By John Burwell Garvey
Editor’s Note: This article has been modified, in part, from the book, Alternative Dispute Resolution: Negotiation, Mediation, Collaborative Law, and Arbitration, (LexisNexis 2013) by John Burwell Garvey and Charles Craver.
Over 90% of all lawsuits settle. Because a large number of those settle during mediation, you should view mediation as a critically important part of the whole process and not just something the court requires. Your skill and preparation often have a direct effect on the mediation result. From my experience on the “inside” as a neutral mediator, I’ve seen lawyers leave money on the table and other lawyers pay more than they needed to. I’ve seen lawyers try cases that could have been settled. Here are a few important strategies that can consistently improve your results:
- Have a thorough understanding of what you think your case is worth.
What is the trier of fact likely to do with this case? Where are your external benchmarks for value? Many lawyers and insurance professionals will try to pick a likely verdict amount using verdict and settlement research and then pick the likelihood of a favorable verdict. If they think the likely verdict is $100,000 and the likelihood of a verdict is 50 percent, they then say the settlement value is $50,000.
Statisticians would approach the same problem by calculating “expected value.” In this approach, you try to calculate the likelihood of each event along a continuum (with all predictions adding up to 100 percent) and then add those values to arrive at the expected value. There is not sufficient space in this article to explain this approach in detail but there is a good explanation at: https://www.wikihow.com/Calculate-an-Expected-Value.
- After you determine value, develop your aspirational goal and your bottom line.
In a case where the settlement terms primarily involve money, your aspirational goal is the most/least you can hope to obtain/pay in a settlement on your best day. Your bottom line is the line at which point you think it makes sense to try the case.
For example, the plaintiff may decide that the best possible outcome in settlement would be $100,000 (aspirational goal) and if the offer is less than $50,000 (bottom line) then she will reject the offer. Likewise, the defense may aspire to a settlement of $30,000 but would be willing to go as high as $55,000 to settle. Notice that both sides do their case evaluation and usually arrive at different numbers. This is discussed further in number 7, below, “Do not fall in love with your case.”
- Make sure your opening offer/demand is based on your aspirational goal and not your bottom line.
If the plaintiff aspires to settle at $100,000 the opening demand must exceed it by enough to have some chance of getting there. And if the defense aspires to settle for $30,000 the opening offer must leave room to move. Generally, the demand should be the most the plaintiff can ask for with a straight face and the offer should be the lowest the defendant can offer without jeopardizing continued negotiations.
- Move in increments that do not clearly convey the midpoint as a destination.
Many mediations quickly fall into a rhythm where everyone is looking at the midpoint. Although you must show progress to keep it moving, “midpoint negotiations” often give away too much information and focus on moving the midpoint up or down. Less transparent moves often inject an uncertainty that allows you to test the resolve of the other party.
- Be aware of the power of anchoring.
Some lawyers begin by making modest demands or generous offers, hoping to generate reciprocal moves from their opponents. But research shows that overly generous early demands and offers are likely to have the opposite effect because of the psychological phenomenon known as “anchoring.” When people receive better offers than they expected, they tend to question their own preliminary assessments and increase their aspirational levels. Make demands and offers that show sincere settlement interest but not weakness.
- Be patient.
When the mediation gets to a point where you can “feel” the likelihood of settlement, there is a tendency to relax and to “move to the middle.” I can often see this in the body language of the lawyers and/or clients. This usually happens after the demand/offer is within the “aspirational – bottom line” range you calculated so you see any additional concessions as gravy. Avoid that feeling!
With patience, this is the time where you can often make the biggest difference. You can test the other side’s resolve by remaining friendly but firm. You do not want to blow up the settlement but you do want to get as close to the other side’s bottom line as possible.
- Do not fall in love with your case.
Studies have shown that lawyers tend to be overly optimistic about the likelihood of winning and the likely verdict amount. Even if you have carefully calculated (see number 1, above) your chances of success and the likely verdict amount, remember that all of those calculations are made based upon assumptions you have made.
Your assumptions are based upon judgment (and often undue optimism), but not hard science. Your opponent has usually made different assumptions. If there is overlap in your “bottom lines” then settlement usually occurs within that range. (In the example in 2, above, the overlap would be between $50,000 and $55,000.)
But if there is no overlap, you must decide if it makes sense to adjust your “bottom line.” If you do not settle, your case will be decided by a jury or other fact finder that will be unique. Unlike a coin toss, there are no established odds that you can calculate as to how that particular jury will decide. A penny is a penny but all juries are different.
As you mediate, remain open to new information, new arguments and new observations. Never let your emotion be a factor. If you fall in love with a case it may well break your heart.
John Garvey has been an active mediator and arbitrator for over 25 years. He is a Professor of Law and the Director of the Daniel Webster Scholar Honors Program at UNH School of Law.