ADR Services - Ralph O. Williams, III

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:

  1. “Givens”; e.g. release, dismissal, each side bears own fees and costs.
  2. “Expected Negotiated Items”; e.g. money, payment terms and confidentiality.
  3. “Deal Breakers”; vary from case to case.

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 Deal Points 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.

Sunk Costs

“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.

Trading Dollars

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:

  1. She must believe you.
  2. She must have the authority to meet your demand.
  3. She must be willing to settle with you.
     

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:

  1.  Write down the sequence of offers and demands as they are made or received. Check the mediator’s notes to make sure they match yours.
  2. Before the mediator leaves your room with your next move, have him confirm it with you.

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

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.

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.

  1. Terminate the negotiation, because the signaled range is out of your “ball park”.
     
  2. Accept the bracketed proposal and see what the other side does next.
     
  3. Ignore the brackets and treat it as an absolute offer, making the appropriate monetary response.
     
  4. Propose a new and different bracket that expresses your view of where the case should settle.
     
  5. Accept half the bracket and modify the other half e.g. using the above example, “I will reduce my demand to $300,000 if you increase your offer to $200,000”.

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.

  1. Terminate the mediation.  Sometimes this is the only response, especially if there has been a pre-mediation promise about who will attend.
  2. Make the attending party into a “good messenger”.  Focus on the facts, damages, evidence and law so that when the attending party reports to his/her colleagues and/or superiors, your position is communicated.  If presentation materials (such as a Power Point Presentation) were used, give a copy to the attending party.
  3. Get all the information you can from the attending party to help you better prepare your case.
  4. Negotiate to a “we will recommend” number that the attending party can take back with the commitment to recommend the settlement.
  5. Negotiate to close the gap as far as possible and then, if appropriate, ask for a mediator’s proposal that each of you can consider for a reasonable period of time.

Build Rapport

Rapport, that state of mutual attention marked by harmony and affinity, leads to and supports productive negotiations.  Build rapport by:

  1. Meeting face to face; the telephone and e-mail filter out the non-verbal communication which is the important 90%.
     
  2. Making small talk; break the ice with neutral conversation about the weather, sports, travel or family.
     
  3. Be self-revealing; share something about yourself, let the other side get to know you.

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.

  1. Paraphrasing; restating what you heard without judgment, argument or reframing it to your advantage.
  2. Inquiring; asking questions to clarify and deepen your understanding, again without arguing i.e. "wouldn't you agree that…" or "yes, but don't you think that …"
  3. Acknowledging; listen for and acknowledge the emotions underlying the statement i.e. "you sound frustrated with the litigation process."

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.

Be Gracious

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.

Team Negotiations

Lawyers generally conceptualize negotiations as “lawyers negotiate and clients approve/disapprove” the result. Research shows we negotiate as a team, allocating the following roles.

  1. Team Leader: someone with negotiating experience, who guides the team to the desired outcome. Most often the lawyer, however, a strong client with deep experience may be the de facto leader.
  2. Stakeholders: Persons interested in the negotiation’s outcome. Almost everyone on the team, present or not, has some stake in the outcome, clients want a good outcome, lawyers want satisfied clients.
  3. Bridge builders: People who build trust and connection with the other side to facilitate the negotiation. This unique interpersonal skill is often the one in short supply, especially in the litigation context.
  4. Technical Experts: Individuals with the substantive knowledge of the negotiation’s subject matter. Accountants, engineers, claim professionals and the lawyers who do the “pick & shovel” work provide factual base for the negotiation.

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.

  1. Recognize that the negotiation has stalled and prod the mediator. Ask what she is going to do to get the process back on track.
  2. Go outside with your client and brainstorm about the day’s progress and how to build on what’s been accomplished.
  3. Have a snack. Better yet, have a snack with the other side.
  4. Find opposing counsel and see if he shares, your perception. Jointly update the agenda and loop in the mediator.
  5. Shift the negotiation from difficult deal points to more agreeable ones.
  6. Declare your intent to keep working on the deal. 

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”.

Be Patient

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.

What’s BATNA?

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:  Its 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.

  1. Request information about the terms of the deal. 
  2. Change the scope of the negotiation by introducing a new deal point.
  3. Engage in discussion about minor points before returning to the impasse issue.
  4. Agree to parts of the deal and continue negotiating about the balance.
     
  5. Ignore the proposal’s “take it or leave it” aspect and make a counter-offer.

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.

Joint Session: 

  • Sitting at the head of the table next to the mediator directs your remarks to the mediator.
  • A seat in the middle of a larger group controls the table and commands attention to your presentation. 
  • Sitting opposite the other side’s decision maker creates an opportunity for influence and rapport.

Caucus: 

  • Sitting between the mediator and the client protects the client and focuses the discussion on the facts and issues.  
  • Allowing the mediator to sit next to the client lets the mediator work with a difficult client and maintain settlement momentum.

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.

Creative counsel working with motivated clients and a resourceful mediator will find ways to resolve almost any problem.

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.

Don't Threaten

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.

  1. Plaintiff, Client v. Defendant, Lawyer: the basic legal malpractice case.
  2. Cross-complainant, Lawyer v. Cross-defendant, Client: unpaid fees.
  3. Lawyer v. Insurer: reservations for rights, coverage issues, burning limits, impaired aggregate limits and consent to settle.
  4. Co-defendants: allocation and contribution.
  5. Plaintiff v. Plaintiff’s Counsel: tactics, strategy, recommendations, fees, costs and net recovery to plaintiff.

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:

  1. What did we/the other side do well?  How could we improve?
  2. What are the strengths and weaknesses of our case?  The other side’s case?
  3. What local color or local knowledge factors will influence the case?
  4. What was the theme or phrase heard most in the other room?
  5. What is the best course of action from here?



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