Saturday, September 6, 2008

The Mediator's Settlement Meter

When I accept a commercial mediation and have reviewed the parties submissions, I like to schedule a conference call before the mediation to do a number of things, such as review the mediation process that I like to use, and confirm that the client representatives have the requisite case knowledge and settlement authority (and confirm that each party accepts as qualified the other party's representative). During this call, if I believe that my mediator's settlement meter grades the prospective mediation with a high score, I also want to affirm to the parties my confidence and expectation that this mediation will result in a settlement. Akin to a pre-mediation pep talk. What is my mediator's settlement meter and how do I read it?

I have found the following variables to be highly indicative of whether or not the mediation will result in a settlement. These variables are:

1. Are the parties reasonably comparable in economic strength? If one party is substantially stronger financially, that party can be expected to take an uncompromising stance in the mediation and try to wear the other party down in litigation. Not much settlement potential here.

2. Do the parties share the blame for the conflict in a relatively equal manner? A mediator can get the sense of whether there is shared blame in the conflict by reviewing the pre-mediation submissions. I am not talking about figuring out what the settlement might be in substantive terms, but simply whether there was problematic activity on both sides. The parties each will have to empathize with the other party's interests and needs in order for there to be any chance to achieve settlement. That empathy is less likely to be forthcoming from a party if it can reasonably be said that the other party is substantially more at fault.

3. Is this a significant conflict? If the matter is not that important, there will be less incentive to settle. This may sound counter-intuitive, but I have found that the gains to be achieved from settlement must be important for a party to take the mediation seriously and see the benefits of settling now; if these gains are not important, because the controversy itself is not that significant, it is too easy for a decision-maker at the mediation to delay and defer to continued litigation, as opposed to making a decision to settle.

4. Are the transaction costs involved in litigation sufficiently large for the parties to wish to avoid these transaction costs through a mediated settlement? By litigation transaction costs I include not only the actual lawyer fees and other costs of conducting litigation and the operational distraction to management, but also the probabilistic damage award that may be payable or received as a litigation outcome. If the parties can be said to share the blame, then there should be in a party's realistic assessment of the cost of litigation a significant damage award (or failure to obtain damages) that the decision-maker should try to avoid by settlement.

5. Is the conflict in the proper procedural posture? Ideally for a settlement, there should have been at least some discovery taken and preferably a failed motion for dismissal or summary judgment. The parties will then know something about the other side's case and realize that there will be a full trial in the case. If the case is too early in development, the parties may not know enough about the other side's case to understand fully the benefits of settlement, and if it is too late in the case, the parties may have sunk too much of an investment in the litigation to fully embrace mediation as a cost-effective solution.


Friday, August 8, 2008

The Mediator's Proposal (Also, the Difference between Party Offers and Proposals)

If offered at the wrong time or in the wrong way, a mediator's proposal can fall as flat as the plains of Kansas onto the mediation table. If offered at the right time and in the right way, it can crystallize a settlement process, much like a sand grain can lead to a pearl. How and when should a mediator offer a settlement proposal?

First, don't get in the way of the parties' own proposals. Now, I distinguish a party proposal from a party offer; a party offer is a low/high ball number which just invites the other party to reply with something equally as unavailing. The next offer is a baby step towards the middle, and so on. A party proposal is something that is carefully thought out and supported on a principled basis, and while it can be expected not to be immediately accepted by the other party, it does reflect some understanding of the other party's interests and objectives.

Usually, parties make many offers, but very few real proposals.

Second, don't introduce a mediator's proposal unless and until each party has had the opportunity to vent, explain its current position, explain its needs, motivations, interests and objectives, and has demonstrated some capacity to understand those of the other party. Moreover, there should be some time devoted to having the parties empathize (meaning understanding the other party's presentation, even if not agreeing with it), and having each party recognize that the other party is (at least somewhat) empathetic.

Usually, parties make offers when they have not really shown empathy; these offers are slight concessions offered as discounts to "get the deal done." They are not proposals, in the sense that they do not seek, in some way palatable to the proposing party, a way for the other party to solve a problem or need, or satisfy an appropriate interest or objective.

Third, if your mediation is in a litigated matter, or immediately before litigation commences, as mine often are, your mediator's proposal cannot purport to value each party's litigating position. A mediator needs to have each side try to convince the other side of the merits and valuation of its litigation. Usually, this can create some movement, but not enough to achieve a settlement.

