Author: Jeffrey Krivis

SETTLEMENT MATTERS

Periodic columns published about strategies and techniques in negotiations that occur in litigated cases:

The evolution of hunters and gatherers (PDF)

A Conversation on the Challenges of Mediation Practice (PDF)

The Negotiation Campaign (PDF)

What movie do you want to make? (PDF)

The argument as a persuasive tool in negotiation (PDF)

The soft touch: The village elder (PDF)

Guitar logic in mediation: Cowboy chords vs. jazz (PDF)

The transactional mediation approach: dealing for dollars (PDF)

Negotiating the reverse auction in class-action cases (PDF)

“Take this!” (PDF)

Why litigators become less intelligent in group-mediation settings (PDF)

The reptilian need for closure (PDF)

Mediation in the woodshed (PDF)

The crystal ball of mediation: Predicting success at trial (PDF)

The Diminishing Shadow Of The Courthouse (PDF)

Setting The Anchor (PDF)

Using A Focus Group When Your Case Gets Locked Up (PDF)

The Windup Before The Pitch (PDF)

Try A Workaround (PDF)

“Reverse Engineering” The Settlement Of A Punch Press Case (PDF)

A Touch of Grey (PDF)

Saving Face: Lessons From Google’s Tiff With China (PDF)

What Tribe Are You In? (PDF)

The Electronic Curtain: Mediating Through E-mail (PDF)

Checking – And Changing – The Status Of The Players (PDF)

Deception In Mediation (PDF)

How To Price The File (PDF)

Speak Their Language (PDF)

When Your Client Is Out Of Control (PDF)

How To Settle A Multi-Party Case Where The Defendants Are Fighting With Each Other Over Liability And Coverage (PDF)

Dealing With Lack Of Authority (PDF)

Can A “Take No Prisoners” Mediator Help You Maximize Your Recovery? (PDF)

What To Do When The Settlement Numbers You Put On The Case Are Miles Away From The Defense Perspective (PDF)

Using The Memorandum Of Understanding As A Draft Settlement Agreement To Streamline Settlement (PDF)

Setting The Stage Of Negotiation (PDF)

Dealing With The “Gap” In Negotiations (PDF)

Use A Ballot To Settle Multiple Claims At The Same Time (PDF)

Don’t Be The Terminator (PDF)

The Elephant In The Room (PDF)

The OODA Loop (PDF)

The Settlement Drift

According to commentator Rachel Maddow in her book “Drift,” the way the United States goes to war has gradually become more secretive and less democratic. She observes that in the last half century, the decision to go to war has become too easy. This is contrary to what the Founders of our nation had in mind. Hence, we have “drifted” away from our founding principles about war.

The drift in our ability to go to war is similar to what has become of modern mediation in the litigation arena. Initially a product of the desire for more efficient and cost effective settlements, the mediation session was seen as the final play in the drama. The moment the curtain would close and the audience would applaud. The mediation session represented the end of the show and a chance to step back and look away from the play. All of the preparation that went into the production was effectively utilized to present the play, and the actors were on their best behavior. If the case had a chance to settle, it would. There were no excuses for parties not being prepared, authority levels not available, or decision makers hiding behind layers of bureaucracy. Cases resolved because the process was designed for closure.

Now, almost 25 years later, the mediation session has transformed itself into one additional step in the litigation menu. Certainly it is still a popular opportunity for case closure, but not necessarily in the minds of the litigants. The process has become strained to the point that the current approach is to schedule mediation without a sense of urgency. It is done to comply with a court order or simply as a matter of practice, with often no expectation of finality. It is often exhausting to be in the middle of this type of drift when the founders of the movement desired the mediation session to be the final moment in the play.

What has happened to cause this type of cultural lethargy in mediation?

