Mediator’s Proposal: Take It Or Leave It

July 13, 2009

Both sides seem to be progressing to resolution, but have hit a wall. Is it time for the mediator to make a proposal for settlement? If so, should the mediator use the value that the case is worth (which one side or the other likely won’t accept), or the value that the mediator thinks will settle the case?

The typical “mediator’s proposal” is given to both sides as a take-it-or-leave-it proposition to resolve the case. Each party can confidentially accept or reject the proposal without compromising their negotiating position. The problem is that the mediator knows who accepted, and who didn’t, and it usually means the exit of the mediator from the matter. In other words, the mediator only gets one bite at the apple.

The technique can have dramatic results. A reluctant plaintiff will make a large jump if the money is really “on the table.” Defendants will come up with money they otherwise deny having, if it means that the case is really over. It also eliminates reactive devaluation.

Generally, the mediator should choose a number that both sides could agree to, rather than a number that the mediator thinks they should agree to. If the parties think that the mediator might make an evaluative proposal, they will approach the mediation like a mini arbitration right from the start.

The mediator should not discuss a proposal until the parties ask for it, or at least until the mediation seems to be over. It is best to set a cut-off time for a simple “yes” or “no” response, allow no negotiating with the mediator about the proposal, and unless there is a deal, don’t end the time period early. Someone could change their mind at the eleventh hour.