As a mediator, you are in no position to jump in and offer a meaningful valuation of a party's litigation. I know, mediators do this all of the time, but they are really just bloviating (all for a good cause, mind you), or their egos have been pumped up on kool-aid. Even if you have read a full record with briefing materials supplied to you as mediation submissions prior to the mediation, all a mediator can really do is assess whether or not a certain claim makes some sense and whether a party's position is reasonable. That's plenty to work with, by the way, but that provides a mediator no special competence to say the litigation is worth x or y to any particular party. Maybe a mediator can say that the litigation is between one party's x and the other party's y, but isn't that sort of self-evident? And even if a mediator could correctly value a case, the parties are still going to resist because they know they will have to litigate this case if the mediation doesn't settle the conflict. So they will maintain a showing of strength even as they assess the wisdom of making concessions.

Here's the key: just as a mediator must recognize that the mediator cannot convince the parties it has any special competence that should lead it to adopt the mediator's valuation of the case, the mediator does have the strength of the mediator's neutrality in being able to offer a proposal that sounds in fairness.

The mediator can ask the parties to put two pins on a litigation valuation map, identifying where each party's litigation valuation rests, whether or not the parties have been making mere offers or have been able to make constructive proposals. Then the mediator can offer an alternative path, which the parties can assess as an alternative to further analysis of litigation value: a neutral mediator's proposal.

Now, some mediator proposals are apparent, even to the parties, after all of the prior discussion, and other mediator proposals require some creative analysis, on the mediator's part, of the parties respective interests and objectives. But the mediator proposal is ready to be made when the mediator believes he or she has reached an understanding of what would be a fair result in the matter.

If a mediator can express empathy, in the sense of explaining why the mediator's proposal solves some of each parties interests, and be assertive, in the sense of explaining why the mediator's proposal does not solve other of each parties interests, then the parties have two alternatives to choose from: the separate pins on their litigation valuation map, and the mediator's proposal.

My next blog entry will seek to assess which conflicts might prove to be more receptive to a mediator's proposal than others.


Friday, July 4, 2008

Finding Those Fifty Cent Dollars

Party A thinks it owes fifty cents to Party B. Party B believes it is entitled to a dollar. Simple solution, right. Just have Party A pay Party B a fifty cent dollar. How does a mediator find those fifty cent dollars?

In reality, they are all around.

When you go to the supermarket, you prefer a half gallon of milk to $4 in your pocket. The supermarket prefers to sell you for $4 a half gallon of milk, for which it paid the farmer $2, than to keep the milk in its case. Markets are where fifty cent dollars are traded, whether they are stock markets, supermarkets or the tag sales that sprout up on country roads on the 4th of July.

Buyers usually do not begrudge the seller for selling a fifty cent dollar, because the fifty cent profit is only a business profit...nothing insidious, no suspicion that the seller is reaching into the buyer's pocket. The buyer either thinks the product is worth a dollar to it, and is not concerned that the product cost the seller fifty cents to make, and the deal is made, or seller and buyer pass like ships in the night.

Parties in conflict have a much harder time finding their fifty cent dollars than parties seeking to consummate a normal transaction. There is a pain sharing formula which is not easily shared between settling parties...each wants the other to give up more. This kind of behavior is as common in settling mode as it would be peculiar in normal transaction mode.

That is why in mediation, after the parties discuss and understand each others' positions, interests and objectives, the mediator is well advised to transition the discussion to considering value-creating trades. These are trades that may have nothing to do with the conflict, but which enable a party to pay fifty cents, and be satisfied, and enable the other party to receive a dollar, and be satisfied.


Saturday, April 19, 2008

Stupid Mediator Tricks (4)

Visualization and "As if" negotiation.

I have been thinking about the applicability of visualization and "as if" social activism to mediation. Maybe mediators focus too much on having each party focus on themselves: on their own interests, and on trying to understand and appreciate the other party's interests.

Maybe mediators should focus more on the settlement itself: by having each party visualize the settlement, and negotiate "as if" there was no choice other than to settle.

At some point in the mediation, maybe I will call a timeout and have each party visualize the settlement. No doubt they will say, "What settlement, we are not even close!" But I will say, visualize it and tell each other: What it feels like. What it has accomplished. What it permits the parties to do going forward. Maybe even what it looks like in substance, but if I go this far, I would want to hear more about what the substantive terms do for each party, how they make each party get something important, rather than what the precise terms are.

