Mediation Boot Camp – The Negotiation
Benson Percival Brown LLP
Mediation procedure is designed to encourage incremental bargaining based upon an introspective evaluation of facts and evidence combined with litigation risk. After your brief has been sent, and the opening statement delivered, it is time to move to that phase of the mediation that involves the negotiation.
The next portion of the program discusses in summary fashion the essential elements of the negotiation phase of the mediation, and effective ways of ensuring that the negotiation matures into a robust settlement dialogue in which all parties participate meaningfully.
Obtaining the best possible outcome for your client
There are four sides to every dispute.
Yes – Four.
Yours, theirs, the truth, and what might happen at trial.
Embracing the concept of mediation inherently means exchanging the quest for truth (misguided or not) that the trial strives to provide, and replacing it with intangibles such as finality and predictability.
There is little doubt that a successful trial should represent the best possible outcome for a litigant. The key word in the previous sentence is successful. Any litigant who can receive a guarantee of success at trial would be a fool to compromise their case at mediation. However, I have yet to meet a lawyer who will guarantee success at trial.
Bright lawyers, those who have seen the end of the road a few times, have an appreciation for the uncertainty of the trial process irrespective of whether the trier of fact is a judge or a jury. That uncertainty is the first reason that most cases settle at mediation.
While a successful trial “should” always represent the best possible outcome for a litigant, sometimes, it does not. The reason is costs. Sometimes, even when you win, you lose. The cost of litigation is the second reason that most cases settle at mediation.
How does this all relate to obtaining the best possible outcome for your client? It starts with an appreciation that the best possible outcome at mediation is different than the client’s best possible outcome at trial. It is a lawyer’s role to develop an understanding of the client’s expectations of the dispute. The best possible outcome at mediation is achieved when the expectations of the client are met both by the process, and by the substantive result.
Start low/high? Cut to the chase?
It almost doesn’t matter – as long as you start.
A client must be ready to negotiate. Ensure that the private caucus is not the first time that your client has thought about the monetary manifestation of the numerous legal issues in the typical lawsuit. For many people the value of the case is in the lawsuit itself. Ensure that if settlement is the goal, the client has thought about what settlement might look like.
Cases that involve multiple defendants represent a special challenge to the start of a negotiation. Diffusion of responsibility is a psychological phenomenon in which people are less likely to take action or feel a sense of responsibility in the presence of a group. Mediators see this phenomenon manifest all the time, sometimes with as few as two defendants. In circumstances where all defendants have come to mediation with a mindset that someone else is going to pay to resolve the case, getting the defense half of the negotiation to start becomes a negotiation within a negotiation, burning valuable negotiation time. Where possible, issues between the defendants should be discussed ahead of time.
There are many different theories about the way in which a negotiation should be conducted, and none can be universally accepted as a winning strategy.
For the most part, it is my experience that the first party to make a credible offer typically sets the point around which the balance of the mediation is focused. This is not quite a cut to the chase strategy, since there is a certain rhythm to a negotiation which is necessary before the litigants can reasonably be expected to have felt that they participated meaningfully. Offers presented which are so far outside the realm of possible as to be meaningless, do nothing to advance the process, waste valuable negotiation time, and can quickly de-rail the negotiation.
At a minimum, any offer presented should lead the opposing litigant to continue to believe that settlement is possible. As such, any offer that is met with continued dialogue is sufficient to advance the process.
Making the most of your time in mediation
There is little doubt that any mediation involves some downtime. Make your client aware that the downtime is perfectly normal. However, a clever litigant will capitalize on this time to further advance the negotiation. A number of suggestions follow:
- Review disputed facts. You should have your entire file with you to check these facts. Typically, the disputed fact is revealed through the representations made in the opening statements.
- Review disbursement lists if provided at the mediation. It is a good idea for counsel to provide disbursement lists with their brief.
- Review pre-judgment interest calculations. Ideally, any math associated with the negotiation should be worked out well before the mediation, but if not, use the private caucus time to complete the calculations.
- Evaluate the last offer received from the other parties involved in the negotiation.
- Prepare the next offer to be presented in the negotiation, and any message or information to accompany the offer.
- Re-evaluate your clients interests to ensure that the offer and any message sent with the offer continuously mesh with the desired outcome.
Client management during mediation
Remember that during a negotiation litigants are asked to make hard decisions that will affect the rest of their lives. Clients come to litigation with varying levels of sophistication and vulnerability. For many, litigation itself is an emotionally charged situation, and the negotiation of the issues over the course of a day can be stressful. For all of the above reasons it is vital that some management of the client’s expectations take place in advance of the mediation.
