Mediation Mag The Mediator's Toolbox

Introduction

Mediators, whether commercial, civil, public policy, or domestic, draw on a range of techniques developed through training and experience—reflecting and reframing positions, reality-testing assumptions, managing the parties’ emotions and expectations, negotiation coaching, and providing practical risk analysis. Commercial mediation is unique, however, in that settlement is expressed almost solely as a dollar amount achieved through distributive bargaining.  Private caucuses or the joint opening group session often set the tone for the rest of the process.  Either typically begins with a focused discussion between the mediator and the parties to clarify the key facts and the timeline leading to the dispute.

 The value of money may differ widely between the parties, based in part on risk analysis, coupled with how much one party is able or willing to pay versus what the other party is willing to accept.  Monetary settlements may be based on several factors, not least of which may be financial security, personal respect, and pride, as well as a sense of fairness and justice in the outcome.  Therefore, the tools in the mediator’s toolbox must be more surgical and precise.  Two of the tools we will discuss below are the availability of monetary brackets and the powerful mediator’s proposal. 

Monetary Brackets and The Mediator’s Proposal

Several months ago, I was presented with an employment discrimination case in which the plaintiff had filed a Complaint in Federal District Court charging his employer with Title VII Racial Discrimination, Retaliation, Workers’ Compensation Retaliation, and assorted state law claims.  The pre-mediation positions submitted by the parties revealed that the trial court had dismissed several claims, including the workers’ compensation retaliation claim and state statutory claims, through a partially successful Motion for Summary Judgment.  The matter was to be scheduled for trial within two months following the mediation, leaving the jury to determine the remaining racial discrimination and retaliation claims. 

Shortly before the mediation was scheduled to begin, the plaintiff submitted to the respondent an initial demand of $310,000.00.  The panels (below) demonstrate the sequence of moves each side made through their initial distributive bargaining attempts, as follows:

The reader will note that the plaintiff’s Round 1 initial demand of $310,000 resulted in a Round 2 offer by the respondent of $30,000.  Round 2 was favorably received by the plaintiff and resulted in a $150,000 drop in the plaintiff’s demand to $160,000 in Round 3.  What followed, unfortunately, resulted in a momentary loss of trust by both sides.  Respondent’s move from his original offer of $30,000 to $37,500 in Round 4 produced an angry outburst from the plaintiff.  The result was that in Round 5, she reduced her demand “only” by $5,000 to $155,000.  Plaintiff claimed that respondent’s $37,500 offer was disrespectful and in “bad faith.”  She threatened to simply match the respondent’s moves throughout the remainder of the mediation. 

It is not unusual for parties engaged in distributive bargaining to reach a roadblock in which one or both parties come to believe that traditional bargaining will not yield the desired result.  In the example above, the plaintiff became upset when her relatively substantial $150,000 downward demand resulted in “only” a $7500 upward response from the respondent.  Emotions sometimes boil when one party or the other feels the other side has failed to reciprocate with a favorable countermove.  These negative emotions can create a downward spiral of reactivity and negativity, sometimes leading to disruption and even termination of the mediation session.

The respondent, apparently fearful that his distributive bargaining technique had failed, turned to a bracket proposal.  In essence, he stated that he would place $50,000 on the table if (and only if) the plaintiff reduced her demand to $100,000.  This is a classic monetary bracket proposal. 

What are Monetary Brackets and How are Monetary Brackets Used?

The use of “brackets” may be utilized to shift both parties' perspectives.  Brackets can assist in closing large monetary gaps without the more time-consuming and emotionally draining traditional distributive bargaining process. 

At a certain point during the negotiation process, it may be beneficial for a party (or the mediator) to suggest breaking from traditional bargaining techniques to focus on settlement ranges rather than hard numbers.  This can be done by a party offering the bracket proposal to convey a good-faith willingness to push toward a “new” middle ground from his or her original position, without formally committing to a fixed offer of settlement, unless both sides agree.  Brackets can be particularly helpful to demonstrate revised zones of settlement.

Monetary “bracketology” utilizes a simple mathematical formula.  Proponents of brackets generally suggest that the party receiving the bracket calculate the midpoint from the boundaries of the bracketed proposal.  To obtain the midpoint, simply add the two bracket boundaries and divide by two. 

Under the rules of a conventional bracket proposal, the party offering the bracket suggests that, if accepted, negotiations can resume within the new targeted range.  Should the bracket be accepted, the party offering the proposed bracket will make the first hard-number move.  In the alternative, the opposing party has the option to submit a counter-bracket, setting out a new proposed settlement range, or rejecting the bracket altogether and responding with a fixed number.  If, at this point, the parties negotiate in this manner, the result may be a series of bracket proposals submitted by each party in turn. 

Below is the bracketology that occurred in our example case rounds:

It should be noted that respondents’ $50,000-$100,000 Round 6 bracket yields a $75,000 midpoint.  It is the mediator's task or responsibility to determine whether the parties are properly calculating midpoints and whether a party may be ignoring the midpoint.   

In our case example, the plaintiff chose not to accept the respondent’s bracket but submitted a counter-bracket of her own, suggesting in Round 7 that she would place $125,000 on the table if the respondent increased his offer to $75,000.  Accordingly, plaintiff’s Round 7 proposal suggested a midpoint of $100,000. 

