Mediation as Anti-Social Behavior, II

I first posted on this subject last year (See "Mediation as Anti-Social Behavior," May 16, 2008) following a post by Geoff Sharp, in which he discussed Prof. Owen Fiss’s 1984 article, Against Settlement, 93 Yale L.J. 1073. Others have continued the discussion, which centers on whether justice is ill-served by people who settle their legal disputes without considering whether society as a whole would be better off if they fought things out in the courts. See, e.g., Michael L. Moffitt’s article, "Three Things to Be Against (‘Settlement’ Not Included) - A Response to Owen Fiss,"

In my earlier post, I deliberately put off discussing "whether individual litigants should be asked to spend their own money to carry society’s banners into battle (presumably for the honor of the thing)." This aspect of the issue appears to have been given little attention by those participating in the debate, but I believe it to be the nub of the matter. The idea that people who have a chance to quickly and efficiently resolve their grievances by settlement should nonetheless be encouraged to forgo that option for a protracted and expensive court battle seems foreign to any concept of justice with which I am familiar. To me, it is basic that the litigants’ interests are paramount, and if society wants a different benefit, society should bear the burden of getting it.

To help clarify the issue as I see it, let’s return to the Supreme Court’s decision in Brown v. Board of Education, a case that is often cited to suggest that settlement would not always be the ideal. To some, the proper question apparently is: "Would the country have been better off if the Browns and Topeka’s Board of Education had settled?" Perhaps not. But to me, as a practicing attorney and mediator, the proper question is: "Would the Browns and the Board and all the other litigants in the cases consolidated in Brown by the Supreme Court — the clients, i.e. — have been better off?" Would Linda Brown have been better off if, instead of litigating, her family had been able to resolve matters early on with the Topeka Board of Education?

This is not to suggest that litigants should be discouraged from fighting for a principle if they want to, and are able to garner the necessary support for their battle. I have never felt that litigants should be forced or coerced into settlement negotiations of any kind. See, e.g., my post of May 17, 2008, "Should Mediation be Mandatory?" There is certainly nothing wrong with individuals or groups choosing to fight passionately for a worthy cause. We need to remember, though, that while the creation of omelets may benefit society, the eggs are seldom better off afterward.

It is beyond the scope of this blog to do complete justice to this topic, but I think it would be beneficial if we started focusing at least some of the debate on it.

That’s My Money We’re Talking About!

This post is mostly for defense attorneys in tort litigation. Hopefully, however, plaintiffs’ attorneys will also gain some insight from it. It has to do with a twist on the so-called "endowment effect" described by Barry Goldman in The Science of Settlement: Ideas for Negotiators, ALI-ABA (2008), § 2.01(e). In a nutshell, the endowment effect is a quirk of human nature that causes people to dislike losing something they already have more than they like gaining something they don’t have. I.e., all else being equal, folks would rather not lose than win. It has been posited that the effect causes plaintiffs to make larger concessions in negotiation than defendants. See James A. Wall, Jr., & Suzanne Chan-Serafin, "Processes in Civil Case Mediations," 26 Conflict Resolution Quarterly 261, 266 (2009). The idea is that it is easier for plaintiffs to "give up" something they never had than for defendants to pay out something they do have.

Conversely, if plaintiffs have an "ownership interest" in an off-the-wall settlement amount fueled by unreasonable notions of value, they are more reluctant to accept less than otherwise. Smart plaintiff attorneys are aware of this effect and resist the temptation to over sell a case’s value to their clients.

