As mediators, we perpetually strive to maintain balance. One moment, we may find ourselves balancing the need of one party to vent at length during a private caucus against the risk that the other party will grow restless and impatient. Another moment, we may find ourselves balancing a request that we “advocate” on behalf of one side against our fear that doing so may alienate the other side and result in our no longer being perceived as fair and impartial. Yet another moment, we may find ourselves balancing our commitment to confidentiality against our concern that withholding certain information will make resolution impossible. And yet another moment, we may find ourselves balancing respect for a party’s right to self-determination against our recognition that a particular negotiating strategy is likely to backfire, leading to a response that is contrary to that party’s stated objective.
All of our balancing acts, however, share one thing in common: they are designed to create an environment which will enable the parties to reach their own point of equilibrium, i.e., the point at which the potential upside and potential downside of ongoing litigation are reasonably in balance. Until the incentive to settle equals or exceeds the incentive to go to trial, resolution is unlikely.
It’s not uncommon for the parties in mediation to fixate on their perceived value of a claim without considering whether their demands and offers present the other side with an incentive to settle. Consider the following hypothetical:
An auto accident, admittedly resulting from defendant’s negligence, causes injuries to plaintiff requiring $25,000 in medical treatment. Both sides agree a jury could return a verdict of as much as $150,000, but both concede privately that a verdict of $50,000 to $100,000 is more probable, with each believing the verdict is likely to be more favorable to their client. If defendant refuses to offer more than $40,000, the imbalance between potential upside and potential downside gives plaintiff little incentive to accept the offer. Similarly, if plaintiff refuses to demand less than $135,000, the imbalance between potential upside and potential downside gives defendant little incentive to agree to the demand.
If, however, plaintiff ultimately lowers the demand to $100,000 and defendant offers $50,000, there will be far greater balance between potential risk and potential reward, reducing the incentive for either side to proceed to trial and increasing the incentive for both sides to continue negotiating.
To maximize the chance of reaching a settlement at mediation, consider engaging in your own balancing act. First, carefully evaluate the best-case/worst-case scenarios for your client, as well as their relative probability. Next, identify the point of equilibrium, i.e., the point at which neither side could afford to risk walking away from a proposed settlement. Finally, formulate a negotiating strategy designed to draw the other side toward that point of equilibrium.
Understanding and appreciating the power of balance in mediation can sometimes shift the balance of power.
As always, I would be pleased to assist you and your clients in the dispute resolution process. Please don’t hesitate to contact me if I can be of service.
Best regards . . .
Floyd J. Siegal