Also at some point in the mediation, maybe I will call a timeout and have each party agree to negotiate in a way "as if" there is no BATNA, no alternative to reaching a settlement. Michael Pollan discusses "as if" behavior in a recent article about what each person can do to help deal with global warming. Essentially each person must suspend disbelief that social change can be accomplished one person at a time. Each person must act as if each person's personal attempt at living a more green life will actually retard global climate change. If everyone acts "as if," then one by one our green decisions accumulate, and we all will accomplish social change. If everyone says that no one person can affect global warming, so why bother, then social change will not happen.

I think everyone has had the experience of being in a situation where you decided to act in a way where you would not accept an available alternative. Maybe something as simple as you are running a race and you are getting tired, and you know you can drop out, but the thought triggers a wave of shame and you say to yourself, "no, I am not going there."

If you want social change, act as if what you do will achieve social change, as if what you do matters. If you want a settlement, negotiate as if there is no alternative, as if the settlement matters.

If I pursue this stupid mediator trick, then my main job becomes making sure each party is negotiating "as if."


Wednesday, April 16, 2008

Stupid Mediator Tricks (3)

Something Mnookin points out in Beyond Winning grabbed my attention. He stated that a productive negotiating posture for parties to adopt is to maintain a dynamic between assertiveness and empathy.

You should maintain assertiveness when stating your own interests and objectives, showing that you take them and your arguments seriously. You should maintain empathy for the other party when the other party negotiates, to understand the other party's interests and objectives by adopting the other party's perspective, seeing what the negotiating table looks like from the other side. I was struck because this same dynamic between assertiveness and empathy was what I have been telling my son is the the essence of leadership.

There is precious little leadership training in high school. This is not viewed as an academic subject, at least for students at this age. Doesn't make sense to me because I find it interesting to discuss with my son.

I might have a conversation with my son that goes like this: what would make people want to listen to you and follow your recommendations? By making sure, first, that you really know who it is you are talking to and where they are coming from, so that you understand their questions or needs in the way that they feel or understand them; and, second, by not being wimpy about where you stand and what you think. Thoughtful yes, but wimpy no. (But don't go over the top).

So now, I think I am going to start some mediations by saying I am looking for some leadership to be able to settle this conflict. Ah, making leaders, that's what mediators do.


Monday, April 14, 2008

Why Mediation is Not a Pre-Trial Trial

The biggest impediment to a mediated settlement in commercial cases is the inability of parties to regard mediation for what it is, as opposed to a pretrial mini-trial.

Parties settle conflicts in mediations, they don't win mediations. Litigators who appear at mediations often don't sufficiently appreciate this, certainly not as much as their clients. Which is why I will probably start making even more certain that only those client representatives who have sufficient stature to think for themselves and authority to act for the client appear at mediations.

Mediations are not mini-trials because mediators are not judges or juries. Thankfully. Mediators do not stand in judgment, and they have no institutional or personal competence in deciding who should prevail in a conflict. Indeed, mediators generally shun the notion that any party should prevail in a conflict, as if conflict was sport.

To the extent mediators do their job, they help the parties themselves discover for themselves meaningful ways to accomplish their goals without undergoing the time, expense and risk of litigation. Litigators seek damages, and perhaps another judgment that they can list on their resume for the next time they pitch a general counsel for a beauty contest. Clients want to a reasonable, risk-adjusted settlement to a problem, so that their business can focus more on profit generation than liability containment.

While there are cases that go to the heart of the way a firm conducts business, even these cases are typically better settled than pursued to a win/lose result. Settlements often become ways for a business to create goodwill even as it eliminates a risk.

Mediators are in the goodwill generating business, and litigators often don't appreciate how much goodwill can be created out of conflict.


Friday, April 11, 2008

Mediator as Agenda-Buster

Is it unrealistic for a mediator to suspect that every party to a mediation is pursuing a hidden agenda?

I always try to be overt in disclosing my mediator's agenda, which is to be a passionate advocate for settlement. I tell parties that I will seek to have them transcend any barriers to settlement that arise in the course of the mediation. I will try to understand what they are saying and acknowledge where they are coming from, both to help the other party understand all this, as well as to be able to suggest ideas or options that might create value for both parties.

