This is one type and use of mediation, and perhaps the most common. Mediation can be used, however, in many other more sophisticated ways. Mediation does not need to be a one-time meeting with a binary result (settlement or no settlement). On the contrary, mediation can be used to develop a customized dispute resolution process for almost any type of dispute.
First, there is no reason why mediation has to wait until after the close of discovery, or even after a lawsuit is filed. For many disputes, a quick and quiet resolution is best. In such instances, the parties may want to consider mediation before litigation is filed.
Second, mediation can be used to facilitate a confidential exchange of necessary information. Many litigators object to early mediation arguing they lack enough information to settle. This is part and parcel of the view of many U.S. litigators that discovery is a necessary part of litigation. This concern can be resolved by developing a process for exchanging information in the mediation. The process is likely to be quicker than in litigation because it is informal (no need to exchange boilerplate requests and objections) and because the mediator can help "supervise" the process. (In my experience, most discovery disputes in court boil down to the lack of ready access to a third party--i.e., a judge--to establish parameters for discovery).
Third, mediation can be used to explore non-monetary settlement options. Many complicated disputes (and some that are not so complicated) involve issues other than a simple exchange of monetary consideration: Intellectual property rights, preserving (or ending) a long-term business relationship, ceasing objectionable marketing practices, or sometimes a simple apology, just to name a few. These issues should often be explored in negotiating a settlement. Further, a mediator may be able to offer suggestions the parties have not considered.
Fourth, if mediation does not ultimately result in a settlement, or results only in a partial settlement, the parties can explore agreeing to other processes--such as arbitration--to get a fast and final decision.
Here is how a fairly simple example of such a process might work:
1. Initial Mediation Session. Meet and discuss the nature of the dispute and the needs of the parties. This would include a discussion of any information exchange needed prior to resolution, whether a confidentiality agreement is needed, and any other preliminary matters that should be resolved prior to final settlement negotiations. The parties would agree to exchange proposals to address these issues following the initial session.
2. Second Mediation Session. This session addresses the parties' proposals for information exchange, confidentiality, etc. The mediator seeks to bridge any gaps in the parties' proposals. If successful, the session results in an agreement for moving forward, and each party then has their "marching orders" for producing information and addressing other concerns. Between this session and the next, the parties exchange information, etc., and the mediator is available to help resolve any disagreements.
3. Third Mediation Session. This proceeds much like a "typical" mediation session, but with the parties encouraged to explore options other than a simple monetary settlement. Once the parties have reached this point, they have hopefully developed a commitment to the process and at least some trust in the other party or opposing counsel, which should help foster a resolution. If a settlement is reached, then it is documented in a settlement agreement. If a settlement is not reached, or only a partial settlement reached, then the parties may choose to agree to arbitration or another method for reaching a final resolution.
One of the best features of mediation is its flexibility. Many of us, however, seem to use mediation only as a one-time binary process as described above. With an experienced mediator and creative parties, mediation can be used in much more flexible and productive ways.
Note: I originally wrote this post as LinkedIn post on January 23, 2016.