to this practice as “Pre-Mediation” and considers this a foundation for successful resolution of disputes.  The Mediator routinely inquiries about the ongoing or prospective business relations between the parties.  In this case, the representatives were both procurement specialists, and each party had multiple plants, in widely divergent segments of the automobile supply chain.  The Mediator suggested that the procurement officers inquire of their procurement colleagues in the various divisions, to see if there were any ongoing, unresolved issues, that could be put on the table for discussion during the upcoming Hearing. Neither representative was enthusiastic about the assignment.  The Mediator was prepared for a challenging Hearing.  

Outcome:  As anticipated, neither party made concessions on liability, and the money exchanges reflected an all or nothing position, not likely to result in settlement of the claim.  Near the end of a long day, the hose manufacturer presented the Mediator with a final cash offer, as well as the acceptance by Plaintiff, of open requests for  multi tiered price increases on several part numbers supplied by different divisions of the Defendant to various divisions of the Plaintiff.  The Mediator dutifully took the instructions into the Plaintiff group.  Without pause, the Plaintiff group acknowledged the outstanding requests for price changes, agreed to several requests, limited others, and agreed to accept the cash settlement, with one additional condition; that the Defendant as purchaser, agree not to re-source several parts currently manufactured by Plaintiff for the entire term of an extended model run.

Insight:  The Mediator could not have predicted the details of this outcome. But the “seed” that the Mediator planted during the Pre-Hearing conference was nurtured by the simple inquiry made by the various procurement officers, and the result was enough “value” to each party to make an otherwise unacceptable cash offer, satisfactory to each party.  This is an example of classic Interest Based negotiating theory.    

Judge: Oakland County Circuit Court, James M. Alexander

Plaintiff’s Counsel: Kelley M. Haladyna, Dickenson Wright, PLLC, Detroit, MI

Defendant’s Counsel:  Jeffrey G. Raphelson, Bodman PLC, Detroit, MI