The Language of Numbers: Negotiating Claims for Money

November 4, 2009

By J. Anderson Little

A Presentation for NC Academy of Trial Lawyers in January, 2000

 My job today is to set the stage for the theme of this program, “Making Negotiations Work”.  With that goal in mind I will speak to you about two subjects.  The first has to do with the process of settlement as we now find it in the courts of North Carolina; and the second has to do with negotiating settlement within the specific context of a personal injury claim. 

 

The Changing Landscape of Settlement in North Carolina

 

Numerous settlement procedures now exist in the judicial arena in North Carolina that did not exist fifteen years ago.  In Superior Courts throughout the state, mediated settlement conferences are mandatory.  In the Industrial Commission, mediated settlement conferences are ordered in all cases.  In the Office of Administrative Hearings, judges routinely order cases to mediated settlement conferences.  And in the Federal Courts, mediated settlement conferences are a mandatory feature of every civil case.

 

In some of those courts, mediated settlement conferences are the only settlement procedure available.  In others, mediated settlement conferences are the favored settlement procedure, and procedures like neutral evaluation or non-binding arbitration being available as alternatives.  In the District Courts of North Carolina, we also have non-binding arbitration for general civil litigation, mediation for child custody cases and a menu of settlement procedures in equitable distribution cases.  A decade ago, these procedures were available on a voluntary basis, but were seldom used by the practicing Bar.

 

Reflect for a moment on the practice of law before settlement procedures like mediated settlement conferences became mandatory, so that the rationale for what we’re doing is not lost in history.  To illustrate the progress we’ve made, let me tell you a short story from my own practice as a trial lawyer.

 

In 1988, I appeared in Superior Court in Orange County to try the personal injury case of a client who suffered nerve damage as the result of an automobile accident.  Our case was first on the docket, so I dutifully prepared for trial with the certain knowledge that the case would be tried.

 

After court had been called into session and fifty jurors were oriented to their week’s work, the presiding judge called opposing counsel and myself to the bench to review our pretrial order.

 

I handed the order to the judge and watched him read it.  As he reached for his pen to sign it, I blurted out, “Judge, I’m not sure I should have certified as true every thing that’s contained in that order.”  The judge stopped and replied curiously, “Why do you say that?”  I answered, “Paragraph 16 says that the parties have had full and frank settlement discussions, and I’m not sure I should have certified that we have done so.”

 

The Judge looked first to opposing counsel, then to me and then back to opposing counsel.  He said, “Mr. Smith what do you say to that?”  My opponent replied, “Well, your honor, perhaps we could benefit from a few minutes of conversation.  Could you hold the case open for fifteen minutes while we talk?”  The judge allowed his request and dismissed the jury for a fifteen-minute break.

 

Six hours later, our case settled in a back room of the courthouse.  The judge called the second case on the calendar; and the jury, which had been sitting idle all day, finally began its work.  My client received a decent settlement; my opponent’s client saved trial costs; and I received a handsome fee.  I also lost the better part of a week and most of the weekend to unnecessary trial preparation.

 

In spite of the fact that rule 16 of the Rules of Practice mandated a pretrial conference in every civil action, most pretrial conferences held prior to 1992 involved only a quick review of a pre-trial order.

 

Prior to 1992, settlement processes were characterized by fragmented, and sometimes frantic, last-minute activity. Settlement discussions were hard to initiate early in the life of a case.  Such negotiations were conducted almost exclusively by lawyers; seldom did litigants participate directly in settlement negotiations.  Everyone wasted time and energy: the courts, clients, and especially the lawyers.  Over the past fifteen years the lawyers of North Carolina have initiated a system of mandatory settlement events that have solved most of these problems.

 

In an adversary judicial system, if one side initiates settlement discussions, the other believes that its opponent has a weak case.  There was in our court system a disincentive to initiating settlement negotiations.  Mandatory settlement procedures eliminate the need for one party to initiate settlement discussions and bring the parties to the bargaining table without anyone losing negotiating leverage.

 

The old saw was that you couldn’t get a case settled until a jury was in the box.  In a way, that was true.  In the old days you couldn’t get settlement discussions begun until the case was ready for trial.  Why not?  All lawyers are driven by deadlines; we’re prompted by deadlines. We tend not to work on files unless there’s an event in the life of a case for which we have to prepare.

 

Mandatory settlement procedures create an event in the life of case to which everyone must pay attention.  Lawyers and their clients take them seriously.  They prepare for them and work hard to achieve settlement. With the advent of mandatory settlement conferences and other settlement procedures, the practice of law is changing in North Carolina for the better.  We are now beginning to pay as much attention to the settlement of civil cases as we are to their trial.

 

Because of our recent attention to settlement processes, we have begun to change the practice of law in another and unexpected way.  Lawyers are becoming increasingly interested in the art and skill of negotiation, because they are expected to use both in the presence of clients, mediators, and other attorneys during mediated settlement conferences.

 

Several months ago I researched the topic of CLE seminars sponsored by this Academy and the North Carolina Bar Association. Before 1990 and 1991, settlement processes and negotiation skills were seldom mentioned as seminar topics.  Now, however, the subject of settlement and negotiation appears frequently on CLE programs.

 

Lawyers’ interest in the subject of settlement and negotiation is illustrated in another way.  It may surprise you to learn that 50 percent of those who attend mediator training courses are lawyers who do not want to become mediators.  Rather, they sign up to learn more about how to represent their clients in settlement conferences.  In other words, they come to learn how to negotiate.

 

How many of you here today who graduated from law school prior to 1992 had a law school course in negotiation.  How many of you who have graduated since 1992 have had such a  course.  I submit to you that most of the practicing lawyers in the State of North Carolina have never taken a course in the art and skill of negotiation.

 

Where did we learn to negotiate?  Until recently, learning to negotiate was left to each individual.  Until recently, law schools did not offer courses and workshops on the subject.  Until recently the practicing Bar did not recognize its importance.

 

Looking back on my legal career, I assumed that you either had negotiation skills or you didn’t.  And if you had observed the way I conducted negotiations, you might conclude that I thought arguing with others passed for negotiating.  I’ve often discribed my negotiating style as a three-part process:  tell my opponent how good my case is; if he doesn’t get it, tell him again; and if all else fails,tell him louder.

 

In my experience, the mediated settlement conference program in our courts has exposed a weakness in our legal training and education with regard to our ability to negotiate.  With the advent of CLE programs such as this one, the availability of mediator training programs, and the experience of negotiating in mediated settlement conferences, we have begun to learn something about negotiating and settling civil cases.

 

Models of the Negotiating Process

 

So, let’s turned our attention to the art and skill of negotiation.  What have we learned?  For starters, let me briefly outline the three models of the mediation process we frequently talk about in our mediator training course.  Why models of the mediation process?  Because the goal of the mediator is to facilitate the parties’ negotiation.  What do mediators learn?  They learn about the negotiation process and how to assist the parties when their negotiations become difficult.

 

            The Problem-Solving Model

 

There are three models we explore in mediator training.  The first of them is the problem-solving model.  The aim of the problem-solving model is to move the parties away from arguing about their positions and help them focus on their goals and objectives.  The goal is to help the parties engage in a problem-solving endeavor that produces solutions which work for everyone.  In other words, the goal of the problem-solving model is to change the entire nature of the negotiation, from traditional bargaining to joint problem solving for mutual gain.

 

Sounds great doesn’t it. And in many cases it works wonderfully. I can recount numerous instances where the problem-solving model helped produce win-win settlements for everyone.  Many of those creative settlements occurred in the context of business disputes.  Can this model be of use in injury claims as well?

 

I have found it useful in that it helps me focus on the goals and objectives of the litigants themselves.  We lawyers need to remember that our clients have needs and interests, and that they influence settlement decisions as much as our careful analysis of the case does. We should remember always to ask, “What are my clients’ goals and objectives?  Have we explored their needs with respect to this litigation as fully as possible?”

 

This inquiry will serve you well.  If you employ it, you may discover useful information: that your client cannot afford the time off from work that a trial would entail, that your client has pressing monetary needs, or that your client does not need the money at all.  What you learn may surprise you.  This inquiry will also help your client focus on the realities of their life, which may create a more realistic settlement process.

 

There is at least one issue that comes up routinely in injury claims for which the problem-solving model is extremely useful.  Near the end of a money negotiation, the issue of confidentiality often will arise.  It doesn’t come up earlier, because the party interested in confidentiality doesn’t believe the case will settle or because he/she fears that to do so will signal an eagerness to settle.

 

Attorney and clients often become emotional about the subject of confidentiality and began fighting with each other about what they will and will not do with respect to it.  To an outside observer, that conversation sounds very much like, “No you can’t.” “Yes I can”.

 

Mediators often treat the issue of confidentiality as a negotiation within a negotiation, one that is susceptible to an interest-based analysis and a problem solving approach.  A mediator, or good negotiator, will ask at this point, “What problem are you trying to solve with a confidentiality provision? Why do you need it?  What will it do for you?”  The other side will be asked the same type of question. “How will a confidentiality provision complicate your life?  How will it hurt you?”

 

It may surprise you to see how quickly parties can achieve breakthrough solutions when the issue of confidentiality is explored in this way.  Turning position-based negotiations into joint problem solving is a thing of beauty when it happens. The challenge for us today, however, is that money negotiations have other characteristics which make a problem solving approach difficult to employ throughout the negotiation.

