We all know the Scout motto: Be prepared. Life is not merely showing up. It’s being ready when you do show up. So, prepare for your mediation; don’t just show up!
In nearly 20 years of serving as mediation neutral, I have observed too many litigants who have intentionally or inadvertently adopted this attitude toward mediation: they know that the mediation session will provide an opportunity to settle their case, and they show up, full of hope tempered with a little pessimism. But they just show up! While I doubt any readers of Under Construction are guilty of this offense, I continue to be amazed at how infrequently parties – even parties with substantial claims – really prepare for mediation. At best, lack of preparation prolongs the mediation process and increases its cost. At worst, failure to prepare wastes a great opportunity to bring a dispute to an earlier and less expensive resolution.
Preparation is as critical to success in mediation as it is to success at trial or in arbitration. But, to a great extent, the kind of preparation needed for mediation is quite different from the kind of preparation needed for trial.
The purpose of a mediation session is not for you to prove to the mediator that your position on the issues is the correct position, that the evidence supports that position and that the law requires the resolution you seek. To the contrary, a mediation session is an opportunity for the parties to negotiate with one another regarding the potential resolution of the dispute, with the assistance of the mediator. The only persons in a mediation invested with the authority to decide anything are the parties themselves. And they are permitted to make decisions about the basis on which they are willing to resolve the matter in any manner acceptable to both (or all) of them (assuming, of course, the resolution is not illegal), taking into account their interests and, if important to the parties, their legal rights.
When you are in a mediation setting, it is helpful to keep in mind the important distinctions between (i) a mediation and (ii) an arbitration, a trial or court settlement conference – and to prepare accordingly. An arbitrator or a judge is going to determine the party’s legal rights in a formal, rule-governed process. In arbitration and litigation, the parties have limited agency, the focus is on the relative rights of the parties and the parties’ feelings about one another or about the dispute are of no significance. Like meditation, settlement conference is an informal proceeding without many governing rules, but like trial or arbitration, a settlement conference nevertheless takes place in the “shadow” of a trial, and in the context of the legal rights of the parties under the facts of the case.
In marked contrast to these dispute resolution proceedings, a mediation is an informal process, without rules, which focuses on the interests of the parties. In mediation, while the facts and the law are important, so, too, are the feelings of the parties about one another, about the dispute and about the mediation process — since these feelings will either interfere with or help the parties’ “rational” decision-making. Most significantly, as noted above, a successful mediation will result not in a decision by a judge or jury or arbitrator, but in the parties’ decision regarding a solution to their problem, making the parties, rather than the mediator, responsible for the quality of the ultimate decision.
Given that mediation is fundamentally different from a trial or arbitration, it is important to prepare differently for mediation. Of course, there is some overlap: a starting point for any dispute resolution process has to be developing an understanding of the claims at issue, the evidence supporting (and undermining) those claims and the impact of the law on assessment of those claims. But in mediation, the objective is not to prevail on your claims but, rather, to obtain a result that is, on balance, better than the likely net result of a trial. And to do that, a litigant needs not only to understand the facts and the law, but also to have a firm understanding of what the party can reasonably expect to achieve in the litigation, how the litigation itself conforms with and advances (or detracts from) the party’s interests and what the likely financial costs will be.
Choose your people wisely; when possible, assemble a diverse team, appoint and empower a “devil’s advocate” and consider utilizing separate “settlement” counsel.
Perhaps the most important decision any litigant makes in connection with preparing for mediation is that regarding the selection of the members of the litigant’s “legal” and client teams who will serve as the client’s representatives in the mediation process.
If the dispute being mediated is already in litigation, the trial lawyers representing the party in the litigation are the most obvious choice to represent the party in mediation – after all, these are the lawyers who are already the most familiar with the legal and factual issues in the case, and who have developed the strategy for the prosecution or defense of the client in the dispute.
But, in appropriate circumstances, parties and counsel should give some consideration to the value of using a separate lawyer (who can be from the same or a different firm than trial counsel) to represent the party as “settlement” counsel. Adding separate lawyers for settlement negotiations is helpful for a few reasons.
First, as set forth above, mediation “advocacy” is different from litigation “advocacy;” and great trial lawyers, accustomed to making a persuasive case to a judge, jury or arbitrator, but not necessarily to the adversary itself, may not be the best mediation advocates. The mediation team needs to serve a different function from that of the litigation team and, therefore, ideally needs to proceed from a different mindset, with the objective of protecting or advancing the litigant’s interests, rather than narrowly taking the best litigation positions.