Defense attorneys can take advantage of the endowment effect by making a reasonable offer in advance of mediation. By "reasonable," I mean something at the lower end of the range of values,* but still within the ballpark. See my discussion of so-called "reverse demand letters" in "Preparing (Your Opponent) for Mediation" (May 12, 2008). This offer should be made far enough in advance of mediation that plaintiff’s counsel has the opportunity to communicate some optimism to the client (e.g., "I’m encouraged by this offer; they’re not there yet, but I think mediation is likely to be productive"). Bolstered by the attorney’s qualified optimism, the plaintiff is more likely to start taking ownership of the offer. Given some time, the plaintiff will be inclined to start thinking about what he or she can do with that money. It stops being the insurance company’s money and starts becoming the plaintiff’s new pickup, remodeled kitchen, down payment on a vacation home, or — in some cases — the ability to take early retirement.

Given most people’s preference for not losing over winning, such a mind set is likely to lead to a greater reluctance to walk away from a settlement, even if the amount offered is "not quite there."


* See my post entitled "Ask Not for Whom the Bell Curve Tolls . . .."

Goodbye, Geoff

I want to add my voice to others who have expressed regret over Geoff Sharp’s decision to discontinue his very popular and always pithy web log (mediator blah . . . blah . . .). Geoff was one of the first to welcome me to the world of online posting last year. I will miss his insight.

Other Stakeholders

Mediators constantly exhort their clients to make sure that the proper decision makers attend mediation sessions — with good reason. It’s true that the presence of appropriate decision makers is probably the most important factor in successful negotiation — and, conversely, lack of participation by such folks is probably the biggest culprit in failed negotiation. However, attorneys and their clients should not assume that just because their party-affiliated decision makers are lined up their side is completely ready to participate meaningfully. In the mediation of personal injury cases, there are often outside stakeholders whose interests will also have to be considered. Health insurers and medical care providers with subrogation interests or liens, family members (or even banks) who may have loaned money to the plaintiff while he or she was out of work, and former spouses, are just a few whose unaddressed interests could have an adverse impact on the success of negotiations. And don’t forget that recent developments in the way the government views Medicare liens often make Uncle Sam the 800 pound gorilla in the room. See, e.g., Steve Mehta's post of April 22, 2009, entitled "Six Things That You Must Know (But Are Afraid to Know) About Medicare Reimbursement Rights: The Medicare Super Lien."

In my standard engagement correspondence I not only address the need for attendance by party-affiliated decision makers, but also include the following:

I urge you to also make arrangements with non-party stakeholders, such as lienholders, family members, etc., to bring them into the loop as much as possible prior to the mediation session. You should encourage such people to either attend or to be available by telephone during the session, if their decisions are likely to impact the success of the negotiations.

I like to explore this issue further with counsel when meeting with them separately in pre-mediation conferences. I’ve seen (too) many mediations falter in their final stages when the interests of outside stakeholders have not been adequately considered. E.g., time and again, dealing with liens by health insurance providers seems to be an afterthought. Consider the following fairly typical exchange in caucus between the mediator and the plaintiff’s team:

Mediator: "The defense says the bills they have amount to only $2,952.16, and they can’t understand where you get your claim that your client has incurred over $10,000. What does Anthem claim as its lien?"

Plaintiffs’ Lawyer: "Um, er, let me make a phone call."

Mediator (later): "So, what’s the verdict?"

Plaintiffs’ Lawyer: "My Anthem guy’s on vacation this week. We’ll certainly get that info, but we’re confident that our list is accurate and related to the accident."

At this point, it becomes obvious to the mediator (and probably to the lawyer’s client!) that not only has the lawyer dropped the ball on firming up special damages, but also will not be able to negotiate a compromise of the lien — at least not until later.

Lest anyone think I am singling out plaintiffs’ attorneys for criticism, defense attorneys are also obligated, in my view, to make sure that outside stakeholders are brought into the picture before a mediation. By the time of mediation all such stakeholders should have been identified, either through formal discovery or informal discussions with plaintiffs’ counsel. Defense counsel should not wait until the day of mediation to broach the subject of their participation with his or her counterpart on the plaintiffs’ side.

Bottom Line: All parties need to make an effort to see that the ducks are in a row before the mediation — assuming, of course, that they want to settle at some level.