These settlement barriers can be overtly on display, such as a party feeling hurt, having a specific and stubborn dollar bottomline, or having little repsect for the other party. These are fine, insofar as they are out in the open and can be addressed, whether successfully or not. But what is a mediator to do when things don't seem to add up, in the sense that a party seems to be taking a position that seems extreme or at odds to that party's declared interest and objective. "Who you gonna call?"


One party may want to stretch out the conflict in order to defer as long as possible the recognition of a loss for accounting purposes. This conflict will simply not be settled here and now. Another party may insist on a lowball settlement because it is judgment proof and believes the other party will never be able to satisfy any judgment it might obtain. I can talk about ethical conduct until I am blue in the face. Another party may have an emotional attachment to, or a shameful history with, the other party to the conflict that the party will not acknowledge that is keeping the party from being reasonable. The other party to the conflict is telling me this in private caucus. Is it the other party who is pursuing the hidden agenda?

You begin to sense what is going on in a private caucus session and you call the party on the carpet, as gently as you can. The problem for me and the mediation is, I have become that party's adversary now. Why? Because I am an advocate for a settlement, and the party's hidden agenda has become my adversary.

If a party in confidential caucus doesn't permit me to acknowledge this hidden agenda in open session, then I simply have to continue to work on that party in caucus. Persistance, patience and maybe a little persuasion to keep the hidden agenda from creating the negotiating impasse. It is a matter of mediator pride, if little else.


Friday, April 4, 2008

Mediator as Advocate for a Settlement

I find that the best way for me to be actively neutral in a mediation is to regard my mediator role as someone who has to be a constant and passionate advocate for settlement.

If I can't be actively neutral, I am not working hard enough to promote settlement. If I am not a constant, even at times annoying, advocate for settlement, then I can't be actively neutral.

What do I mean be being actively neutral? Really, this is the core obligation of a mediator. Each party must feel that it's assumptions and positions are being actively challenged by the mediator in a neutral manner. In part, this neutrality is achieved when the party sees the mediator treating the other party in a like manner. But much of a mediator's challenges are done in separate caucus, where the parties can't witness the other party's equal treatment. So, how does a mediator try to have parties tear down their own barriers to settlement, and consider what are uncomfortable options that ultimately prove to be fruitful avenues to a fair settlement? Especially in commercial cases where each party is represented by a staunch advocate that is prepared to press on with litigation? By being a staunch advocate as well, the only one in the room that is an advocate for a purpose and not a party.

Truthfully, I have very few reliable guideposts in mediation. I really will not know what each party's litigation strategy is, even if I ask in caucus. I really will not know what each party's real bottom line is, even if it is loudly announced in open session. Really, all that I have to guide me as mediator is patience and a strong disposition to advocate for settlement, especially when the mediation operates in the shadow of litigation. Of course, often enough, the parties will reasonably assess their interests, objectives and likelihood of prevailing in litigation in a manner which leaves no recourse for settlement, at least until the course of the litigation causes them to reassess. For a passionate advocate of settlement, you win some and you lose some, just like passionate courtroom advocates.


Friday, March 21, 2008

Stupid Mediator Tricks (2)

One of the justifications of mediation with a neutral over straight negotiation between two parties is the ability of the mediator to reduce strategic behavior. That is, if in a negotiation without a mediator a party is engaging in negotiating tactics that are frustrating the settlement process and the other party objects, then the conflict simply moves to the meta-level of whether the negotiation is proceeding in good faith. If a mediator calls a party on the carpet for engaging in divisive tactics, preferably in caucus, the mediator's impartiality can have greater effectiveness.

But, of course, all parties use negotiating tactics that seek to promote their own welfare in every mediation, and the mediator has to be alert to not only recognize strategic behavior, but also to be frugal in calling timeouts over the overly self-interested negotiator. No one likes a nag, and a mediator loses all moral authority if the mediator nags to no effect. What to do?

Part of the mediator's responsibility is to have the parties not only identify their own interests and objectives (and understand how the current conflict is denying them the ability to achieve them), but also understand the other party's interests and objectives. If a party understands the other party's interests and objectives, a party can understand how the conflict is a joint problem, in which any proposal must not only advance the party's interests but also satisfy the other party's interests. The parties are connected by a conflict, which is a social bond as much as any other.

