Mediation of a franchise termination: evaluation, a secret recording and an unrepresented party
You are the mediator in a dispute between FranchiseCo, a national coffee chain, and Ms Alvarez, who operated a franchised outlet for four years. FranchiseCo terminated the franchise agreement for alleged under-reporting of royalties, relying on a reconciliation of till data. Ms Alvarez says the termination was a pretext to take back a profitable site; she has GBP 350,000 invested, eight staff, and claims GBP 600,000 in lost profits. She is unrepresented, speaks English as a second language, and is visibly distressed. FranchiseCo's counsel is a former general counsel of a rival franchise chain and, in the first caucus, asks you to give Ms Alvarez a 'realistic assessment' that she will lose in court. Counsel also says they have a secretly recorded telephone call with Ms Alvarez's manager that 'proves' the under-reporting and proposes to play it in joint session. The mediation agreement is silent on evaluations. Ms Alvarez has asked you privately whether she should accept GBP 80,000.
1. Should you give the requested 'realistic assessment'? Set out the model of mediation you are using, the disclosures you must make, and how you would respond to each party.
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The default is facilitative mediation: you help the parties analyse risk and generate options, but you do not decide or predict outcomes. Evaluative mediation is possible only with the informed consent of all parties. First, disclose your own position and any connection with FranchiseCo's counsel or the rival chain; if the former general counsel role creates a reasonable apprehension of bias, decline the mandate or obtain written consent after full disclosure. Do not give legal advice to Ms Alvarez; she is not your client. You may help her reality-test by asking about evidence, costs, time and enforcement, and by suggesting she take independent legal advice or adjourn for it. If both parties consent to an evaluation, label it as a non-binding view based on the information available, give it in joint session if possible, and balance strengths and weaknesses on both sides. Never use an evaluation as a pressure tactic at the request of one party. Explain to FranchiseCo that an evaluation aimed only at the other side is advocacy, not mediation.
2. How do you handle the secretly recorded call? Address confidentiality, admissibility, and whether it can be used in the mediation.
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A secretly recorded call raises three separate issues. First, mediation confidentiality: the recording pre-dates the mediation, so it is not automatically protected, but using it as an ambush in joint session destroys the trust the process depends on. Second, legality and admissibility: secret recording may breach data-protection or employment law, and unlawfully obtained evidence may be excluded in later proceedings. Third, fairness: Ms Alvarez is unrepresented and may be ambushed. In caucus, ask FranchiseCo's counsel to explain the provenance, legality and purpose of the recording. Do not accept it into the mediation unilaterally. If FranchiseCo wants to rely on it, require disclosure to Ms Alvarez in advance, time to take advice, and her consent to its use; otherwise exclude it from the joint session and treat it as background only. You may ask FranchiseCo to put its substance to Ms Alvarez as questions rather than play it. If the recording suggests a criminal offence, consider whether you must suspend and take advice. Record your decision and the reasons.
3. Ms Alvarez asks whether to accept GBP 80,000. What do you say, and what safeguards do you build into any settlement?
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You cannot advise her whether to accept; that is legal advice and you are not her lawyer. You can explain the choice: GBP 80,000 is certain and immediate, while her GBP 600,000 claim is subject to evidence, costs, delay, counterclaim and enforcement risk. Help her identify her BATNA-likely litigation with an uncertain outcome and possible costs exposure-and her non-monetary interests: a reference, transfer of equipment, staff continuity, and avoiding publicity. Encourage her to obtain independent legal advice before signing, and offer an adjournment or interpreter. Check that her consent is voluntary and informed, and that she understands the release. Safeguards in the settlement: written terms, a clear payment date and method, security or a charging clause, confidentiality and non-disparagement, scope of release, no admission of liability, tax treatment, and a confirmation that she had the opportunity to take advice. Do not draft legal advice; record the commercial terms and recommend independent review. If the power imbalance makes informed consent doubtful, do not pressure a signature.