As importantly, however, studies in brain science and human behavior now make it clear that it is just cognitively difficult for a lawyer to switch from aggressively pursuing and supporting the client’s positions in litigation to negotiating with an eye towards the client’s interests in a mediation – and perhaps, consequently, lawyers and parties frequently make serious mistakes when evaluating settlement offers. As Randall Kiser and his colleagues Martin Asher and Blakely McShane have demonstrated in studies conducted with very large sets of data regarding cases that went to verdict in California and New York, plaintiffs had rejected, prior to trial, settlement offers that were greater than or equal to the ultimate trial outcome more than 60% of the time. And, while defendants miscalculate whether to accept or reject a settlement proposal at a lower rate (only about 25% of the time), the magnitude of defendants’ mistakes is about 25 times that of the median plaintiff's mistake.1
It is likely that these miscalculations regarding settlement decisions arise, at least in part, out of the way that human beings think and make decisions, especially when functioning as part of a team, like a client-lawyer team preparing a case in litigation.2 Teams of this type often exhibit “group think” – the process in which people working toward a similar goal begin to reinforce one another’s thinking, by selectively focusing on the perceived “good” facts and unintentionally, but systematically, discounting or ignoring altogether the “bad” facts.3
Asking different attorneys to represent a party in a mediation or settlement negotiation context, therefore, can both bring a fresh perspective that has not yet been distorted by group think. Moreover, this may permit a person who is stylistically suited to advocacy in the mediation context to be placed on the team.
Even if, however, a dispute is not significant enough to merit the engagement of a separate attorney as “settlement” counsel, the results of studies conducted by Kiser and others suggest that parties can take several other steps to reduce the likelihood of settlement mistakes.4
First, parties should at least make sure that the team of lawyers representing the client in connection with the mediation is diverse since diverse (e.g., gender, experience, and racial diversity) teams seem generally to make better decisions. To ensure that the diverse perspectives represented on such a team can contribute substantively, the team should also adopt ground rules that facilitate an open and robust exchange of ideas and perspectives among team members. In addition, team leaders should foster an atmosphere in which team members are encouraged to disagree with one another.
Moreover, parties in all cases should designate someone on the legal team to play the devil’s advocate, i.e, the person tasked with looking at the evidence and the issues from the other side’s perspective and advancing that point of view within the client’s team. Of course, for the devil’s advocate to be helpful, the senior lawyers on the team have to make sure that the devil’s advocates are truly empowered to speak up and that the views they express are treated with credibility.
The number and nature of the client representatives involved in a mediation team will depend on the nature and size of the dispute. In most instances, it may be important that the client representatives include at least one person who either has knowledge of or understands the facts of the case. But, in addition, to ensure that the mediation process is as fruitful as possible, the client representatives ideally should include an individual with both nominal and actual settlement authority. When I meet with counsel in a pre-mediation telephone conference, I always ask that the parties bring to the table a representative with settlement authority equal to the last settlement demand from the opposing side. However, this is not always possible. Sometimes the adverse demand is so far out of the recipient’s zone of anticipated settlement that the receiving party is unwilling to monopolize the time of someone senior enough to have the requisite settlement authority. At other times, simple matters of corporate or public entity governance require that a settlement be adopted or approved by a governing body. But it is a good rule of thumb and a goal worth attempting to achieve when identifying the client representatives ideally suited to participate in the mediation session.
Finally, depending on the nature of the issues or claims, a party’s mediation team may also include others, such as the parties’ experts or their insurance adjusters. Before commencement of the mediation process, it is an important that everyone on a party’s mediation team understand the nature and role of these third parties; likewise, the third parties must understand the nature of the mediation process and contribute constructively to preparation for the mediation and, as appropriate, participation in the mediation sessions.
Make sure you have the information you need to be able to have a meaningful discussion of the dispute in mediation
Mediation can be very effective and cost-saving early on in a dispute, before the parties have spent a lot of time in the discovery process. But that advantage is also often perceived of as a disadvantage because the parties have not had the opportunity to conduct full discovery. In my experience, mediation can work as well – and even more advantageously for the parties – when it is conducted early, long before the parties have completed full discovery, as long as the parties have all the information they truly need to participate meaningfully in the mediation process. This means you need enough information from all of your adversaries in the matter to understand and develop an idea of the cost to your client of continued litigation and to evaluate your litigation risk, i.e., to develop your best case and worst case scenarios for the outcome of your litigation (your “BATNA,” the best alternative to a negotiated agreement; and your “WATNA,” the worst alternative to a negotiated agreement). You also need enough information to develop an idea of your adversary’s BATNA and WATNA.
This information is often not the same as and certainly not everything a party would be entitled to as part of full discovery, but if you identify and review the items critical to the above analyses, you generally can get enough information to proceed. And, to the extent that you have some difficulty in getting the necessary information, do not hesitate to use the assistance of your mediator in facilitating pre-mediation information exchange.
