Friday, July 18, 2008

Show Me the Money!

Personal injury mediations have a number of characteristics in common which set them apart from mediation of other types of disputes: (a) insurance companies are usually the primary stakeholders on the defense side; (b) typically, the disputants’ only relevant relationship is that of parties to the same lawsuit; (c) the parties are not interested in repairing the relationship, but in ending it; and (d) ending the relationship will, in virtually all such cases, happen when the insurance company writes a check, and the plaintiff deposits it.

Philosophers have decried efforts to reduce human misery to haggling over dollars, but the concept of wergild is firmly embedded in our society. In one form or another, it has been the basis of our Anglo-American tort system since well before the battle of Hastings. Like it or not, this is the planet we live on.

The focus on money, however, does not mean that there is no room for creative value-enhancing ideas in settlement negotiations. Money, after all, has no inherent value; its worth depends on what it will buy. And the value of such "things" is very much in the eye of the beholder. Different people place different values on the same goods and services. These differences, if explored thoughtfully, can often lead to settlement when the parties are close, but not close enough.

For example: years ago, I represented a husband and wife as plaintiffs in an auto accident case. The defendant’s liability was clear, but the injuries were not too serious and resolved within a year or so. The insurance company was not willing to offer enough cash to interest my clients. Rather than give up, the defense attorney and I tried to look beyond the obvious and to find a solution which would benefit the plaintiffs more than it cost the insurance company.

My clients had a young child. Both were employed and, by the time of trial, were earning more money than they ever had before. They did not need more money; what they needed was tax planning. Once my clients’ needs were analyzed, we were able to reach a settlement in which enough money was paid up front to pay my fee, with a little left over for a modest family vacation. The amount remaining (less than $10,000) was used to purchase an annuity that would pay a lump sum in the neighborhood of $200,000 when the couple was ready to retire, or a lesser amount when their child reached college age.

This story should serve as an example of how it is possible to "think outside of the box," even when the case is "only about money."

Monday, July 7, 2008

The Goal of Mediation Is Not (Necessarily) Settlement

To some, the title of this posting will sound like rank heresy. If the goal is not settlement, what is it? Why are we paying this person to shuttle back and forth like Henry Kissinger if we might end the day with an empty sack?

In my view, the primary goal of mediation of a tort case is knowledge, with settlement being a possible byproduct. The idea is to learn whether all sides are close in their thinking on the value of the case. If they are, settlement is likely to follow; if they are not — and cannot be convinced to change — settlement is not likely to follow.

Opposing lawyers who have worked with each other a long time can sometimes "cut to the chase" and determine whether their clients are on the same page without a mediator. For most people, however, the adversary system gets in the way of frank discussion, and the assistance of a third party (i.e., the mediator) is necessary.

I tend to divide most tort mediations into two phases. During the first phase, I try to determine in my own mind whether the parties are actually thinking in the same value range — whether or not their public positions are close. Depending on the facts of the case (and the parties and counsel involved) this process can range from relatively quick to incredibly drawn out. If, in the end, I think the parties really are in the same ballpark, I move the process into phase two and help the parties turn their general understanding into a specific agreement, working to help bridge any remaining gaps.

Where I part company with some mediators is in what I do if I believe that the parties (in their heart of hearts) are not close. In such cases, I do not try to change anybody’s mind or even nudge the parties toward a settlement. It’s their case, not mine. I believe that people should not be pressured in any way by the mediator to change their minds during a mediation. Like most important matters, decisions to settle should not be made until all relevant information has been assessed and each party truly believes that a settlement on the terms available is in his or her best interest. This normally takes time.

If, during the process, the parties learn that they are looking at the case differently, it is appropriate to adjourn the mediation and allow some time for everybody to reevaluate their options in light of new information. Before adjourning, however, the parties should determine what steps need to be taken in the interim before scheduling further mediation sessions. For example, are more depositions needed, or expert opinion necessary to support certain facts being asserted? It is certainly appropriate for the mediator to assist the parties in this endeavor.