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15 Tips for a Successful Mediation (Part III) by David Hathaway

Published: November 14th, 2013

By: David P. Hathaway

This article is the final section of a three-part series that was published in the November issue of the Briefs, a publication of the Orange County Bar Association.

Tip #11: Beware the Annoying Negotiator.

Some lawyers employ tactics that make mediation maddening. There are a number of examples: the good cop/bad cop (one lawyer walks out in a huff, the other lawyer stays and “reveals” what the client needs, which is actually the target rather than the reserve); the costume jewelry salesman (always adding things of zero value to get you to trade something better); the poor soul (can’t afford anything); the auctioneer (he can get it cheaper elsewhere or he has a buyer who will pay more); the pseudo-cooperator (explaining how it’s a win-win and getting more info from you); the higher authority (I have to check with my wife, and then “she” reduces the offer); the nibbler (sells you the eyeglass frame, plus the prescription, plus the left lens, plus the right lens, plus the case, etc.); the fait accompli (this is our standard deal for every case and there is nothing we can do to change it); the guy with funny money (you can make this tax deductible, or pay in the next budget year, or allocate money toward payroll, or split it five ways, etc.); the red herring dragger (always focuses on a bogus argument); the relationship hostage-taker (“if you valued our friendship you would do this for me and in return I will help you earn business”); the tough guy (“I’ve never lost a case like this in 30 years”); the snail (tries to make the mediation go past midnight); the blowhard (just tells irrelevant stories to distract you all day); the time-bomb (suddenly gets irate at the negotiation process and begins to walk out); the critic (nothing is a good idea and no compromise will ever work); the poor host (turns off the air conditioning and won’t order lunch); the know-it-all (he has a perfect spreadsheet and there is no way to refute his numbers); the one-track mind (refuses to consider other issues until the parties will agree to one thing, like nailing down the date of an employee’s termination). So, how do you deal with these people? Just like with bullying in school, people only mess with you if it works. Ignore them. If that does not work, get away from negotiating and talk directly about their behavior and how the process needs to change. Always have a suggestion on how to proceed in a more constructive way. If they still don’t change, you may have to confront them and retaliate (i.e., if you continue to do this, then we will make our next offer good for only 10 minutes). But remember, your definition of difficult behavior may say more about you then it does about them. Try not to wish the other person was different. Instead, just do your job and stay the course.

Tip #12: Make Progress at the End of the Day.

There are a few tricks to reaching a settlement at the end of the day. One is to dump “the rest of the money” and impart a sense of urgency. It is a tactic geared to convincing the other side it is the best you can do. Another option is to “split the baby” and meet in the middle, which might work if you are very close, but never do it too early, because as soon as you make the suggestion, you just told the other side you would go as far as that middle number. The same is true for a “would ya, could ya,” meaning if you go to this number, I will go to that number. These are sometimes called “brackets.” Similarly, if you offer a lump sum initial payment at any time, there is no way to pull it back. For settlements involving a number of payments, always negotiate the lump sum first and then get to the monthly installments. If the other side stops, do not “bid against yourself” by moving twice without any movement by the other side. However, simply opening the negotiations with a number is almost never “bidding against yourself” because chances are it will not be even in the ballpark of what the other side would accept. Plaintiffs usually should expect to go first with an opening demand. If the other side plays hard-ball and makes miniscule concessions, you should punish bad behavior by doing whatever they do, and relaying a specific message through the mediator that “our last move is a response to what came from you.” Likewise, you should reward good behavior. Don’t get into percentages, because they mean nothing. You could come down 5% ($100,000 to $95,000) and they could go up 100% ($5,000 to $10,000) and both sides only moved $5,000. You should have an end game plan, meaning a way to give the other side a small victory to entice them to close the deal. It is very important psychologically. For example, you might offer to pay the entire mediator’s fee. Typically it is not a good idea to have the parties get together to talk “man to man” to close a deal, because the weaker one might cave in without his lawyer present, or their tempers could destroy all the progress of the mediation thus far. If the other side offers non-monetary terms, do not try to negotiate the monetary amount at the same time, because it is the non-monetary terms that will help you value the money component, and some of them can be quite valuable if you fully understand what is being offered. Be careful of clients who try to negotiate your fees just to make the settlement work, or clients who ask your opinion about whether to accept a final offer and then accuse you of a bias, particularly in a contingency fee case. If it looks like the parties are just too far apart, rather than declaring an impasse, the parties might agree to settle part of case. In any event, you should have a game plan so that you can make progress at the end of the day.

Tip #13: Know When to Pass the Reserve.

As mentioned previously, a party should come to mediation with a starting number, a target point, and a reserve (the lowest number to accept or the highest amount to pay). Because there is a negative bargaining zone in most mediations, at the end of the day a party is going to be forced either to walk away, or to go past the reserve. People go past their reserve all the time because most cases settle at mediation despite a negative bargaining zone, but this is not an easy decision. To help your client decide, consider his or her risk tolerance. Some clients hear their chance to win is less than 50% and are seriously frightened, whereas others are inspired for the challenge (remember the famous line by Jim Carrey in Dumb & Dumber: “So you’re saying there’s a chance!”) Some have a stomach for driving a hard bargain and others do not. In fact, bargaining is much more prevalent in some parts of the world than others: according to one source, 75% of Americans pay the fixed price for goods without negotiating, whereas in Israel, only 11% pay the fixed price. Some clients have an immediate financial need for the settlement and others do not. Some clients need mediation more for venting than for money. Also consider the relationship between the person in attendance and the money. Is it their money, are they acting in a fiduciary capacity, or is this public money? Is it the culprit sitting in the next room, or is it the president of the company who has to answer to the board of directors? If you have a married couple in the room and it’s the husband’s case, the wife may want to settle, but if it’s the wife’s case, the husband may want to keep fighting. You might even have other factors at play, such as an impending sale of the company where the prospective buyer has instructed the seller to settle the lawsuit prior to closing, no matter what the number. Remember that under Fla. R. Civ. P. 1.720 as amended effective January 1, 2012, a party must have a representative attend mediation with full authority to settle “without further consultation,” although you probably would never know if the person in the other room was making phone calls to consult with others. Phone calls actually can be helpful, to the extent the caller is obtaining a higher settlement limit, but they can also be harmful, as people on the other end of a phone may be less inclined to compromise because they have not endured the difficulty of the bargaining process which itself is part of what gets cases settled. Also consider whether these parties will ever see each other again and, if they are going to remain in the same industry, how future business will go. By the end of the day the plaintiff should be well equipped to decide whether to settle for a bit less, or for the defense, whether to pay slightly more, than what the case is arguably worth.