Make sure you and your client representatives know and have considered what your client’s interests are in connection with the matter to be mediated
In their classic negotiation text, Getting to Yes5, Roger Fisher and William Ury recount a possibly apocryphal dispute between two people over an orange. Both parties believe and assert that they need the orange – the whole orange. Of course, it turns out that one needs all of the orange peel, while the other needs all the orange juice, so an exploration of why each person needs “the whole orange” would lead to a win-win solution to the orange dispute: one would get the orange peel and the other the orange juice. This story is an excellent and memorable illustration of the need for all parties in dispute, as well as their advisors, to be sure they have explored and fully understand the party’s interests, in addition to their positions.
Identifying interests is not always easy. And, while it is sometimes difficult to identify one’s own interests underlying the positions taken, it is even more difficult to identify what the other side’s interests might be. The key starting point, however, is simply to ask your client, "Why?" Why do you want the orange? Why does the adversary also want the orange? Why do you need that? What are your concerns, fears or hopes about the litigation?
Many parties in litigation have an interest in seeking justice, but possibly they are just as interested in keeping the costs expended in the pursuit of justice in line with any potential reward at the conclusion of litigation. Consider: Is this just a money dispute or are non-monetary interests at stake? Do the parties care about maintaining their reputations or retaining or repairing a valued, though damaged, relationship? Do they have an interest in avoiding investing any more time or energy in sorting out past issues? Would they like to deploy their resources in obtaining a possible toehold in a new line of business? What about confidentiality? Is your client interested in keeping the dispute as quiet and confidential as possible? These are but a few of the interests that may lurk beneath the surface of parties’ litigation positions, and it behooves you and your client to surface them explicitly before the commencement of a mediation process.
Moreover, it is more than likely that each party is going to have multiple interests at stake in the dispute – and at times a party’s own multiple interests may conflict with one another. Most common is a desire to win the largest (or smallest) possible damage award and to avoid spending another minute on deposition preparation or on lawyer’s fees! Given that your client likely has multiple interest in play, take some time after brainstorming with the client regarding its interests to try to prioritize both your client’s interests and the perceived interests of your adversary.
Complete the analysis of your litigation risk and know your BATNA
Before developing a negotiation strategy (see below), you need to know your BATNA. In turn, to develop your BATNA, you need to have analyzed your litigation risk.
A litigation risk assessment starts with the candid consideration of the strengths and weaknesses of your case, including the quality of your witnesses, and consideration of the strengths and weaknesses of your adversary’s case. Once you have identified strengths and weaknesses, you need to quantify the best litigated outcome for your client, that is, what is the best judgment amount your client can achieve, if it wins on every point on which it is your considered judgment that it should win. Next, you should assign the percentage probability that the best outcome you’ve identified will, in fact, occur – is it 50% or 70%, etc. Knowing the so-called best outcome for your client constitutes less than half of what you need to know to negotiate. You also need to have taken the next step of honestly and candidly quantifying the likelihood of that outcome, since we all know that even a case deemed a “slam dunk” does not carry a 100% chance of success.6
Prepare a litigation budget for the anticipated costs of the litigation going forward
Next, you should prepare an analysis of when your client’s anticipates litigation costs if the litigation proceeds. For purposes of this analysis, the costs that the client has incurred thus far in the litigation process are not important. At this point, those are “sunk costs.” However, it's important to include (i) attorneys’ fees through trial – or even through appeal if a right to appeal exists that your client or your adversary seems likely to take advantage of, plus (ii) other costs like expert fees, deposition transcripts, other document creation or copying fees, and arbitrator fees. Although harder to quantify, it is also appropriate to estimate the soft costs that a litigant might incur, including management time spent responding to discovery requests, preparing for and giving testimony, and discussing strategy with lawyers.
Brainstorm settlement options with your client’s mediation team and prepare a negotiation strategy
Before commencement of the mediation session, make sure that you have worked with your client to expressly identify your objectives in connection with the mediation. Do you want to use the mediation only to try to settle the dispute at hand? Or does it make sense to use the mediation to achieve possibly broader (or narrower) objectives? Is the mediation an opportunity only to move the ball down the field a bit? Or an opportunity to begin repairing a damaged relationship with a valued customer or supplier? Work with your client to identify all the things the other party can do to satisfy your client's interests and what the client can offer the adversary in exchange.
