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Mediation Tips - Negotiation
Introducing Deal Points I - The Basics
Timing is everything in life and mediation. The success of a mediation can be undermined by introducing critical deal points at the wrong time.
Deal points fall into 3 general categories:
You do not have to mention “givens” until the end of the mediation because everyone knows they are part of the deal. “Expected negotiated items” are the meat of the mediation and naturally follow the discussion of the facts and law.
Introducing DealPoints II – “Deal Breakers”
A “deal breaker” is a point that is crucial to an agreement and one which you will walk away from the negotiation if you do not get it.
“Deal breakers” should not be left to the end of the mediation, hoping that once an agreement is in place the other side will quickly agree to a critical term. Rather than agreement, it is more likely that there will be a sense of betrayal and that time was wasted.
It is best to bring up your “deal breakers” about halfway through the negotiation, when you know that serious negotiations are under way, but there is still room for everyone to move and adjust their positions.
Final note: Once you put your “deal breakers” on the table, expect to hear the other side’s “deal breakers” in response.
Introducing Deal Points III – “Givens” Revisited
“Givens” are deal points, such as a release and dismissal, which are part of every mediation. Unfortunately, your “givens” may not be the other side’s “givens”.
As part of your mediation preparation, list your “givens” e.g. form of release (unilateral or mutual), type of dismissal, timing of payments, confidentiality. Discuss your givens with the mediator early on, so they can be worked into the negotiation sooner, rather than later.
If the other side agrees with your “givens”, then the mediation is off to a good start. If there is disagreement, you can meet it early instead of having to conduct a supplemental negotiation that could alter key deal points, such as payment amount.
Introducing Deal Points IV – Use the Settlement Agreement
The evolving “best practice” is to bring the form of the Settlement Agreement to the mediation, both in hard copy and electronic form. As the negotiation unfolds, as early as possible, share the Settlement Agreement form with the other side and use it as the basis to conduct and conclude the negotiation. Because virtually all offices have word processing capability, the Settlement Agreement can be completed and signed at the mediation, saving all parties the extended drafting and revision loop.
“Sunk costs” is an accounting/business term which means “unrecoverable costs incurred on a project,” e.g. research and development. In a lawsuit sunk costs are the incurred attorneys’ fees and costs. Absent fee shifting contract provisions or statutes, sunk costs do not drive case value.
When evaluating and/or negotiating a case, try to put aside the sunk costs. Focus on the case’s present value and how spending future money will influence that value.
In economic or business terms, the goal of any lawsuit is to maximize return on investment. In other words, how will future money spent influence the case’s value? The plaintiff is willing to spend a dollar to increase the chances that she will collect three or four more. Conversely, the defendant is willing to spend a dollar to increase the probability that he will pay three or four less.
Bluffing is Dangerous
When we are trying to obtain a result, but do not have the necessary leverage, we are tempted to bluff.
For a settlement bluff to succeed, you have to hit a trifecta with your opponent:
The danger of a failed bluff is that it leaves you in a worse position because your weakness (lack of leverage) is revealed and your credibility is impugned.
What is an “Open Ended Question”?
An open ended question is one designed to promote discussion and elicit information. Open ended questions start with “what”, “how” or “tell me”. For example: How will we work around the statute of limitations defense? What evidence will the other side produce on this issue? Tell me about the loss of earnings claim.
Open ended questions work well in joint sessions when you are trying to promote a dialogue with the other side and in caucus when analyzing a claim or defense. To obtain maximum value from an open ended question, you must actively listen to the answer, rather than prepare your next response.
NB: Open ended questions also work well in depositions and relationships.
Track the Negotiations
During a negotiation, parties, lawyers and sometimes the mediator, lose track of the current offer and demand. This can lead to misunderstandings in your room and worse yet, a miscommunication to the other side. Two recommendations:
A case is settled when both sides realize they are “trading dollars,” i.e. the plaintiff spends a dollar to make a dollar and the defendant spends a dollar to save a dollar. This point is virtually the same for both sides and, like art, you know it when you see it
Responding to Bracketed Offers
Bracketed proposals, where an offer is linked to a conditional response, i.e. “I will offer you $100,000 if you will reduce your demand to $300,000”, are now part of the negotiator’s tool kit.