Tip #14: Take Your Time With Settlement Agreements.

The worst mistakes at mediation involve settlement agreements. A risk manager once said that legal representation is like an airline flight: the takeoff and landing are the most dangerous. If the conflict check and engagement letter are part of your takeoff, the settlement agreement and disengagement letter are part of your landing. Be absolutely sure of the wording of the settlement agreement, because what appear to be minor issues can have major effects. There was a story once where a lawyer representing the State of Florida agreed that all amounts collected as of a particular date would remain property of the State. Later, it was determined that although the State had been billing prior to that date, nothing had yet been collected, so the State inadvertently settled for nothing. Another time, where the liability to make installment payments was only for the corporation, and not the individual officers and directors who had been joined in the suit, the young defense attorney drafting the settlement late at night wrote, “Defendants shall pay …” which included the individuals. For every settlement agreement, be sure to consider what terms apply to which parties to the case, and consider requesting releases even for client-related persons who are not parties. In one case, a plaintiff settled a case against his business partner who had allegedly been paying kickbacks with corporate funds to vendors who were personally close with him, and then the plaintiff immediately sued the vendors to collect the same amounts that had already been settled by the business partner. Consider whether releases should be general or limited, and try to do some thinking in advance so you are not pondering these issues for the first time a 11 p.m. on the day of mediation. Ask yourself whether the parties should stipulate that the settlement agreement is confidential, because whereas generally the conversations at mediation are confidential, the agreement itself is not. See Fla. Stat. § 44.405. Ancillary documents may be necessary to effect the agreement, such as stock transfers and collateral. Be very careful of settlements involving the transfer of real property because the issues can be very complex with regard to title searches, unpaid assessments or dues, preparation of deeds in other states or foreign countries, how the transaction will be treated by the IRS, land valuation concerns, exchange rate of foreign currency, hiring out of state law firms to prepare transfer instruments, metes and bounds questions, outstanding tax certificates, payment for appraisals and closing costs, unforeseen encumbrances or environmental issues, possible renters, dealing with possession after settlement but prior to conveyance, the timing of the closing, and many other issues that often cannot be adequately addressed at a mediation conference. Under Rule 4-5.6(b) of the Rules of Professional Conduct, a settlement cannot include any promise not to represent a related party in the future. Non-disparagement clauses can be very risky. One woman settled a case for $10 million and later gave a television interview about the “f–ing dufuses who fired me.” She instantly became a defendant in a $10 million breach of contract suit. If at all possible, you should never agree to a concept in principle and then draft the contract later; it has to be signed at mediation or else the parties may change their mind after the stress of the mediation has worn off. Mediation works in part because of the difficulty of the process, but even though everyone may be tired after a long day, it is crucial to take your time with the settlement agreement.

Tip #15: Keep Mediation in Perspective.

As a lawyer, your job is to obtain the best possible outcome for your client under the facts and law, within the rules of professionalism. You should strive to “own the facts” and recognize that the devil is in the detail. The better you know the case, the better chance you have to resolve it favorably for your client. Your goal is to win, but truth be told, your job is not to win. In fact, it is often best not to keep score of how many times you feel your client “won” or “lost.” There are many factors that contribute to the outcome of a case that we cannot control. It is important to keep the client’s expectations reasonable, if possible. Mediators often say that the sign of a good mediation is where both sides walk away grudgingly satisfied or even somewhat dissatisfied with the result, but relieved that the case is over. Clients who think lawyers want cases to continue so they can keep billing hours are wrong. Lawyers are always representing their clients’ best interests, not their own, and no one can deny that the stress and time commitment in a case multiplies after mediation fails and the parties begin preparing for trial. Lawyers also need to keep their own expectations in check. Some lawyers strike a bargain at mediation and feel proud that they did the best they could, whereas others are always disappointed that they were denied the feeling of a complete victory (sometimes called a “winner’s curse”). Mediation is not a perfect science, and neither side will know if they could have done better unless the mediator tells them. Keep in mind that the most a lawyer can ever reasonably expect to do at mediation is to pull the other party to its reserve number or slightly beyond. If you get your opponent to move 10% off his or her reserve, great. A move of 15% is outstanding. You will probably never get 25%, but the fact is, you really will never know. If you can get the case settled for a number that is acceptable to your client without the risk of trial, you are doing your clients a tremendous service. By keeping mediation in perspective, you will be more apt to reach successful settlements for your clients.

About the Author: David Hathaway is a shareholder in Dean Mead’s Orlando office. He is the Chair of Dean Mead’s Litigation department and the Trust and Estate Litigation Practice Group. He represents corporations and business people to resolve difficult disputes of almost any kind in both state and federal courts. Mr. Hathaway also represents trustees, personal representatives and family members in controversies regarding wills, trusts and estates. In addition, Mr. Hathaway counsels a number of clients in intellectual property matters, frequently helping them apply for federal trademark registrations. He may be reached at