 

            Achieving Understanding

 

The second model that we talk about in mediation training is difficult to name.  Its goal is not settlement at all; its goal is understanding.  Put another way, in this model settlement occurs as a result of achieving understanding.  Therefore, the mediator’s goal, and I submit to you the negotiator’s goal, is to achieve understanding.

 

Understanding of what?  Everything that touches the case: all perspectives on the facts, the law, the issues involved in liability and damages, the circumstances of the parties, the needs and interests of the parties, the relationship between the parties and their counsel, the options available to them to solve the problem, the power they possess to achieve settlement, and the communications that occur between the parties.

 

Pretty esoteric sounding  stuff, huh?  Is this a useful approach?  I submit that it is.  And for me it is the heart and soul of mediation and negotiation in whatever type of case you’re dealing with.  Understanding is what makes settlement possible.

 

The tools for achieving understanding are simple.  They are of the tools of active listening, open-ended questioning, and summary statements.  Achieving understanding underlies everything I do as a mediator.  It is an approach that would serve lawyer/negotiators equally well.

 

Does this approach help in injury claims?  My answer is, “Yes, but…”  Yes, because it reminds mediators and negotiators alike to gain understanding before jumping to conclusions, to look for what is missing in the discussion, and to constantly check for assumptions that lead to misunderstandings.  But, it doesn’t appear at first blush to have utility in the run-of-the-mill personal injury case where money is the currency of settlement.

 

            Traditional Bargaining

 

A more useful approach, at least initially, is one I call traditional bargaining.  Traditional bargaining has a bad name in mediation circles.  Most of the literature of mediation is devoted to the problem-solving model, moving people away from position-based bargaining.  Why is that?  Position-based bargaining quickly leads to impasse.  Parties compare opening positions and say, “No way this can settle” and quit the negotiation.

 

In addition, achieving settlement in position-based bargaining is characterized by a series of concessions.  How’s that for motivation to settle?  To achieve settlement, I have to keep giving up something.  A process of concessions, giving up more and more, feels very much like a lose-lose proposition.  It’s difficult psychologically for a negotiator to make a seemingly endless stream of concessions.  So, traditional bargaining is difficult to get going and keep going.

 

The flip side of this discussion is that most of the negotiations we conduct in the real world have a traditional bargaining flavor to them, particularly when they involve money.  Whether we’re buying a car, selling the house, or shopping for supplies, we constantly engage in traditional, position-based, money-oriented bargaining.

 

This is especially true in a personal injury claim, wrongful death case, or workers’ compensation claim.  Occasionally, we can problem solve our way to a new and creative solution.  But most of the time, a personal injury negotiation is about one thing, money.  Someone wants as much of it as they can get; and someone else wants to keep as much of it as possible.  Negotiations in those cases usually start with money and end with money.

 

So, is there any way we as mediators and negotiators can do traditional bargaining in personal injury cases better?  The good news is that we can.  First, from Fisher and Ury’s well-known book on negotiation, Getting To Yes, we get the idea of legitimacy. Simply put, legitimacy is the notion that you need to document your claim.

 

We need to provide the other side with independent verification of our point of view whether it’s about permanency, causation, medical expenses, wages, or any other issue in the case.  And we need to provide it well in advance of the settlement conference, so that the other side can review it as necessary to satisfy themselves of its accuracy.  If we want someone else’s money, we need to supply them with the information to justify  their decision.

 

Attorneys should carefully review their case before a settlement conference to see if any issue needs further documentation.  If so, then documentation should be provided forthwith, so that the settlement conference will be a productive one.  The most frequent complaint I hear from the defense side of the table is that they have not been provided documentation of some aspect of the claim.  It’s not enough to bring that information to the conference.  It should be provided for review by the defense well in advance of the settlement conference.

 

Another important contribution Fisher and Ury have made is the concept of B.A.T.N.A., the Best Alternative to A Negotiated Agreement.  Fisher and Ury suggest that a negotiator should know his/her best alternatives to achieving settlement.  Answer the question, “What will I do, what will I get, if I don’t settle this case?”  In the litigation context B.A.T.N.A. analysis means what I will get at trial and what it will cost  me to get it.  This is just plain, old-fashion risk analysis.

 

Why do we do risk analysis?  So we can have a framework for deciding where to start our money negotiations and for deciding when we’ve moved far enough.  In other words, to know at what point we are better off taking our chances with the judge or jury instead of taking what has been offered in negotiation.  Risk analysis is fundamental.

 

Do attorneys always conduct a risk analysis before settlement conferences? Do we conduct our risk analysis with our clients before coming to the settlement conference? Even if we’ve conducted risk analysis with our clients, have they absorbed it? The fact that the answer to these questions is often “No’ explains why mediators typically spend a lot of time in private sessions with the plaintiff in the early stages of a mediated settlement conference.  We’re going over B.A.T.N.A. stuff; we’re helping you and your client do risk analysis.

 

Litigation risk analysis is a service mark registered by Mark Victor, a west coast attorney who has taught a course by that name throughout the country since the late ’70s.  Mark applies a weighted probability analysis to cases in litigation.  That’s a technique taught in business schools, sometimes known as a decision-tree analysis.  I highly recommend Mark’s course for all litigators and mediators.

 

Mark uses this approach not only to assist lawyers and their clients in settling litigation but also to direct limited discovery resources to the issues in the case which can cause the most dramatic shift in value.

 

So, expect to spend time in mediated settlement conferences talking about the case, the factual disputes, legal disputes, any decision the judge or jury will have to make and , most importantly, the damages, in order to identify your risk factors and articulate their probability of occurrence.

 

One additional word about damages.  In my experience, plaintiffs spend more time and energy on the liability portion of a personal injury case than do defendants.  Defendants are always asking me in private sessions, “What does the plaintiff think he/she will get if he wins?”  This is where the concepts of legitimacy and risk analysis come together.

 

We suggest that you find ways to collect and document the settlement value and jury verdicts in the types of cases you intend to handle.  How many of you keep notebooks on settlements and verdicts that your office has handled, records that can be shown to clients and claims representatives alike?  How many of you talk with the clerks, bailiffs, and lawyers after a term of court to determine what happened to the injury cases tried that week and what the verdicts were?  How many of you meet regularly with a group of trial lawyers to discuss recent settlements and verdicts?  These are techniques, and there are many more, which can enhance your own case evaluation, as well as provide a source of legitimacy which might not exist otherwise.

 

Are these concepts helpful in a money negotiation?  Absolutely.  Risk analysis grounds the parties in the realities of their case and produces a more realistic negotiation.

 

The Nature of Money Negotiations

 

Mediators have these models in mind as we work to facilitate negotiations.  About four years ago, however, I began to doubt that these models adequately describe what goes on in money negotiations and began to wonder what a mediator or negotiator can do when movement from one position to another stalls.

 

In particular, I began to notice two phenomena that occur repeatedly in injury cases.  The first is that money negotiations are characterized by multiple rounds of bargaining which continue long after discussion about case evaluation or risk analysis has run out.  At some point in a personal injury negotiation, the conversation is less about the merits of the case and more about swapping money positions.  This is the phase of money negotiations that I jokingly called “the used car sale”. 

 

I first noticed this characteristic in a personal injury case during the early years of the mediated settlement conference pilot program in Fayetteville.  Two excellent attorneys, who routinely met with me after the second or third round of offers, declined my invitation to talk attorney to attorney.  At the end of 12 complete rounds of offers and counter offers, the case finally settled.  As I recall, we quit talking about the merits of the case at round 3.  By the way, the plaintiff started her negotiations at $10,000 and the defendant started at $2,500.  Twelve rounds later, they settled at $4,700.

 

More recently, I mediated an injury claim in which the plaintiff started at $125,000 and the defendant started at $90,000.  Nineteen full rounds later the case settled at $115,000.  Little mention was made of the merits of the case after the second set of offers.  These cases are extreme examples of what happens to some extent in almost every personal injury case I mediate.  I began asking myself, “What’s going on here?”

 

The second phenomenon also dawned on me gradually.  I found that money negotiations become surprisingly emotional during private sessions, after starting the conference with a civil discussion together with me in a general session.  People become angry and frustrated with the other side as if they had been cursed or shouted at, even though no one speaks an ill word of the other.

 

It was intriguing to me.  An offer was passed from one side to the other.  And yet, the intensity of feeling displayed by one side upon the arrival of the proposal from the other is often strong, even hostile. People are getting mad at each other not because of some personally degrading remark but as a result of receiving proposals that are deemed to be unacceptable.

 

Mediators hear all kinds of phrases signaling discontent or anger.  I’ve catalogued these under the heading of “settlement conference cliches”, because I hear them over and over.  “I’m not even going to dignified that offer with a response” is one of my favorites.  What does that mean, and what is going on to stir such strong emotions?  What insight can we provide to move the parties along?

 

Unfortunately, I have found nothing in the literature of mediation and negotiation that speaks directly to this problem.  I’ve discovered that in an effort to promote the value of the problem-solving model, theorists have neglected to study the negotiation of money claims.  Yet, this is the arena in which we operate every day of our professional lives.

 

Over the past several years, I’ve given these phenomena considerable thought and have come to some conclusions, loosely collected under the theme, “the language of numbers”.