1. The dilution of the process by mandatory mediation programs. The institutionalization of mediation into court programs has resulted in way too many cases going to mediation that did not belong in that process in the first place. Why? The court viewed mediation as a panacea to court funding issues and a way to manage caseloads, while the mediation community viewed it as a distinct process that is client centered and empowering. The court imposed strict time guidelines on the process and the litigants, resulting in less thought given to process management and more thought given to court compliance. Another bureaucracy was born at the expense of a successful process.

2. The failure of litigators to be fully prepared to discuss, not argue their cases. When the court put its imprimatur on the concept of mediating litigated cases, it impliedly encouraged the same type of approach that lawyers use when they are pleading a case to a judge. That approach seems to involve arguments where one side wins and the other side loses. Arguments of this nature made outside the formal structure of a courthouse are not as persuasive as discussions between counsel and parties where blame is discussed but not the focal point. To counter this dynamic, mediators and parties have gone to extremes to avoid direct dialogue. This has often reduced the role of the mediator to a “water carrier” of offers and counter offers, similar to a production worker. This automated approach reduces what has been the main ingredient in successful mediation practice — creativity.

3. Loss of Confidence In The Process. After years of participating in repetitive and somewhat scripted processes, some litigators have lost confidence in the process of mediation. They take extreme and unreasonable positions early on and lose patience if the case is not in the proper settlement range by the second or third move. Mediators are guilty of not shaking up the process so that the parties are actually forced to think a bit outside their comfort zones. This reality, coupled with the usual and customary gamesmanship that occurs in every negotiation, has resulted in a contamination of the process and lack of patience on the part of litigators. What was once considered a simple negotiation tactic to get a better deal has turned into an inadvertent effort to fool the mediator into actually believing negotiation tricks and tactics. This can and often does result in the mediator calling an early impasse, or the parties folding up their tents without letting the process unfold.

4. The Follow Up Syndrome. Some lawyers conclude that there might be more value in not settling so long as the mediator “follows up” and nudges the parties to different numbers after the session has gained momentum. One strategy that has become commonplace is for lawyers and companies to use the mediation session as a sort of “scratch and sniff” opportunity. The idea is to check out what might be below the surface, but don’t let the other side know you’re open to settlement. The latter would be accomplished by the work of the mediator after the session when s/he calls everyone to follow up at no charge to the parties. While follow up is critical to the success of some mediation, it is lately overused by some parties to gain more favorable resolution.

5. The Concept of Managed Care. Like doctors, lawyers who are hired by insurers are to some extent following the guideposts of the treatment the insurers deem necessary and appropriate for the dispute. In order to reduce costs, insurers impose limitations on settlements. While this has been an effective way for insurers to save money, it does come at a price by sometimes paralyzing defense counsel who are sincere about resolving disputes. A cycle can occur in which truly excellent defense lawyers are unable to be proactive and honest about risk for fear that their principal will not respect their suggestions.

6. The Economics of ADR Providers. The proliferation of administrators of private mediation and arbitration programs has added an economic layer to the system. While there are benefits to this business model, it creates added pressure on the neutrals to increase their billable time in order pay the costs of the administrator. This economic reality has bled into the system so that it has become acceptable to conduct numerous hearings at a sizable cost to the parties in order to satisfy the multiple economic interests that are integrated into each case.

What can be done to fix the system?

Some might argue that the system doesn’t need fixing. After all, most providers and successful mediators are enjoying sizable financial benefits, and the courts continue to inundate private industry with referrals. Indeed, when the mediation process is successful it is a joy for all involved and a reminder of why the process gained such favor in the civil justice system. Yet, like any “system,” when it becomes too standardized and repetitive, marginalization occurs. To counter this dilemma, a few ideas are worth considering:

1) Reduce the number of cases referred by courts to mediation. Judges have limited tools in their boxes for managing increasing caseloads. Encouraging every case to go to mediation was good 25 years ago when lawyers needed to get used to and educated about the process. Now that we have moved into the institutionalization phase of mediation, courts should become more deliberative about which cases they encourage to mediate as well as the timing of the recommendation. Many cases need a proper exchange of information before negotiation. In fact, many lawyers are great negotiators and should try their hand at direct dialogue with their adversary before simply scheduling mediation.

