The Midpoint Rule
Whether you were aware of this rule or not, chances are that opposing counsel has viewed any number that you brought up to them through the lens of the “midpoint rule.”
The midpoint rule, also known as “splitting the difference,” is a common technique used in one of the most used forms of settlement negotiations—mediation. The rule is used to help parties reach a fair settlement. It involves calculating the halfway point between the monetary positions of the parties and serves as a reference point that can facilitate more productive negotiations. Every number you bring up will likely signal to opposing counsel that you are contemplating that number’s halfway point as a fair number for your client.
How the Midpoint Rule Works—Two Examples
Example 1
The plaintiff demands $100,000. The defendant counters $40,000.
Combine the amount claimed by the plaintiff and the amount offered by the defendant. $100,000 + $40,000 = $140,000.
Divide the total by two to find the average of the two amounts. $140,000 / 2 = $70,000.
In this example, $70,000 is the midpoint between the two positions. This number can be a benchmark in further negotiations so that the parties can determine whether there is common ground between their positions.
Example 2
The plaintiff sets a price of $150,000, while the defendant is willing to pay only $50,000.
Midpoint Calculation: ($150,000 + $50,000) /2 = $100,000.
In this case, $100,000 is the midpoint. As such, the two parties can use this amount as a reference for their further bargaining and possibly come up with a compromise figure that would benefit both of them. The moral of the story is to beware of the number you raise because it will likely evoke the midpoint rule.
Find Your Negotiation Style
Finding your settlement negotiation style is crucial for effective advocacy. Whether you lean toward an aggressive, assertive, or collaborative approach, you are well advised to understand or begin to understand your natural tendencies.
An aggressive style might involve taking a firm stance and pushing hard for your client’s demands, which can be effective in certain high-stakes situations. On the other hand, a collaborative style focuses on finding mutually beneficial solutions and building rapport with the opposing party, often leading to more amicable and sustainable agreements.
Reflect on your past experiences, seek feedback from mentors, and practice different techniques to discover and refine the style that best suits your personality and your client’s specific needs.
Key Communication Strategies for Settlement Negotiations
Preparation Is Key
- Research and Analysis. Before entering negotiations, conduct thorough research on the case facts, legal precedents, and the opposing party’s position. Understand your client’s goals and the potential risks and benefits of settling.
- Develop a Strategy. Outline your negotiation strategy, including your opening offer, desired outcomes, and fallback positions. Anticipate the opposing party’s arguments and prepare counterarguments.
Active Listening
- Understand Their Perspective. Listen attentively to the opposing party’s concerns and priorities. This helps build rapport and shows you are open to finding a mutually beneficial solution.
- Clarify and Confirm. Paraphrase their statements to ensure you correctly understand their position. For example, “If I understand correctly, your main concern is the payment timeline. Is that right?”
Clear and Concise Communication
- Avoid Legal Jargon. Use plain language to ensure all parties comprehend the discussion, especially if non-lawyers are involved in the negotiations.
- Be Direct But Polite (Unless Your Style Dictates Otherwise). Clearly articulate your client’s position and the rationale behind it.
Emotional Intelligence
- Manage Emotions. Stay calm and composed, even if negotiations become tense. Acknowledge and address the emotions of all parties involved. This is crucial when the numbers are big. The last thing you want is for the opposing party or a mediator to sense your client’s excitement when they hear a big number; this can damage your position.
- Build Trust. Foster a positive relationship with the opposing party. Trust can lead to more open and productive discussions.
Flexibility and Creativity
- Explore Alternatives. Be open to creative solutions that may satisfy both parties. For example, if a monetary settlement is difficult, consider non-monetary options like future business opportunities or service agreements.
- Adjust Your Approach. If negotiations stall, be willing to modify your strategy. This may involve revising your offer or discovering new ways to address the opposing party’s concerns.
Example: Employment Dispute Settlement
Scenario
An employee, Joe, claims wrongful termination and seeks compensation. The employer, XYZ, Inc., is willing to settle but disputes the amount.
Preparation
Joe’s lawyer, Ana, reviews the employment contract, company policies, and relevant communications. Ana also takes into account Joe’s career goals and potential future earnings.
Negotiation
- Opening Statement. Ana begins by clearly articulating Joe’s position and the rationale behind it. “Joe was terminated without just cause, which has significantly impacted her career and financial stability. We are seeking a settlement of $100,000 to cover lost wages and emotional distress.”
- Active Listening. The employer’s lawyer, Chris, responds with their perspective. “XYZ, Inc. acknowledges the termination but believes the requested amount is excessive given the circumstances.”
- Clarification. Ana paraphrases to ensure understanding. “So, XYZ, Inc. agrees that there was a termination but disputes the $100,000 amount. Can you elaborate on what you consider a fair settlement?”
- Emotional Intelligence. Ana addresses the emotional aspect. “Joe is not only seeking financial compensation but also a sense of closure and fairness. A positive reference letter and outplacement services would greatly assist him in moving forward.”
- Flexibility and Creativity. Chris proposes a counteroffer. “We can offer $60,000 along with a positive reference letter and outplacement services.”
- Building Trust. Ana acknowledges the offer and shows a willingness to compromise. “We appreciate XYZ, Inc.’s willingness to provide additional support. How about we meet halfway at $80,000, along with the reference letter and outplacement services?”
- Final Agreement. After further discussion, both parties agree on a settlement of $75,000, a positive reference letter, and outplacement services. This resolution addresses both Joe’s financial needs and his career goals while also being acceptable to XYZ, Inc.
Actionable Tips to Help You Succeed with Settlement Negotiations
- Practice Mock Negotiations. Role-playing with colleagues can help you hone your negotiation skills and prepare for potential challenges.
- Seek Mentorship. Experienced lawyers can offer valuable insights and constructive feedback on your negotiation techniques.
- Stay Informed. Keep abreast of legal developments and negotiation strategies through continuing education and professional development opportunities.
- Reflect and Learn. After each negotiation, take time to evaluate what went well and identify areas for improvement. Use this knowledge to enhance your future negotiations.
Effective Communication During Settlement Negotiations Is Essential
Effective communication during settlement negotiations is essential for securing favorable outcomes for your clients. By remembering the midpoint rule, finding your style, preparing thoroughly, listening actively, communicating clearly, managing emotions, and remaining flexible, you can confidently navigate these discussions.
