Negotiation 101 in Mediation

As an Southern Indiana mediator with decades of experience, I can’t stress the importance of adequate preparation. So many mediations I’ve been involved in have not settled or lasted substantially longer than they should have because one party or the other had not prepared their case or their client. Never forget that this may be your 200th mediation in your career, but for your client it may well be the first and only mediation. A mediator can be a very valuable tool in helping the parties reach a reasonable settlement, but the mediator can’t complete all of the necessary discovery during mediation AND devote an adequate amount of time working through the issues.

Should I Negotiate the Hard Issues or the Easy Issues First During Mediation?

In some cases, there is one overriding issue, such as parenting time or property issue, that will determine if the case will really settle. There is certainly something to be said, however, for the philosophy that it is better to get agreement on small issues to build momentum before working into the big issues. Each case is different, but this is where it is critical to have a good sense of what your client’s goals are. I’ve had clients who insist to me pre-mediation that they will not settle the case at all unless they get X but, once we get into mediation, they come off that position relatively soon.

What Is Bracketing?

I’m sure everyone understands the concept of bracketing. Whoever starts the negotiation sets the top or the bottom of the bracket and the person who responds completes the bracket so that both parties now understand how far apart they are.

There has to be a reasonable basis for the bracket. In certain types of cases, there is an absolute high number for the bracket. Years ago, I received a demand in a medical malpractice case where the plaintiff requested $2 million. At the time, the Indiana Medical Malpractice Act capped the healthcare provider’s maximum exposure at $1.25 million. Lawyers generally understand bracketing, but clients rarely do. Oftentimes, they need to be reminded that the first offer does not reveal much about the ultimate settlement value of the case.

Timing and Money Are Critical Variables During Most Mediations.

It is easy sometimes to forget in mediation that one person may absolutely insist upon a certain amount of money but be flexible about the payment terms. Another party may absolutely need the money immediately and may be willing to discount the settlement for prompt payment. In some cases, it is important to recognize the difference between types of assets. In family law mediations we often deal with assets with different liquidity – $50,000 from a 401(k) is not the same as $50,000 in cash.

What Other Variables and Interests Should Attorneys Consider When Negotiating for a Client?

Attorneys should be mindful of the following in civil cases:

  • The importance of confidentiality.
  • The potential impact of litigation on ongoing business issues.
  • The likelihood of an appeal.
  • The potential that a case can be resolved by a dispositive motion.
  • Concerns about how a particular witness may perform in a deposition or at trial.
  • The financial impact of an adverse judgment, including potential bankruptcy of a party or the business.
  • Whether the parties will have an ongoing business relationship or not after the case is done.

In family law cases, the following are often critical considerations:

  • Issues regarding fault – adultery or other marital misconduct, even if it’s not legally relevant.
  • Dealing with grief issues from one or both parties and the loss of a relationship.
  • Coping with the idea that one or both parties’ financial circumstances or standard of living may dramatically change.

How Can Mediators Facilitate Effective Negotiation?

Negotiations can be challenging, especially when substantial assets or vital relationships are hanging in the balance.  However, mediators can take certain actions to help streamline the process and increase the chances of a successful outcome.

Active Listening

An empathetic mediator is a much more effective mediator. Active listening involves listening to the other party and then replay back key points from their discussion. I’ve absolutely been guilty in the past of trying to redirect parties to focus them on particular issues rather than let them go on about particular matters. In the initial session, it is very important that the parties feel that their entire position has been heard in the initial pass. In both mediation training seminars that I’ve attended, there was a component devoted to emotional intelligence. The participants completed an emotional intelligence test before the seminar and received the results during the seminar. Unlike traditional intelligence, the discussion was that emotional intelligence can be improved with work.

Careful Questioning

A mediator will often ask a lot of background questions to determine interest and probe particular issues. As one author noted, it is important that the questions be open-ended and not judgmental.[1] Likewise, the mediator’s reactions to the answers should be neutral. I know, at times, that my body language and reacting to particular answers was much more telling than my actual comment. The author noted the importance of recognizing that every mediation and every party is unique. I remember my law school bankruptcy professor, a local bankruptcy judge, talking about the dignity of the debtor, and the importance of not judging the people who feel the need to file bankruptcy.