2) Encourage the exchange of pocket briefs between the parties before the mediation so that time spent in the session is productive and less adversarial. The pocket briefs between the parties should be primarily focused on highlighting the information that best supports the case narrative.

3) Consider the appropriate use of joint sessions during the mediation, but not necessarily right out of the gate. What has happened in the “settlement drift” is that the parties have relied exclusively on the mediator to be responsible for all information and numbers exchange. By delegating all responsibilities to the mediator, the parties have missed out on a huge opportunity to influence the other side with direct dialogue. Lawyers should use direct dialogue to their advantage, particularly when they are articulate and trained as great communicators. Mediators don’t have an exclusive license on communication skills. A lawyer should be courageous and ask for direct dialogue from time to time if it will move the ball forward.

4) Respect the need for timing in negotiation. No one ever free falls or gets to their magic settlement number quickly, despite their best efforts. It is human nature to get accustomed to reduced expectations over time, which is why reducing a complex negotiation into a short period is a recipe for failure. Allow the process to play out and respect the fact that the mediator is managing expectations in more than one conference room.

Final Thoughts

The settlement drift described above does not have to be the new normal. With the institutionalization of mediation into the fabric of the civil justice system, the process of mediation will continue to change, and corrections are inevitably going to occur. The trend toward better screening and intake of mediation cases is already taking place on the front lines, and mediators have begun a concerted effort to bring creativity back to the forefront. Moreover, law schools have produced a huge crop of advocates who are highly educated in the proper use of mediation and will not stand for “same old same old.” Its time to control the drift in the process and press the reset button so we can return to our founding principles about mediation as a preferred method of dispute resolution.

The Rules of Improvisation

1. Don’t deny offers and ideas: Denial is the primary reason negotiations get stalled. It causes you to have to regroup and try again, and it builds frustration in all parties including your audience.

2. Say yes, and!: Every negotiation is a communication process built on a story. To begin with, the players have to agree to the basic set-up; the who, what and where have to be developed so that the stage is properly set for the negotiation. After that, each idea should be met with “yes, and.” By saying “yes, and” we are not necessarily agreeing with the principles presented by our partners. We are simply developing the scene. First we accept the reality created by our partners, and then we add new information, so that we can ultimately determine what realistic options are available for settlement.

3. Avoid questions: Asking questions is a form of blocking. Questions force our negotiation partners to stop whatever they are doing and come up with an answer. You put the burden of coming up with something “interesting” on your partner, which means you are no longer doing a scene together, but forcing that person to do more work than you are willing to do. On a more subtle basis, questions can be used to add information or tell your partner the direction to go.

4. Be aware of status: Status refers to pecking order. The person who is lower in status defers to the person who is higher in status. This is established partly by social position, e.g., boss and employee, but mainly by interaction. Either person can play low or high status. If you act in a way that says you are not to be messed with, you establish high status. If you act in a way that says you’d rather follow than lead, you establish low status. Either way, the other player must adjust to you. Status is established in every line and gesture and changes continuously, and different behaviors can be used to raise or lower another person’s status.

5. Listen: Pay very close attention to everything that happens in the scene. What you hear is the raw material that goes into your story line. Once you have registered enough information about the people in your scene, you can lead folks back to your idea or agenda. The good standup comic asks the audience questions and riffs on their answers to lead into the next preplanned punch line.

6. Spontaneity: Trust your imagination without doubt or question; let a scene move forward without preconceptions or a fixed idea of where it should go.

7. Make the other guy look good: You don’t get anywhere by putting the other person down or leaving them out to dry or making them feel stupid. The better you make your partner look, the better the scene is going to be, and, as a direct result, the better outcome you are going to achieve.

8. Tell a story: Storytelling is probably the easiest rule to remember but the hardest one to do. In a negotiation, you must take unrelated elements and bring them together to create an interesting tale.

