Sheldon Stark IAM Distinguished Fellow

Part 2: Arriving at the Mediation Table

Who Goes First?

This is the second of a 3-part article on managing opening offers.  Part I dealt with establishing trust and gaining confidence in the mediator and the mediator’s coaching from the very start, overseeing the exchange of necessary information, and encouraging the parties to exchange compelling written submissions that lay out their client’s perspective in a persuasive narrative well supported by the evidence.

One of the most important questions for the day of mediation is “whose turn it is to make the first offer?”  If there have been no prior negotiations, most negotiators and negotiation coaches believe it is the plaintiff’s turn to put out the opening number.  First, it is traditional for the plaintiff to start.  (It confuses the defense when they don’t want to, and not in a good way.)  Second, plaintiff brought the case.  Presumably, plaintiff knows the value of his or her claims. Accordingly, Plaintiff should tell the defense what he/she wants.  Third, “anchoring” research shows going first is in plaintiff’s best interest.[1]

If a party made a settlement proposal before arriving at the mediation table, it is the offeree’s responsibility to respond and throw out the first number once the mediation process kicks off.  I liken it to a tennis match:  One party lobbed the ball over the net by making an offer before mediation; the other party should lob it back with a counteroffer.

This should be simple, straightforward and commonsensical.  Years ago, when I represented clients, I wouldn’t have dreamed there was any controversy around this.  Turns out, there is.  The same arguments are made repeatedly by advocates on either side of the “v.”: “We didn’t reply to the offer because it was outrageous.  Tell them to give us a reasonable number and we’ll answer it.”  Experienced mediators know this to be a fool’s errand.  Every advocate on the planet rejects such requests with righteous indignation: “I’m not going to negotiate against myself!  This is the number.  If they don’t like it, we’re done here!”  As noted in Part III, there are techniques to help us move past this potential impasse.

Advance Preparation

Most participants come to the table on the day of mediation with a top or bottom line or range for what they hope to achieve.  Some have a strategic plan in the form of an offer/concession strategy.  The best are also flexible:  they bring a plan, but they listen and adjust based upon fresh insight or new information.  Typically, they have conducted a thorough review of their file, analyzed the facts and law, diagnosed the risks as then understood, identified the strengths and weaknesses, calculated potential damages or loss, and assessed the amount of their claim or exposure.  Sometimes the lawyers have negotiated with their own clients about settlement value[2].  Most often, based on their top or bottom line, they establish their opening number and obtain client approval.  As a mediator, are you ready to hear it at the outset?  I suggest not.  I recommend investing time in risk assessment before soliciting a party’s previously prepared opening number.

If the mediator does her job properly, that opening number might very well change in a good direction as a result.  Here’s why:

No one can exercise good judgment about whether to settle and on what terms unless and until they have as much information as possible.  Mediation is an excellent process for the transfer of information, and mediators are responsible for making certain that each side has sufficient information to enable the exercise of good judgment.  Assuming the participants are open-minded and flexible, their opening numbers after a robust discussion of risk will be far more productive than not.  Such information includes inter alia:

  • What is the story each side tells and is that story plausible? If plausible, what are the chances a decision-maker will find it persuasive?  Is the story sympathetic and easy to tell?  Will the trier of fact have the patience necessary to listen to the end?  If the story is believed, what is the most likely outcome?
  • What is the best evidence each side can marshal? How persuasive is it?  What is the risk such evidence will be excluded by a motion in limine?  Does the exclusion of the evidence increase the likelihood and risk of an appeal – requiring more time, more attorney fees, more risk – and possible reversal?
  • How credible are the witnesses – the parties in particular? Will a jury like them? What impeachment material is available?  Does anyone appear to be lying even if they are not?[3]
  • What’s the judge’s predisposition? What’s the court’s track record granting or denying dispositive motions in similar cases?  What’s the risk this dispute will be dismissed, or the sails trimmed in some crucial fashion?
  • What might jurors be like in the venue where the trial will be held? In employment cases in Michigan, for example, Wayne County jurors – where Detroit is located – generally believe an employer must have good cause to terminate an employee.  In Kent County where Grand Rapids – home to the DeVos family – is located, by contrast, every juror is familiar with the employment at-will doctrine.  Do verdict sizes in Genesee County, where Flint is located, differ from those in Ottawa County?
  • As only a small percentage of all cases make it to trial, what is there about this dispute that might be different? And, in the wake of the COVID-19 pandemic, when does anyone realistically expect a  trial?
  • What are the big risks for each side? Where are the holes in the claims or defenses?  Perfect cases are few and far between.  Rarely is a liability a “lay down hand” or the defense a “slam dunk”.  A longtime trial lawyer turned mediator William “Bill” Sankbiel, likes to say, “I’ve never seen a case I couldn’t lose.”  If the parties try the case 10 times, how many times would the plaintiff recover a verdict?

The “Softening Up” Process

Litigators and parties focus on their strengths and minimize their weaknesses,  sometimes convincing themselves that they have no weaknesses. Both are prone to fall in love with their case leading them to sweep potential “warts” under the carpet.

For that reason, the opening numbers parties bring to the table may reflect a myopic – and therefore unrealistic – vision of risk.  Risk impacts valuation.  As a result, the more appreciation a party has for risk, the more reasonable their numbers.  Mediators help the parties examine their risks in large part to challenge their certainty about the outcome and enhance flexibility in a productive direction.  Accordingly, the numbers that the parties had in mind at 9:30 am are not as relevant as their numbers several hours later after engaging in risk assessment.  Then is the time to place numbers on the table for consideration.

