Tip # 3: “Pre-Mediation Negotiation”
A key
to successful negotiation at mediation is to manage the expectations
of the opponent before you get to the table. Previous articles in this
series have discussed other ways of managing expectations to maximize
the potential for achieving a good settlement. None is more important
than pre-mediation negotiation. When should numbers be discussed before
mediation? How should the subject be approached? Is it best not to
convey proposals before mediation in some cases?
In larger
cases with uncertain verdict potential, it is essential
to get some sense of what the other side is seeking, before mediation.
Without this, the mediation session can be frustrating for both sides,
and will often fail. The problem was evident in a recent insurance
Bad Faith mediation. Both sides privately told the mediator that the
verdict range was about $1 million to $5 million, depending upon how
much a jury awarded for business losses and punitive damages (if any).
No discussion of numbers occurred between the parties before mediation.
The defense hoped plaintiff would be happy with $750,000 to $1
million,
but did little to condition plaintiff for such a number. Plaintiff
hoped for $3.5 million or more, but gave no clues in advance. Briefs
were not exchanged. The insurance carrier came to mediation with insufficient
reserves, and the plaintiff with unrealistic hopes. If numbers had
been floated in advance, it would have begun the process of adjusting
expectations before mediation. The case required a second session to
resolve, with a lot of effort by the mediator to soothe frayed emotions
from the first session. Neither side was unreasonable. Both sides simply
missed opportunities to adjust the expectations of the other.
In a routine
case, where most attorneys will know the settlement range
(i.e., a simple PI or business accounting case), it may work to float
numbers for the first time at mediation. Usually, no one will be surprised
or caught unprepared by the proposals. But even here, there is no down
side to floating a pre-mediation settlement proposal, and encouraging
the opponent to do likewise. It will help define the “brackets”
within
which a fruitful negotiation may unfold. If you are uncomfortable making
a pre-mediation proposal, at least sound out your opponent about the
range, to make sure the case is ready for negotiation. There are many
creative ways to do this in casual conversation, without revealing
too much. For instance, compare your case to another similar case which
settled or went to verdict at a stated figure, and solicit a responsive
comment. Suggest that the case value is more or less than a familiar
benchmark (policy limit; appraisal value; “six figures;” a
statutory ceiling, etc.), and gauge the reaction. Most attorneys will
give you some hints about their true position.
There are
cases in which the perspectives, strong emotions, or fragile
egos make it nearly impossible to talk numbers before mediation. Any
hint about one’s position could blow the mediation off calendar,
before the mediator has a chance to work with the parties. In such
cases, let the mediator know of your concern, and ask the mediator
to sound out the opposition before mediation. The mediator may be able
to begin adjusting their expectations by telephone, and ease your opponent
into the negotiation.
Before
mediation, competent attorneys on both sides advise their
clients of the possible outcomes, risks and costs of litigation, as
well as what to realistically expect in a settlement. The
stated position
of the other side is important in assessing what is realistic in settlement,
and helps adjust the expectations. Mediation is often about coming
to terms with what is possible.
Help your
opponent adjust their thinking about what is possible by
talking numbers or ranges before mediation, whenever possible. A skilled
mediator will take it from there.
Next month, we will look at “Joint Session
Creativity.”