9. Look beyond the words: Become sensitive to reading nonverbal communication so you can ask clarifying questions and sense what the real subtext is. Words are tools to accomplish goals, and character goals are often quite different from the dialogue spoken.

10. Don’t waffle: Some people like to babble in the hope an idea will pop into their heads. Waffling is a way of postponing making a constructive offer when you lack an idea.

11. Don’t try to be funny: Humor will naturally come out of a scene without any effort.

12. Make the active choice: Improvisational negotiation is about the doing. People are drawn to action. When there is the opportunity to do something (show rather than tell) always go for the active choice.

13. Enter and exit with purpose: Entering, exiting and staying put should have a reason, be justified. Don’t just say “Ok, bye” and walk out of a scene. Give a reason. Unjustified exits tend to be a problem.

14. Create a game within a scene: Every scene is like a skit and involves a game between the participants. In the famous Monty Python “argument” scene, the characters play a game in which everything that is said is denied, which becomes the agreed upon behavior of the players.

15. Allow ideas to form in the progress of the scene: Do not go into a scene with all of the beats worked out. Allow time for new ideas to arise. Do not panic when things do not happen when you want them to happen.

16. Understand pattern development: Be alert in a scene to developing patterns of conversation: “Mary had a little lamb whose fleece . . . “. The audience knows what you should say as well as your fellow performers, so say it.

Summary

Improvisation in traditional theater has relied on conflict to create drama. Improvisation in non-traditional theater requires agreement. Conflict for its own sake stops the action. Agreement allows the action to proceed, though it may take two or more opposing paths. What is fundamental is the relationship between the opposing characters.

Planning To Settle Complex Employment Cases? Ten Tips To Increase Your Chance of Success

Mediating complex employment cases is like rehearsing for a concerto. The conductor spends a substantial amount of time reviewing the score, while the musicians practice the piece both individually and collectively.  Hours and hours of practice result in one concert. Malcolm Gladwell, in his recent book “Outliers,” describes the phenomenon of hugely successful people and how they achieved their success through planning and preparation.  For example, the Beatles rehearsed and played their music for at least 10,000 hours before they were ready for the Ed Sullivan Show.  That’s not to say it’s necessary to spend that much time preparing for an employment mediation, but the potential for success or failure depends on your willingness to invest the time in planning.

The preparation process allows a litigator to anticipate mine fields that will occur in a mediated settlement, and provides for direction when it appears that the case might be at an impasse.  This process brings you two-thirds of the way toward the finish line and is critical in the trial lawyer’s toolbox.  Getting to the finish line requires simple implementation of the planning process, which utilizes the strategies and tactics of a good negotiator.  In addition to helping guide you through the implementation process, a good mediator will provide closing techniques that take the case into the end zone.  This article focuses on the planning and preparation process and offers ten modest suggestions for success.

1. Financial Ability and Willingness To Pay – Whether dealing with a class action or single plaintiff case, the first consideration should be whether the defendant has the ability to pay a settlement based on your expected value.  This issue has become much more prevalent in times of economic recession, even in companies which appear on their faces to be successful, i.e., having numerous corporate locations and many employees.  Some of these companies are surviving on a shoestring, hoping to get through difficult economic times by staying even with the game.  Big payouts for litigation could trigger default obligations with lenders which are not readily apparent until you get into the mediation room.  Small businesses count on cash flow in the same way that many in society live paycheck to paycheck.  An asset check on the defendant is a good first step, but it is only the beginning of the story.  A candid discussion with defense counsel might unearth additional information that is not available through conventional means.  For example, defense counsel might provide some clues about their client which they couldn’t say during the mediation — with the client sitting next to them – which would allow trial lawyers to manage their own expectations before getting into the mediation room.

2. Learn Their Constituency — Many companies bring negotiators to the table who are not the ultimate decision makers.  An obvious example involves governmental agencies where board approval will be required.  In those cases, when convening the mediation it is critical to make sure someone will be present whose recommendation has been accepted by the board on most occasions.  When dealing with non-governmental cases, such as corporate decision makers or out-of-state insurance offices, having someone available by phone after hours is not the best option, but it is sometimes the only option to get the wheels of settlement spinning.  If this is the case, make sure that the defense gives permission to the mediator before the case is heard to have direct contact with the decision maker.