There are five ways to respond to a bracketed proposal.
Handling Parties Without Settlement Authority
Many mediation participants are frustrated because the person with final authority to settle the matter has not attended. Consider these responses to this difficult situation.
Rapport, that state of mutual attention marked by harmony and affinity, leads to and supports productive negotiations. Build rapport by:
Resist "Competitive Arousal"
Competitive arousal is the urge to win rather than make the best deal. Negotiating with people you perceive as rivals, negotiating under time pressure and negotiating in front of an audience contribute to competitive arousal which impairs your judgment.
Solutions/Recommendations: Think of the other side as a partner working toward an agreeable settlement. Schedule enough time to conduct the mediation. Avoid the temptation to be extra aggressive in front of your client.
What is Active Listening?
Every mediation and self-help relationship text advocates active listening without much definition or guidance as to how to do it. Active listening is not patiently waiting for the other side to finish speaking and then arguing your points.
Active listening is comprised of three behaviors.
All negotiations are interpersonal interactions whether with another lawyer, your significant other or your children. If you do not actively listen first, you will not understand where they are coming from and you certainly will not get them to change their position.
Your grandmother was right, “You catch more flies with honey than with vinegar,” especially in mediation.
The best trial lawyers are unfailingly courteous, professional, open and pleasant to be/work with. They rarely raise their voices, are not “insulted” with the other side’s offer/demand and do not label the other side’s position as “silly or ridiculous.” They simply go about the business of learning the strengths and weaknesses of their case, making the best deal for their client or preparing for trial.
Good News – Bad News
Psychological studies demonstrate that relaying good news a little at a time makes people happier than receiving it all at once. Conversely, receiving bad news a little at a time makes people more depressed than getting it all at once.
The successful negotiator gives concessions and delivers good news in increments to secure the highest benefit. When making demands or presenting difficult deal points, it is best to bundle them together to ameliorate their negative impact on the negotiating process.
Don’t forget the “Why”
When making a demand or offer, always explain to the other side “why” the facts/law/circumstances justify your position. When you explain your position you motivate the other side to review their position resulting in a change or further discussion of your respective positions. This dialogue opens the path to resolution.
To be heard, lower your voice
When clients, opposing parties or counsel become emotional or raise their voices, the best response is careful, modulated and at lower volume. A voice at low volume forces people to lean forward to hear you, as they move toward you to listen, they are drawn to your point.
Lawyers generally conceptualize negotiations as “lawyers negotiate and clients approve/disapprove” the result. Research shows we negotiate as a team, allocating the following roles.
Recognizing what role is being played by whom smooths the negotiation path by generating options, testing outcomes and formulating successful tactics and strategies.
Play Through the Rough Space
In almost every mediation, between 2:00 and 3:00, in an all day mediation, the parties and counsel get discouraged and start saying things like, “we are wasting our time,” “we will never make a deal,” and “why can’t we just ‘cut to the chase?’”. This is the rough space in a mediation. If your mediator is not guiding / coaching / encouraging the parties and counsel through this rough space, you will have to pick up the slack. Here are some suggestions to keep the process going.
Open in the “Ballpark”
Experienced lawyers, both plaintiff and defense, know the reasonable range of value (the “ballpark”) for matters within their expertise. The best opening position is in the “parking lot”, close to the case’s value, but with room to move. If the other side is reasonable and opens in a similar position, you will make progress rapidly. If the other side is out on the “freeway”, move slowly until they get to the “ballpark”.
Mediation is a process which with hard work and a little luck leads to settlement. Along the way you must resist the urge to “cut to the chase.” You never know the other side’s last number until you hear it at the end of the mediation.
Go through every step. Learn about the facts and issues through the briefs and/or a joint session. Meet privately with the mediator at least twice to share your thoughts and find out what the other side is up to. Negotiate patiently. As long as both sides are moving, there may be a deal.