 

Money Negotiations as a Form of Communication

 

When people get mad at each other, threatened to pack up and go home, send low-ball or high-ball numbers in retaliation for unacceptable money proposals from the other side, it is safe to assume that those people are communicating something with their proposal that goes beyond the proposal itself.  In other words, we send “a message” with our proposal. How else can we explain the sometimes strong, negative reaction we hear when an unacceptable proposal is received?

 

Some time ago, I began to think of money negotiations as a form of communication.  We send messages with our proposals and our opponents react to those messages. If that is true, what is the subject matter of our communication?

 

My conclusion is this: the parties to a money negotiation are trying to communicate indirectly about something that they dare not communicate directly — that is, the range in which the case can settle.  Why can’t we communicate directly about it?  Why can’t we just say what our number is?  There are at least two reasons.

 

We can’t (or rather, don’t) because we fear the other side will take advantage of us.  If we tell them our best number, two things will happen.  The first is that the other side will begin to put downward pressure on us to go below that number.  The second is that we will not be able to get more money from the negotiation than the lowest figure at which we’re willing to settle.

 

So, not only is the other side trying to take advantage of us, we’re trying to take advantage of the other side.  Perhaps that’s a little strong.   We want the most money we can get out of the negotiation.  To communicate our rock-bottom price at an early stage of negotiation means that we forego the opportunity of settling at a higher level.  And so we don’t dare communicate directly about our final numbers.  Rather, we communicate about settlement indirectly, with a series of moves or positions.  In the process, the parties begin to learn where settlement can occur, without absolutely revealing their walk-away number.

 

The central problem in money negotiations is that we can’t communicate directly; we have to communicate indirectly by making movement from one position to another.  I appreciate the need to do that as a trial lawyer.  But I also know that indirect communications frequently lead to miscommunication and misunderstanding. When we communicate indirectly, our intended messages are often garbled, misunderstood or misinterpreted.

 

A concrete example comes to mind.  Plaintiff starts at $100,000.  We learn later that the plaintiff’s bottom line is $35,000.  Defendant believes this is a $15,000 to $30,000 case and that the plaintiff is outrageous in her demand.  The defendant wants to quit negotiations, believing that the case will not settle.  The mediator talks him back to the table, but the defendant low-balls with $5,000.  The defendant sends the mediator back to the plaintiff with that number and tells the mediator, “We want them to get the message that they need to get real.”

 

Plaintiff now hears defendant’s low-ball and goes ballistic. “That’s not negotiating in good faith”, he says.  “OK, he went $5,000, I’ll drop $5,000.  My next number is $95,000.

 

This is a fairly typical personal injury settlement conference scenario. The Plaintiff started too high; the defendant responded in kind; the plaintiff followed by responding in kind; etc.; etc.  I ask you, “What have the parties communicated to each other about where this case can settle?”

 

On the negative side, they have communicated nothing clearly about where the proper range of settlement is.  In fact, they have miscommunicated about that aspect of the negotiation.  The defense now thinks the plaintiff’s range is much higher then it actually is, and the plaintiff thinks the defendant’s range is much lower.  They will soon become pessimistic about the prospects of settlement.

 

On the positive side, the parties have told each other that their positions are way out of the ball park of settlement.  But the import of that part of the message is lost, because negative reactions to the proposals are beginning to cloud the judgment of the participants. 

 

What is missing from this scenario?  What’s missing is a clear and convincing game plan for negotiation by either party.  Both sides have lost sight of the goal of negotiations, which is to find the range in which the case can settle.  If each side had made proposals consistent with their theory of the case instead of reacting to the other side’s proposals, movement toward settlement would have occurred.

 

Now, this brings me to another conclusion I’ve reached in the past several years about money negotiations.  Movement toward the other side breeds movement.  The closer we come to the other side, the more incentive there is for the other side to move.  Movement creates the perception that settlement is possible and that perception creates a further impetus to move.

 

Conversely, the perception that the parties are far apart breeds impasse, or minimal movement.  Parties tend not to move, or tend to move in minimal amounts, if they believe a case won’t settle.  So, lack of movement or minimal movement actually slows the progress of achieving settlement.

 

When I mediate a claim for money, I try to achieve movement from both parties.   I have learned that if the parties can keep movement occurring and not stop it by over reacting to the other side, they will see a reason to keep working and keep moving within a range that they have determined is acceptable.

 

I encourage parties to pay attention to the movement that’s occurring within the negotiation.  Most importantly, I encourage the party I’m working with at the moment to think carefully about their next proposal and how it presents an opportunity to encourage the other side to put more money on the table.

 

I ask, “Is the movement you’re about to make consistent with your game plan?  Or is it only a reaction to the other side’s movement?  Is it communicating where the case can settle, or is it communicating a settlement range much higher than intended?

 

Let me be careful to interject a qualification at this point.  I am not saying that I’m trying to encourage people to move when their case evaluation says they should not.  No, as a mediator I will respect your case evaluation.  In other words, I will respect the range within which you say you can settle the case and the point at which you can go no further.  What I am saying is that I try to encourage movement between the parties when it has stopped  short of their bottom lines because of some reason other than case evaluation.

 

Let me explain this in greater detail.  Recently I pulled from my files about 50 of the sheets on which I record money positions advanced by both sides to the settlement conference.  Almost without exception, the place where the plaintiff was willing to settle was at least three times less than their initial offer.  Also, almost without exception, the plaintiff either: was ready to quit the negotiations as futile, offered a smaller figure than usual in retaliation for a small movement by the other side, or contemplated not moving at all until the other side “got serious”.

 

Since these case settled, it’s clear to me now that the plaintiff could have moved lower (that is, hadn’t exceeded the lower limits of his risk analysis) but didn’t do so because of some negative reaction to the other party’s proposal.

 

 

I’ve observed another phenomenon about movement in money negotiations that occurs as the parties begin to get close to their best number: we tend not to move to our bottom or top lines if we don’t think the case will settle.  However, what may seem instinctive to us is, in this instance, counter-productive.  In my experience, most cases will settle if the parties eventually state what their best numbers are.  Again, it’s the proximity idea.  If the parties know that the true gap separating them is small, more often than not they will find a way to bridge it.  So, once the parties have concluded that they have to reach their best numbers to settle the case, I encourage them to continue movement toward their best numbers.

 

Why do we resist going to our bottom line when it appears that a gap between the parties’ positions will still exist? I have asked this question over and over but have never received a reply that’s persuasive.  What I hear the most is. “I won’t have any more room to move.”  Usually that means the speaker fears someone will put downward pressure on him as the case approaches trial.

 

This is a common fear.  And it’s realistic in that the other side is always putting downward pressure on us.  But when negotiators realize and exercise the control they have in a negotiation, they know no one can force them to settle in a range that is not consistent with the value of the case.

 

Additionally, since the implementation of mediated settlement conferences throughout the State, trial judges are now more likely to put a case before the jury than they are to engage in the arm-twisting settlement efforts they have been accused of conducting many years ago.

 

 

The second observation about money negotiations is this: parties to a money negotiation will get angry with each other while swapping proposals.  They will refuse to make another move, start packing their bags, or sling low-ball or high-ball proposals at each other.  This kind of behavior occurs even though the parties have not reached their bottom lines or their best numbers.

 

What is happening here to stop movement when a party’s bottom line has not been reached?  Why do we become emotional when the other side has said nothing insulting to us, when they aren’t even in the same room with us? Why do we take settlement proposals personally?  People tell me all the time that they are “insulted” by an offer. How does a money offer made by one party become insulting to the other party? 

 

There are at least two explanations.  The first stems from our tendency as human beings to become angry when someone disagrees with what we say or do.  Disagreement with our views equates to criticism of us as people.  That is why one of Fisher and Ury’s maxims in  Getting To Yes  is, “Be hard on the problem; be easy on the people.”

 

This happens most powerfully in wrongful death cases.  Often the plaintiff explodes in anger when the defendant’s offer is perceived as too low or his/her movement as too slow.  The plaintiff instinctively translates that offer into a negative statement about the value of the decedent’s life.  Thus, the offer is taken as an insult.

 

On the other side of the table, the defense also reacts with strong negative emotion when the plaintiff makes a demand that is “too high” or moves too slowly. (By the way the defense team calls the plaintiff’s offer to settle a “demand”. Do you hear the personalizing and demonizing going on with the use of that term?)  However, my sense is that the defense doesn’t feel insulted in the same way that plaintiffs do, although they may use the same words.

 

Typically, the flavor of this reaction is, “He’s just wasting my time.”  So, the defense is insulted, but for a different reason than the plaintiff.  “I’ve got better things to do than sit around and let some inexperience, uninformed, money-grubbing plaintiff’s attorney waste my time.”   In almost every personal injury case I mediate, strong negative emotions will be generated by the seemingly innocuous act of passing money proposals from room to room.

 

I’ve concluded that mediators and negotiators would be well served by viewing money bargaining as a form of communication.  The subject of the communication is the ballpark in which the case can settle.

 

We sometimes compare money negotiations to “a dance.”  In my experience, the dance begins very slowly in most negotiations about money.  In fact it looks more like a junior high prom with girls on one side and boys on the other, than it does a singles’ club where everyone is looking for action.  Money negotiations tend to begin slowly, bog down in the middle, and generate more emotion than the subject matter would suggest.

