Aside from all of the ancillary and political issues, and the strategical and tactical posturing that goes into mediation of a damages case, probably the most important factor in my view of whether mediation will be successful is a simple math calculation issue. Are the parties relatively close or far apart on agreeing to a dollar figure that will settle case prior to the mediation? This issue seems obvious, but it is the most important factor that goes into settling a damages case in the mediation session. The parties and their attorneys
may not know the answer to the simple math money question until the day of the mediation.
The question and analysis is one of using simple math. This important factor is what I call the “settlement bracket factor.”
- What is the range of money in a defined bracket that the plaintiff will take to “call it a day”?
- What is the range of money in a defined bracket that defendant will pay to “call it a day?”
- How will this settlement payment be funded? In one payment, in two payments, or by an insurance carrier that has an obligation to indemnify its insured?
If the parties are in a close parallel settlement bracket range prior to the commencement of the mediation, it is likely that a good mediator can pull the parties together in the bracket, agree on a number, and settle the case in principal. An effective strategy for mediation is for parties and the mediator to push toward a bracket that is within a close percentage differential. That bracket may be within a 20 to 25 % range differential, but if parties are close enough in the financial bracket prior to the mediation, there is a good chance the case will settle in the mediation.
For example, a plaintiff party demands $100,000, and the opposing party may be willing to pay as much as $75,000 at the end of the mediation to settle the case. Although the $ 75,000 figure has not been communicated to the demanding party prior to or at the beginning of the mediation, the defendant may have that amount of authority coming into the mediation. Since there is a differential of 25% prior to the mediation, there is good chance for settlement because the parties are only $25,000 apart. There is no guarantee of course in this numbers game, but if the range differential was as high as 50%, the parties would not be in that close parallel bracket for success and the case would most likely not settle in mediation on that day.
In a mediation session that is being conducted in good faith by parties that are motivated to settle the case that day in the mediation, both sides will “get some benefit” and will “give up some benefit.” Both sides will shoulder some burden. Simply put, there is give and take and benefits and burdens to be assumed to gravitate into the settlement bracket to reach agreement.
Of course, there are other important considerations that go into settling a case in mediation. These include whether there is insurance money that can pay for the settlement. Obviously, it is advantageous to all parties if there is an insurance policy that could fund a settlement, and the carrier is willing to accept coverage for the total loss or the majority of the loss.
Another moving part is whether the parties are willing to sign the settlement agreement quickly after the attorneys have drafted the settlement agreement. This is a very important factor that is often overlooked. It sometimes happens that there is a verbal agreement in principal at the mediation, and after the mediation one party refuses to sign the final written settlement agreement. Or there may be a disagreement as to minor terms. This can be quite frustrating.
For example, I once had a settlement, where there was a settlement payment to be paid over a long period of time with interest- and there was a disagreement over how the interest was to be calculated- simple interest, compound interest, etc. This turned into a big obstacle, and it became obvious that one side was using this interest calculation issue as an excuse not to finally settle the case at all. One potential solution to this problem is to have the parties sign the settlement agreement promptly at the mediation session this can be very effective in getting the deal done right away in the presence of the mediator, the parties, and their attorneys. If you want to use this tactic, make sure the attorneys bring a lap top to the session have access to a printer to get the agreement signed that day.
Mediation Can Be Very Useful to Resolve the Dispute
In sum, the mindset of preparing for mediation in a business or real estate damages case should be that if the parties are relatively close on the money bracket issue before the mediation, the mediation will likely be successful. I would use a bracketing analysis and approach to determine where parties are positioned at the beginning of the mediation, and keep bracketing and caucusing for the entire session. The parties’ positions may change toward the end of the session. Sometimes, a case may require 2 sessions to achieve success. Mediation is a very important tool to stop the suffering, uncertainty, and sleepless nights that goes with complex litigation, and I hope this presentation will help foster some insights for settlements to be achieved n complex cases.
The author, Nate Bernstein, Esq., is the Managing Counsel of the LA Real Estate Law Group, a Los Angeles based real estate and business law firm. You can contact Nate at (818) 383-5759 or visit www.larealestatelawgroup.com. The firm serves clients throughout Southern and Northern California. Nate Bernstein is a 22 year veteran Los Angeles real estate and business attorney, transaction and trial lawyer. Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights, and debtor’s bankruptcy options. He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, and in house counsel at Denley Investment Management Company, a large privately held company. Nate Bernstein created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation. Nate has personally litigated more than 40 real estate trials, and has settled more than 200 complex real estate and business cases.