Sometimes, I will ask a party, whether in caucus or in open session (although usually first in caucus) "How does that proposal (or statement, or question etc.) solve our common problem?" The usual answer, which need not be spoken, is that it doesn't, it merely advances the party's own self-interest. If I get the sense from the opening statements that the parties are too entrenched in advocacy mode (say 10 out of a scale of 10, rather than the normal 8 out of 10), I will use the "summing up" mediation tactic in open session, in which I try to replay back to each party what I heard each party say, but I will try to massage my reading with an interpretation that identifies certain interests as shared interests, and the conflict as a common problem. Then I will finish this summation with the question, "I am now interested to hear how we are going to solve our common problem."

Usually this invites slightly pained expressions from the parties. But as my high school athletic trainer used to say, "If it hurts a little, that's good!"


Friday, March 14, 2008

Pity the Poor Misunderstood Mediator

I have been thinking some about the American Bar Association's Section of Dispute Resolution Task Force on Improving Mediation Quality report, which I have reviewed in prior posts. Boiling things down a bit, the most interesting finding is that, generally, users want mediators to be more active, prepared and willing to venture from facilitator to evaluator. Maybe there is a fundamental misunderstanding among users concerning the role of the mediator in the practice of the art of mediation.

Of course mediators are more than willing to be active, but mediators are sensitive to the risk of being too active, which would impinge upon a central tenet of mediation, party self-determination.

Likewise, mediators are professionals who enter mediations having read party submissions and prepared with an understanding of how the clients have described the conflict. Mediators also often have subject matter expertise that they can bring to bear to provoke a thoughtful consideration of issues raised by the conflict. But mediators understand the risk that that they can be over-prepared. Mediation is, in many ways, a performance piece in which the parties themselves are the central actors. It is the performance, the give and take of the actual negotiation, which yields the settlement, and mediators should not rely too much on papers prepared in advance by the parties. These papers are still "fight" pieces prepared by the parties in advocacy mode before the mediation begins, and the mediator does not want these position papers to take a greater importance than the clues and openings that can be summoned once the negotiating process begins. Pre-mediation papers are never prepared in a collaborative manner, and I can't tell you how many times I have received feeble attempts to comply with my request to set forth in these papers a confidential statement of what a party would accept as a reasonable compromise.

As for facilitative versus evaluative modes of mediations, I find that I try to do what I think the mediation needs. Mostly, I facilitate, using whatever techniques I can think of to get parties to think in terms of solving a joint problem, as opposed to winning a joust (yes, even stupid mediator tricks). But here's the key for me: I tend to find that the surest sign that I am floundering in a mediation is when I start to become more evaluative. When I offer my evaluations, or succumb to the request to provide them, I am forcing the mediation, trying to accelerate movement, not focusing on the parties' interests and objectives enough to help the parties recognize and claim common ground.

So pity the poor misunderstood mediator who is just trying to be a mediator, and not a hero.


Sunday, March 9, 2008

Stupid Mediator Tricks

David Letterman uses stupid pet tricks on his show. I have been thinking that some of the mediation tactics I have been using amount to "stupid mediator tricks," in the sense that like Dave's pet tricks, sometimes they work and sometimes they don't. Here's my stupid mediator trick with respect to opening statements.

Parties generally like to open with opening statements, so I let them do it. It lets each party have its say, it gets things going with a statement, whether clear or not, of the nature of the claim and how the parties see things differently, and it is a way for each party to start to listen and hear each other....or not.

I find that too often, each party is too impressed with the need to get its point of view out there, and not impressed enough with the need to hear what the other party is saying. So, I tell each party before they proceed with their openings that I want them to take out a piece of paper, listen to the other party's opening statement, and write down the most important thing that they think the other party is trying to communicate, and whether they heard anything new. I have each party exchange their reactions to the opening statements after the openings are made. Then I ask each party whether the other party gets it.

It is an exercise in listening appended to an act, the opening statement, which is too often viewed as an exercise in speaking only.


Sunday, March 2, 2008

Mediation Quality Task Force (Mediator Persistence)

I have posted on the American Bar Association's Section of Dispute Resolution Task Force on Improving Mediation Quality report and its first three findings, Mediation Preparation, here, Case-by-Case Customization, here, and Mediator Analytical Techniques, here. In this post, I will review and comment upon the report's fourth finding, Mediator Persistence. As with Mediator Analytical Techniques, it is interesting to note that mediation users expect more of mediators than many mediators normally conceive of their role.