 

When one side thinks the other is out of the negotiating ballpark, the result on a personal level may be anger or frustration. The result is slow movement or no movement at all.  “Let’s quit and go home.”  “This isn’t going anywhere.”  “I’m wasting my time.” If we decide to make another proposal, our movement often will be smaller than ordinary.  Our intent is to send “them” the message that they are in the wrong ballpark.

 

When movement stops in a money negotiation, it may be because the parties have different case evaluations.  More often than not, however, the parties stop because one party is reacting to his/her perception that the other side is “out of the ballpark”.

 

I have observed that the defense will stay low if they think the plaintiff is too high and that plaintiffs will stay high if they think the defendant is too low.  Once again, great distance between the parties will breed stagnation or impasse.  Proximity or movement toward each other will breed additional movement.

 

That is the irony of money negotiations.  If you want someone to come to you ( that is, put more money on the table),  you need to move toward them.  Your movement toward them will tend to increase their flexibility within the range they think is appropriate.

 

Now, that runs counter to our instincts.  One of our settlement conference cliches is, “ I need to send them a message that they’re just too low.  So, I’ll only move a hundred dollars.”  Do you hear that?  “I want to send them a message.”  Number proposals are intended to send messages; the intent is to communicate.  Once again, the problem in money negotiations is that we communicate indirectly.  As a result we miscommunicate and don’t get the results we want.

 

So the proper test for our response to another’s proposal is not, “How much do I move in relation to their move?”  It’s, “ How much do I move in relation to my bottom line?”     Our goal should be to communicate, “You’re too high”, by showing the other side where the proper range of settlement is, not where it isn’t.

 

If we move a dollar from 100 to 99 in retaliation for what we perceive as a low-ball, we have communicated that the case will settle between 90 and 100.  Now, if that is our range, fine.  We’ve done it right.  But if our range is 60 to 100, we’ve sent the wrong message with a one-dollar move.  We have miscommunicated about the ballpark of settlement.  We have done nothing to create the perception that the case can settle and, thus, nothing to encourage the other side to put money on the table.

 

If we act on our instinct to retaliate, we wind up paying more attention to what the other side is doing than what we’re doing.  Please understand that I’m not saying we shouldn’t pay attention to what the other side is doing.  In fact, I encourage everyone to graph the moves each party makes in order to discover patterns which may tell us something about the other side’s intentions.  Are they slowing up?  Are they continuing to move? Will they meet in the middle?

 

However, the mistake most negotiators make is that they don’t pay enough attention to how their own movement signals or communicates the proper range of settlement.  The proper test of your response to another’s movement is not, “How much do I move in relation to what they have done?”  It is, “How much do I move in relation to my bottom-line?”

 

Of course, if you haven’t determined your bottom-line (or at least, a target number) before negotiations begin, then it’s tough to plan effective movement during negotiations.  My experience is that, more often than not, plaintiffs spend the first half of the settlement conference doing risk analysis with their clients.  Their first number typically does not accurately reflect their ultimate assessment of the proper settlement ballpark.

 

To the extent that you can do risk assessment or case evaluation before the conference, and plan your positions accordingly, your early proposals will more accurately reflect your range of settlement.  And movement is more likely to occur earlier in the conference.

 

I should acknowledge here that clients do not always absorb and understand your thoughts about the value of their case.  For this reason, settlement conferences often are helpful to you in achieving greater communication with your clients, thus improving the attorney-client relationship. This is a legitimate use and goal of mediation.

 

The second reason we react to the other side’s movement with a small movement of our own is a bit more subtle.  Their move suggests to us that they will end up in a ballpark that is unacceptable to us when compared to our own risk analysis, case evaluation, and settlement range.  We resist being pulled into their range or ballpark by shortening up on our moves. “We’re not going there, so we’re not going to move as much as we would have if they had made a bigger move.”  I’ve heard that a thousand times.  It must be human nature.

 

But like much in human nature, it is counterproductive.  By shortening up on our moves, we send a signal about our range. We’re telling them that we’re getting near the bottom of our range by tightening up.  If that’s true, okay.  But if it’s not true, tightening up will produce a reaction from the other side that is something you don’t want. They will tighten up too.  And they will stop putting more money on the table.

 

To properly signal your own range, you have to keep moving without regard to what the other side is doing.

 

After several rounds of proposals, I often hear the following:  “If we keep matching each other we’ll end up in the middle. That’s below our bottom line and I can’t go there. So, I’ll slow up and signal them that I can’t get there.”  Wrong!  We send a signal that we can’t go there when we get to the end of our range, not in the middle.  By slowing up before we get near the end of our range, we’re sending the wrong message about where the case can settle.

 

We send the wrong signals because we’re concentrating more on what they’re doing than on what we’re doing.  Why do we do that?  Because we fear being pulled into settlement territory that’s lower than we want to go.  When we experience fear, we pull back; we draw up; we tighten up; or we strike out.  Those are the behaviors we exhibit when we react instinctively and without reflection.

 

When, in a money negotiation, we fear being pulled into the unacceptable range of settlement, we instinctively tighten up with our movement. When we tighten up before we get to the end of our negotiating range, in reaction to the other side’s movement, we send the wrong signal.  We’ve told them that we’re ready to quit, when in reality, we haven’t reached the end of our range.  And when we tighten up at the end of our range, we’ve sent the appropriate signal, “Enough! That’s as far as we’ll go.”

 

I find the work of William Glasser in his book, Control Theory, exceedingly helpful on this point.  Glasser points out what is in reality an obvious fact: we can only control what is in our power to control.  We can only control our own behavior.

 

We cannot control judges, juries, or the movement our opponents make in negotiations.  We can not keep them from evaluating differently than we, or from opening with a low-ball, or from moving slower than we wish.  But we can control our own case evaluation, our own negotiating ranges, how much we move at any one time, and, ultimately, to stop when we’ve reached the end of our range.  No one can make us go beyond our range to settle a case.

 

Feeling pushed by the other party, many negotiators begin to lose a sense of control and react instinctively by tightening up their movement.  Not surprisingly, a mediator can play a useful role at this point by helping parties evaluate their reactions, weigh their options and formulate a proposal that will communicate the right message — the proper range within which this case can settle.  In short the mediator can help parties regain a sense of control.

 

Summary

 

Mediators are not needed if the parties are negotiating well on their own. When trouble develops, a mediator may help by insuring that clear communications occur and that everyone has been heard, by focusing the parties on meeting their own goals and objectives, by facilitating the flow of information needed for decision-making, by encouraging and facilitating risk analysis and case evaluation, and by helping the parties formulate positions which accurately communicate the appropriate range of settlement and encourage movement from the other side.

 

In a negotiation about money, the problems experienced by negotiators in creating movement toward settlement can best be understood as communication problems.  This is something that commentators on the mediation process have written about extensively but have never applied to money negotiations.

 

 

 

In closing, let me call your attention to the story about a little boy who asked his father where he came from.  After listening patiently to his father’s awkward discourse on the birds and the bees, the boy looked up quizzically and said, “ Joey told me he came from Brooklyn.  Where did I come from, Dad?”

 

You see, it’s all about communication.

 

Suggested Articles

June 10, 2009

Suggested Books

May 30, 2009

  • Making Money Talk, J. Anderson Little
  • The Mediation Process, Christopher W. Moore
  • The Promise of Mediation, Robert A.B. Bush & Joseph Folger
  • When Talk Works: Profile of Mediators, Deborah M. Kolb and Associates
  • Getting to Yes: Negotiating Agreement Without Giving In, Roger Fisher & William Ury
  • Getting Past No: Negotiating With Difficult People, William Ury
  • Getting Ready to Negotiate, Roger Fisher & Danny Urtel
  • Getting Together, Building Relationships As We Negotiate, Roger Fisher & Scott Brown
  • You Just Don’t Understand, Deborah Tannen, Ph.D.
  • Taking From 9 to 5, Deborah Tannen, Ph.D.
  • In A Different Voice, Carol Gilligan
  • Games People Play, Eric Berne
  • The Magic of Rapport, Jerry Richardson
  • The Human Factor at Work, Eric Oliver
  • Influencing With Integrity, Genie Z. Laborde
  • Control Theory, William Glasser
  • Wired for Conflict, Sondra S. Vansant

Important Organizations

May 30, 2009

The Multi-Door Courthouse Has Finally Arrived: New Settlement Procedures are Now Available in Superior Court

May 30, 2009

By J. Anderson Little

In 1983, a Task Force on Dispute Resolution was created by North Carolina Bar Association President Charles L. Fulton of Raleigh. The Task Force “set out to explore and propose new and promising alternative methods of dispute resolution. The fundamental goal of the Task Force [was] to enhance the quality and reach of the practice of conflict resolution for the people of North Carolina.”

In 1985, the Task Force issued a report of its study and recommended that the Bar Association and other leaders in the State support the development of ADR in the courts of North Carolina and in the public sector through the work of community-based organizations. The insights in that report shaped and informed the development of ADR by its succession organizations, the Dispute Resolution Committee and the Dispute Resolution Section of the N.C. Bar Association.

The cover of the report depicts the front elevation of a fanciful courthouse with the seal of North Carolina on its pediment, and with three front doors labeled “Litigation”, “Arbitration”, and “Mediation”. These are the three doors of the “multi-door courthouse”.

