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Proposal For Settlement and Mediation:Part III-Mediating With An Unexpired Proposal For Settlement

March 5, 2012

This is the last of my three-part series regarding combining mediation strategy with the powerful litigation tool, the timely proposal for settlement: How to effectively mediate when with an unexpired proposal for settlement still pending as you begin mediation?

(Part I of this series concerns the  proper use of the proposal for settlement in timing your mediation, as a set-up for your mediation negotiation and as an end-goal of any failed mediation.  Part II addresses additional tactical suggestions for when and how to use at least one proposal for settlement in your overall strategy of negotiations, including in mediation.)

Despite your best planning (See, Part’s I & II), the timing of your proposal for settlement and your required mediation date may simply overlap.  In other words, your proposal of settlement is still open to acceptance on, and even after, the date of your mediation.

If so, the old saying, “Caught between the Devil and the deep blue sea”, will quickly come to mind. And, you now must face difficult choices and the requirement of careful planning and action to preserve your proposal and mediation negotiation benefits.

(Note:  I make the assumption for these suggestions, that continuance of your mediation is not an option; otherwise, your choice should be obvious.)

Initially, you face the immediate difficult choice of: 1)  foregoing this valuable incentive to mediation or other resolution negotiation, i.e., by withdrawing this proposal, or, 2) actively entering mediation with your proposal still pending and/or even available for acceptance following mediation.

This initial choice may be harder or easier dependent upon the timing of this mediation, (early or “final”) and whether any other prior proposals (as you know I strongly advocate) are already outstanding.  Further, your choice is dependent upon whether your pending proposal was one presented in truly good faith, or one submitted tactically or knowing that it was unlikely to ever become a benefit, even if you are successful at trial..

And, an additional consideration, and a very important one, is whether your opposition has previously served a proposal upon your client.

Consider your options then presented:

Begin mediation with your proposal still pending?

When only one party has made a proposal for settlement, it implies that only one party has made the requisite evaluation of full trial value and thus make their present “reduced/increased” offer required for the intent of the procedure. When your opponent has not made a similar proposal, or worse, has made no negotiation effort, it must be presumed that the party who proposed their settlement is facing beginning mediation negotiation in a highly prejudiced negotiation position.  After all, only one side has “negotiated” to a point that their offer is 25% less or 25% more than what they believe will be their position outcome at trial!.

Withdrawal of your still pending proposal for settlement?

Your withdrawal of your latest proposal can either precede mediation, take place literally as mediation is occurring or even after a failed mediation (assuming your timely compliance with the technical requirements of a withdrawal).

However, any withdrawal of your pending proposal means your negotiation return to exactly where you were before you made your present proposal.  And, if you withdraw your proposal, you lose (and presumptively now cannot use) the precise negotiation pressure for which the tactic was intended.  And, worse, if mediation is not successful, you (may) have lost the legal benefit you presumptively intended to gain.

And, do you really think your opposition will forget your “former” proposal position?  Guess what the mediator is hearing, repetitively, in caucus with your opposition each time you propose a position higher (or lower) than your withdrawn proposal?.

Your opposition now knows, or should know, that for any proposal to have been made, that client must have given their permission based upon their position assumed at that time.  And, that permission would have had to include the possibility that the opposition might choose to accept it in final conclusion of the dispute.

What will be your explanation, at mediation, as to why that pending or recently withdrawn position is not still (at least ultimately) acceptable?  And, how can you retain any credibility so necessary for any mediation resolution without a reasonable explanation?

Still, I think your choice is clear. I suggest that any proposal for settlement , properly calculated and properly used for the use intended, is simply too great a “weapon” to ever abandon once delivered.  And, of course, particularly, if the one pending is either your only proposal, or your “nearly best” one and there remains too little time to propose another should your mediation fail. .

Accordingly, I presently suggest you  simply choose to mediate with your proposal still pending!

But, now, how? 

How can you now move forward with any meaningful mediation negotiation?

Simple.  Make and follow a plan!

First, understand your predicament.  If you are the Plaintiff, and you have performed the requisite evaluation, presumptively your latest  proposal is presently far less than what you believe is your likely outcome at trial.  If you are the Defendant, your last offer of settlement is obviously “much” higher than you had ever intended to propose.

However, if your opponent has not acted equally, you must now seek to level the playing field of mediation negotiation.

