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Securing Optimal Settlement Agreements Through Mediation

PREPARATION IS THE KEY

As a fundamentally different process than trial, mediation requires different steps for effective preparation. Unlike trial, mediation is a non-adjudicative group negotiation process where the participants, with   process guidance by mediators, decide whether and how to settle a case based upon their own decision-making. The terms of settlement may be monetary and non-monetary. The mediation process is structured but informal. It is both collaborative, with participants jointly exploring the the possibility of settlement, and adversarial, where the parties assert legal claims and defenses. With these characteristics, mediation enables parties to create business solutions to business disputes, family solutions to family disputes, and other agreements that are individualized to meet the specific interests of the particular participants. 

Trial, by contrast, is a highly adversarial adjudicative process, bound by formal rules of evidence and procedure. The primary goal of litigants is to persuade the judge or jury to decide in their favor, with a monetary award being the traditional measure of damages. Extensive time is spent preparing direct and cross-examination of witnesses. The rules of evidence strictly govern the admissibility of information offered by the parties. Studies have shown that party satisfaction with the trial process is relatively low, both procedurally (the parties’ perception of fairness in the process) and substantively (the parties’ satisfaction with the outcome).

The fundamental differences in the nature of mediation and trial inform the preparation process in different ways. In mediation, there is no examination of witnesses, so it is unnecessary for counsel to prepare direct and cross-examination. The rules of evidence do not govern in mediation, so counsel does not need to anticipate or assert objections to statements made by mediation participants. Exhibits are usually prepared informally and joint exhibit notebooks generally are not used. Mediation briefs, though not required, are commonly provided by counsel and they offer an opportunity for advocacy. 

Careful and thorough preparation for mediation, with its unique characteristics, yields a clear understanding of the benefits of mediating a case and the consequences of failing to reach a negotiated agreement. In addition, effective mediation preparation opens opportunities for optimal settlements that may never be achieved if standard trial preparation is used. Even though mediation is a dynamic process, using the steps provided below, it is possible to plan for mediation and, with some flexibility, to mediate your plan. It should be noted that every one of the following tactics can be used with equal effectiveness in both negotiation and mediation. It is also noteworthy that most litigated disputes are resolved through direct, one-on-one negotiation. Generally, mediation is used when direct negotiations have failed or are otherwise unproductive. Due to the formal training that professional mediators receive, most litigated disputes can be globally resolved even when direct negotiations have failed. 

Positioning a Case for Mediation  A case is not ready for mediation until the parties have sufficient information to realistically evaluate liability, damages, and the interests of the parties. Unlike trial, however, it is not necessary to depose numerous witnesses and review every document to engage in productive mediation. As counsel begins to consider mediation, it will be helpful to deliberately lower the adversarial tone of advocacy and to engage in more cooperative actions with opposing counsel (for example, more flexibility in discovery deadlines, more positive interpersonal exchanges between counsel, searching for areas of agreement such as undisputed facts, claims, or defenses).  Note that the client’s rights are not being compromised and claims/defenses are not being waived; instead, there is a strategic softening of positional tactics, at least while mediation is being considered).

Opening a Conversation about Mediation  At times, counsel may believe that suggesting mediation reflects weakness or desperation. In part, this impression depends upon how the proposal of mediation is made. If counsel says, “I think this is a good case for mediation,” s/he has pre-committed to the process and, at the same time, given opposing counsel veto power over the process. Another way to explore mediation, without pre-committing, is for counsel to raise the issue of mediation and to inquire whether opposing counsel thinks it would be appropriate. This approach might sound like, “This case might be a good candidate for mediation. What do you think?”  This approach puts the idea of mediation on the table for discussion and may  reveal opposing counsel’s level of interest without pre-commitment by the attorney raising the issue. 

Research  Preparing for mediation involves research into the factual background and applicable law–and goes well beyond it. Many disputes are driven by personal and business interests of the parties. Effective preparation, therefore, requires counsel to identify their own client’s priorities and concerns as well as those of the other party. This may be accomplished by having a conversation with the client about their major concerns and goals. Identifying the interests of other parties requires asking interest-based questions, including, “What’s most important to your client?” or “What are your client’s main concerns?”  Without a clear understanding of the parties’ interests, developing meaningful options for settlement is like shooting in the dark. Savvy negotiators actively search for the parties’ underlying interests so they can help the clients develop settlement terms that serve their interests.

