How Counsel Can Create Value While Negotiating Settlements - ADR Systems

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Contracts and settlement agreements are deals. The parties are buyers and sellers, and the settlement is the transaction. What attorneys don’t realize is that a deal can be a ‘joint-value-creating exchange,”[1] a process that can give all sides what they want – or enough of it – to close the deal. This article will focus on how attorneys can create value for their clients in mediation, but it also applies to any settlement negotiation that an attorney may be involved in.

While negotiating settlements in mediation, counsel can take three actionable steps to create value. They can take off the litigator hat, know their bargaining power[2], and trade across terms while negotiating.[3]

Take Off the Litigator Hat

Litigation is competitive and argumentative. Mediation is not. In mediation, parties negotiate a settlement collaboratively, pragmatically and realistically; it is a joint solution to a shared problem. Counsel create value in settlement negotiations by taking off their well-trained litigator’s hat because doing so involves a shift in thinking toward a more realistic appraisal of the dispute as a whole and how a settlement agreement within that context can best serve their clients’ interests.

“Frequently, counsel get caught up in diving into the factual scenario to rebut a demand or offer,” said Hon. Marguerite A. Quinn, (Ret.), senior mediator and arbitrator at ADR Systems. “That distracts them from thinking about their clients’ best interests, which exist somewhere between the best and worst elements of their side of the case and the wider realities of the dispute: its greatest strengths, its real weaknesses, its valuation, the other side’s valid positions, the policy limits, money already spent, money to be spent if it does not settle and the very real risks of trial, where anything can happen.”

When counsel engage in mediation with this wider perspective, the process becomes a realistic give and take,  not a tug of war by two opposite forces. With the litigator’s hat off, counsel can stay steadfast in their strongest positions and offer the other side reasonable concessions. Suddenly, such gestures expand the parties’ area of agreement,[4] creating value for both by moving them closer to settlement.

Know Your Bargaining Power

Although counsel must negotiate realistically, they must also firmly understand their bargaining power in a negotiation. Counsel create value when they understand their bargaining power by knowing how to negotiate from their best, most optimal positions.

To understand their bargaining power, counsel should know their BATNA[5], their best alternative to a negotiated agreement: What counsel is prepared to do if the case does not settle in mediation. An obvious answer is going to trial, but it is not the only one.

“In my experience, counsel have been prepared to file — or already have filed — a motion for summary judgment or have plead a cause of action seeking punitive damages,” said Hon. Mitchell L. Hoffman, (Ret.), senior mediator and arbitrator at ADR Systems. “That’s hard ball, for sure, and it can hinder negotiations if it is played too early or in the wrong way. But I think that when counsel have thought through their strategy beyond the day of mediation, which exposes them to more risk than does settlement, they’ve usually thought about how they are willing to reasonably negotiate in great detail.”

Bargaining power is also how counsel can bend negotiations in their direction during mediation. It’s leverage. For example, counsel may, during mediation, reveal a surprise witness or piece of evidence for which the other side did not think to ask. Another approach may be to declare their willingness to take additional depositions — admittedly, another kind of BATNA — increasing the costs of litigation for everyone because one side can afford to spend it. And a third approach may even be to paradoxically make themselves weak in order to make themselves strong[6] by declaring a best-and-final offer, a hard limit that the other side must accept or put an end to the negotiations.

While all this talk of “power” may seem counterproductive to a collaborative process like mediation, the truth is that it is essential to making it more collaborative. When counsel understand how strong their case’s strengths are and the degree to which they are willing to assert those strengths, they are better prepared to negotiate in more focused ways. And when negotiations are more focused, they are more efficient and realistic about the needs and limits of all the parties involved. Understanding one’s bargaining power is, then, a means to a more valuable end.

Trade Across Terms

Money certainly talks in mediation, but it is not the only voice. Counsel create value in mediation when they treat the process not as a simple price negotiation, a barter, but as a quest to “find trades among various elements,”[7] negotiating money in addition to and in exchange for other terms that fill in the emerging deal.

“To make a lower offer more compelling, defendants have stated their willingness to pay for all mediation costs. To make a higher demand more accommodating, plaintiffs have stated their willingness to have the payments structured over time — especially in nursing home cases,” said Hon. Christopher E. Lawler, (Ret.), senior mediator and arbitrator at ADR Systems. “The point is that both sides are negotiating for what they want by also offering an accommodation, a concession, that makes their term in one part of the deal more appealing to the other side overall. It creates value for everyone.”

Counsel may also trade across terms by agreeing to modified confidentiality, allowing one side to advertise the case’s nature and settlement value but not reveal the parties’ identities, in exchange for a mutual non-disparagement agreement that requires the reimbursement of settlement money if this term is violated. Likewise, parties can move closer to settlement in highly emotional business and injury disputes by asking to reduce the price of settlement in exchange for a donation of money to a cause or non-profit dear to the plaintiff or related to the inciting harm of the dispute. In these and many other ways, parties create value by providing both sides what they desire through strategic exchanges that are mutually advantageous to both.[8]

A settlement is valuable to everyone involved. By negotiating them as deals that generate value for all involved, counsel can better represent their clients on a collaborative quest toward a shared goal. When counsel take off their litigator’s hat, understand their bargaining power, and trade across terms, they negotiate more effectively in that spirit.

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Hon. Mitchell L. Hoffman, (Ret.) has cultivated over 38 years of experience as a legal practitioner, having spent 21 of those years as a judge and 17 as an attorney. On the bench, he handled both Chancery and Law Division calls, settling many commercial and personal injury cases. Judge Hoffman is known for his detailed case preparation and analysis. He is fair and even-tempered and provides a calming influence during mediations.

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Hon. Christopher E. Lawler (Ret.) has more than 33 years of experience in personal injury and commercial matters as a respected litigator and sought-after pretrial judge. As a jurist, he pretried over 1,200 cases, handling some of the largest cases in Cook County history. Judge Lawler applies his legal knowledge and his experience from decades of community involvement to his mediations and arbitrations. His volunteer service has given him important insight into the needs of a wide variety of people, helping him to better facilitate the resolution of disputes.

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Hon. Marguerite A. Quinn, (Ret) brings 38 years of legal experience to her role as a senior mediator and arbitrator. On the bench she presided over both commercial and personal injury cases, including one of the largest toxic tort cases in Cook County. She values patience when working with parties to resolve disputes and urges everyone involved in her mediations to intentionally listen to each other.

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[1] See Subramanian, Guhan, and Michael Klausner. Deals: The Economic Structure of Business Transactions. Harvard University Press, 2024, p. 7.

[2] Id. at 9.

[3] Id. at 15.

[4] Id. at 13.

[5] Id. at 9.

[6] Id. at 10.

[7] Id. at 15.

[8] Id. at 15.

Excellent set up, neutrals and administration.  Judge Ward is one of the best mediators I have ever worked with in over 80 mediations.

Craig Hoffman, Esq.Ruberry, Stalmack & Garvey, LLC
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