The issue: Assessing real negotiation goals.
The problem: It’s still pervasive—we overestimate our claims, and we underestimate our exposure.
Better practices: Get the emotional component on the table. Get a mediator. Get focused on effective interactions.
When I conduct continuing legal education and in-house
effective legal negotiation programs, I am amazed how often attorneys
ask about initiating dispute resolution procedures.
The questioners seem to believe that whoever broaches
the subject first will signal a weakness that will be exploited by the
opposing side. They seem to assume that case settlement negotiations are
secondary to the litigation process, despite the fact the reverse is
Today, fewer than two percent of federal court civil
complaints are resolved through adjudications. More than 98% are
dismissed, withdrawn, or settled, with the vast majority being resolved
through settlement interactions conducted by the parties alone or with
mediator assistance. In most states, less than 10% of civil actions are
In fact, if going first was evidence of weakness,
plaintiffs would never file complaints. A party contemplating a lawsuit
should not hesitate to contact the opposing side even before any formal
complaint has been filed to see if an amicable resolution could be
achieved through informal talks.
Prior to the filing of a complaint, the parties are
often more amenable to such discussions than they are after a complaint
has been filed, due to the fact the adversarial process has not yet been
Before they ever contact the other side, parties must be
thoroughly prepared to negotiate. They must become familiar with the
factual, legal, and economic issues involved.
Once they possess this information, they must ask
themselves three critical questions. First, what happens to their side
if no agreement is reached with the other side? If the case might go to
trial, what is the probability the claimant will prevail, and how much
might be awarded to that party?
They should multiply the percentage of cases the
claimant is likely to win by the amount they think would be awarded to
determine the anticipated trial value. If they represent the claimants,
they must then subtract their anticipated litigation costs, and if they represent the responding party, they must add
their anticipated litigation costs to the predicted trial outcome. This
figure should establish their bottom line, since it would be unwise to
accept less—or pay more—than the likely outcome of litigation.
Almost all litigators ask this question to determine
their own bottom line, but they fail to explore a related issue. What do
they believe the other side thinks will be the outcome if no settlement
Due to an egocentric bias, claimants tend to
overestimate trial outcomes, while defendants underestimate such
occurrences. Nevertheless, the impact of “gain-loss framing” suggests
that claimants are less likely to go to trial than defendants. Persons
facing a sure gain and the possibility of a greater gain or no gain tend to be risk averse, and they take the certain gain. Persons facing a sure loss
and the possibility of a greater loss or no loss tend to be risk
takers, hoping to avoid any loss. Since claimants are facing a sure gain
while defendants are facing a sure loss, there is greater psychological
pressure on the claimants to accept reasonable defense offers to settle
than there is on the defendants to accept a reasonable claimant demand.
GET YOUR GOALS
After parties determine their own bottom lines—and those
of the other side—they must establish their goals. How high or low do
they hope to go? There is a direct correlation between claimant
aspiration levels and negotiation outcomes. Individuals who think they
should get better deals usually obtain more beneficial results than
persons with more modest objectives.
The final thing parties must determine is what their
opening demands/offers should be. Some individuals like to begin with
modest opening demands/offers hoping to induce the opposing side to
begin with equally modest offers.
But due to a phenomenon called anchoring, however, such
an approach has the opposite effect. Persons who receive modest initial
position statements begin to think they will do better than they
initially expected, and they move psychologically away from the other
On the other hand, when parties begin with offers that
are less generous to the opposing side, those persons begin to believe
that they will not do as well as they originally hoped. As a result,
they lower their expectations and begin to move more toward the other
side. It is thus beneficial for litigants to plan opening positions that
benefit their own side, but which they can logically explain to the
other side. If they are unable to defend their opening positions, they
lose credibility and undermine the validity of their offers.
Once parties have established their bottom lines, their
aspirations, and their planned opening positions, they are ready to
commence the bargaining process. This may be accomplished with a phone
call or a written message. The initiating party must articulate its
concerns in a detailed, but non-adversarial, manner that is designed to
generate a meaningful response from the other side.
This approach can be especially beneficial where the
disputing parties have a continuing business relationship they wish to
preserve. The initiating side may request specific redress for any
wrongful behavior being alleged, or it may generally describe what it
believes was done wrong and try to elicit a substantive response from
the other side.
If a party does not believe that the opposing side will
respond meaningfully to a general demand communication, it may indicate
an intention to file a formal complaint if no appropriate reply is
received by a specific date. To demonstrate its definite intention to
file a complaint if no significant response is received, the initiating
party may include a prepared, but unfiled, complaint to make it clear it
means what it has threatened.
