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Preparing for a Successful Mediation by Understanding the Process

July 29, 2013 at 2:49 PM

Preparation the key

All good litigation lawyers know that thorough preparation is the key to successful courtroom advocacy. Less well understood is the need to prepare for mediation. Even less well understood is how to prepare for mediation.

The mediation dynamic

Good preparation for mediation requires an understanding of its fundamental dynamic.

The basic distinction between courtroom advocacy and mediation advocacy is this. In the courtroom the lawyer directs his/her persuasive efforts to the judge(s). In the mediation room the lawyer directs his/her persuasive efforts to the opposition.

Odd as it may seem, lawyers locked together in courtroom battles need communicate little with one and other. The "conversation" is with the judge(s).

The mediation dynamic is entirely different. The "conversation" is with the opponent. What the opposition thinks is all-important. After all, they will only settle with your client if they consider that to be in their interests.

The goal and the challenge

Although litigation and mediation processes are entirely different, they share the same goal. That goal is to achieve an outcome which optimises the client's interests.

The challenge of mediation therefore, is to achieve an outcome which optimises the client's interests by settling up with a hostile opposition, who likewise want an optimal outcome for themselves.

This necessitates that the lawyer understands the interests not only of his/her client, but the interests of the opposition as well.

Understanding the client and opposition assists or enables the lawyer to:

• accurately advise the client on whether to settle and how to settle;
• be persuasive of the opposition so as to achieve a good deal for the client.

The carrot and the stick

In the courtroom, the lawyer's stance towards the opposition is an entirely negative process of unrelenting attack. By contrast, a good advocate in mediation will utilise both the positive and the negative. The accomplished lawyer will attack the opposition's case, but then "sympathetically" offer reasons and inducements for the opposition to settle in the manner proposed.

In short, the good mediation lawyer uses both the carrot and the stick.

Care has to be taken however to avoid beating the opposition so severely with the stick that they lose the capacity or willingness to settle up with your client. The good advocate is perceived by the opposition to be a tough adversary, but a fair and decent one, with whom they are prepared to strike a deal.

Realism, strength and risk

A major reason that cases settle in mediation, often contrary to expectation, is that the parties acquire a realistic appreciation of the nature and degree of the risks that they face should the case not settle. Furthermore, they acquire a realistic appreciation of the upper limit of what they are able to achieve by way of settlement. It is the interplay between these two key notions of risk and achievability, both imbued with realism, which lies at the heart of mediation.

The judgement call which the lawyer is ultimately required to make is this: given the risk that the client faces if they don't settle, and given that the best possible proposal is now on the table, is it in the client's interest to settle on the basis proposed? Has there been a sufficient trade-off between risk and benefit? In other words, is the compromise of benefit the proposal envisages justified by the offset of risk?

For example:

• Should the lawyer advise the plaintiff client that it may be in their interests to settle their $1,000,000 claim for $650,000, having regard to the risk of proceeding to court and failing to recover anything at all?

• Should the lawyer advise the developer client that it is worth settling for a lesser scheme, having regard to the risk of adverse publicity should the matter proceed to the Environment Court?

• Should the lawyer support the inclination of the fledging defendant corporate client to severely compromise their strong claim against a commercial behemoth, in order to maintain a profitable future business relationship with that firm?

• Should the lawyer advise the union client to settle favourably with the employer having regard to the risk of an adverse precedent being set should the matter proceed to the Employment Relations Authority or Employment Court?

Assessing risk

The above examples illustrate that the risk assessment involves consideration of both the nature of the risk and its probability. Good old-fashioned legal skills and experience are required to identify and evaluate both aspects of risk. The lawyer needs to accurately and objectively assess the strengths or otherwise of both the factual and legal arguments. Gut instinct, informed by good analysis, will underlie the lawyer's advice as to whether or not the risk is worth taking at the available cost.

Bargaining strength

The lawyer is seeking the best achievable outcome for the client. Achievability is determined by bargaining strength. Bargaining strength (or weakness) results from:

• the strength or otherwise of the client's factual and legal arguments, relative to those of the opposition;

• considerations which impel the client or the opposition towards, or away from settlement; in other words, whether there are incentives or disincentives to settling.

To the extent that the client is impelled towards settlement (i.e. must settle) its bargaining strength is thereby weakened. To the extent that the opposition is impelled towards settlement (i.e. must settle) then its bargaining strength is thereby weakened. And vice versa: to the extent the client has no incentive to settle, its bargaining strength is strengthened (and the opposition's correspondingly weakened), and to the extent that the opposition has no incentive to settle, its bargaining strength is strengthened (and the client's correspondingly weakened).

Combining risks, strengths, carrots and sticks

Broken down, there are only four main arguments lawyers employ against the opposition during mediation. Here they are:

1. "Your factual and legal arguments are weak, and my client's are strong, and so it is in your interests to settle on the basis we propose." (A basis favourable to the client.)