Next, determine where to begin your “initial” mediation negotiation. Your two choices:  One, Ignore your (last) proposal for settlement, and “return”, for negotiation purposes, to begin your mediation negotiation at the full value of your trial outcome claim or defense. Or, two, begin your negotiation at your stated proposal for settlement and then prepare to “hang tough”.

(Note, this second option is particularly difficult with any liquidated damage claim!  After all, you have agreed by your proposal to accept less than you “know” you will obtain in damages if only your prevail.  The only issue left then is winning.  Meaningful negotiation usually requires both sides to have as many variable factors to negotiate as possible.)

Next, be prepared to patiently persevere.  Either choice will, predictably, draw numerous and repeated, “wasted time” complaints and hard feelings from your opposition complaining about your choice.

“Returning to full value” for mediation negotiation will bring quick derision due to the above mentioned prior knowledge of your opponent of your pending proposal.  “Wasting time” and “lack of good faith” will be a constant refrain.

However, beginning without any room to negotiate, I believe, may be worse.  You will immediately hear you “must move to even achieve another offer”.  And  “hanging tough”, quickly becomes equally offensive to your opponent who predictably will want to insist on your making multiple incremental moves and similar to your opponent’s.  This “hanging tough” component, also may never allow negotiations to even get started.

By my observation, the “return to full value ” approach seems to waste about the same amount of time as allegedly beginning your negotiations at your “lowest/highest” last proposal.

Accordingly, presently,  I suggest you choose the “return to full (or near full) value” approach to begin your mediation negotiation..

Next, pre-prepare your opposition for (either) elected approach.  Do not wait until your opening statement, if any, to alert your opposition to where you intend to open your negotiation.

A letter to your opposition, hopefully with as much notice as possible (to be forwarded to the decision makers) suggesting that as your proposal has not (then) be accepted, and with no (reasonable) prior offers, that you will be beginning your mediation negotiations at a different figure than your pending proposal, but still at a discount from the full value expected at trial, is critical.

And, then state your “different figure” in your letter!

Next, plan carefully your negotiation strategy during mediation.

Initially, in your opening statement, remind your opponent(s) that your proposal has not been accepted and because it has not, and no counter offers have been made, it is important to return to your pre-proposal position to allow normal mediation negotiation..

(And, one good counter to the “howls” of unfairness of”starting over” is to point out that returning to your “full value” position is certainly no worse than the opposition having made no proposal prior to mediation!.)

Next, open your negotiations by your beginning mediation demand/initial offer for less/more than your figure stated in your pre-mediation “letter”   (But, still higher/lower than your pending proposal.)

This unexpected, unilateral move, usually will help dampen the opponent’s planned cry of “wasting time”.

Next, but only if necessary to getting negotiations back on track, announce your intention to withdraw your proposal for settlement. (But,really, do you want to get in a race to see which office can “mail” their withdrawal or acceptance earlier?  (By the way, how do you time an “office-stamped” post mark?)

Next, now RAPIDLY negotiate with larger than normal increments. 

Notice that your prior withdrawn position is then quickly re-instated but still allows you the requisite room for “incremental matching” that is so generally the part of most incremental negotiations.  But, move as rapidly as you can to re-instate something near your pending proposal.

Finally, and, hopefully early (or indeed it will be too late), make sure you propose to settle for at or less than your outstanding proposal.

(Note: If you ignore your proposal (presumptively only 75% of the true full value, if you are the plaintiff/Claimant or 125% of the value if you are the Defendant), at the end of the day, regardless of your mediation negotiation, your opponent will, unless you withdraw it before accepted, have the option of merely “accepting” your proposal.  Accordingly, at the end of your mediation, therefore you simply must be at or below where your pre-mediation proposal would place you, should it have been accepted.)

Likely, using some or all of these steps, and assuming a good mediator to keep the process viable, you can eventually still arrive at your last proposal for settlement value, or likely even less/more.

In summary, if you get “caught” with a pending proposal for settlement as you begin mediation, leave the proposal pending, return to full value for your negotiations and work with your mediator to keep the parties engaged until the parties are returned to a similar position to where they would have been if both had been equally engaged in  pre-mediation negotiations.

The real solution?  Just don’t get “caught” with an unexpired proposal for settlement in mediation!  See, Parts I and II!

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