With regard to the monetary components of a settlement, come to the mediation session ready to provide a principled opening offer or demand that you can explain, based on the litigation risk analysis you have completed. Be sure, also, to have thought through the moves that you anticipate making throughout the mediation-negotiation, in light of both your litigation risk analysis, and the anticipated costs of litigation going forward (which ordinarily will operate to reduce the net amount recovered by a plaintiff and to increase the net amount paid by a defendant). Like any game plan, you may have to revise it as soon as you put it into action, but the exercise of developing the game plan will place you in a better position to drive the negotiation in a direction satisfactory to you and your client.
Finally, it is often a good idea to bring a draft settlement agreement with you to the mediation session (indeed, in my practice as a mediator, I have started to ask the parties to do just this) so that you have at hand the language you would like to use for the most important operative provisions of any settlement agreement. A draft agreement in hand provides the added benefit of serving as an outline of sorts with regard to the terms that you believe should be part of any settlement.
Consider the nature and extent of your pre-mediation submissions.
As a general matter, pre-mediation submissions should have two parts: a short confidential letter or memorandum to the mediator, and a longer submission exchanged with the other party (or parties). Both parts of the submission are important.
The “shared” submission should include at a minimum an outline of the major legal and factual issues from your client’s point of view, and your analysis of these issues, along with copies of the most important and relevant documents. Even if the mediator does not have a practice of requiring shared submissions (as some do not), you should encourage the exchange of this pre-mediation submission with your adversary. Remember, the point of the mediation session is not to persuade the mediator that your legal position is correct. The point is to persuade the decision-makers on the other side of the mediation table that a resolution shaped like the one you have offered is the preferred resolution.
Moreover to the extent that the pre-mediation submissions include important information regarding your interpretation of critical facts or critical points of law, you will need to spend time in the mediation session itself educating your adversary regarding these positions (and the basis for these positions) to the extent that the adversary does not have your written submission.
I frequently hear from parties that they “know what the other side is going to say” and that they “don’t need” to see one another’s pre-mediation submissions or, even more frequently, a joint opening session is unnecessary. The fact is, however, that parties often think they know the other side’s position but learn from this exchange that they do not. And even parties who do “know” what the other side will say, often do not, in fact, know the basis for the other side’s positions. In all instances, paying careful attention to the other side’s position papers and opening statement can be a revelation.
The second part of the submission is just as critical. The confidential submission should not duplicate the exchanged submission – and if it does, you might as well simply do without it. The confidential submission to the mediator, instead, should share with the mediator your thoughts regarding the dynamics between the parties, identify any personality issues that you think might be important for the mediator to be attuned to in the mediation session, set forth the bargaining history in the case and identify the obstacles that you perceive to settlement.
Prepare your opening statement or presentation
Last, but not least, craft an opening statement or presentation for the initial mediation session in light of all of the above factors. The points you believe important to make should be presented with clarity. Your presentation should be designed to persuade your opponent’s decision-makers of the merits of your position, even if your opponents do not agree with your position.
In addition, adopting the right tone at the beginning of the mediation session will go a long way to fostering a successful mediation process. Your clients should understand that this joint mediation session is not the place for a grand, confrontational opening statement from counsel. Moreover, while questions and answers across the negotiating table frequently are possible, the mediation session is not the place for cross-examination of the adversary. Rather, your tone and approach need to be businesslike, communicating an openness to listen to what the adversary has to say, and presenting your positions in a matter of fact manner.
Remember that this is a great — and possibly your only — opportunity to present your case directly to decision-makers on the other side. So, use the language of persuasion, not advocacy, keeping in mind at all times that the party needing persuading is not the mediator but your opponent’s decision-makers.
1. Randall Kiser, Martin Asher and Blakely McShane, “Let’s Not Make a Deal: An Empirical Study of Decision Making in Unsuccessful Settlement Negotiations,” Journal of Empirical Legal Studies, vol. 5, no. 3 at 551-591 (2008).
2. See., e.g., Daniel Kahneman, Thinking, Fast and Slow (Farrar Straus & Giroux, 2011)(general information regarding human decision-making).
3. See Laura Kaster, “Improving Lawyer Judgment by Reducing the Impact of ‘Client Think,’” ABA Dispute Resolution Journal, Feb./Apr. 2012, for an excellent description of how group think infects the litigation process and a more extensive and detailed discussion of the steps lawyers and parties can take to reduce the impact of group think and improve the quality of decision-making.
4. Id. See also, Randall Kiser, Beyond Right and Wrong: The Power of Effective Decision Making for Attorneys and Clients, Chapters 8-11 (Springer 2010).
5. Roger Fisher and William Ury, Getting to Yes: Negotiating Agreement Without Giving In, 2d ed. (Penguin, 1981, 1991)
6. There are now many software tools available to assist parties and their attorneys in completing a rigorous litigation risk analysis, and these tools might be very valuable in a case with multiple, dependent, issues.