2. "My client has no need to settle up with you, and so if you want a settlement, and we know you do, then you should settle on the basis we propose." (A basis favourable to the client.)

3. "Here is a proposal which satisfies your special needs, and so in order to secure those benefits, it's in your interests to settle on that basis." (A basis favourable to the client.)

4. "Your BATNAs and WATNAs are telling us you should settle as we propose."(A basis favourable to the client.)

BATNAs and WATNAs

So-called best alternatives to negotiated agreements (BATNAs) and worst alternatives to negotiated agreements (WATNAs) are nothing more than best and worst case scenarios.

The good mediation advocate understands the opposition's BATNA and WATNA and uses them persuasively, arguing:

• "You should accept our offer, because compared with your best case scenario were the case not to settle, it is a favourable one to you." Example: "You would recover $500,000 in net terms if you went to court and succeeded in full on your $700,000 claim, in which case our settlement proposal of $350,000, when viewed against the risk of your not succeeding at all, is favourable to you."

• "You would be wise to accept our offer because we know that your worst case scenario is unsustainable by you." Example: "You would go into liquidation if you lost in court, and so it is in your interests to accept our modest offer in order to avoid that risk."

The good mediation advocate must also understand the client's BATNA and WATNA. That is because the judgement call as to whether a possible settlement is in the client's interest, can logically only be made by reference to the alternative of not settling.

If for example, the plaintiff client's BATNA is $1,000,000 as the result of the cost of it taking its claim for $1,350,000 to court, then taking account of litigation risk, it may be in its interests to accept an offer of $850,000.

Or if that same client's WATNA is that their claim fails completely and they pay court and legal costs to boot, and yet are already in dire financial straits, it may be in their interests to accept the offer of $500,000, notwithstanding that their claim is for $1,350,000.

Parameters and possibilities

Lawyers will be more confident and relaxed, and hence more effective in mediation, if they enter the mediation knowing the following:

• the parameters between which the parties are able to settle;
• the parameters between which it is in the parties' interests to settle;
• and hence, the parameters between which the parties are likely to settle.

And so instead of being faced with a dauntingly wide negotiation landscape, the lawyer is helped by knowing that the critical negotiation contest will most likely take place within a relatively confined area.

Further, it helps to have thought about the possible ways in which the dispute might settle, that is to say, what features, terms and conditions might be contained in the settlement agreement. This enables the lawyer to propose or effectively respond to various options or terms and conditions which "expand the pie," that is to say, increase the range of settlement possibilities. An expanded "pie" enhances the prospects of settlement.

For example, a case may not resolve on the basis of a bald payment of $250,000, but it may resolve on the basis of that sum being paid by ten equal monthly instalments, and interest thereon being paid on the date of the final instalment, with penalty interest being paid for any late instalment and/or there being an option to cancel in the event of an instalment becoming overdue.

Presumptions and flexibility

Two things are almost guaranteed to confront the lawyer during the course of mediation:

1. presumptions the lawyer and client have made turn out to be false, sometimes providing a pleasant surprise, but sometimes an unpleasant surprise;

2. the client's bargaining strength turns out to be different from that which the lawyer earlier assessed, sometimes stronger, but more often weaker.

In preparation therefore, the lawyer needs to:

• as much as possible avoid making presumptions;

• realise that strategic assessment may need to be altered on the basis of information gleaned during the course of the mediation.

Questions

In the light of all the above, the lawyer by way of preparation should, by their own analysis and in discussions with the client, address the following thirty questions:

1. What are the strengths of the client's factual arguments?
2. What are the weaknesses of the client's factual arguments?
3. What are the strengths of the opposition's factual arguments?
4. What are the weaknesses of the opposition's factual arguments?
5. What are the strengths of the client's legal arguments?
6. What are the weaknesses of the client's legal arguments?
7. What are the strengths of the opposition's legal arguments?
8. What are the weaknesses of the opposition's legal arguments?
9. What do the answers to 1 to 8 say about the client's bargaining strength or lack thereof?
10. What reasons or incentive does the client have to settle?
11. What reasons or incentive does the opposition have to settle?
12. What disincentives are there to the client settling?
13. What disincentives are there to the opposition settling?
14. What do the answers to questions 11 to 13 say about the client's bargaining strength or lack thereof?
15. Does the client have any particular needs that should be addressed in the settlement, and can they be provided by the opposition?
16. Does the opposition have any particular needs that might be addressed in the settlement, and can they be provided by the client?
17. Do the answers to questions 15 and 16 make settlement more difficult, or easier to achieve? Do they impact on the client's bargaining strength helpfully or unhelpfully?
18. Are there any absolute parameters within which the client must settle?
19. Are there any absolute parameters within which the opposition must settle?
20. To what extent is there overlap between the parameters identified in questions 18 and 19?
21. What do the answers to 18 to 20 say about the client's bargaining strength or lack thereof?
22. What are the parameters between which it would appear to be in the client's interests to settle, especially having regard to their BATNA and WATNA?
23. What are the parameters between which it would appear to be in the opposition's interests to settle, especially having regard to their BATNA and WATNA?
24. To what extent is there overlap between parameters identified in questions 22 and 23?
25. What do the answers to questions 22 to 24 say about the client's bargaining strength or lack thereof?
26. What settlement options and terms and conditions might be open to the parties?
27. Having regard to questions 1 to 26, how, and between what parameters is the case likely to settle?
28. Are there any difficulties or issues which might render the negotiations more challenging than usual (e.g. the opposing chief executives hate one and other, one of them is near deaf and the other has a heart condition)?
29. Are there any features or issues which might render the negotiations more capable of settlement (e.g. the opposing chief executives are old school buddies and both hate conflict)?
30. Having regard to the answers to questions 1 to 29, what tone, approaches, measures, tactics and strategy should be used during the negotiations? Should the client make the first offer and if so what should it be?

Questions simplified

The above thirty questions can be reduced to the following five:

(i) How do the competing factual and legal arguments impact on the client's bargaining power?
(ii) How do the parties' incentives and disincentives to settling impact on the client's bargaining power?
(iii) How do the parties' BATNAs and WATNAs impact on the client's bargaining power?
(iv) What types and range of settlement are:
a. possible?
b. likely?
c. in the client's interests?
(v) What special features exist which might affect the conduct or outcome of the mediation?

Offers

Something needs to be said about the last question in 30 above. It is commonplace amongst lawyers:

• to not want to put the first offer on the table;
• to make their first offer a very low one.

Lawyers fear that by putting the first offer on the table they commit themselves to a level of settlement which might be too concessionary, and that their first offer will be deemed a starting point only, and bargained upwards.

These fears are not entirely without foundation, but it is worth observing that:

• putting the first offer on the table allows that party to "anchor" the negotiations at a particular level (parties find it hard to move a long way from the first offer on the table);

• by putting in an excessively low offer, that party may inject unhelpful pessimism into the negotiations and send a message to the opposition that they are not serious about settling; furthermore, it may only serve to guarantee a long and exhaustive process of incremental bargaining; finally and importantly, the party who solemnly declares that settlement at a particular (low) level is fair, loses credibility when they later inevitably declare that a much higher level is fair.

Mundane preparation

Like preparation for court, preparation for mediation involves the mundane and tedious, but nevertheless such preparation is important. Here are some points to cover. The lawyer should:

1. Ensure that all those attending the mediation with him/her:

• realise that the mediation conference may take all day and go into the night;

• have no other commitments throughout the possible duration of the mediation conference, so that they can give it their undivided attention;

• have no distractions during the mediation conference, such as car parking or child care worries;

• are ready for a process which is physically and emotionally exhausting.

2. Explain the mediation process to the client:

• private, confidential, without prejudice, and voluntary throughout;

• mediator does not make binding decisions;

• lawyer can talk to client at any time and mediator may do so also in "caucus";

• the usual format: introduction by mediator, opening statements by parties, agenda setting, discussion of facts and law, settlement discussions and settlement agreement;

• settlement agreement drawn up at conclusion (not later) and is binding and enforceable.

3. Go through the agreement to mediate with the client before the day of the mediation.

4. Ensure that there is present with the lawyer all persons required to supply the necessary information and expertise to argue and support the case, bearing in mind that usually there is no opportunity to provide the information at a later date.

5. Ensure that the client has unfettered authority to settle at the conclusion of the mediation bearing in mind that the outcome may be unanticipated; at the very least, ensure that there is access to a person who can provide the authority and who will be reliably available throughout the entire course of the mediation, including late at night.

6. Ensure as required that the opposition have sufficient advance notice of arguments or proposals and copies of documentation so that they are not taken by surprise, and as a result cannot settle at mediation.

7. If the lawyer rather than mediator has responsibility for the venue, ensure that it provides:

• adequate seating for all, in a room neither too big nor too small;

• that water, tea and coffee are readily available;

• there is a whiteboard and marker pens;

• there is a sufficient number of breakout rooms; and

• that there is after hours entry.

8. Prepare the opening statement. The opening statement is important because the opposition will listen attentively. It is an opportunity to establish rapport with the opposition, generate a constructive tone and hit home key points.

Conclusion

At times, mediations are absorbing, intriguing and even uplifting. Such is more likely to be the experience of the well-prepared lawyer, than the ill prepared lawyer. May that be your experience. Good luck.

 

 

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Category: Negotiation