During the negotiation counsel must ensure that their client understands the effect of offers being presented and the substantive interest being advanced. Ensure that the client appreciates the rationale behind any compromise. With each offer, objectives should be re-reviewed to ensure that counsel and client are on-side.
Using the mediator to read the other side
In every negotiation there is a dynamic. The dynamic is in play in the negotiation itself, but also within each room. The mediator will be privy to the dynamic in both rooms, and may, if asked, give helpful comments about the manner in which the dynamic is presenting. This information can be helpful in tailoring an offer to accommodate the expectations or interests of the other party.
A common example from personal injury cases involves family law act claimants. Whether or not a defendant makes an offer to a family law act claimant may be contingent on the role that the individual appears to be taking in the negotiation.
Looking for the breakthrough or tipping point
In circumstances where good rhythm is achieved in the mediation, good timing and strategy are typically rewarded with a breakthrough. A breakthrough is achieved when all parties can state for the first time in the negotiation, with a reasonable level of confidence, that settlement will be achieved. The development of the breakthrough provides the kinetic energy for the final compromise necessary to conclude the deal.
The concept of the tipping point has come to mean any process that beyond a certain point (the tipping point) proceeds dramatically. A skilled lawyer and negotiator develops an appreciation for the tipping point in the case and steers the process there achieving a balance in the negotiation from which the litigant opposite is left with only one reasonable conclusion. When the tipping point is achieved, but not surpassed, reasonable people settle cases.
Explaining the logic behind your offer
A principled approach to a negotiation is always to be preferred. Where ever possible an offer should be justified and explained. Even more effective is when an offer can be directly connected to specific evidence. To reference an easy example, a plaintiff might direct a defendant to pre-accident income tax returns in circumstances where a baseline for a loss of income is to be established. A defendant might direct a plaintiff to the plaintiff’s income tax returns in circumstances where the plaintiff’s offer is predicated upon a baseline not reflective of the past income as established in the returns.
Do you or the mediator present your final offer?
The best mediation resolves without either party presenting a final offer. An appropriate figure naturally develops between the parties representing the last compromise that both parties will make to their position. However, where a final offer is to be presented, there is a relatively common strategy of counsel presenting that offer directly. Typically, it is an approach that I would only recommend in cases where the solicitors have a positive working connection, and the decision makers also have enjoyed a positive working environment. In the absence of the right dynamic, the direct presentation of an offer can be perceived as an ultimatum.
Avoiding mediation impasse involves many of the issues discussed above in this paper, and the previous papers. Choose a mediator carefully; one who you believe will be of assistance in brokering the relationship necessary to develop the process into a negotiation. Ensure that the decision makers are present and empowered to make the hard decisions asked of them.
All negotiations develop some form of impasse, and that is when the real work of the mediator begins. However, litigants who are motivated to settle should be mindful to do whatever they can to avoid impasse. Drawing lines in the negotiation, or using language to send the message that further compromise and flexibility are no longer possible creates impasse as the litigant’s position must then be supported to preserve credibility. Moderated language typically sends the correct message without boxing the negotiation into an impasse.
As an impasse develops it is usually helpful to re-visit the core issues in the litigation. A re-evaluation of the risk analysis that started the negotiation and a re-consideration of the expenses that will ensue once the tipping point is passed should be all that is required.
Where impasse does occur, a good mediator will usually have two or three strategies to assist in working through the impasse.
If mediation does not resolve due to impasse, make sure that the impasse is real. An impasse that derives from ego does nothing to advance the interests of a litigant.
Closing the deal
A negotiation ends well when both sides are equally unhappy with the result.
A well done negotiation usually points to an obvious conclusion. The challenge is dragging the parties to that conclusion. By the end of the negotiation, the litigants are tired, and every good point has been made two or three times already in the quest to minimize the gap. Each litigant feels that they have compromised as much as they can, and the lawyers begin to pack up their bags and find their coats.
This is the right time to start calculating the costs of a trial. Think about the witnesses to be called, and their preparation time. Think about the experts yet to be retained, and the disbursements to be spent in preparing for trial. The simple fact is that our legal system has become more complicated. The number of documents in a file has grown exponentially, and, the amounts at stake have increased. As a result, trials have become longer, and consequently, more expensive. Concern over the costs of litigation settles many cases, and should, represent a significant factor in closing the deal.