The phrase, multi-door courthouse, was heard frequently in the eighties and early nineties. As states began to investigate the use of ADR in their court systems, the ABA’s Special Committee on Alternative Dispute Resolution promoted the term, and the administrative mechanism it implies, throughout the country. During that period, our own Chief Justice Exum began to sprinkle his articles and speeches with the same evocative image.

In reality, the multi-door courthouse has proven to be impractical and expensive. As a metaphor, however, the multi-door courthouse has had a useful life. It represents the many settlement procedures available to litigants to assist them in the resolution of their cases. And it inspires those who participate in the design of court improvements to keep the advantages of all ADR procedures in mind.

In North Carolina during the 1990s, the image of the multi-door courthouse has gradually given way to the computer oriented image of the ADR menu. An ADR menu is an array of settlement procedures from which the parties may choose

The 1995 legislation implementing mediated settlement conferences state-wide (G.S. 7A-38.1) was drafted by the Dispute Resolution Section with a menu format in mind. It authorized the implementation of Mediated Settlement Conferences state-wide and it authorized the Supreme Court to provide for the use of other settlement procedures in the event that the parties agree to their use. So the multi-door courthouse arrived in the superior courts of North Carolina in the form of a menu of settlement proceedings available in every superior court case, with mediated settlement conferences assuming the default position.

The term “other settlement procedures” is a phrase found in Section (i) of the 1995 legislation implementing Mediated Settlement Conferences state-wide (G.S. 7A-38.1)

(i) Promotion of other settlement procedures. Nothing in this section is intended to preclude the use of other dispute resolution methods within the superior court. Parties to a superior court civil action are encouraged to select other available dispute resolution methods. The senior resident superior court judge, at the request of and with the consent of the parties, may order the parties to attend and participate in any other settlement procedure authorized by rules of the Supreme Court or by local superior court rules, in lieu of attending a mediated settlement conference. Neutral third-parties acting pursuant to this section shall be selected and compensated in accordance with such rules or pursuant to agreement of the parties. Nothing in this section shall prohibit the parties from participating in, or the court from ordering, other dispute resolution procedures, including arbitration, to the extent authorized under State or Federal law.

There are five points I would like to make about it in order to set the stage for a discussion of the procedures set out in that section.

  1. The goal of “other settlement procedures” is the same as the goal of the mediated settlement conference: to create an event in the life of civil litigation which focuses on settlement rather than trial preparation. Binding forms of ADR have never been recommended by the Bar Association or adopted by the General Assembly as procedures of choice in court ordered ADR programs. Non-binding forms of ADR are procedures which attempt to foster settlement discussions rather than summarily dispose of cases. Although binding forms of arbitration and summary trials are mentioned and authorized in this section, settlement is clearly the focus of “other settlement procedures”.
  2. The mediated settlement conference retains its position as the settlement procedure of choice in the superior courts. It has the “default position” among the several settlement tools in the ADR menu. Mediation at its core is about discussion and negotiation. It is the most direct form of settlement procedure in the ADR menu.
  3. Closely related to the preceding discussion, the decision to utilize other settlement procedures rests with the parties and is used in lieu of a mediated settlement conference. The court holds veto power only. Without the parties’ agreement, the court may order only a mediated settlement conference; it cannot order another settlement procedure.This formulation is based on two notions; that the parties are in the best position to know their needs with respect to settlement, and that no one party should be able to dictate to the other what procedure should be utilized. The court does hold veto power over the parties’ selection and would probably exercise it if the court believed the parties, by selecting another procedure, were attempting to avoid engaging in settlement efforts altogether.
  4. The persons who serve as neutrals in “other settlement procedures” are selected by the parties without judicial intervention or approval. If the parties cannot agree on the person to be selected, the compensation to be paid or the attendance requirements to be applied, then the court may not appoint a neutral, as the court must do in a mediated settlement conference, or order the use of another settlement procedureIf the parties cannot agree on those items, then they must attend a mediated settlement conference as originally ordered by the court. To utilize “other settlement procedures” the parties must achieve complete agreement as to the type of procedure to be used, the identity and compensation of the neutral, and the attendance requirements to be applied.
  5. Finally, Section (i) of the 1995 legislation gave the power and authority for implementing “other settlement procedures” to the Supreme Court. The new rules promulgated by the Supreme Court last week authorize three ADR procedures for use in lieu of mediated settlement conferences: neutral evaluation, arbitration, and summary trials. Settlement procedures described and approved by local rules or orders may be utilized in addition to the three authorized by the Supreme Court Rules.

RULE 1.A.(2) MOTION TO AUTHORIZE THE USE OF OTHER SETTLEMENT PROCEDURES. A party interested in utilizing another settlement procedure in lieu of a court-order mediated settlement conference should seek the agreement of the other parties as to the type of procedure to be used, the identity of the neutral who will assist the parties, the neutral’s rate of compensation, and the attendance requirements to be applied.

The time frame in which the court is notified of the parties’ decision to utilize another settlement procedure is the same as for the selection of a mediator. It should be familiar to attorneys who are accustomed to selecting their own mediators under existing rules. However, the time for making these decisions occurs early in the formal settlement process. Attorneys should be prepared to process these decisions in a timely fashion if they wish to preserve their options under Section (i).

RULE 10.A.&B. OTHER SETTLEMENT PROCEDURES. The settlement procedures identified and authorized by this rule are three: neutral evaluation, arbitration, and summary trial. Notice that arbitration and summary trials come in two forms, non-binding and binding. The non-binding forms are truly settlement devices and are intended to promote settlement discussions after the parties receive the neutral’s advisory decision. The binding forms are truly adjudicatory devices in which the neutral’s decision is final.

RULE 10.C. GENERAL RULES APPLICABLE TO OTHER SETTLEMENT PROCEDURES. Portions of the rules governing other settlement procedures which are common to all of the procedures are set out in this rule in order to avoid repetition.

(1)&(3) Deadlines. The deadline for completion of all settlement procedures is the same as that set for the mediated settlement conference in the court’s original order. It may be extended by order of the court upon the filing of a motion by a party or neutral, as in the case of a mediated settlement conference.

(2) Authority and Duties of Neutrals. This provision sets out the duties and authority of those acting as neutrals for other settlement procedures and basically tracks Rule 6 of the rules for mediated settlement conferences.

(6) Inadmissibility. However, in reference to the inadmissibility of statements and conduct referred to in (2)(b)(i)(d), it should be pointed out that Section (l) of G.S. 7A-38.1 makes no reference to “other settlement procedures”. Whether or not the protections of that provision apply to “other settlement procedure” is uncertain. This provision [Rule 10.C.(6)] takes the language of Section (l) of the statute and makes it applicable to “other settlement procedures”. May the Court by rule adopt what amounts to a rule of evidence? Hopefully, amendments to G.S. 7A-38.1 will be offered in the near future to clarify that Section (l) applies to all procedures authorized by that statute.

(4)&(5) Location & Delay. These provisions are the same as those for mediated settlement conferences.

(7) Record of the Proceeding. This provision is new and provides for a record when the procedure involves a binding form of settlement procedure.

(8) Ex Parte Communications. Other settlement procedures differ from mediated settlement conferences in that they require the neutral to make a substantive decision. Therefore, the neutral acts more like a judge than a mediator and the prohibition against ex parte communications is appropriate.

(9) Duties of the Parties. The attendance requirements of this provision are very different from Rule 4 of the mediated settlement conference rules in that the parties may fashion their own requirements for the attendance of parties, attorneys, and other persons with authority to settle the case. This provision tracks the district court non-binding arbitration program in not requiring much in the way of attendance; it makes attendance one of the items the parties must agree upon in order to use another settlement procedure in lieu of a mediated settlement conference. This provision has produced much comment. We would appreciate any thoughts you have about it.

(10)&(12) Selection and Compensation of Neutrals. As I have indicated in previous comments, the parties must agree upon a neutral to use “other settlement procedures” in lieu of a court ordered mediated settlement conference. There are no certification requirements or procedures for neutrals acting pursuant to these rules. Since the court is not involved in the selection process, the parties control the selection of the neutral and are the sole arbiters of the neutral’s competence. Again, the use of “other settlement procedures” requires a high degree of agreement; it is a completely consensual process.

(11) Disqualification. This provision is similar to the disqualification provision of Rule 2.E.

(13) Sanctions. This provision is the same as Rule 5 of the mediated settlement conference rules. Remember that a party may be sanctioned only for failure to attend “other settlement procedures” and that attendance requirements are fashioned by the parties

Mediated Settlement Conferences in North Carolina

May 30, 2009

By J. Anderson Little

Ladies and gentlemen, I have been asked to introduce to you the Rules and Statutes governing Mediated Settlement Conferences in North Carolina. There are new developments in our civil procedure which may become common place in the near future and represent significant changes in the way we lawyers go about settling law suits.

I am confident that these changes are positive ones and believe that they will produce great efficiencies in your practice and foster a greater sense of satisfaction in your professional life. Before I highlight the rules for you, let me talk a moment about several concepts that underlie the conference program.

First, Mediated Settlement Conferences, and mediation in general, fall within that category of procedures we call Alternative Dispute Resolution, or ADR for short. These techniques include several old forms of dispute resolution such as arbitration and mediation and several newer forms such as sununary jury trials, mini trials and early neutral evaluation. They are now jumped together, in both their binding and nonbinding forms, under the banner of ADR.

The obvious question to be asked about these procedures is, of course, “To what are they alternatives? To what do they stand in opposition?”