Limitations of Common Sense

The concept of "common sense" is regarded in our culture as the most practical application of intelligence. Webster’s defines the term as "sound and prudent judgment based on a simple perception of the situation or facts."* Juries are exhorted by both judges and lawyers to use it when weighing evidence; parents tell their children to use it when they first learn to drive or start to date; and politicians urge citizens to follow it when going to the polls.

Unfortunately, common sense, like beauty, is very much in the eye of the beholder. Too often it’s used as a short cut to avoid analysis. Human nature being what it is, most people tend to rationalize that the result they want is the only "common sense" solution. Barry Goldman, in The Science of Settlement: Ideas for Negotiators, refers to this phenomenon as the "self-serving bias."† Until each side to a mediation understands why its opponents think the way they do, settlement will be difficult to achieve, regardless how much effort and skill a mediator may bring to bear.

At the risk of sounding platitudinous, don’t mediate until you’re ready. To be ready, you have to understand the other side’s "common sense" arguments almost as well as your own. And you have to make sure that the other folks are equally well prepared. Do the depositions; disclose the medical records; have frank discussions over lunch (or whatever) with opposing counsel. You don’t have to give away the store or disclose all your hole cards, but you need to make sure you know where your opponents are coming from and vice versa. Your chances of settlement improve when you are ready for mediation, but improve even more when all are ready. Why do you need to make sure your opponent is ready? Because a lawyer who is caught unprepared at mediation loses client control — and that’s not good for either side.

* Merriam Webster’s Online Dictionary (10th ed).

† ALI-ABA (2008), § 2.01(d).

We Got ‘Em Cornered!

If your defense team is so proud of its case that you truly don’t plan to offer more than nuisance value, you shouldn’t bother to mediate. Instead, you should courteously and frankly communicate that fact to the plaintiff’s attorney before a lot of time is wasted preparing for, paying for and attending a mediation. If the plaintiff secretly agrees with your assessment, you might quickly get the job done over the telephone. If not, well, that’s what trials are for.

Hiding your intention to play hard ball until the day of mediation is a sure-fire way to crater any negotiations. There are usually enough emotions bouncing off the walls in the plaintiff’s room during the mediation of a tough personal injury case; a defense team that wants to settle shouldn’t add desperation to the mix.

Unless you're determined to try the case, don’t put the plaintiff between a rock and a hard place. Always give them a reasonable way out. In over thirty years of practice, I have seen only one plaintiff just give up and walk away from a no-offer case, and only a very few simply fold and accept a nuisance offer. People who have their backs against a wall usually fight, even if it’s irrational to do so. And if they fight, sometimes they win. Remember Doug Flutie’s long bomb against Miami in 1984?

The Mediator as Dutch Uncle

I am always uncomfortable when asked to play the role of Dutch uncle by an attorney for a party involved in one of my mediations. The request is usually (but not always) made by the attorney for the plaintiff and goes something like this: "My client just doesn’t understand that a jury will never give her the kind of money she is looking for! I need you to bring her down to earth." I become even less comfortable if it appears that the attorney has been too chicken to discuss the matter frankly with the client and simply wants me to get him or her off the hook.

A cardinal principle of mediation is that it allows the parties themselves to decide their case, rather than having the decision turned over to 12 strangers. Nobody should either be coerced or manipulated into settling a case — even for their own good (as perceived by others). Having said that, I will sometimes — reluctantly — agree to "help talk sense" to the client, but only when I conclude that: (a) the client truly does not understand the risks; (b) I have the active support of the client’s own attorney, who has come to the same conclusion; (c) I believe that the other side’s offer is both fair and will not be improved; and (d) I believe it would do no good for the parties to adjourn and, after reflection, try again later.

Even with all of these factors in place, I personally prefer the wise grandfather approach, using reality-testing questions, over the more abrasive Dutch uncle lecture. The process of mediation will be respected only if the parties are persuaded instead of pushed.