What do clients need to know about mediation?
I’ve narrowed it down to five key practical points. Five Minute Law. Five key points. Get it?
But before my five key things clients need to know, some basics.
Mediation is not arbitration. A lot of non-lawyers get confused about mediation versus arbitration. I will now dispel that confusion and allow you to wow your friends by explaining the difference.
Just remember this:
Arbitration = binding, more formal
Mediation = non-binding, less formal
Think of going to arbitration as going to court, but with an arbitrator (or sometimes three arbitrators) instead of a judge and jury. It’s usually not going to be quite as formal as a courtroom, but an arbitration hearing is still somewhat formal. At the end, the arbitrator will render an award that is binding on the parties, like a judgment from a court.
Oh, and by the way, arbitration sucks.
When I give continuing legal education presentations to other lawyers, I can usually get a laugh by saying something about how arbitration is so much faster and cheaper than litigation. That laughter tells you everything you need to know about arbitration. But we don’t need to open that can of worms here.
Mediation is different. The mediator is a neutral party—usually an experienced lawyer, sometimes a former judge—who just tries to help the parties negotiate a compromise to settle the case. The mediator doesn’t make any binding decision. And the process is relatively informal. Typically the mediator will shuttle back and forth across the hall between conference rooms where the two sides are huddled.
Another basic point about mediation is that it is now routine. There was a time, before I started practicing law, when mediation was still something of an innovation, but no more. Most lawsuits will get mediated. I’ve done dozens of them. Lawyers with higher-volume practices have done hundreds of them.
And after all those mediations, I’ve learned a few things, which I will now share with you, for free.
1. It’s something of a ritual
There are a lot of “ritualistic” aspects to mediation. A mediation tends to follow a certain script that others have followed many times before.
This might cause some savvy (or jaded) litigants to lose their patience (more about that later) and want to dispense with the formalities. Can we drop the posturing, please?!
But generally it’s better to embrace the ritualistic aspect of mediation and just roll with it. Accept the fact that certain things are likely to happen:
- The mediator will give the opening spiel she’s given a hundred times, including how it’s better for the parties to settle than to trust their fates to twelve random people who know nothing about the case.
- If there’s a joint opening session (more about that later too), let the opposing party vent. Let the opposing lawyer go through his fancy PowerPoint slides. It’s just part of the process.
- The plaintiff’s opening settlement offer will be sky-high.
- The defendant will respond with a low-ball offer.
- You will probably go back and forth multiple times before anybody makes a serious offer.
- Somebody who has done this before will keep track of the half-way point between the party’s offers.
- Somebody’s lawyer will say “we can argue about [legal issue in the case] until we’re blue in the face, the question is how do we settle this case.”
- Another lawyer will say “we’re not going to bid against ourselves.”
- By the afternoon you will be stress-eating the peanut butter crackers from the mediator’s snack basket.
- Late in the afternoon when things bog down the mediator will ask “can I just get the lawyers together for a minute?” Or alternatively, “is it ok if I just have the business people talk face-to-face without the lawyers?”
These are time-honored traditions. You’re paying the mediator—and your lawyer—a lot of money, so don’t miss out on them.
That includes the airing of grievances ritual.
2. Sometimes you just have to let people vent
I call this the Festivus rule.
For those of you who don’t watch Seinfeld, “Festivus” is a made-up holiday that includes several traditions, including the “airing of grievances.”
Airing of grievances is also a standard ritual in mediation. So I could have included it in point no. 1 above, but I think it’s important enough to get its own category.
Back when I was starting out in litigation—coincidentally the same time period when Seinfeld was on the air—the mediation would start with a “joint session.” Everybody—lawyers, clients, the clients’ therapists—got to say their peace in front of everybody else.
And believe me, by the time of the mediation, everybody had some grievances to air.
Today, the joint session seems to be falling out of favor. In many cases, it’s really not necessary, because the two sides understand each other’s positions just fine. All that venting can be a waste of time, at best. At worst, it can kill the “Kum-ba-yah” vibe and cause somebody to walk out.
For theses reasons, mediators don’t do the joint session as often now.
Mind you, that doesn’t mean the venting is gone, just that it has shifted to separate rooms where the mediator listens to each side voice its gripes.
If you don’t like drama, this may feel like a waste of time. But sometimes you just have to let people vent before you’re going to make any progress towards a compromise. The better mediators—and lawyers—understand this.
