Hey Mike. I don’t get it. I go to mediation and we spend most of the day talking about the case, the law, the facts, you know, that stuff we went to law school to figure out. And then all of a sudden it’s like a switch has been thrown and we ignore all of that and just start tossing numbers back and forth like a hot potato. What gives? Why don’t we skip all that gab fest at the beginning and just get down to it?
— Impatient In Inland Empire–
Dear Impatient. First, if you are impatient in the Inland Empire, how do you get to downtown L.A. without blowing a fuse? Helicopter? That traffic’s a bitch.
But I suppose a traffic report is not what you were writing about. For an impatient counsel, your question is pretty insightful. Hopefully you’ll have the patience to make it to the end of this blog entry to find the answer.
Let’s Start At The Beginning — The Target
But first, let’s start at the beginning…with your client. He hired you because he has a dispute with someone or something (although corporations are people too, or so I’ve heard….) One way to resolve the dispute is to bring a lawsuit.
Lawsuits are perfectly good ways to resolve disputes because no one gets hurt … at least not physically. The legal resolution process will be messy, it will be expensive, it will be time-consuming, it may even be embarrassing, and did I mention expensive?, but it will resolve this dispute … one of these years. Justly (in the eyes of the winner) or unjustly (in the eyes of the loser), thanks to the mob wisdom of 6-12 strangers dragged in off the street (with a possible assist from a learned judge and possibly a bunch of learned justices), your client’s dispute will someday … mercifully … be over. This legal dispute resolution process – this trial and possible appeal – is critically important to the mediation process and is the answer to your question. This tortuous trip to trial becomes the target to beat at mediation.
(Hang in there, Mr. Impatient, I’m getting there!)
Beating The Target
In contrast to Mr. Toad’s Wild Trial Ride, mediation is like It’s A Small World, though without the saccharin music. In mediation, the parties try to beat the trial path target by creating options they like better than trial. Mediation is about understanding true needs, desires, interests, wishes, fears, and motivations. It’s then about trying to invent settlement options that address those needs better than the alternative … which is generally continued litigation and trial. If the parties can create a settlement option that they both like better than the target, then they can shake hands and call it a day … a good day. That is our goal in mediation, to create a tomorrow that the parties like better than the trial path they are on today!
For the negotiation geeks among us, trial is generally your BATNA (Best Alternative To a Negotiated Agreement). Every settlement option is compared to the alternative, which is the litigation process and trial, to determine if the settlement proposal is any good.
So What, Mike!
“SO WHAT” you ask? “Why are you telling me this?” I’ll tell you why, Mr. Impatient. The problem is this: the way you analyze the trial option, and the way your opposing party analyzes the trial option, is not the same. In fact, it’s not even close.
Let’s take an example. Suppose you represent the plaintiff in an employment case, a former CFO. Your client was fired the day after he complained about certain accounting discrepancies that he thought violated the law. He even has a text from the company president that told him to stop snooping around the “private” books and records … or else. Seems like a case with some potential – high earning individual, apparent unlawful termination, emotional distress, and of course statutory attorney’s fees. It will take a pretty good settlement offer to warrant giving up this jury trial opportunity.
On the other hand, the defendant sees the case differently. The employer actually made the decision to terminate your client’s employment two weeks before the CFO made any complaint; the termination decision was based on repeated insubordination, including swearing at the boss, and repeated tardies (“it’s that darn traffic from Rancho Cucamonga”), not to mention the positive finding of morphine in the recent random drug test. Plus there’s the after-acquired evidence of the missing $50,000. The defendant employer believes your client likely read the termination writing on the wall and so complained in an attempt to set up a lawsuit. Obviously, this defendant is not willing to put up much, if any, money in settlement.
Because you and your client think this is a great case – your BATNA looks pretty strong – it will take a pretty rich settlement to beat what you believe is your trial target.
And the defendant thinks this is a great case to defend – her BATNA looks pretty darn strong – so it will take a pretty low settlement to beat what she believes is her trial target.
Can We Just Get Down To It?
Alright, Mr. Impatient, here’s a test for you: What would happen if we just “got down to it” by tossing numbers back and forth? Do you think we would ever find a settlement figure that the plaintiff thought was high enough to warrant giving up this jury trial, AND the defendant thought was low enough to justify forfeiting a chance for a defense verdict?
I don’t think so.
And yet, this is still an eminently settle-able case.