Analyze Alternatives  To assist clients in understanding the strength of their case, it is necessary to analyze and discuss their alternatives in the event they are unable to reach a mediated settlement agreement. In negotiation terms, this analysis is referred to as the BATNA (best alternative to a negotiated agreement). Getting to Yes–Negotiating Agreement Without Giving In, Roger Fisher, William Ury, Bruce Patton (Penguin Books, 2011). In the context of litigation, this means analyzing the best outcome at trial. For the sake of balance, it is also necessary to have a candid conversation with the client about the worst possible outcome at trial (WATNA), which may include outcomes where a prevailing party may owe another party specified court costs, possibly including expert witness fees, if they don’t receive a judgment that is better than a previous statutory settlement offer.  CCP Section 998. One of the most difficult tasks is to evaluate potential outcomes in terms of the most likely outcome at trial (MLATNA) if an agreement cannot be reached through negotiation. The analysis of alternatives to agreement requires careful consideration of the downside of failing to reach a negotiated agreement. Attorneys are in a strong position to conduct this analysis based upon experience, legal analysis, and knowledge of jury norms in the community where the case or non-litigated conflict is located. For new lawyers, reference to LexisNexis Verdicts and Settlement Analyzer, which is a free online database of jury verdicts and settlements, can be invaluable. The analysis of alternatives provides a client with a clear framework for comparing a negotiated agreement with the consequences of failing to reach an agreement.

Set Aspiration Price  It is very helpful for counsel to understand the client’s expectations, i.e., the aspiration price. During an initial client consultation and on an on-going basis, it is valuable for counsel to confer with their client about the client’s expectations.  The expectations may not always be realistic or achievable, but an understanding of the client’s hopes (aspirations) will reveal their personal outlook and may assist in managing unreasonable expectations. Counsel should be careful not to reinforce unreasonable expectations in their communications with clients, who will generally remember the best possible outcomes and not the most likely outcomes of their case.

Set a Reservation Price  In the lead-up to mediation, counsel should have a frank discussion with the client about the “bottom line,” i.e., the reservation price. This number or set of terms is informed by thorough research (including identifying the parties’ interests) as well as community norms for evaluating particular claims or defenses. Because it is impossible to evaluate with precision a single number or set of terms, experienced counsel may discuss a range for the reservation price, such as “$65,000 plus or minus 10%.”  

Develop Options for Agreement that Serve the Parties’ Interests   Before mediation, counsel should have detailed discussions with the client about possible settlement terms that promote the client’s most important interests. Clients can be a rich resource of ideas. Long before they consulted counsel, clients have been thinking about terms and trade-offs. Counsel can learn about the opposing party’s options by inquiring of opposing counsel and by listening carefully for clues about options for agreement that opposing counsel may allude to in conversations about discovery or other litigation-related matters. In contrast to conventional negotiations, where parties search only for options that satisfy their own interests, successful negotiation often involves a give and take process, known as “creating value,” which involves an active search for options that satisfy one or more of the parties’ interests. 

Set an Opening Offer that Promotes Negotiation  Throwaway offers tend to poison a negotiation and they may derail the mediation process even before it starts. Counsel should give careful consideration to setting an “anchor” with their opening offer, i.e., making an opening offer that is reasonable but ambitious. Many mediations bog down when one party’s opening offer is considered to be “out of the ballpark.”  Effective preparation for mediation includes having a conversation, or several, with opposing counsel about the general range of the value of a case, without making an ultimatum but asking exploratory questions about the case value. 

Choose Tactics, Types of Bargaining, and Styles of Bargaining  Based upon prior dealings with opposing counsel during the pendency of a case, counsel should choose from a wide array of conventional and advanced negotiating tactics to use in mediation. If opposing counsel uses a traditional approach to litigation, then conventional tactics may be most effective. If opposing counsel is relatively sophisticated in negotiation, advanced tactics may be productive and well-received. The range of tactics that are available is too broad to address in this article, but the important point is to consider which tactics might generate productive responses in advance of mediation.  Rigid negotiators who use a limited range of tactics are generally less effective; versatile negotiators who have learned a wider range of tactics generally are more effective.

Research has shown that many negotiators use readily identifiable styles of negotiation, including competitive, collaborative, compromising, accommodating and avoiding styles.   The strongest negotiators learn early on about their natural proclivities and seek to develop and strengthen styles of negotiation where they are the weakest.  In preparation for mediation, it is helpful for counsel to review their interactions with opposing counsel to make decisions about which style of negotiation may be most productive.

Conclusion  Effective preparation for mediation is a complex process that requires careful analysis and thorough consideration of a number of specific factors. In addition to the above, counsel must make decisions about when to mediate and which mediator to choose. When it is done properly, effective preparation can give a party an enormous advantage in the mediation process and significantly increase the chances of an optimal settlement. 

                        author

Gregg Relyea

Gregg Relyea, Esq. is a full-time private mediator in San Diego, California.  In addition to teaching mediation at the University of San Diego School of Law and the University of California, San Diego (UCSD), Mr. Relyea has written a comprehensive negotiation and mediation practice guide, Negotiation, Mediation, and Dispute Resolution--Core Skills… MORE >

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