Litigation
Aug. 6, 2002
Dealing With the Midgame and Endgame
Column by Brian McDonald - Last week, in Part 1, mediator Brian McDonald discussed benefits of putting out the first number, setting a reasonable range for bargaining and charting your concessions. In Part 2, he discusses strategies for the midgame and endgame of mediation negotiation.
Last week, in Part 1, mediator Brian McDonald discussed benefits of putting out the first number, setting a reasonable range for bargaining and charting your concessions. In Part 2, he discusses strategies for the midgame and endgame of mediation negotiation.
Once competition develops, traditional mediation advocates may use a process called "tit-for-tat." This theory suggests as follows:
• Begin cooperatively in your negotiation.
• Retaliate if the other side is competitive.
• Concede when the other side becomes more cooperative.
However, recent studies conducted at Stanford University suggest a slightly different approach may be more effective:
• Be cooperative.
• Remain cooperative unless you are behind ("neither an exploiter nor a sucker be").
For example, assume the negotiation follows this scenario: Plaintiff demands $500,000. Defendant offers $25,000. Plaintiff counters with $485,000. Defendant counters with $40,000. Plaintiff counters with $470,000. Defendant counters with $55,000.
Many feel this is a typical court settlement conference scenario. Parties in mediation feel and say that with this process they are wasting time. It also is known as "bracketing" - the demand and offer, when added up and divided by two, still yield the same amount. Experience indicates that whoever makes the first credible move may control the pace and style of further negotiations, secure a better result and still benefit from the aura of being cooperative.
Send a message with your concession
You should consider that part of a successful mediation is framing your concession in a way that tells the other side it has made a good point or has a good argument and that, as a result of their point or argument, you have adjusted your expectations and lowered your demands.
This type of good faith negotiation generates good will, and good will, more often than not, generates good settlements.
A mediator can be used to affect the flow. Faced with an initial defense offer that is minimal, a plaintiff may authorize the mediator to tell the other side that the plaintiff had intended to make their initial demand unjustifiably high because they felt the $5,000 offer was unjustifiably low.
In the spirit of cooperation and in good faith, the plaintiff will demand $350,000 but will emphasize, through the mediator, that this is not an invitation to bid for a "tit-for-tat" negotiation.
Rather, this "credible offer" is being made to encourage the defendant to come up to a reasonable range.
If you use this tactic, be sure the mediator carries the message correctly to avoid "concession devaluation," the idea that large concessions early in the mediation signal that the party is anxious to settle and that the matters conceded were unimportant.
Impasse
If you adopt a cooperative approach but the opposition is truly competitive and still refuses to cooperate, how do you respond? You cannot rush the process. In the first caucus, you need to resist the impulse to "cut to the chase." Timing is everything.
You simply will not get top dollar early in the mediation with a competitive negotiator on the other side. The other side wants the mediator to understand its position on value and work to help them get it.
You feel the same and must be ready to participate actively in open-minded communication. Principled negotiation! This assumes you have carefully planned where you wish to end up and how you get there.
You should have an idea of the concessions you will make, the timing of each and whether you are operating in a cooperative mode or competitive mode. Do not lose the other side's attention by making a demand that can be seen as unreasonable or even outrageous. Further, consider using the mediator to probe the other side.
Bargaining and negotiation moves should be made in relation to the value of your case, not necessarily in relation to the other side's offers or moves.
If, after a lengthy mediation, your last demand is $700,000 and the defense's last offer is $75,000, if your client is willing to settle a case for $450,000 and be happy with that, why not make that demand?
You did not make a large move early, to avoid "concession devaluation." However, at this point a new, lower offer puts pressure on the other side, especially if it is at the top of the range where the defense wants to settle.
Some may argue, "If I go low and they don't come up, then this lower number will be my ceiling next time we negotiate."
Why? There is no rule that you can be forced to take an amount three months from now simply because you made the offer previously.
Passage of time, increased costs and increased expenditure of your effort can be changes in circumstances. Why not come to your bottom-line demand at the end of the mediation session and see whether the defendants will come to it?
Cleverly crafting where you wish to start and what tactics you wish to use in each case should help you construct a "horse trade" that will be preferable to no agreement.
Your further challenge is to dovetail this session into joint gains and good will now and in the future, keeping in mind the tactics of first offer, first reasonable offer, anchor and adjustment, norm of reciprocity, concession devaluation and tit-for-tat.
When you leave the mediation, you want to know that the possibilities for a negotiated settlement have been thoroughly explored and exhausted.
Brian McDonald is a full-time mediator in San Francisco. He is affiliated statewide with ADR Services.
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