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December 16, 2017

Draft the Settlement Agreement First!

by John Bickerman

One of the most effective techniques I know and use as a mediator is to begin negotiating the terms of the settlement agreement before the joint mediation session. Wait a second! That sounds counterintuitive! How do you negotiate an agreement before you even sit down and face the other side? You don't even know what they want!

My instruction is simple: On the organizational phone call, I request that the defendant—the party paying money—draft and send a proposed settlement agreement to the other party at least a week before the joint session is scheduled to begin. Once approved by both parties, this will be the final document, except for the payment term. The advantages are several.

Terms are much easier to negotiate before the parties decide on price. Painful experience has taught me that once the payment term has been agreed to by the parties, negotiations over seemingly minor terms can take on heightened interest and more conflict. "Well, if you want me to give you that term, then you'll just have to pay me more money!" Interestingly, if the terms are shared and agreed to prior to negotiations at the joint session, then the parties have already factored into their price negotiation all elements of the final agreement.

Hidden boulders are discovered. Nothing can crater a mediation faster than a party sharing a settlement term that the other side considers a non-starter or deal-breaker. By sharing terms beforehand, the parties and the mediators can identify obstacles early and figure out how to work around them. And, if the disputed term is a true "must-have" for both parties, then having a negotiation on all of the other terms and price will be a waste of time and the mediation will be a failure. Better to know that before the parties expend money on the counsel and the mediator.

Negotiating the settlement agreement beforehand is efficient. Mediators have a responsibility to make the process as efficient as possible. While a term sheet may be binding and enforceable, parties will almost always want to memorialize their agreement in a complete writing. Much time and money can be spent when attorneys circulate and revise multiple drafts. However, if the settlement agreement has been negotiated prior to the joint session, with the exception of the amount of the payment, there's nothing else to be done after the parties agree on the price. I have learned that clients love this idea. They leave the mediation with a final agreement knowing that there will be no more costs to incur.

Circulating a settlement agreement sets a positive tone. Tone and how parties approach a mediation is often a good predictor of success. Research in behavioral economics has shown that parties that are optimistic and feel positively toward their counter-part are more likely to reach agreement. Circulating an agreement tells the other side that you're here to settle the dispute and that you really want to settle. Usually the terms are boilerplate language regarding releases, representations, identification of the parties or confidentiality that are not controversial. Also, and importantly, the resolution of even minor issues creates positive momentum that can carry over to the more difficult issues in the negotiation.

For all of these reasons, circulating and negotiating a settlement agreement as the first task assigned to the parties and not the last will result in a better, faster, more efficient process that increases the likelihood of success. Try it.

John Bickerman is the founder of Bickerman Dispute Resolution in Washington, D.C.

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