3. Social Networking – Before stepping into the mediation room, an investigation of both your client and the defendant should occur through not only an online search engine, but also through whatever social networks are accessible. There is no doubt that the defense will investigate a single plaintiff case through MySpace and Facebook type networks in order to gather negative information about an individual plaintiff.  At the same time, individual defendants and their companies are likely to have an online presence with data that may not surface during discovery.  The marketing departments of many companies control and manage the dissemination of online information.  They rarely communicate with the risk management side of the house as they have different goals in mind.  As a result, messages often appear online which are contradictory to defenses in a lawsuit.

4. Is Your Client Plaintiff-Worthy? — In the old Seinfeld series, Elaine spent considerable time contemplating whether her boyfriend was “sponge-worthy”.  If so, he might get lucky.  If not, she might as well dump him.  The same holds true in employment cases.  For wage an hour class action cases, sometimes the plaintiff had a limited job that precludes representation of all class members.  In addition, many plaintiffs are simply not qualified to represent a class based on inappropriate background information and/or behavior.  This should be determined before the case is filed, and appropriate backup representation should be enlisted.  In a single-plaintiff case, it should be assumed that the defense will discover most of the negative information about a plaintiff, and a determination should be made early on whether to pursue the case or to get into mediation quickly before extensive discovery takes place.

5. Timing – It is no accident that when children ask for raises in their allowance or money for some unnecessary item, they are clever enough to not ask during a family feud, when their parents have just come home exhausted from work or there is some type of pressure in the house. Instead, they wait for a special time like Sunday morning when the family sleeps in and has coffee and bagels and everyone is relaxed.  They know there is a higher likelihood of getting an acceptance on the request under those conditions.  The timing for negotiating a settlement has the same characteristics.  Oftentimes the defense will want to have an early mediation before expenses are incurred in litigation.  While this is a good opportunity to settle the case, it is also code for compromise.  Compromise is the raw material of mediated settlements that may not necessarily produce an optimum outcome for your case.  By agreeing to mediate early, simply recognize that the case will be discounted off the potential value which occurs closer toward trial.

6. What Does The Data Tell You? – In wage-and-hour class action cases, oftentimes the negotiation is driven by the financial documentation, such as paystubs and clock-in data.  This information should be gathered before formal discovery occurs through informal means such as client information as well as friendly co-workers.  The data could then be compared against what is provided by the defense in formal discovery.  When convening mediation, if the data has not been provided, it is absolutely critical to success that there is a commitment to provide the data at least one month before the scheduled mediation so that your forensic experts can analyze the case.  In fact, sometimes it is a sign of weakness to schedule mediation without having evaluated the data in advance.

7. Reverse Engineer The Numbers – Throughout the course of the mediation, particularly in wage and hour class action cases, it should become clear what the financial opportunities might be.  If that opportunity is below the plaintiff’s expected value, consider reverse engineering the numbers so that both sides can achieve their objectives.  For example, if the employer in a class action has a budget of $500,000.00 in cash to settle the case, break it down into its component parts, including attorney fees, class representative enhancement, costs, administrative expenses and other miscellaneous costs.  Subtract that number from a higher settlement number such as $750,000.00 and propose a hybrid claims-made process such as the type that involves a guaranteed payout of at least 50% of the net value. This works well in cases where it is not anticipated that there will be a large claim turnout.  Through reverse engineering, you can demonstrate that the employer achieves their objectives of a $500,000.00 payout while documenting a $750,000.00 settlement.