The traditional answer to those questions has been that they are alternatives to the method of adjudication we find in our court system, namely the formal jury trial. AU of the ADR techniques, in both their binding and nonbinding forms, have been jumped together as techniques that are alternative to the trial process.

Recently, my thinking about that assumption has begun to change. It now seems appropriate to divide ADR into two classes: those procedures which are truly alternatives to the adjudication process which we know as trials, and those which are alternatives to the traditional settlement process that we participate in daily on an informal basis.

Alternative Dispute Resolution techniques that are truly alternatives to our trial system, are those that look very much like adjudicatory hearings, but which are dissimilar in one or more respects. Binding arbitration is an example. In binding arbitration the case is adjudicated by a person chosen by the parties, who usually has experience in the subject matter in dispute, who hears the case in an informal or abbreviated hearing, and who renders a decision which is binding among the parties. Other alternative adjudicatorv techniques include binding summary jury trials and binding mini trials.

There are other ADR techniques, however,. which are not alternatives to trial at all. They are settlement techniques and thus, they stand in opposition to, or in addition to our traditional approach to settlement. Those settlement techniques include non-binding arbitration, non-binding sununary jury trial and mini trials, early neutral evaluation, and mediation. The non-binding forms of arbitration, sununary jury trials, and mini trials also look like informal adjudicatorv hearings. They also result in an opinion by the decision maker, but one that is advisory in nature and serves as a basis for settlement discussion among the parties. Mediation does not look like a trial at all and in reality is a form of negotiation between the parties which are facilitated by a third party neutral. All of these techniques stand in opposition to settlement negotiations which are conducted largely by attorneys on behalf of their clients without the presence of formal structure.

Little attention has been paid to the settlement of civil cases in the literature of trial court administration. What we know about these settlement procedures is antidotal, but very strongly rooted in the psyche and practice of trial lawyers in North Carolina. The record for the success of traditional lawyer initiated, lawyer conducted settlement negotiations is, in some respects, quite good. Most people admit, even ADR advocates, that over ninety percent of civil cases are disposed of in one fashion or another prior to trial. It’s a pretty impressive record and probably accounts for the fact that our traditional settlement processes have received little critical attention.

Whv then, have alternatives to traditional settlement techniques arisen in recent years? Why, in fact, are they now being urged upon the Bar and courts by people both inside and outside the legal system? I think the answer to that question can be found by analyzing some of the detrimental aspects of settlement negotiations as they are engaged in on behalf of clients by lawyers.

In the first place, we know that it is very hard to get lawyers to talk to each other in advance of trial. One of the frequently heard complaints lawyers make is that they “cannot get the other side to the table.” In recent decades we have lost the informal structures that brought us together and promoted settlement discussions. In addition, some of us now take the position that we gain an economic advantage for our clients by avoiding settlement discussions.

Secondly, we know that traditional settlement discussions conducted by telephone, involving multiple conversations between lawyers and clients, result in a fragmented settlement process. Communication experts call this type of long distance discussion “serial communication.” It is often characterized by miscommunication and lost opportunities.

Thirdly, even when we lawyers are successful in discussing settlement face to face, we find it difficult to negotiate productively. Often we are limited by the positions our clients have taken and our own duty to advocate them. In short, we lawyers know how to advocate; now we need to learn how to negotiate.

People on a national scale, such as Roger Fisher and Bill Ury of the Harvard Negotiation Project, and on the local scene, such as Walker Blakely of the UNC Law School, have begun teaching the art and skill of negotiation. The usual method of negotiating is to advance our clients’ positions and advocate their claims. The new system teaches us to analyze the needs and interests that lie behind our clients’ positions, so that we can engage in a process of joint problem solving with our adversaries.

Underlying all these thoughts is the suspicion that the adversary process which we have come to depend upon to adequately adjudicate rights and remedies in our society, is responsible for impeding our settlement efforts. The adversary system simply may not be conducive to settlement efforts.

We have great faith in the adversary system. Our society has worked hard over the centuries to perfect it. We know it is the most successful system for eliminating bias on the part of decision makers. But, the adversary system is one which promotes and encourages advocacy about our clients’ positions and claims. it is not a system which encourages analysis of needs and interests and provides a model for joint problem solving.

Add the fact that our system is now beginning to feel the impact of large caseloads and increasingly complex cases, and we have as a result rising numbers of untried cases, increasing length of time to trial and decreasing confidence on the part of the public that its court system is effective for its citizens.

The detrimental impact of all these factors can be seen from several different perspectives. From the chent’s perspective, settlement discussions typically occur after considerable resources have been spent preparing for trial. As trial preparation advances and settlement is delayed, clients are left with great uncertainty and expensive disruption to their business and personal lives. We tend to underestimate that disruption. Former Judge Bob Rouse, who was a member of our Dispute Resolution Committee and instrumental in writing these rules, was frequently heard discussing his observations in this regard. Upon returning to practice after serving on the Superior Court Bench, he was shocked to discover how complex trial preparation had become and how adversely it impacted upon the lives of his clients, particularly his business and professional clients.

From the perspective of trial judges, senior judges in charge of administering civil cases and trial court administrators, there are costs associated with our current system of settlement. Across this state, stories can be told in every judicial district about weeks of trial time lost due to the continuance or settlement of cases on the eve of trial. There are many districts in this state which appear to have full dockets on trial week, but in reality have only two or three matters ready for disposition. We all know the stories of jurors sitting idle while attorneys confer in the halls of the courthouse, often for the first time, trying to settle their cases. Jurors sit idle, losing time from their work, and the court system as a whole loses time which could be spent hearing other cases.

And finally, from the perspective of the trial lawyer, there are many costs associated with our informal system of settlement. First, trial lawyers are caught in a dilemma. Should we prepare our case for trial or should we attempt settlement negotiations? And if we attempt settlement negotiations, how long and to what extent should we delay the preparation of our case for trial?

Lawyers’s sense of worth and satisfaction in their practice is at stake here. Simply put, our own sense of satisfaction diminishes as we are forced to prepare cases what we believe will settle on the eve of trial. One unfortunate consequence of this dilemma is serious under-preparation on the part of the attorney if he calculates wrongly that the case will be settled. Another result is frantic last minute trial preparation on weekends and evenings, time that could be put to other purposes either in one’s business or family life.

Secondly, we should note that most of us are concerned about the fees we charge our clients and try to be economical with our clients’ money. This may come as a shock to the public, but practicing lawyers know the truth of it. We don’t want to put our clients to unnecessary expense and trouble, and yet we are forced by traditional settlement procedures to do just that.

There are many deficiencies in our traditional settlement methods. They work to the detriment of clients, attorneys, and the public alike. And while they have held us all captive, we assume that things will always be the same and that there are no good alternatives to our present system.

The Mediated Settlement Conference Pilot Program is an attempt to test in this state a structured settlement process that has proven effective in other jurisdictions. It is based on several assumptions.

First, that structured settlement negotiations involving attorneys and their clients, conducted well in advance of trial, will provide a kind of certainty about trial preparation that will produce savings and satisfactions to us all.

Second, it is based on the assumption that someone other than the parties, attorneys and judges is necessary to facilitate the discussion of the parties: someone who is trained to search for the needs and interests of the parties underlying the dispute, and to engage the parties in joint problem solving.

Thirdly, it is based upon the belief that the cost of providing facilitation services should be borne by the parties rather than the state. This proposition is similar to principles underlying our rules of discovery and is not intended to, nor does it, acts as a barrier to the constitutional right to a jury trial.

Fourth, it is based upon the conviction that everyone who has authority to settle the case should participate in the settlement process, but that progress toward settlement cannot be mandated. Thus attorneys, parties, and insurance companies must appear at the conference. However, progress toward settlement will always be left to the skill of the mediator and the imagination and hard work of the parties.

Simply put, the Mediated Settlement Conference program provides a structured settlement event that will give the parties their best opportunity to resolve their case before serious trial preparation begins.

Your Bar Association, working through its Dispute Resolution Committee, initiated this program. We commend it to you. We hope and believe it will improve relationships between you and your clients, bring greater efficiencies to you in your practice, increase your satisfaction in the practice of law, increase your clients’ satisfaction with their court experience and make the administration of justice in North Carolina more efficient.

We trust that you will enter into this experiment with an understanding of its intent, as well as its procedures, and with a willingness to be open to the possibilities that your own skills in negotiation will be enhanced because of your participation in it.

Address given by Mr. Little at a NCBA CLE on Mediated Settlement Conferences in July, 1992

Mediation: A New Way of Working

May 30, 2009

By Thorns Craven

Mediation and mediators are featured in the news almost daily. Mediators are dispatched to the Middle East and other trouble spots around the world to assist battling nations. Mediators are called in to help negotiate labor disputes between management and labor. Mediators are even being used in schools to assist students in working out personal differences. Most of us are familiar with the traditional forums for settling a dispute: Judges do this in courts; arbitrators issue rulings; and licensing boards make decisions.

We also are familiar with helping clients negotiate a deal, arriving at a mutually acceptable contract. And we are unfortunately familiar with situations where a deal goes sour, or a misunderstanding occurs, or inaccurate information is relied upon by someone, and the matter escalates until one or more parties feels aggrieved and takes that grievance into the administrative or judicial system.

At that point, you may have said, as many have, “There must be a better way.”

