Arbitration & Mediation

The Devil in the Details: When Do You First Talk Terms?

By Victoria Pynchon

As you'll recall, we're in hour nine of the mediation.  The parties have finally agreed to settle the antitrust litigation the Court ordered them to mediate ("we won't settle; we'll only be here for an hour"). 

Defense counsel wants to write up the "deal points" and make a quick getaway.  Before she does so, we have the following conversation.

"We'll need three years to pay it."

I fake calm.

"Your security?" I ask, my mind racing to the other room where an already unhappy set of plaintiffs are sitting.

"We don't have security.  I told you my clients are broke.  I also told you we'd need terms but you didn't want to talk about them."

This is true.  From hour one the defense insisted they'd need to pay over time and the Plaintiffs wanted to know what terms the defense was thinking of.  Throughout the day I'd told them both the same thing:  "let's see if we can agree on a number before we start talking terms."

I have reasons for this.  They are as follows:

• once people have agreed upon a number, it's far more difficult for them to walk away from a deal; the Plaintiffs have already begun to think about what the money will mean to them and the defense has begun to imagine life without the litigation;
• people are risk averse.  So long as there is no (or only minimal) money on the table, it's easy to refuse to engage in the often difficult process of readjusting their expectations and compromising their desires.  When there's enough money on the table to make both parties want to settle, walking away involves loss.  

This is often the trickiest part of the mediation.  The three-year time table and absence of security is, I know, enough to blow up this deal.  I'm going to take heat from the Plaintiffs' side, for resisting their efforts to learn the Defendants' terms before they spent an entire day agreeing upon the price.  I don't, however, regret my decision.  If these terms cause the negotiation to break down now, they certainly would have done so in hour one.

How I help the parties negotiate what is poised to become a rancorous impasse in the next post.

Full post as published by Settle It Now Negotiation Blog on January 19, 2009 (boomark / email).