When a party receives a demand letter from another
party, it should not hesitate to contact the other side to ask what it
hopes to obtain. Even though this side may be the first one to formally
raise the settlement issue, it can usually induce the other side to
begin the substantive talks by asking it what it hopes to achieve.
Once the substantive discussions have begun, the
participants must go behind the overt demands and explore the underlying
interests. What is the complaining party really concerned about, and
what does it want to obtain?
Business representatives frequently make the mistake of
assuming that legal disputes are entirely objective matters that can
only be resolved through detached legal analysis. They ignore the
emotional aspects of many conflicts. The initiating side often wants to
have the other side express some regret for what has occurred, and may
especially appreciate an express apology. The contrite party may simply
indicate that it is sorry for what has happened, or, in appropriate
situations, may apologize for its inappropriate behavior.
GET A MEDIATOR
When interparty settlement discussions do not generate
mutual accords, disputing parties should not hesitate to seek mediator
assistance. They may initiate this process on their own by agreeing upon
a neutral expert to facilitate their talks, or this process may be
commenced through the formal settlement conference required by most
federal and state courts.
If mediator-assisted procedures are to be effective, the
disputing parties must be thoroughly prepared for substantive talks.
They must be familiar with the relevant factual, legal, and economic
issues, and know what they hope to achieve through the settlement
I am amazed how often other mediators and I begin
sessions with parties that have not even conducted any substantive
settlement talks before our first session. It is imperative for
disputing parties to conduct such discussions on their own well before
any neutral facilitator becomes involved, to enable them to resolve many
conflicts without the need for third-party intervention.
Even if they are unable to resolve their conflict
through such direct communications, they can become familiar with the
specific issues involved, and the underlying interests associated with
those matters. This makes the subsequent mediation process far more
efficient than when the disputing parties begin with no appreciation of
each other’s positions.
Once mediation procedures are begun, the disputing parties must be prepared to negotiate—with
each other, with the neutral facilitator, and through that person with
the opposing side. When people ask me what I do when I mediate, I
indicate that I negotiate with the disputants. Two critical factors
provide the authority I need: first, the fact that I am a neutral person
with no interest in the matter to be resolved, and second, the fact
that I have no authority to tell either side what to do. This enables me
to help the disputants explore the different options in an unbiased and
A significant debate among ADR academics concerns the
degree to which neutral facilitators may offer their opinions. A pure
facilitative/elicitive neutral endeavors to avoid such issues by asking
the parties questions designed to get them moving toward one another
without any suggestions concerning where they should end up.
Relationship-oriented/transformative neutrals similarly eschew direct suggestions regarding what the disputants should do.
On the other hand, evaluative/directive mediators
frequently assess the merits of disputant positions and indicate how
they believe the matter should be resolved.
Most mediators I know admit to employing all three
styles at different times during most of the mediations they conduct.
When continuing business partnerships are involved, they work to
preserve those relationships. They endeavor to initiate direct
party-to-party discussions through the use of non-evaluative inquiries.
If these procedures begin to stall, they regularly conduct separate
caucus sessions—either through their own initiative or at the suggestion
of the parties themselves. During such caucuses, parties frequently ask
the neutral facilitator what he or she thinks, or that individual
simply suggests possible ways to resolve the matter.
Despite the continuing debate among academics, recent
studies have found that most disputing parties actually appreciate some
evaluative assessments by neutral facilitators, both to educate their
own clients and to move the discussions forward in a more focused
When such opinions are offered in separate caucus
sessions, the parties should not think that only their side is being
cajoled. They must appreciate the fact that the neutral person is using a
similar approach when he or she meets with the opposing side to get it
to move toward them.
If disputing parties effectively initiate meaningful
settlement discussions on their own, they should find it easy to resolve
many disputes without the assistance of third-party neutrals. Even when
such interparty communications do not result in mutual accords, they
can help the parties narrow their focus and enhance the subsequent
efforts of neutral facilitators to generate settlement agreements. If no
meaningful talks begin until the mediation process has commenced, the
settlement process will be inefficient and needlessly delayed.
The author is the Freda Alverson Professor of Law at
the George Washington University Law School in Washington, D.C. He is
the author of “Effective Legal Negotiation and Settlement” (7th ed. 2012
LEXIS); “Skills & Values; Legal Negotiating” (2nd ed.
2012 LEXIS); and “The Intelligent Negotiator” (2002 Prima/Crown). He is
coauthor of “Skills & Values: Alternative Dispute Resolution” (2013
LEXIS); “Legal Negotiating” (2007 Thomson/West) and “Alternative Dispute
Resolution: The Advocate’s Perspective” (4th ed.2011 LEXIS).
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