Arbitration & Mediation

How Can I Convince My Client to Lose More than Predicted and Still Maintain My Own Credibility?

By Victoria Pynchon

The provocative comment we're following is Jay Welsh's remark that to settle most cases the Plaintiff has to accept a lot less than he wanted to recover and the defendant has to pay a lot more than he ever imagined paying.  And the response we're replying to is Canadian lawyer Michael Webster's:

When the issues have been crystallized into legal ones so well, you are in a lose/lose situation. The manager's dilemma then becomes counsel's dilemma: how do I manage to convince my client to lose more than I ever predicted and still maintain my own credibility.

The reason litigators settle law suits is because the outcome of litigation is uncertain and its pursuit expensive.  But that just states the problem.  How do you "tell" a client in the midst of expensive litigation that he's going to have to pay way more or accept way less than his attorney predicted (with appropriate disclaimers) long, long ago?

First, let me provide a checklist for success in commercial mediation:

1. Bring the real deal-makers to the mediation or settlement conference for it is they -- not their attorneys -- who will  make the decision to pay way more or to accept way less than they had previously imagined.   
2. Bring the parties back into the conflict as participants in its resolution again.  Businesses have commercial problems that have business solutions.  Litigation is often just the stick to force the continuation of commercial negotiations that broke down in so spectacular a way that the parties stopped talking to one another, hired lawyers, and began to fight over legal issues the parties neither care about nor understand.  The parties have now experienced how surreal their negotiation becomes when it's conducted in the courts.  They're probably ready to deal again.  Let them.  
3. Permit the parties to discuss all aspects of the conflict whether they are relevant to the legal issues or not.  The reason one party initiated litigation against the other party is not because he wanted to create precedent.  And if precedent is what a party wants, money might but often cannot settle the matter.  
4. Bring the experts along and let them talk to one another about the ways in which the matter might be resolved or even why their expert opinions are diametrically opposed.  
5. Address the parties' justice issues.  People seek out lawyers for one reason and one reason only.  Because they believe themselves to be the victims of an injustice.  And if its the defendant you represent, the injustice visited upon it is the litigation itself.  I spend a significant amount of time during a mediation discussing justice issues with the parties. 
   1. they're being extorted
   2. they're being low-balled
   3. they were defrauded
   4. their trust and confidence was betrayed
   5. their competitor's market tactics have been unfair and violative of any number of state or federal laws
   6. their intellectual property was stolen
   7. etc., etc., etc.
6. Let the mediator talk with the parties about what the justice system can do, what it should do, what it most likely cannot or will not do.  Most parties will not be happy with their attorneys if their justice issues are not addressed at the time of settlement.  And its my job to make clients happy with their attorneys.
7. Let the mediator help the parties understand that their case has -- with no one's fault -- gotten worse rather than better over time and why.   
8. When all else fails, blame the "system." 

Why Parties Pay More or Accept Less than They Want To

Jay Welsh is right.  If the parties have hired a mediator to settle complex commercial or mass tort litigation, they have done so because they need to pay more and accept less than they are prepared to do.  Otherwise, they'd settle without the assistance of a mediator.

This does not mean that the mediator bangs heads or twists arms.  There are hundreds of reasons why parties do not continue to trial and thousands of good excuses for corporate counsel to stop the bleeding.  They include:

1. the witnesses on the other side performed better in pre-trial testimony than expected
2. the Judge made pre-trial rulings that cut the heart out of your case
3. the Supreme Court (state or federal) just over-turned a hundred years of precedent making one party's legal case far worse and the other's far better than expected
4. it's the economy, stupid
5. the client realizes during the course of the mediation that there's more than one way to organize the facts and apply the law -- something lawyers are trained to do and even sophisticated clients find hard to swallow.  Having had an "aha" experience during the mediation, the client realizes there's more (or less) at risk than he's been thinking and the offer/demand now on the table looks pretty darn good after all
6. the other side becomes un-demonized during the course of the mediation, making it easier to part with money for the purpose of resolving the one thing both sides have in common -- a difficult, uncertain, expensive, dangerous lawsuit.
7. one side simply out-negotiates the other (it happens) 
8. one or both sides lose heart for the battle when they see that the delta between the their bottom lines is not as great as they expected it to be
9. the parties manage to "expand the pie" (more about this later) such that the plaintiff does not have to accept that much less nor the defendant pay all that much more than each anticipated (it happens)
10. one party genuinely develops an understanding of and empathy for the other side's position and changes a hard line attitude against settlement as a result (it happens)

Full post as published by Settle It Now Negotiation Blog on April 26, 2008 (boomark / email).