End the mediation when all useful work is completed i.e. a settlement is reached, a discovery/motion plan is agreed upon or a second session is scheduled.
BATNA is mediator jargon for Best Alternative To a Negotiated Agreement.
BATNA is used by mediators to promote settlement by exploring unpleasant options such as further expensive discovery, personal impact of the litigation on the party and the risks of trial.
From counsel’s point of view, BATNA points to the mediation’s positive outcomes: focused discovery, better understanding of and planning for the other side’s position and both parties’ expectations adjusted and more realistic.
Try Negotiation “Bracketing”
When distributive bargaining is not working, taking too long or might cause ill will, try negotiation “bracketing” to narrow the gap.
Negotiation “bracketing” is the process of making a conditional offer linked to an expected response from the other side. For example, plaintiff states, “I will demand $500,000 if the defendant offers $200,000.” Defendant responds by accepting the bracket or proposing a different bracket (Defendant will offer $100,000 if plaintiff demands $400,000) or offering an absolute number. Plaintiff then replies with one of the same three options. Using negotiation “bracketing,” the parties send clear signals about their expectations, save time and avoid the stress of the negotiating dance that starts with a $1 million demand and a $10,000 offer.
The Mediator’s Proposal
The parties have reached an impasse in negotiations, it’s late in the day, everyone wants the case settled, but no one wants to or feels they can move without prejudicing their position. The concept of a “mediator’s proposal” is introduced, raising the question: Does everyone (mediator, parties and counsel) understand the concept of a mediator’s proposal in the same way or at all?
Here’s how the basic mediator’s proposal works. Once both sides have agreed that a mediator’s proposal would be an appropriate way to try to break the impasse, the mediator explains the process outlined below.
The mediator will privately prepare a ballot for each side setting out the amount of the proposed settlement and any other case critical terms with a space to indicate either a “yes” or “no” vote. The proposal is delivered without further explanation for the parties’ consideration. Each side votes as it sees its best interest.
The mediator collects the completed ballots and reviews them in private. If there are 2 “yes” votes, the mediator announces the settlement. If there are 2 “no” votes or a “yes” and a “no”, the mediator announces that there is no settlement. The mediator does not disclose which side voted which way because to do so would advantage the side that voted “no”. They learn that the “yes” side was willing to make a move. Note that the side that voted “yes” is slightly advantaged because they know that the other side is unwilling to move, while their willingness to move is kept confidential. Two "no" votes send no information to either side.
Let the Mediator Deliver Bad News
Sometimes a client has unreasonable settlement expectations or makes a poor impression as a witness. If trial counsel brings this bad news to the client’s attention, the client often thinks that counsel is taking the opposition’s position and is not on the client’s side.
Try to find some private time with the mediator, away from the client, such as on the way to the coffee station or the rest room to discuss the best way to readjust the client’s expectations and/or deliver bad news.
As with everything in life, timing is critical. The client must feel that their position has been heard and that serious negotiations are in progress, before the client can be receptive to re-evaluating a settlement position. Allowing the mediator to deliver the bad news lets counsel maintain the advocate/advisor role and the client’s confidence.
Confront the Issue
Common mediation problems: It's 2:00 p.m. with no serious settlement negotiations; too much time spent on a side issue; or the mediator just doesn’t get it.
The universal solution is: Confront the issue.
Ask questions such as: “What do we do to get this mediation on track for settlement?” “How can we make up for time lost discussing the least important issue in the case?” Persist in your questions until you get answers that will move the process forward.
Make an observation, e.g., “We don’t seem to be communicating. I thought you agreed with us on the statute of limitations issue.” Armed with a response you can educate the mediator who can then educate the other side.
Remind the mediator that the process belongs to the parties and their counsel and that the mediaitor’s job is to help them toward a settlement. Try to identify the sticking points and ask the mediator what he/she suggests to move forward. Consider talking to opposing counsel; she/he may be having the same problems. If so, try a joint meeting with the mediator and all counsel, using the above techniques.