8. Embrace The Legal Issues – Oftentimes mediation occurs in the shadow of a motion for class certification or summary judgment.  The defense will want to discount the case based on the likelihood of success on these motions.  How an appropriate discount is determined in such a situation is a matter of justifying legal theories in relation to financial data and risk.  Assuming the parties are unable to find common ground on the discount value of the case, a settlement can occur contingent upon the outcome of the motion.  Similar to a “high-low” binding arbitration, the defendant can cap its exposure if it loses the motion, and the plaintiff can obtain guaranteed money if it loses the motion.  This can be an attractive option for some employers who are uncertain about the anticipated court ruling.  Even if it is an option that is not desirable by the defendant, the simple conversation about this option will lead to a more reasonable discussion of settlement numbers that could result in a fair outcome.

9. Exchange The Settlement Outline in Advance – Whether the case is a single plaintiff or class action, exchanging the proposed terms of the deal in advance will serve to identify the minefields that occur late in mediation.  To this end, in a wage-and-hour class action case, consider sending the defense a one page bullet point outline that includes consideration of: (a) injunctive relief for overtime, rest and meal break issues; (b) definition of the class; (c) class period commencement and end dates; (d) class members to be paid on cash or claims made basis; (e) pay period for failure to pay overtime; (f) pay period for failure to provide meal period – rest breaks; (g) pro-rated claims if they exceed the amount of monies available; (h) notice and claim form to be sent / attached to paystubs to class members; (i) notice and claim form to appear on claims administrator’s website; (j) notice, claim form and settlement papers to appear on class counsel’s website; (k) notice to be in English and Spanish; (l) identification of the claims administrator; (m) common fund to pay all claims; (n) cost of notice and claim administrator to be paid from common fund ; (o) possible cy-près of unused portion of common fund; (p) defendant has option to blow up if more than a certain amount of objectors; (q) defendant will not object to a separate award of the court of a  certain percentage of common fund to cover class counsel’s fees and costs; (r) class representative enhancement award; (s) dates for preliminary approval, claim form, objections / opt outs, final approval, payment of attorneys fees and payment of class members.

In a classic single plaintiff case, the proposed memorandum of understanding should take into consideration (a) Who the check is made payable to including a breakdown of separate checks for attorney and client; (b) whether a 1099 with Indemnity or W-2 is requesting or a combination of both; (c) date and characterization of termination i.e. resignation, layoff or termination; (d) additional payments due by statute or personnel policies such as vacation, sick pa, personal days, etc; (e) dismissal of lawsuit with or without prejudice and whether it involves entire action; (f) unilateral or mutual releases with Civil Code section 1542 language; (g) confidentiality and/or non-disparagement agreement; (h) reemployment or no reemployment; (i) job references; (j) any additional terms.

10.  Anticipate Objectors and Judicial Review of Fairness – The trend in the courts is towards strict scrutiny of complex employment settlements, particularly in the class action area.  As a result, when planning for a negotiated settlement of a class action, anticipate what will be included in your declaration which justifies the amount per employee assuming every employee files a claim.  If that amount is too low, all the effort leading up to the judicial fairness hearing will be wasted.  On the other hand, there may be sufficient risk factors involved in the case such as inability to obtain class certification, outstanding legal issues, financial ability to pay and so on which justify a range which would empower judicial officer to endorse the settlement.

Summary

It is no surprise that baseball teams spend six weeks before the season practicing their skills in the grapefruit league before they go to the big show.  Even Bruce Springsteen and the E Street Band rehearse the same songs they have been playing for 35 years before they go out on tour.  Lawyers who are planning on attending a mediation should not limit their planning to submitting a legal brief to the mediator the night before the mediation.  Instead, the brief should be the icing on the cake and the cake should be in the oven long enough so that it is fluffy and ready to eat. Remember, the Beatles had been performing for 7 years before they stepped foot on American soil. Now that’s preparation!

Jeffrey Krivis has been named one of the top neutrals in the state by the Daily Journal, and was awarded the 2010 Lawyer of The Year Award for Alternative Dispute Resolution in Los Angeles by Best Lawyers.  He teaches at Pepperdine Law School and can be reached at www.firstmediation.com.