I learn a great deal by asking questions.  Sometimes the attorneys learn information that they were not aware of. Sometimes I ask one party why they think the other party has taken a particular position or wants a particular outcome.

Be Sensitive About Time

I always tell the parties that I may spend more time in one room than in the other room, but clients get very edgy if the mediator has been gone for a long amount of time and start speculating about what that means.

If I’m spending a lot more time in one room, I want to make sure that I explain to the other side why that is. It may simply be that one side has a lot of new issues that had not been fleshed out before. In some cases, one party has provided a written submission and one party has not, which means that I spend more time with the party that has not submitted something. In some cases, one party is simply more emotional about the case than the other and needs more time to process things. If I can, when I leave one room, I try to give that room some homework ideas that I want them working on while I’m with other party.

Encourage Brainstorming

A mediator should encourage the parties to think outside the box. In one case that I had recently both parties were disagreeing about the value of the business and the owner’s ability to pay his spouse an appropriate amount of money for the value of the business. After some initial work, it became clear that the owner legitimately wanted to sell his business to a third party and stop working. The focus of the mediation then shifted to how the business would be sold because then both parties were on the same page about trying to get the maximum dollar for the business.

How Should Mediators Work Through Discovery Issues?

In almost every case that I have mediated, there is still some element of discovery or information development that happens during mediation. In some cases, the issues are very narrow, but in other cases the parties have elected not to do any discovery at all due to time constraints or other considerations. If both parties want to proceed forward without doing formal discovery, the mediator inevitably ends up doing very expedited discovery. It is helpful to have a few tools at your disposal to work through these types of issues.

Is There an Objective Source of Information on the Issue?

In some cases, the parties may have never valued vehicles or find out that they have widely different opinions on value on real property. In our neck of the woods, the gold standard for vehicle values is the Kelley Blue Book private party value. If the parties have not valued these vehicles, one of the first homework items is to run these reports. As to real property, the potential range of values can be significant. The parties can certainly obtain information about the assessed value of real property, but that tends to be on the low end of things unless there’s substantial issues with the condition of the property. In some cases, a party will run a Zillow search which provides decent information about recent sales, but the ultimate value, in my experience, tends to be high. In some cases, I have asked one of the parties who had a friend who is a real estate agent to run market comparable during mediation to get a better sense of recent sales for comparison.

Can a Party Get Information Online or Relatively Easily During Mediation?

If there are issues about bank accounts or credit cards, I find that most people have online access and most bank and credit card providers generally keep 12 to 24 months’ worth of statements available online. In one recent mediation I had, my client called a local bank for a specific statement which could not be pulled online and was able to go to a bank that was 10 minutes away and bring back the actual statements.

In a recent case, my client insisted that the parties’ boat was worth $20,000 because the motors were worth that much. The other side absolutely believed that that the items had only scrap value. My client mentioned in passing that she had a relative who had worked on these assets and knew a little bit about them. When the mediator was out of the room, I asked her to call the relative. The relative indicated that, although the motors could be worth that much if fully reconditioned, in their present condition scrap value was the right value. With that information, we were then able to move forward quickly on the other matters.

If Information is Not Available, What Options Would Resolve the Issue?

In some cases, the information is simply not available for whatever reason, I find it helpful if the parties can agree on what source of information would resolve the issue. For example, if the parties cannot agree on the value of real property, can the parties agree to a person to perform an appraisal and simply plug that number into the asset sheet? That would allow the parties to reach a complete agreement contingent upon one issue which has an objective way to resolve itself.

In some cases, the parties may believe that personal property (usually collections, tools, and guns) are worth a lot more than they probably are. If the parties are unwilling to look at online sources such as eBay or the like, the parties may simply agree to sell the assets and divide the proceeds evenly. In a few cases, the parties have decided to do a Chinese auction wherein each party would receive one item off the list, then the other person would have the option to select an item from that list, and so forth until all the items were gone. The initial selection is usually selected by flipping a coin. Although unorthodox, it has resolved a couple of cases.