3. The “Power Move” at mediation usually doesn’t work
Once everyone has their chance to vent, the mediation usually turns to getting a settlement offer. In most cases, the mediator will ask the plaintiff to make the first offer. The mediator might call it a settlement “demand.”
The plaintiff is the party that initiated the lawsuit, and the plaintiff is usually the party that is asking the defendant to pay money, agree to some kind of non-monetary relief, or both. So there is some logic to the plaintiff making the first offer.
As I’ve already previewed, if you’re the defendant you should be prepared for the plaintiff’s first offer to be astronomical. Conversely, if you’re the plaintiff you should be prepared for the defendant to respond with an absurdly low-ball counter-offer.
Again, these are time-honored rituals.
In both cases, the party who receives the offer may be tempted to pull the “Power Move.” For example, after receiving the plaintiff’s ridiculously high opening offer, the defendant may feel like walking out of the mediation, or at least threatening to do so, perhaps even with dramatic effect.
The plaintiff may be tempted to do the same thing after getting the defendant’s first offer.
If your goal is to try to settle the lawsuit, the “Power Move” tactic usually doesn’t work. Frankly, the Power Move is usually more about a party or a lawyer trying to look like a badass than anything else. Rarely will the defendant beg the plaintiff not to walk out, or vice-versa.
No, it’s more likely the Power Move will just provoke an equal and opposite Power Counter-Move.
But the Power Move does have one benefit: it does tend to adjust the expectations of the opposing party.
4. It’s about setting and re-setting expectations
Adjusting expectations is often the key to getting a case settled. I’ll give you an example.
Let’s say it’s a basic breach of contract lawsuit where the plaintiff claims damages of $200,000. The defendant says he didn’t breach the contract, but even if he did, the damages are no more than $20,000.
Before the mediation, the plaintiff tells her lawyer her bottom line is $100,000. That’s her absolute floor. The defendant tells his lawyer his bottom line is $40,000. That’s his absolute ceiling.
Assume both sides are sincere. That case won’t settle, right? There’s a $60,000 gap between the bottom lines.
But if you’ve done a lot of mediations, I already know what you’re thinking. What if I told you the bottom lines can change?
Yes, the parties’ “bottom line” positions can change—and often will. And what makes them change is their perception of the other party’s expectations.
So, sticking with our hypothetical, if you’re the defendant and you expect the plaintiff would settle for $40,000, that’s going to affect your bottom line. On the other hand, if you come away from the mediation thinking the plaintiff will never go that low, that may cause your bottom line to creep up.
So the offers you make at mediation will tend to set and re-set the other parties’ expectations. It’s a fluid process.
Still, some people just don’t want to go with the flow.
5. Patience is a virtue in mediation
It’s easy to lose your patience at a mediation. Especially after the venting discussed in no. 2 above.
Here’s how it often goes down.
Plaintiff makes an opening settlement offer of $200,000. Defendant says that’s crazy, I’ll offer $5,000. Plaintiff says, ok if that’s how you want to play it, $195,000. Defendant says two can play that game, how about $7,500?
At this rate the mediation may go on until midnight.
You’ll find yourself thinking, why not just cut to the chase? We all know this case is going to settle somewhere around $90,000. And I’m ready to go home and watch the new Ted Lasso that just dropped today. Do we really need to spend all day moving $5,000 at a time?
The short answer is yes. Yes, you need to play the incremental game.
Sure, you could make the Power Move of saying, “look, I’m just going to go right to our bottom line: $90,000, take it or leave it.”
The problem with this Power Move—in most cases—is that you are just setting a new floor, or ceiling, depending on which side you’re on.
That’s because the other side will probably be like that Anchorman meme: “I don’t believe you.” They won’t believe that’s really your bottom line. So if you’re the defendant and you jump from $5,000 to $90,000, you’ve just moved the plaintiff’s expectations upwards.
Remember, it’s about setting and re-setting expectations.
So if there’s one thing I’ve learned from a lot of mediations, it’s that the side that is more patient is usually the side that will get the better end of the deal.
Save the Power Moves for when the DJ plays “Come On, Eileen” at your college reunion.
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Zach Wolfe (zach@zachwolfelaw.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at Zach Wolfe Law Firm (zachwolfelaw.com). Thomson Reuters named him a Texas “Super Lawyer”® for Business Litigation in 2020, 2021, and 2022.
These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.
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