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Mediation Tip: Early Mediations Require Claimant’s Deep Discounting

August 29, 2011

“Early” mediations are a great tool for many litigators for many reasons.   See my earlier blog, The Weaker Your Position, The Earlier You Should Mediate, December 13, 2010.    However, seeking an early mediation, or accepting a request for one, require that you plan for the reality that the claimant in any early mediation will normally be facing acceptance of a significant discount of their position to achieve an early resolution.

There are always exceptions to this caveat.  Any defendant, at any time, may simply choose an immediate resolution for reasons unique to that cause and that defendant.   And, if a defendant is fully prepared to evaluate the same facts and law as the claimant and just as if a trial were soon pending, early resolution is always possible. 

However, in general, at least planning for comparably deep discounting is particularly necessary for most larger-dollar disputes to reduce the frustration of all involved.

There are many reasons for the likelihood of this discount mentality.  Knowing those reasons, in advance,  may allow you a better decision to accept early mediation or not.  Or, at the least, to plan for achieving other mediation goals.

The most obvious is that the facts of your cause are simply not known.  By “not known”, I mean that the facts may not be legally clear because they have not undergone, yet, the legal process that make them reliable and thus “known”.   Accordingly, those on both sides of the dispute who must decide on any future probable outcome before deciding how they will negotiate simply will not accept any fact other than those presented by their own counsel. 

And, the same is true as to common acceptance of the prevailing law.  Even prepared attorneys often may not have contemplated all of the possible legal grounds of claims or defenses.  And, usually they have not had the time to test any known conflict with their opposition with the court.  (Another good reason for a verdict form from each side, see my blog, Mediation Opening Statement:  A Required Consideration…Your Likely Verdict Form.  August 9. 2011.)

But even if the parties could somehow agree on the fact and the law and even as to what may be “owed“, the party being asked to pay often will find it simply advantageous to wait until other prevailing factors make it more advantageous to resolve and pay.

Why?  Simply because outside factors at work directly affect any potential resolution at an early mediation.

First, whether you like it or not, presuming for this discussion a legitimate claim simply awaiting paymenta defendant is effectively holding the claimant’s money and will likely pay the claim only as and when dictated by the total circumstances. 

What total circumstances?  Well, among other matters, something as simple as the prevailing rate of the available interest return on the monies held.  And, another, the total of the monies in dispute and required to be paid.  The larger the amount of  money “held”, the larger the interest rate (or other value of time), the longer the monies may be held for this factor alone.

Still another factor can be the absence of any intangible to be gained by the defendant is an early resolution.  Intangibles include, adverse publicity, collateral contractual considerations, personal relationships losses, and the rigors of the litigation process.  What does the Defendant have to gain by resolving the matter now as opposed to later?

And, of course, the payer’s evaluation of the perceived risk of proceeding further versus an immediate resolution.  And this may be the largest factor.  The greater the likelihood that a defendant may alter the amount ultimately to be paid, or even prevail, the murkier the total amount of “monies held” become.  The murkier the total monies held , the longer the payment may be held.

What other collateral factors are in play?

Well, (sound like President Regan is writing this?) the expense expected compared against the incentive for continuing.  For example, the greater the payer’s attorneys fees, the greater the litigation costs as compared to the monies allegedly “due”, the sooner the issue will resolve.  And, of course, the larger the monies “earned” merely holding the monies, compared with these expenses, will also dictate the time likely before the monies can be obtained.

Of course, adding to these considerations are the potential additive effects of the claimant’s taxable costs or attorneys fees , and the risk that one or both and these expenses will be shifted to the defendant with or without legal fee shifting techniques.

But there are other not-so-obvious factors, much more subtle, in play in early mediations.

Negotiation technique is very personal to negotiators.  As I have pointed out in other previous blogs, Mediation Negotiation 101, July 4, 2011,  even though there are many negotiation generalities to learn that can aid those who wish to negotiate better, there will always be exceptions to any rule.  Different personalities approach early mediation differently than late mediations.

And this is particularly true of those who literally spend their lives negotiating.  These professionals, right or wrong, have developed their own technique, honed in perhaps hundreds, if not thousands of prior similar matters, and often they are guided from some insight that is not easily contemplated, much less understood.

For example,  many negotiators who sense/feel that their efforts simply will not be successful that day, will not only change the dynamics of that negotiation but will likely never reveal what they ultimately could have agreed upon.   And that “feeling” can come early in a mediation.  Sometimes so early, that even if the mediator senses resolution is actually possible, the party or attorney who does not believe it possible, will simply stop trying rather than going against their inner sense.

Interestingly, this “fear” of offering to resolve the dispute at top (or bottom) dollar and NOT resolving the dispute is equally shared by both the paying defendant(s) and the claimant.  Both believe that by giving their best offer and not resolving leaves them nowhere to later go if the claim is not resolved.  Although this may or may not be rational (after all, if that is the “best” offer, why would it EVER change?), it is so prevalent a belief that is simply a fact of negotiation.

Another factor can be real or imagined negotiation or presentation offenses by a claimant or a defendant.  Offenses may include words or deeds or even apparent attitudes.  And they can be intentional or unintentional. 

Negotiators are human.  If they are going to be asked to “go to the wall” for an early resolution, they simply have to believe that it is the right thing to do.  Any real or imagined offense to a negotiator, on either side of a position, can quickly remove any personal attitude or incentive for that negotiator to “take a chance”.  (See also, my blog, Mediation Strategy:  Leave Your Guns At Home, August 15, 2011.  It can happen in late mediations.  But, it is usually deadly in early ones.

Another pitch for the value of your mediator:  If the parties will allow the mediator to get them close to each other, the mediator can be an effective means to avoid the mutual fear that a best offer will NOT resolve a matter by allowing the parties to explore their best, but not extend it unless resolution is mutual.

And many early mediating attorneys will feel they must use an early mediation to educate their opposition on opening statement on their version of disputed fact.  If so, even the most sensitive of such disputed-fact presentations can create an alienated and emotional atmosphere for parties who may not  have yet had the opportunity of hearing these matters first from their own counsel.  And, early negative emotion in any mediation is not a recommended way to achieve resolution.

Again, an experienced mediator, if heeded, can gauge the temperatures of the parties and steer listening parties away from offensive openings, negotiation positions, etc. and into tactics that will lead to resolution.

Early mediation is still a good idea in any number of mediation opportunities.  However, as the dollars at issue rise, the parties agreement on fact or law separate, and the likely outcome at trial should mediation fail differ too widely, the less one might want to agree to early mediation.

In summary, the converse to the advisability of an early mediation is that if you have that proverbial claimant’s clear liability, catastrophic-damage case, unless there is some other practical factor pressing you to consider a deep discount to the fair future settlement value of your case, you may want to pass on early mediation.

As a mediator, I hate to even suggest giving up any opportunity to mediate.  And, I still believe there are many goals to be achieved at mediation for smart mediating parties OTHER than only a final resolution.

But, if you cannot or will not justify your mediation of your case on alternate goals to be achieved, and if early resolution, particularly at a relatively deep discount from your firm ultimate future value is unacceptable for any reason, than forgo early mediation, get your case in shape for trial, get a trial date and then mediate only as you approach immediate trial as your alternative to a failed voluntary resolution. 

Your frustration level at the mediation process (and that of your mediator) will be much lower.

What Do You Think? Your Insight Can Be Helpful To Others.

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