A Better Way

Many of us involved in mediation think that the better way has been invented, and it’s called mediation. NCAR members are about to discover that many of the daily conflicts which have occurred and will continue to occur in the course of doing business will have better outcomes because REALTORS® are about to adopt mediation as a way of resolving those conflicts.

Why is mediation a better way? Let me quote from the preamble to the Standards of Professional Conduct adopted by the North Carolina Dispute Resolution Commission on May 10, 1996:

Mediation is a process in which an impartial person, a mediator, works with disputing parties to help them explore settlement, reconciliation, and understanding among them. In mediation, the primary responsibility for the resolution of a dispute rests with the parties. The mediator’s role is to facilitate communication and recognition among the parties and to encourage and assist the parties in deciding how and on what terms to resolve the issues in dispute. Among other things, a mediator assists the parties in identifying issues, reducing obstacles to communication, and maximizing the exploration of alternatives. A mediator does not render decisions on the issues in dispute.

The key concept is that the parties have the responsibility for the resolution of the dispute, and the mediator is present to help them.

The mediator can help each side in a dispute to identify and clarify the real issue in the conflict. Often parties are focused on a particular part of the problem, and need perspective. Mediators can help people move back, examine the context, and find an acceptable way toward resolution.

Often parties become so frustrated and angry with each other that productive communication comes to a standstill. The parties simply cannot talk to each other. The mediator can listen, ask questions, restate and reframe, and can talk to each side without the emotional language of anger and frustration.

Parties to a dispute are frequently so focused on the substance of the complaint that they lack the capacity to think about a process which might lead toward resolution. The mediator brings with him or her that process, and can explain the process to the disputants, and can manage and oversee that process throughout.

Mediation is Private and Voluntary

Almost all of our conventional means of resolving disputes are public. Lawsuits form a public record; administrative complaints are published and discussed; and arbitration awards are generally distributed. Mediation is private.

Most mediations take place in private places–law offices, business offices, corporate conference rooms–that the parties select and agree to. No one attends mediation without the permission of everyone involved. There are no court reporters to take the transcript and no rules of evidence or procedure to shape the content of the discussion.

Mediation, to repeat, is voluntary. Voluntary means that the parties really do not have to do anything that they do not want to do. Sometimes that is better stated in the reverse: Parties CAN do anything they want to do. Compare that concept with all the lawsuits and administrative matters you know about.

Another way to describe the voluntary aspect of mediation is to highlight one of the values held most high by mediators, self-determination. The NC Code mentioned earlier includes this statement:

A mediator shall respect and encourage self-determination by the parties in their decision whether, and on what terms, to resolve their dispute, and shall refrain from being directive and judgmental regarding the issues in dispute and options for settlement.

The code goes on to comment, “a mediator may raise questions for the parties to consider regarding the acceptability, sufficiency, and feasibility, for all sides, of proposed options for settlement–including their impact on third parties. Furthermore, a mediator may make suggestions for the parties’ consideration. However at no time shall a mediator make a decision for the parties, or express an opinion about or advise for or against any proposal under consideration.”

Talking and Listening

So what do the parties do in a mediation? They talk. Sometimes they talk to each other, ask questions, answer questions, provide more details, and give substantiating documents. Sometimes they talk to the mediator, or they talk to each other through the mediator.

What else do they do? They listen. They hear a different perspective on the dispute from the other party. They see information they might not have had before.

They reassess and develop the context of their dispute. Often people in conflict think solely about the conflict itself, and fail to put it into context. How long will a resolution take? What will the costs of pursuing the matter be? What is the likelihood of success? What is the solvency of the other side? The answers to these questions can help parties understand the true dimensions of their conflict.

They bargain, they engage in joint problem solving, they achieve a deeper understanding of themselves and of the other parties involved. All of these things can happen in mediation as the parties engage with each other and are assisted by the mediator, who has the necessary training and experience to help them work out their differences in a productive manner.

Being a mediator is not easy. It takes training, experience and sensitivity. Working with people who are in conflict with each other is often arduous and frustrating itself. But it is frequently rewarding to be able to assist people who have been angry, distrustful, acrimonious, upset, and all the other adjectives you can add to describe people who are in a dispute that has grown to this level. And when those parties reach across the table to shake hands, and tell you, “Good job, thanks for your help,” it’s like no other feeling you have had in your professional life.

This article appeared in the November 2002 issue of NC REALTOR, the monthly magazine of the NC REALTORS®

Confessions of a Lawyer-Mediator

May 30, 2009

By J. Anderson Little

Once upon a time—before the advent of mediated settlement conferences—I was a trial lawyer. Not a great one mind you, but busy nevertheless. For seventeen years, I handled all kinds of trials: commercial, property, construction, personal injury, equitable distribution, child custody and support, and criminal. For all the stress and exigencies of trial work, it provided an interesting professional life.

By far, the most frustrating part of it was negotiating the resolution of clients’ cases. At first I thought it was because I had no way of bringing the other side to the bargaining table. My feeling was that we needed a systematic way of exploring the resolution of civil cases with all players participating. That’s one of the basic ideas underpinning the Mediated Settlement Conference Pilot Program—and it works.

Mediated settlement conferences are a hit with lawyers because they produce settlement events in which everyone who has a stake in the litigation comes to the table ready to negotiate.

I was right. Getting everyone to the table who needs to be there was part of the problem. I soon discovered what the other part of the problem was—I didn’t know how to negotiate.

Negotiating appears to be one of those skills that lawyers think no one can learn by studying and that you either have or you don’t. Actually I’m not even sure many of us have thought it to be a skill at all.

I used to think that a trial lawyer did well in negotiations about money only because he/she had a reputation for winning handsome awards from juries. At times it appeared to me that you either got what you demanded or you tried your case. Negotiation? I’m embarrassed to say I didn’t think it went on very much; and I certainly didn’t know much about it.

Other types of cases seemed to fare a bit better. Take E.D. cases for example. Many, if not most, E.D. cases are negotiated by lawyers on behalf of their clients. We help our clients list, categorize, and value property. We help them develop proposals and evaluate the proposals of the other side. But what do we do when we can’t get the other side to agree with us?

I know what I used to do. I would either argue the facts and law to my opponent one more time in the hope that he/she would finally see the light. Or I would accuse the other side of being stubborn or of negotiating in bad faith. The truth of the matter is that I was frustrated at not being able to get the case settled or settled in the way that I or my client wanted. I really didn’t know how to get from point A—the position my client had taken about the case—to point B—a settlement of the parties’ dispute.

In my own defense I should quickly add two things. Neither I nor lawyers before me have had much opportunity to learn the art and skills of negotiation. Only recently have courses like the Harvard Negotiation Workshop and N.I.T.A.’s Negotiation Seminar introduced lawyers to the practical skills and the principles underlying successful negotiations.

Secondly, I am a better negotiator now than I was before beginning mediation training six years ago. Mediation, after all, is the facilitation of negotiations. Mediators have to learn the same skills and principles that successful negotiators practice in order to assist the parties in the resolution of their disputes.

So, what have I learned about negotiating in the past six years from my course work, negotiating on behalf of clients, and my work as a mediator in nearly two hundred civil cases?

NEGOTIATING BY THE NUMBERS

I quickly discovered that the literature in the field of negotiation distinguishes between bargaining that is position-based and bargaining that is interest-based. Negotiations that are interest-based are characterized by discussions which uncover the needs and interests of the parties and create solutions which advance their needs and interests.

Position-based bargaining is characterized by discussions which advance the positions or proposals of each side and lead to a resolution of the dispute by the give and take of concessions by the parties.

Most commentators these days favor interest-based negotiations. The reasons are simple: position-based bargaining often leads the parties to impasse, with cries of “foul” and “bad faith”, and leaves everyone with little understanding of how to get beyond the deadlock experienced by the parties.

Interest-based bargaining puts the parties in the position of joint problem solving, enabling them to create multiple solutions for evaluation, and leaving them with principles of decision making that will help them avoid impasse.

I am now convinced that civil cases, particularly those involving personal injury claim, generally will be characterized by position-based bargaining. Even though I will make a case for greater use of interest-based bargaining in a moment, I believe that most of us will negotiate “by the numbers”.

Although this form of bargaining may have its limits, position-based bargaining will be the norm for most lawyers. The good news is that position-based bargaining can, and should, be learned and conducted successfully.

Value Your Case The first rule of thumb for the position-based negotiator is to make a realistic appraisal of the case. This is particularly difficult for plaintiffs’ lawyers. We typically over value our cases. This is due in part to the fact that we are especially aware of our duty to advise clients of potential outcomes. Our clients have no jury verdict data base to help them make decisions. They depend totally upon their lawyers; and their lawyers do not want to carelessly advise them out of recoveries “the right jury” might give them.

Plaintiffs’ attorneys also don’t seem to be in the habit of valuing their cases—at least, compared to defense attorneys. Perhaps it’s because insurance companies require their attorneys to provide written analyses outlining the way in which they arrive at opinions as to value. Plaintiffs’ attorneys rarely talk to their clients about how an analysis of value is undertaken.

Analyze Damages First Look to the damage picture first. What are the categories of damages about which the trial judge will instruct the jury? Which of those are subject to being quantified through bills from medical providers or other documentation? Which are subjective in nature and not quantifiable, such as pain and suffering?

