In my previous blog posts on this subject, I discussed lack of preparedness on the part of counsel and/or client, and the counterproductive use of the opportunity to make an opening statement, as two of my pet peeves as a mediator.
In no particular order, my third pet peeve has to do with unreasonable settlement positions.
At some point in every mediation, and usually fairly early on, a party will be called on to take a formal settlement position by making an offer to settle. Most of the time in commercial cases, the offer will involve either the payment or the receipt of money. Invariably, the offer is made in the setting of a private consultation between a party, his or her counsel and me and it is intended that I convey the offer to the opposing side in a separate private consultation.
From time to time, offers are provided to me with the accompanying caution that this is that party’s final position or, alternatively, that while it may not be the final position, there is very little room to move.
Nobody ever believes that. Mediators don’t believe that, and opposing sides certainly never believe it. If the party making such an offer is actually telling the truth, then the offer has to be revised in order to leave more room for movement before it is presented to the opposing side. The nature of the process, and human nature generally, is such that a party receiving an offer will assume that there is room to move and simply will not believe anything to the contrary.
The difficulty that arises, and therefore a pet peeve of mine, is that from time to time a party will make an offer that is so outrageously excessive as to cause a complete loss of credibility. If the offer is ridiculous, the opposing party will respond in one of a number of ways and none of them enhance the possibility of settlement. Firstly, the opposing party may conclude that the offeror simply has no reasonable or rational appreciation for the probabilities of the offeror’s chances of success or failure in the action. An offeror held in such low regard will generally not receive a reasonable counteroffer. Secondly, the receiving party may conclude that the offeror has no sincere interest in settlement so that the entire process is a complete waste of time and that it might as well conclude on the spot.
Where the receiving party responds with a reasonable offer and the next number put forward by the offeror betrays the fact that the offeror obviously knew that his first number was outrageous, the receiving party will invariably resent the offeror for having wasted everyone’s time. If the offeror’s response to the counteroffer shows only a slight movement, once again the opposing party may conclude that the entire exercise has little or no chance of success.
The bottom line, of course, is that there is no substitute for the conduct of a thoughtful and reasoned analysis by each party of the likely outcome or ranges of outcomes at trial. Once that analysis has been conducted, there is certainly no harm in aiming at the high or low end of that range so that a party comes in within shouting distance of a reasonable result, while leaving room to move in the subsequent negotiation. A party who shoots for the moon will likely end up shooting himself in the foot.