As can be seen, the plaintiff’s Round 9 bracket suggested that if the respondent were to move to $75,000, the plaintiff would move to $120,000.  Following this exchange, the respondent expressed to the mediator that he believed that the distributive bargaining process could once again be productive and proposed a defendant’s “hard” offer of $75,000.  This suggestion was favorably received by the plaintiff, resulting in additional rounds of distributive bargaining, as follows:

At the conclusion of Round 16, which resulted in the respondent’s offer of $84,000, the distributive bargaining process presented yet another challenge.  The respondent indicated privately to the mediator that his next offer would likely be his “last and final offer.”  The mediator warned the respondent that a last and final offer at this stage of negotiations could very likely result in an impasse.  Rather than assuming that risk, the respondent inquired whether the mediator would consider making a “mediator’s proposal.”

Every experienced commercial mediator has experienced the moment when negotiations have reached a critical crossroads.  The parties have negotiated for hours.  Emotions are beginning to rise.  Movement has slowed to a crawl.  Both sides quietly begin to wonder whether a settlement is slipping away.  At that point, the mediator’s effectiveness depends less on their personal powers of persuasion and more on working with the parties to determine which approach will be most effective in moving the negotiations forward.

The Mediator’s Monetary Proposal

When one or both parties suggest that I consider making a mediator's monetary settlement proposal, I typically begin by explaining what such a proposal represents—and what it does not.  I emphasize that the proposal is not intended to predict the value a judge or jury might assign to the case at trial.  Rather, it is informed by the confidential settlement discussions conducted separately with each party throughout the mediation.  Those discussions provide the framework, or reference point(s), from which the proposal may be developed.

Before presenting a proposal, I often discuss the practical advantages of a negotiated resolution and why financial and non-monetary considerations, as well as emotions, may best serve the parties’ interests.  I might also ask each party, in confidence, for the monetary settlement amount they believe the opposing party would realistically agree to resolve the dispute.  These conversations often help establish a rationale for settlement and assess whether a mediator's proposal has a reasonable likelihood of success.

If both parties are receptive to the concept, we discuss the procedures governing a traditional mediator's proposal.  I determine whether the parties wish to receive the proposal orally during the mediation session or whether additional time, together with a written explanation supporting the recommendation, would be more helpful.  The process itself is straightforward.  With the consent of both parties, the mediator submits a proposed monetary settlement, which may also incorporate previously negotiated non-monetary terms.  During separate caucuses, each party privately and confidentially advises the mediator whether the proposal is accepted or rejected.

The defining feature of a mediator's proposal is its confidentiality.  The mediator does not disclose either party's response, unless both parties independently accept the proposal.  If either party declines, the mediator simply advises that the proposal did not result in a settlement.  Neither party is informed whether the other accepted or rejected the recommendation.

Even when a proposal is rejected, negotiations often continue.  The rejecting party may indicate an alternative amount that would be acceptable.  Or a party that accepted the proposal may choose to waive confidentiality and disclose its willingness to accept the mediator’s proposal in an effort to revive negotiations.  In other cases, the mediator may declare an impasse but continue confidential follow-up discussions over the ensuing days to determine whether either party's position has changed.  Experience has shown that mediators' proposals frequently produce successful resolutions, even after traditional negotiations have stalled.

A mediator's proposal is not always presented on the day of mediation.  A plaintiff may wish to consult with a spouse, family member, or financial advisor before making a final decision.  Likewise, an insurance representative or a client representative may request a written strengths-and-weaknesses analysis before responding.  In those situations, the parties are typically given a specific deadline to confidentially advise the mediator whether they accept or reject the proposal.

A mediator's proposal should not become a routine feature of every mediation. It is generally most effective only after meaningful negotiations have reached an impasse, the mediator has developed a thorough understanding of the legal and factual issues, and the parties have demonstrated a genuine interest in resolving the dispute.  Used too early, a proposal may short-circuit productive negotiations; used at the appropriate time, however, it can provide the final catalyst necessary to achieve a settlement.

In the case discussed here, the mediator proposed a settlement of $92,000, together with a previously agreed-upon package of non-monetary terms and conditions.  Both parties accepted the proposal during the mediation session, resulting in a complete resolution of the dispute.

Conclusion

Negotiation is an inherently human process, shaped as much by perception and emotion as by legal analysis.  The mediator’s role is to manage these dynamics and use tools such as monetary brackets and mediator’s proposals as mechanisms for restoring momentum, reframing expectations, and guiding parties toward resolution. 

During negotiations, it is a very common human trait to feel that we have conferred a benefit to the other party through our generous monetary offer and that the other party has incurred an obligation to reciprocate.  It is equally human to consider inflicting harm should we feel our settlement offer has been scorned or rejected.  Through deep and active listening, mediators attempt to build trust and manage the emotional dimensions of negotiation. 

In situations where negotiations appear to be “stuck” or “derailed” due to a perceived failure to reciprocate, it is common for the parties to ask the mediator, “What do you think we should propose?”  Word of warning, should I receive this question, I will often attempt to turn the question back to obtain the party’s view.  If pressed further, I will often express my opinion through the use of hypotheticals to seek the proper negotiation balance. 

The mediator has the advantage of their training and experience to delve into the parties' perceived interests through a close examination of each party's bargaining position.  I have found that at key moments during negotiations, mediator coaching can be highly valuable and may make the difference between an impasse and a successful outcome.  I encourage the parties to engage with the mediator and seek the mediator’s suggestions, particularly when the going gets tough. 

Indeed, the recipe for successful negotiations may contain any number of ingredients: 

Negotiation Recipe (taste-tested and approved by Larry)

Ingredients to have on hand:

• 2 cups of strategy
• 1 pint of persistence
• 1 dollop of emotion
• 1 TBL of frustration
• 1 ½ cups of patience

Mix, then stir occasionally. 

If the recipe is successful, the result may bring with it just a smidgen of exuberance.  More often than not, when parties remain patient, persistent, and willing to reach a little further than they initially thought possible, they will retain control over the outcome of the dispute.