Now what is a realistic jury verdict range for this type of case? What is an aberrant verdict on each side of the ledger, the home run and the strike out? In what range will sixty to seventy per cent of the verdicts fall? What is the low side of that range and what is the high side?

It’s truly amazing what can happen when both sides begin analyzing their damages in this fashion. Often the plaintiff’s and the defendant’s attorney will value the case within the same range of verdicts. When that happens, the question then becomes one of liability; and the inquiry can focus on the chances of prevailing on those issues.

Of course the chances of winning the case on liability affect the settlement value of the case. Damages worth $100,000 in a clear liability case may be worth only $50,000 in a case where the plaintiff’s chances of prevailing on liability are fifty per cent. These are examples of the kind of questions that should be asked and answered in order to begin to get a handle on the value of the case for settlement purposes.

Search For Objective Criteria The experienced as well as the inexperienced lawyer can have difficulty in answering some of the questions posed in the preceding paragraphs. How does one know what a jury will do with pain and suffering in a given case? What will claims for society and companionship bring in a wrongful death case?

After a recent CLE course on negotiation that Mediation, Inc. offers, an experienced trial attorney approached me about this problem. He became convinced during the seminar that the single greatest improvement he could make in his negotiating was in the proper valuation of his cases. The question then became, where does one go to develop an opinion as to value?

We should always look for objective standards by which to judge the damages in our cases. The discovery of objective standards serves two purposes. The first is that it gives you confidence the opinion you reach as to value is based in reality. The second is that it provides additional credibility to your position. If your position can be judged by some independent source as an acceptable appraisal of the situation, then your position becomes more than just the opinion of you or your client. It has legitimacy

The first way to do this is by clearly defining for yourself and your client which elements of damages are subjective and which are objective. For those that are clearly objective, be sure to provide documentation well in advance of settlement discussions. Damages which should be objective, but have not been documented, will not be considered by your opponent when they evaluate your settlement offers.

There is only one standard I know of which is considered objective by both sides in a civil case—and that is a jury verdict decided under the same or similar circumstances as your case. Where do you find that information? How similar are the verdicts and awards to the facts and circumstances of your case? Are there any sources that you can tap into to give you the kind of jury verdict information you need to value your case and lend credibility to your opinion?

There are, of course, jury verdict services to which you can subscribe. My experience is that they tell you more about the verdicts in Dade County, Florida than they do in North Carolina. But you do have partners and associates with whom you can discuss your cases on a regular basis. There are experienced trial lawyers in your area who will consult with you on a fee or gratis basis. The important thing is that you get a clear handle on what actual juries have decided in actual cases in the county where you expect to try your case.

Work With a Negotiating Range It’s important to develop a range of numbers to guide your negotiations before you begin settlement discussions. Your range should bear some relationship to the range of jury verdicts developed earlier.

Think about it. What will be the effect of the plaintiff’s starting with a number significantly higher than the best a jury will do sixty to seventy per cent of the time? My experience is that the other side will refuse to begin the negotiating game with you. You will hear them say, “I’m not going to bid against myself”.

On the other side of that coin, why should the plaintiff’s lowest, or “drop dead” number, be anything lower than the worst a jury will do ordinarily? The purpose of negotiating a settlement by the numbers is to get your client what he/she might get from a jury, taking into account the costs and risks of a trial that is necessary to get that verdict.

The reverse is true of defendants. Low balling the plaintiff at the beginning will make him/her mad and confirm what all plaintiffs’ attorneys believe anyway: that you only want to stall the case and force the plaintiff into long and costly trial preparation.

Think about your prior conversations with opposing counsel or adjusters. Are there numbers already on the table which have defined the parties’ starting points? What will be the effect of backing up on those numbers? Do you have a legitimate reason for bringing in a higher or lower figure than the one previously discussed? Do you have the documentation to support the change? What will happen if your opponent finds out about the change of position for the first time at the conference? Should you alert him/her to the change ahead of time?

Finally, you should think about what happens between your starting and ending numbers. I’ve seen few negotiations that are concluded with one or two rounds of movement. There’s something in the human psyche that resists early resolution.

Think about those rare times when you have stated an opening number for the purchase of a car and the salesman took your first number. Your reaction was, “I started too high”. The numbers dance many of us hate appears to be necessary to test the legitimacy of the other side’s positions–and our own.

You will need to develop intermediate positions in addition to your negotiating range. They may not be fully developed until the settlement conference, as the other side educates you about the risks you run at trial. But they should have the look of legitimacy and bear some relationship to the facts of the case and the issues at trial. Otherwise, movement on your side from one number to another will begin to look incredible.

If you are going to negotiate by the numbers you need to know the numbers game and how to play it. Resist the temptation to come up with a single “reasonable” number. Those of us who hate to go back and forth tend to opt for the settlement bullet. It doesn’t work. Experienced negotiators don’t play the game that way. And no one will believe you if you do.

INTEREST-BASED NEGOTIATIONS

Interest-based negotiations assume something that lawyers do not always know. That is, what our clients’ interests in the litigation are, what they need from the lawsuit, what their goals and objectives are. I don’t mean what they want from the lawsuit in terms of amounts of money. I mean: for what do they intend to use the money? What does the action represent to them? What will it enable them to do or accomplish?

Last year I mediated a seven million dollar breach of contract claim in which the emotions of the participants ran high. That case settled not because the parties negotiated by the numbers, but because they took the time to investigate thoroughly their own needs and interests in the litigation. They concluded that each was better off going back into business with the other than going to trial for an uncertain result. Their business goals and objectives were best served by a solution they created and the court had no power to give them.

So, what are the interests of your client? What do they need from this lawsuit? What can they get from the other side which will advance their goals and objectives? When the lawyer’s analysis runs in this direction, numbers usually are not the first thoughts that come to mind.

Analysis by numbers often leads to fixed positions that result in impasse. Analysis by goals and objectives, and needs and interests, often leads to productive problem solving. Some of the most successful cases I have mediated settled with the parties engaging in joint problem solving. The task was to find a solution which advanced both parties’ interests.

Interests Analysis in an Injury Case That’s difficult to do in the context of litigation where the parties come to the table in a combative rather than a “let’s do business” frame of reference. It’s even more difficult in cases where only money appears to be at stake. The typical auto accident, personal injury, case is a good example.

What are the needs and interests of a plaintiff in such a case, other than getting as much money as he/she possibly can? Does he want an opportunity to be heard, to have his day in court, to have the other side take him seriously? Is time a consideration? Does she have the time to leave her business and devote herself to litigation?

Is the payment of past or future medical bills or other services important? Is the need for money a present or future need? What about the ability of the claimant to handle large sums of money over a period of time?

Are there things other than money which will solve this claimant’ problem? Does he really want revenge? Is an apology, framed in some way acceptable to the defendant, what the plaintiff really wants? Are there low cost, non-monetary, but high benefit solutions the defendant can provide that satisfy the plaintiff’s real needs and interests in the case?

Needs and interests analysis is most productive in complex business litigation. The stakes are usually high. The costs of litigation are an important factor. The clients usually have business objectives which the other side can influence. There are many important variables which render a simple “what’s this case worth and can I prove it” approach to negotiation ineffective.

BRINGING THE CLIENT INTO THE PROCESS

I always thought I was fairly client centered in my law practice. Mediation taught me that the client is often left out of the negotiating process, with detrimental results.

Mediators often witness the problems lawyers face in settlement conferences when an adjuster or client is attending in person. The party not present for the conference has to be brought up to speed on the process. Much is lost in the translation. Most importantly, the lawyer is put in the unenviable position of trying to sell his client on a position that took hours of processing to achieve.

That’s the problem with leaving clients out of the negotiating process. They don’t have the opportunity to move with us in understanding the settlement potential of their case. And we put ourselves in the position of having to sell unpopular positions to our clients. You can lose a lot of clients that way.

Settlement conferences often serve the purpose of bringing clients into the negotiating process. There the lawyer can carry the client through a position-based or interests-based analysis of their case. The client is present for all stages of the process and participates with his/her lawyer in the evaluation of settlement offers.

Even without the benefit of a settlement conference, lawyers can do more to bring clients into the negotiating process. Mediation training helped me find new ways of working with my clients to settle their cases. I began dealing with my clients as if I were a mediator. I carried them through a position-based and an interest-based analysis of their cases. We developed ranges of jury verdicts with which to work. We worked out starting and drop dead numbers and positions in between. And we talked about what they needed from the litigation.

Not only did I convey every offer of settlement from the other side, as I was required to do, I conferred with my clients in person as I would in a private session of a mediated settlement conference. Each offer was analyzed in terms of the ranges set out prior to the negotiations and in terms of their needs and interests. And counter offers were developed jointly.

What a wonderful way to work. Bringing the client into the negotiating process takes more time and energy. But it produces satisfied clients—and a sense of accomplishment through teamwork that is satisfying to the lawyer.

Mediated Settlement Conferences: Solving Problems for Trial Lawyers

April 29, 1992

By J. Anderson Little

Trial lawyers love to try lawsuits —but only if they cannot be settled within a reasonable range of potential jury verdicts. Trial lawyers would prefer to settle those cases which have potential for pre-trial resolution.

This may come as a surprise to laymen. Many layman do not understand that lawyers view themselves as counselors and advisors as well as litigators. The role of the lawyers, even trial lawyers, is to assist their clients in formulating and achieving their goals and objectives.

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