Given that mediation is mandatory in North Carolina and in most other states, in-house lawyers who handle litigation are now well-versed in the mediation process. Mediation typically begin with an opening session, during which the mediator is likely to tell the parties that a successful mediation is one in which both sides walk away unhappy. While we understand this sentiment, we respectfully disagree.
For corporations, reaching a settlement on agreeable terms is usually preferable to dealing with the uncertainty and risks of trial. Typically, mediation provides the best opportunity for parties to a dispute to reach such an agreement. Moreover, because parties to a dispute come to mediation (hopefully) with the goal of settling the case, it also provides the best opportunity to reach a settlement on favorable terms. In other words, like any other negotiation, we think you should try to "win" at mediation, so that your opponent is the one to walk away unhappy rather than you.
I. Defining a "Win" at Mediation
The first step in "winning" at mediation is to determine what constitutes a "win." Usually, a "win" at trial means a complete vindication of your rights (whether a defense verdict or a verdict in the amount you requested). As we all know, this is difficult to achieve and can be extremely expensive. At mediation, on the other hand, a "win" should be defined as achieving a settlement that is in line with your assessment of the risks associated with trial or arbitration and minimizes the costs of going forward. For example, if you believe there is a 50% chance that a verdict in the amount of one million dollars will be entered against you at trial, then any settlement under $500,000.00 could be considered a "win." Of course, there are numerous factors that should go into this analysis (legal fees, possible range of outcomes, avoidance of publicity, etc.), and it is never as straightforward as this example. That said, in order to "win" at mediation, you must first work with outside counsel to perform a sufficient analysis so you at least know what a "win" actually looks like. Too often, clients and counsel treat mediation as just another step in the process and try to perform their analysis at the mediation, leaving them strategically behind and unprepared to deal with a strategic opponent.
II. Positioning the Case to "Win" at Mediation
This step goes hand-in-hand with defining what a "win" is at mediation. In particular, the purpose of discovery (both informal and formal) is always two-fold: (1) to learn facts that will allow you to evaluate your case, and (2) to learn and emphasize facts that help your case. In other words, one of the goals of discovery should be to create risk for the other side to consider before mediation.
In today’s litigation environment, everyone knows that most cases will eventually settle. As a result, it is easy to fall into the mindset of simply trying keep costs down until you get to mediation. It is possible to settle cases at mediation this way, and it may save some legal fees, but it is unlikely that you will "win" mediation this way. In other words, whatever you save in legal fees, you are likely giving away much more in settlement value. The only way to "win" at mediation is to position your case so that (1) you will be prepared to go to trial, and (2), more importantly, the other side knows that you will be prepared to go to trial. In today’s environment, where fewer lawyers have actual trial experience, this is extremely valuable.
This does not mean that you should never agree to an early mediation. It does mean, though, that whenever you mediate, you should not do so in a vacuum. For example, if you mediate early, you may want to wait until you receive your initial discovery responses. Alternatively, if you mediate in the middle of discovery, you may want to wait until you have completed the critical depositions. Regardless of when you mediate, though, in order to "win," you will need some leverage to use with the other side. The only way to do this is to develop facts which cast doubt on the other side's position.
Of course, because litigation is expensive, the decision of when to mediate, and how much to do before mediation, should be a topic of conversation between in-house and outside counsel at the outset of every case, and should be reconsidered throughout the litigation as new developments arise.
III. Negotiating to "Win" at Mediation
If a case is evaluated and positioned properly, by the time you go to mediation, you should know what the risks of going forward are and have determined a range within which you would be willing to settle the case. At the mediation, the goal then changes to obtaining the most favorable settlement possible.
Unfortunately, you cannot make the other side conduct the same candid assessment of its case that you have. That said, you can use the mediation process as an opportunity to educate the other side about the weaknesses in their case. In order to do this, outside counsel should do an opening presentation that is consistent with your assessment. This means that if you are only willing to pay defense costs, the opening presentation should not be an hour-long PowerPoint presentation. On the other hand, if you determine that there is real risk to a case and you are willing to pay something more than defense costs to settle it, outside counsel should do a presentation that communicates the problems with the other side’s case and why your opponent should discount the value of their claims. In addition, especially during the early rounds of negotiations, it is important to provide information that the mediator can use to convince the other side that it should adjust its expectations.
On a related note, assuming you have conducted a thorough assessment of your case before the mediation, the other side ordinarily should not be able to convince you to consider a settlement that is outside of your range. Of course, you should listen carefully to the other side to see if they provide you with any new information that could change your assessment.
Finally, in order to "win" at mediation, you must make moves that communicate to the other side what you are willing to do to settle the case. I have found that one way to do this is begin the mediation is by making reasonable offers or demands, without regard for what the other side does. Ordinarily, the other side will, at some point, become unreasonable. By starting negotiations as the more reasonable party, you will build credibility with the mediator and, ultimately, with the other side. Once your credibility is established as a reasonable and prepared litigant, you can then communicate your dissatisfaction with the other side by making moves that are smaller in amount than the other side. If you have done a good job of building credibility, the mediator will likely be on your side by this point. Finally, each of the moves you make will communicate a mid-point at which the other side will believe you would settle the case. Accordingly, it is important to watch the mid-point throughout the negotiations to make sure you are either comfortable with where it is or where it is headed.
In sum, the keys to "winning" at mediation are: (1) a thorough assessment and valuation of the case; (2) development of facts through the discovery process that will create risk for the other side; and (3) a negotiation strategy that clearly communicates to the other side the terms on which you are willing to settle the case. Unfortunately, you cannot make the other side settle at mediation, but you can ensure that, if you do settle, you will not have to walk away unhappy.
Copyright 2014, ACC Charlotte Chapter FOCUS. Reprint permission granted.