Shooting For Different Targets
The reason jumping right into the numbers wont work is, simply enough, the parties are shooting for different targets. The target the parties are trying to beat – the trial path – is not perceived to be the same in each room. The plaintiff is trying to obtain a settlement that beats his view of the trial option (a sure win with lots of damages); the defendant is trying to obtain a settlement that beats her view of the trial option (a sure defense verdict). Barring some secret undisclosed motivation (such as the plaintiff needs $25,000 to pay for a surgery for his child; or the defendant needs to resolve this case at any price in order to consummate a major merger), this case is not going to settle until the parties’ views of the trial risks are a little more aligned. They need to be shooting, if not for the same target, at least for targets that are close to one another.
Now, Mr. Impatient, do you see where this is going?
The fact is, both you and your opposing party are wrong in your evaluations of the trial path. This error could be due in part to the fact that the parties are not operating under the same understanding of the facts; or they may be unequal in their understanding of the pertinent law; or it could simply be due to an implicit bias natural in all human beings. Regardless, the fact is you are both shooting for different targets, making it next to impossible, without more, to find a settlement both parties would prefer to their delusional self-view of the case.
Realigning The Parties’ Understanding Of Trial — The Real Trial
So what is the mediator doing in those first four hours of mediation?
He or she is helping you, your client, and the other party better understand what that trial option really looks like. She is making the effort to better align the parties’ understanding of their true BATNAs, their true trial option, the targets. He is trying to disabuse the parties of the overinflated and inaccurate view of trial that they carried with them into the mediation process at the outset, and to see the trial option a little more realistically and objectively. He’s helping make sure each side understands the facts that the other side has and can present at trial; she’s exploring the legal framework to ensure each side is operating under the same one; he’s helping the parties understand what the trial path is really all about, legally, financially, and emotionally. She’s not trying to bash anyone’s case or tell you your case stinks; but she is trying to get everyone to evaluate the case with as much information as possible, and to do so as objectively as possible.
This realignment process makes sense, and is indeed at times critical to success. Think of it this way: You are finally buying your dream Tesla (fine, my dream Tesla), and Elon Musk offers you financing at 8.5%. Do you take this deal? It depends, doesn’t it, on your alternatives? If your best alternative (your BATNA) is 28% financing from the dude in the back alley, then that 8.5% looks mighty attractive. On the other hand, if your best alternative is 3% from your cousin Vinny, then you can probably pass on the dealer’s offer. You’d rather have a 3% loan than an 8.5% loan.
As you can see, it is imperative that, in making this financing decision, you know what your real financing options are … not the financing options you think you can get, or the ones you want to get, but the actual true financing options available to you. You need to know your true BATNA. After all, the worse case scenario would be that you believe you can get 3% financing so you turn down the dealer’s offer of 8.5%, only to discover that the best you can really get is Back Alley Bart’s 28%. That would not only stink, it would be a tad embarrassing when you have to explain your negotiating prowess to your spouse. In other words, to make a good decision, it is in your best interest to understand as clearly and objectively as possible what your alternative really is, not what you want it to be.
Seriously, Mike, What Does All This Have To Do With Mediation?
Which brings us back to mediation. To make the best decision possible in mediation, it is absolutely in your and your client’s best interest to understand as clearly and as objectively as possible just how strong or weak your trial path really is. This means that at some point you have to STOP DRINKING YOUR OWN KOOL AID and look as objectively as possible at what your trial option really looks like so you will know to the extent possible whether the best deal you can make at mediation is in fact better than, or worse than, your true BATNA, your true trial alternative.
The mediator is there to help you with this process. When the mediator is questioning your case, asking about evidence, exploring legal theories, studying witness credibility, he is doing this to help you. It’s not a challenge to your skill or abilities as a trial lawyer or an attack on the veracity of your client. It’s just an effort to explore the realities of the trial option as objectively as possible so you can better determine whether, if you don’t cut a deal, you have a 3% loan or a 28% loan waiting for you … or something in between. And with this information, you will be better able to evaluate the wisdom of taking Elon Musk’s 8.5% settlement offer.
The mediator is doing this in both rooms, of course. The fact is, both plaintiff and defendant generally come into mediation with over-inflated views of their trial option, and through the mediation process, a little objectivity can be infused. Indeed, if all goes well, while the plaintiff and defendant will likely never come to the same “valuation” of the trial option, they will generally come close enough to make the litigation/trial path a beatable target for each of them.
So That’s It? Brilliant!
So now you know, Mr. Impatient (like you really had the patience to read to the end of this 2,074 word blog…). We spend 2/3 of the mediation talking about the law and facts because that’s often what it takes to get the parties and their counsel to get a more realistic and objective understanding of their true BATNAs, their actual trial option. Once the realignment is done, we don’t need to talk much about the facts and law anymore. At that point, we can finally “just get down to it” and start flipping numbers back and forth.
Thanks for asking!