A very high percentage of employment claims are resolved through mediation. This article addresses best practices in planning, strategy and advocacy in the mediation process. Part 2 of this article discusses the middle and end stages of mediation- from first offers through planning settlement moves in the negotiation process, through closing the gaps between the parties, breaking impasse, reaching an agreement and documenting it.
- Set the stage with your opening offer.
Given your case valuation, your opening offer should be selected as part of your overall settlement strategy and potential settlement moves and concessions. It should be accompanied by a rationale, so the opposition is not left guessing. There is no right or wrong strategy. The opening offer can send a message, good or bad, with an anchoring effect. The opening offer must also take into account prior offers. It is not advisable to backpedal from prior offers.
A reasonable opening settlement offer would be in what each party sees as the likely plaintiff verdict range, which each may view quite differently. If a reasonable offer is met with a reasonable counter-offer, both sides should see the likely settlement range fairly quickly and be able to achieve a settlement in a few moves.
A plaintiff aggressive offer would be in the high end of its perceived likely verdict range, while a defendant aggressive offer would be in the low end of its view of the likely plaintiff verdict range. In this range each party’s view of the facts, law and damage calculations should credibly support its offer, but a wider gap will make a settlement more challenging. First offers often lean towards aggressive due to over-optimism and a natural inclination to not leave money on the table. A party making an extremely aggressive offer must anticipate that it may become necessary to make substantial settlement concessions to achieve a settlement.
An insulting opening offer would be “over the top” or “pie in the sky” on the plaintiff side, and a waiver of costs or de minimis offer on the defense side. Rather than being an anchor, it often becomes a boomerang, provoking an equally insulting counter-offer. This can create a very wide divide which will require either significant patience and very large conciliatory moves, or lead to early impasse and termination of the mediation or walk-out.
- Plan your settlement moves in mediation.
The “middle rounds” are the heart of the mediation, consuming the most time and where most of the movement occurs. Each party’s second move is often its most important in signaling its intentions, particularly if its opening offer was aggressive. The next few moves also send key strategic signals to the opposing party, either firmness or conciliation. It is important to have a negotiation plan regarding the end goal and the sizes of the concessions. Parties should think multiple settlement moves ahead, making the moves strategic and not emotionally driven.
In the first few moves, there is extensive information exchange, through the mediator, of each party’s positions. The mediator is working to keep the momentum moving, and the counteroffers flowing. An early stall, where one party refuses to counter unless the other party makes a double move, can lead to the response “I’m not going to bid against myself” and a potential impasse.
- Work with the mediator to avoid or break impasse.
The best way around impasse is to avoid it by positive attitude, strategy and moves, making conciliatory moves at the right moment, and avoiding emotional responses to moves by the opposition. As impasse approaches or is upon you, it should cause each party to seek the mediator’s insights as the “angel of reality” to help re-evaluate the strengths and weaknesses of its position, to consider positions articulated by the opposition, the risks of achieving the litigation result it seeks, to discuss comparable discounts or results in similar matters, the remaining fees and costs, fee shifting, and the benefits of settlement and getting the matter behind them.
Upon re-evaluation, the parties may decide to make additional moves, may suggest conditional bracketed moves where both move in unison (though not necessarily in equal amounts), or may ask the mediator to suggest brackets. There are many other possible options such as late joint sessions, lawyer-to-lawyer or client-to-client or expert-to-expert discussions. The parties may request a mediator’s proposal which may either settle the case or scuttle the mediation. If the mediator’s proposal is not accepted, the parties may still use it as a basis for further proposals. In the case of a strong deadlock, a cessation may be advisable to allow a cooling off period which can cause rethinking.
- Close the deal.
If the parties have been exchanging offers, they will often reach a point where they sense that a settlement might be achievable but may take additional moves to reach closure. They often will revert to smaller reciprocal moves to try to reach a fair mid-point. They may offer to split the difference, suggest conditional bracketed moves, or suggest that conditionally one party would move to the mid-point if the other will move to the mid-point.
In contrast, in another scenario one party or both may be at or near their “walk-away” number but there is still a gap between the parties’ positions. Either party may signal that it has little bargaining room left or has reached its final number. This creates a negative bargaining range. Parties often do find a way to bridge such a gap. The parties may recalibrate and move their “walk-away” numbers. Another method is to “enlarge the pie” by exploring interests and issues that can be exchanged to create value to bridge the gap.
The parties may exchange further proposals, or a party’s last, best and final proposal may be accepted if the other party concludes that it is the best achievable result at that point in time. Sometimes this occurs through follow-up calls, when the parties have had time to reflect on the totality of the circumstances. When the heat of the moment passes, parties often recognize that settlement is the best outcome in an uncertain litigation setting.
Once a settlement is reached, it should be memorialized in a written memorandum of understanding or generic settlement agreement, stating that it is enforceable and admissible in court, signed by the parties before they leave the mediation. This can be followed later by a more formal settlement agreement.
Following the best practices described in this article to carefully plan and make strategic moves throughout the early, middle and late phases of the mediation process can help lead to successful results and durable settlement agreements.