After examining their risks, a party may remain resolute, stubbornly attached to the numbers they came with.  It’s their case, their money, their decision.  We should, however, understand why they prefer to take their chances  notwithstanding the risks.  .  [4]

Mediation is a voluntary process.  Settlement is voluntary.  Mediators assist in negotiation; they do not compel resolution.  While the parties may request a mediator’s proposal and some of us are willing to provide one, it is not generally our job to tell the parties what their case is worth. Before they choose between settling and rolling the dice, it is our job to identify and help them weigh the risks realistically

When is the Right Time?

Knowing when to solicit an opening number is a judgment call.  While we are engaged in “softening them up”, the parties may grow impatient.  “Can’t we cut to the chase?  Look what time it is!”  Impatience can be driven by many factors: attorney and mediator hourly rates; frustration with progress; pessimism about whether the dispute will settle; resentment that their beloved theories are challenged, etc.[5]

When that happens,  I point out that if the case doesn’t settle, there can be great value in letting the process unfold: enhanced risk assessment, better understanding of how the other side will present their case, and a sense of the other side’s best numbers.  Good advocates want and need this information and can be helpful in tamping down party impatience, which nonetheless must be respected.  Accordingly, I make strategic decisions: which risks to discuss first, what to save for later rounds, and when to back off.  Strategic mediators always save a few good risk questions for later rounds to generate additional movement when needed.

“After You, My Dear!”

When the time comes to open the exchange of numbers, it is helpful to know the negotiation history.  What numbers have previously been exchanged, if any?  Most parties are willing to share.[6]  As noted above, if there have been no discussions, the first number should come from the plaintiff.

Sometimes, however, the plaintiff counsel wants the defense to throw out the first number.  I try to discourage that.  “In the history of American jurisprudence,” I like to say, “no plaintiff’s lawyer has ever been happy as a result of making defendant go first.”  It confuses defense counsel.  It undermines the plaintiff’s credibility and reduces respect for counsel’s judgment.  It sharpens suspicion.  “What are they up to?”  Because an opening defense number is likely to “anchor” the negotiation at a disappointing level, making the defense go first is rarely in the plaintiff’s best interest.  It is rare in my experience, that the defense prefers to go first.

Where the defense is attempting to respond to a pre-mediation demand, they sometimes seek a different number from the plaintiff.  “We’re not in the same ballpark.  Our ballparks aren’t even in the same city!  How do we respond to that?  We can’t!”

To avoid an impasse before we’ve even started, I am generally willing to request a new number from plaintiff “for purposes of mediation.”  “Yes, it’s their turn,” I say in plaintiff’s caucus room, “but your number didn’t reflect any risk.  Much time has passed.    You have a lot more information.  You acknowledge the number was your best day in court – and maybe then some.  They’ve been unwilling to reply.  They remain reluctant.  Now that we’re here and we’ve had a good discussion of risk, will you at least consider proposing a more productive number that takes some of that risk into account?”  Sometimes, after deliberating, plaintiff counsel agrees.

If not, I return to the other room and seek flexibility from the defense side.  There are several ways to move forward.

  • “What number would you respond to? If they started with a better number, what would your counter have been?  Can I offer your hypothetical counter and explain that you’ve authorized me to make it on the basis that you’re trying to show good faith not respond to an unrealistic demand?”
  • “You think this is a ridiculous, unrealistic number and you’re worried about the message you’re sending if you reply. Why not respond with an equally ridiculous number and send the same signal back?”  I call this the “bookend” approach learned from Jon Muth.
  • “What if we pretend this is already Round 2? Where would you expect to be to get Round 2 off to a good start?  If you authorize a good counter, I’ll work hard to get you a number you haven’t heard before that you maybe also won’t like, but you’ll see it as progress.”

When the parties have agreed to mediation voluntarily, it is rare that one or the other intervention doesn’t get the negotiation moving.

[1] Opening offers have a strong effect on negotiations. “The first offer typically serves as an anchor that strongly influences the discussion that follows. In research documenting this price anchoring effect, psychologists Daniel Kahneman and Amos Tversky found that even random numbers can have a dramatic impact on people’s subsequent judgments and decisions.”  From the Harvard Project on Negotiation.

[2] Settlement negotiations often resemble a three-ring circus.  In the left ring, plaintiff’s counsel is negotiating with her client, trying to rein in overly optimistic expectations.  In the right ring, defense counsel is pressing defense representatives for more authority to reach a settlement number.  In the center ring, the advocates negotiate with one another over a final resolution.

[3] When Jack Lemon was a young actor coming up in Hollywood, George Burns took him under his wing.  “Kid,” he supposedly advised, “in this business sincerity is everything… (pause)… And if you can fake that, you’ve got it made!”

[4] Was the original number approved by a committee or significant other, for example, who is not available to discuss making a change?  Perhaps an adjournment is in order. If it is unclear how much a party has been educated by the process, it can be helpful to ask them in a private caucus to articulate the other sides position in their own words or to list the risks they themselves face.

[5] Impatience can be very real.  Pressure to move faster, however, can also be an effort to hijack the discussion and avoid facing hard truths.

[6] Practice tip: If you haven’t already ascertained the negotiation history from your pre-mediation calls, ask about it with all lawyers present.  It’s remarkable how often they do not agree as to who made the last offer or how much it was!  If they’ve exchanged offers in writing, I ask for copies.

Coming soon: Part III – Mediator as Coach.