What Should I Consider When Drafting a Settlement Agreement?

Several years ago, I attended a seminar where a lawyer mentioned that she always prepared a draft settlement agreement before every mediation. Over the last several years, I’ve tried to take this approach when I represent a party and sometimes when I’m the mediator if I have enough information to figure out where certain assets are going to fall.

Drafting in advance can save so much time for the parties and the mediator. A party can have in place all the language that they are comfortable with in place. It is also a very helpful checklist of all the issues that you think are in play. In one or two cases I’ve actually forgotten about a minor issue, but when I tendered my draft proposal to the mediator it reminded me that I needed to work out that issue. I deal with a number of lawyers on a regular basis where we have cases where we on opposite sides, but I also mediate their cases or they mediate my cases from time to time. By now, they have seen my standard language on particular issues and know that there are no surprises. It also gives the client peace of mind knowing that their lawyer principally drafted the agreement. Of course, there is always the consideration that any ambiguities will be interpreted against the drafter unless you have language expressly saying to the contrary

It seems that whenever the parties feel that they generally have an agreement that everyone is then rushing to get things done, especially at the end of the day. That is the time when I am most concerned about mistakes being made. The mediator has to keep track of everyone’s position and sometimes there can be very subtle differences on what a party thinks they are agreeing to and what they are not. Ultimately, however, it is the party’s responsibility to make sure that the mediation agreement contains everything.

What Issues Need to be Addressed Post-Mediation?

Make sure that everyone understands who is preparing any ancillary documents which are needed to effectuate the terms of the agreement, such as stipulations of dismissal, deeds, corporate resolutions, and qualified domestic relations orders (QDROs) to transfer certain retirement accounts. It is easy to forget about these items after the case is over, but it can be very difficult to create these documents later.

I have had several cases where, for whatever reason, the parties never tendered deeds to transfer property and people are scrambling to find a spouse who has been absent for potentially years to sign a deed. Even worse are the cases where the QDRO was not done, and the owner of the account has started to draw out benefits of which the other spouse was to receive a portion. There may be costs associated with some of these documents and it should be clear who is paying those costs.   Some retirement companies charge $500 or more to simply review QDRO documents. In one civil case I had, all the important release documents were promptly completed but, for some reason, the actual stipulation of dismissal was not filed for over a year.

Who Is Responsible for Paying Mediation Costs?

The attorneys need to make certain that the parties understand that the mediator needs to get paid at the end of mediation unless other arrangements have been made. The mediator will likely have your client sign a contract for those fees, but sometimes the clients seem to forget the details of those agreements. Some attorneys pay the mediation fees out of their escrow funds.  Some mediators make the attorney and/or the firm personally liable for fees if the client does not pay those fees.

In civil cases, payment of the mediator is rarely an issue. In family law cases, the client needs to understand that, unless otherwise agreed, payment is due at the end of mediation. Mediation fees can always be negotiated as part of the underlying agreement, but the mediator should not be in a position to negotiate about his or her fees. I had a mediation where the lawyer for one of the parties simply assumed that I would be okay with the mediation fees being paid out of some other funds that were to be paid out to his client out in 90 days. The mediator should always have a provision indicating that the mediator shall be entitled to reasonable attorney fees if a party does not timely pay their invoice. Unfortunately, I’ve had result to seeking court relief on a few occasions to get paid.  With pro se parties, I have strongly considered having them deposit a certain amount of funds in escrow before mediation to avoid problems at a later date.

Final Considerations for Successful Negotiations and Mediation in Indiana.

Encourage creativity! I always tell the parties and my client that this is our opportunity to do something outside of the box that a court might never think of. Very few things are completely off the table and sometimes we simply need to readjust our mindset on a particular issue.

Understand the importance of relationships. If an attorney burns their bridges with opposing counsel during their very first case (or mediation), the next case is going to be much more difficult. Likewise, as a mediator, your reputation for impartiality is paramount. If the attorneys feel that you are biased towards one side or the other, they will simply never use you again and tell other people why they are not using you as a mediator.  If you need assistance with a mediation or a negotiation, I invite you to call our office to schedule a consultation.


[1] Macmillan, supra 25

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