Arbitration & Mediation

Mediators' Proposals: the Good, the Bad and the Ugly

By Victoria Pynchon

At the close of the year, our good friend John DeGroote at Settlement Perspectives asked whether mediators' proposals had lost their utility.  Now that parties "know the mediator's proposal is coming," he wrote,

savvy negotiators angle for an advantageous impasse rather than a settlement. Compromise is no longer the goal of the mediation exercise; instead it becomes a play to the 'neutral,' whose power to craft the mediation proposal will make her the real decisionmaker:

• In cases where the mediator's proposal will be based on who will pay what, the parties — or worse yet, one party — will spend valuable time and effort constructing an impasse when, in the absence of a mediator's proposal as a fallback, he might have actually achieved a compromise settlement; or

• In cases where the mediator's proposal will be based on the value of the case, no one has an incentive to be candid with the mediator — so positions become more important than interests; or

• In cases where the parties aren't sure what will drive the mediator's proposal, they dig into their positions and hope for impasse — with the most likely result being a mediator's proposal predicated on those positions.

Just yesterday, prominent local IP litigator, trial lawyer and deal-maker Robert J. Rose of Sheldon Mak Rose & Anderson graced the IP ADR Blog with a guest post on the utility of mediators' proposals here.  As Rose notes:

A reluctant plaintiff will make a large jump if the money is really 'on the table.'  Defendants will come up with money they otherwise deny having, if it means that the case is really over.  It also eliminates reactive devaluation.

For those who skipped social psychology in college, reactive devaluation is what every lawyer is taught in the first year of practice, if not earlier.  "If the other side wants it," said my first mentor, "you don't, even if it seems like a good idea to you."  With that admonition ringing in the ears of every litigator, the need for a mediator is obvious.  Given the dangers cited by DeGroote, however, has the mediator's proposal lost its utility as just another way to "game" the negotiation.

I have two short stories to illustrate the reason I re-direct the parties to bracketing when they ask me to make a mediator's proposal. 

First, let me explain that I am one of those mediators who used my "proposal" option by putting a number on the table I thought both parties would accept.  I tested these assumptions in separate caucuses by asking each side "if they came down to $X would you come up to $Y."  When the numbers didn't overlap, I'd guage how much pain there might be for both parties to bridge the gap, along with other entirely subjective opinions of the state of the negotiation itself such as:

• how invested each side was in walking away with a settlement that day
• whether either attorney needed help in bringing a little more reality to their clients before the parties would be ready to accept a proposal by the mediator; and,
• how much "street cred" I'd developed with the parties personally so that they'd accept my estimate of the settlement price-point even if they wouldn't accept their own attorney's advice /*

The first time I felt uncomfortable making mediator's proposals was at the end of a mediation that had just settled a particularly fractious commercial case.  In the Zone of Potential Agreement , my proposal was high on the side of the Plaintiff because I felt the defendant had more "give" than did Plaintiff's counsel. 

I made the proposal and both sides accepted.  When I walked into the defense caucus to tell counsel that he had a deal, he burst into laughter and clapped his hands together, saying, "I was prepared to take less; that's a great deal.  Thanks so much."

Everyone Lies to the Mediator

O.K., that was my first lesson in the first rule of mediation:  everyone, EVERYONE lies to the mediator.  You do not get to lie to the mediator twice, however, so I caution anyone who wishes to respond to the deal premised upon a mediator's proposal in the manner this lawyer did never to hire that mediator again.

Still, I took a lesson from the attorney's merriment.  First, he's not the only one to manipulate me.  He's just the only one to let me know how much I'm being manipulated.  I don't like being manipulated.  But that's what attorneys -- litigators -- are trained to do.  My mediators' proposals were based, at least in part, upon attorney manipulation, putting my finger-prints and my credulity or cynicism far too much front and center on the final result.  I not only didn't like that for myself -- I didn't like what it meant for the parties' self-determination.

So that's reason no. 1 -- an extremely strong reason no. 1 - why I dont' like to make mediator's proposals.

"If We'd Wanted a Third Party to Decide, We Would Have Arbitrated This Case"

The quote above is from the largest and most sophisticated commercial case I've mediated to date. We were at the end of day two and the parties -- who had travelled great distances to meet in a neutral city -- were nowhere near a landing point.  I was a sufficiently experienced mediator to land the case, but new enough that I was still prone to get stuck in the parties' positions.  I hadn't yet given up mediator's proposals and suggested making one. 

"I didn't hire you to have a third party make my decision for me," said counsel.  "If you want to get the parties closer together, why don't you suggest a bracket?" (for a explanation of bracketing, see my colleague Ralph Williams' article Introducing Deal Points - the Basics.)

I'd used brackets as a means of testing the parties' true distance before that day ("if he went to $X would you come down to $Y?") but I'd never made a mediator's proposal before that was a bracket.  Although we didn't settle the case that day with a bracket (it took four full months of follow-up telephone negotiations to do that) I took counsel's point to heart.  The parties don't hire me to make a decision for them.  And they're much happier when they get to make the decision themselves.  Even though the parties do decide "switch on-switch off" whether to accept the mediator's proposals, it hasn't come to them as the result of their own (assisted) negotiation.  That being the case, the agreement reached is, I'm afraid, far less durable and far less satisfying than one achieved without the mediator's thumb on the scale.

I decided I was not inclined to use mediators' proposals more than two years ago.  In all that time, however, I've never refused to make one.  Rather, I've suggested alternative ways of achieving resolution, all of which were successful in those cases where the parties' believed a mediator's proposal could do the job for them.

I'd like to hear thoughts on these points -- manipulation and party satisfaction -- from my litigator readers as well as my mediator readers.

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*  I say this with the following caveat:  I would never attempt to influence clients to do something other than what their attorneys advise.  From time to time, however, the attorney needs to make the mediator the "bad cop" in the negotiation so that the client will not feel as if the attorney is no longer fighting for his interests.  I only play "bad cop" with the attorney's advice and consent.  My job is to get the settlement concluded making the attorneys look good, not bad.

Full post as published by Settle It Now Negotiation Blog on July 12, 2009 (boomark / email).