Responding to “Take it or Leave it” Offers
“Take it or leave it” offers sometimes prematurely terminate a mediation. Below are 5 responses that keep the process moving toward resolution.
However, sometimes the best response is to leave the mediation, continue preparing your case and wait for the next opportunity.
Change Your Seat, Change Your Luck
The above poker adage applies in mediation too. Choose the seat that best suits your purpose.
Play for a Process
Sometimes a case will not settle. Instead of walking out feeling like the mediation was a waste of time, look for alternatives. Negotiate for a process that will accelerate settlement.
Often a key discovery, such as a deposition or document production prevents the parties from moving forward. Agree to schedule the deposition or exchange the documents, then reschedule the mediation. Or negotiate a high-low agreement for a binding arbitration. Or, in a business dispute, an informal audit between the parties' accounting departments can narrow differences to the point where a conference call with the mediator will end the dispute.
Don’t “Wild Card”
A “wild card” is a last minute deal point that surprises the other side, threatens to derail a nearly completed negotiation, potentially creates ill will and at a minimum, unduly consumes time. Terms such as confidentiality, payment schedules, security and any emotionally charged items, should be introduced early enough in the mediation so they can be absorbed and responded to by the other side.
When discussing alternatives to settlement, never make threats that you can’t or won’t carry out. Upon hearing your threat the other side evaluates if you have the will and/or the resources to execute it. If either is found wanting, you have weakened your bargaining position, not strengthened it.
One Mediation or Many?
Sometimes mediations stall or fail because we are mediating the wrong conflict. For example in a legal malpractice case, there may be 5 distinct disputes.
Because each of these disputes must be resolved before a final settlement can be achieved, time is well spent identifying the disputes and selecting their resolution order.
Recognize Reactive Devaluation
Reactive devaluation is the psychological/negotiation phenomenon where a negotiator automatically discounts any proposal from the other side. It often hinders productive negotiations by creating unreasonable responses and early impasse.
Before you react and discount or reject a proposal, stop and ask if it contains points to build on or work with in the negotiation.
If you anticipate that the other side will devalue your settlement ideas, merely because they come from you, consider having the mediator advance the concepts as his/her own.
Debrief the Mediator
After an unsuccessful mediation and the other side has left, sit with the mediator and debrief. Start a dialogue with the following questions:
Mediation Advice from Kenny Rogers – Part I
In "The Gambler" Kenny Rogers advised, "Know when to hold 'em, know when to fold 'em," words of wisdom for the young gambler and the negotiator. Every mediation has an arc. Both lawyer and client need to recognize when they have reached the top of the arc, achieving their best result. Further negotiation rarely secures more value and sometimes alerts the other side to concessions they should not have made. Here are three signs that the mediation is over for the day:
Mediation Advice from Kenny Rogers – Part II
In "The Gambler" Kenny Rogers concludes his advice with, "Never count your money when you're sitting at the table." During a mediation, the lawyer and sometimes the client look ahead to the end of the mediation, saying things like, "I'll never take/pay that amount" or "This case will never settle." Here are three suggestions for staying in and maximizing your mediation results:
Six Weapons of Influence
The Six Weapons of Influence are: 1. Reciprocity, 2. Commitment and Consistency, 3. Social Proof, 4. Liking, 5. Authority and 6. Scarcity. They are based on research by Robert Cialdini, Ph.D., a psychology professor at Arizona State University and his ground breaking book, Influence: The Psychology of Persuasion.
1. Reciprocity – “Return the favor”
2. Commitment and Consistency – "Follow through"
3. Social Proof - "Consensus and experience"
4. Liking - "The friendly sales person"
5. Authority - "Directed Deference"
6. Scarcity - "Limited availability"
Capital-N, Small-n Negotiations
Capital N-negotiations are when we negotiate for others, our company, team or clients. These negotiations follow a predictable pattern of preparation, discovering interests, exchanging positions, making trade-offs and closing the deal.