All mediators would regard persistence as an important mediator virtue. Indeed, as the task force report puts it, users don't expect mediators to act like a "potted plant," and all mediators would agree (although one can see mediators cautioning users that sometimes listening is an important prerequisite to mediator intervention, and that they can hold off with the watering can for awhile). Users characterize mediator persistence as follows: "trying to keep people at the table, trying to get the case settled by exerting some 'pressure,' and trying to get people back to the table after a mediation session fails to settle the case...Eighty-two percent (82%) of users thought 'exerting some pressure' was an important trait, very important or essential for a mediator to be effective."

I have found that applying pressure often only raises the frustration level arising from an impasse in settlement discussions. A party may want a mediator to apply pressure against the other party, but against the party itself and its counsel, not so much. I am not counselling against pressure by any means. A mediator can apply pressure and maintain neutrality as long as the pressure is applied even-handedly and on a principled basis. But the real question is, how to apply pressure effectively, with respect to the right issues, against the right party, and at the right time.

I have found that every mediation contains a pivot point; an issue that both parties understand to be crucial and with respect to which one party more than the other has the capacity to address. This does not mean that any party wants to make a move at the pivot point, but rather that if the mediation is to become successful, the best pressure that can be applied is to focus on the party that "controls" the pivot point.

There are many impasse-breaking tools that a mediator can use, such as a conditional offer in a caucus (what would you want the other party to offer you if I tell them you might be able to offer X?). But listening, waiting for, and finding the pivot point and the party in the best position to address the pivot point issue is a prerequisite before the mediator dials up the pressure gauge.


Friday, February 29, 2008

Mediation Quality Task Force (Mediator Analytical Techniques)

I have posted on the American Bar Association's Section of Dispute Resolution Task Force on Improving Mediation Quality report and its first two findings, Mediation Preparation, here, and Case-by-Case Customization, here. In this post, I will review and comment upon the report's third finding, the Mediator's "Analytical" Techniques. The task force found a substantial difference between the willingness of mediation users to have mediators apply various "evaluative" mediation techniques and the mediators' own willingness to do so. This is probably the most interesting finding of the task force and, for the development of mediation as a coherent practice and methodology, also the most perplexing.

Mediation users (in this task force report, users are counsel who represent parties before mediation rather than the parties themselves) approve of the use by mediators of both facilitative and evaluative mediation analytical techniques. Users believe by substantial majorities that it is important for mediators to use such facilitative techniques as the mediator's asking pointed questions that raise important issues, providing an analysis of the case that identifies important strengths and weaknesses and suggesting ways to settle the conflict. Mediators also agree that these techniques are valuable.

Where users and mediators differ are the appropriateness of using such evaluative mediation techniques as the mediator's offering an independent assessment of a party's case, such as by providing the mediator's own valuation of the case or a prediction of the likely court results, or applying pressure for a party to accept a proposed settlement. Users also believe that these evaluative techniques are useful, albeit by smaller majorities than with respect to facilitative techniques, while mediators are much more hesitant to find these evaluative techniques useful and by a substantial majority do not believe they are appropriate in any and all mediations.

At first blush, this is a highly perplexing result for mediation, since there seems to be a basic difference in understanding the appropriate rules of engagement between mediation users and mediators. Perhaps it is better for mediators to be more rather than less hesitant to venture forth with evaluative inputs, and the fluidity of mediation may prevent it from ever developing a common set of groundrules. However, the report goes on to identify factors that users find important in determining their own receptivity to evaluative inputs from the mediator, and it is in this list of factors that the report finds its greatest contribution.

Users seem to be voting for a situational approach to mediation, and are willing to have the mediator be increasingly evaluative, depending upon the following factors:

whether assessment is explicitly requested;
extent of mediator’s knowledge and expertise;
degree of confidence mediator expresses in assessment;
degree of pressure mediator exerts to accept assessment;
whether assessment is given in joint session or caucus;
how early or late in process assessment is given;
whether assessment is given before apparent impasse or only after impasse;
nature of issues (e.g., legal, financial, emotional);
whether all counsel seem competent; and
whether mediator seems impartial.

These results highlight an important process question that should be addressed before the mediation: the mediator should discuss with counsel not only the mediator's style and willingness to engage in both facilitative and evaluative mediation, but also counsels' preferences as to whether to participate in an evaluative mediation and under what conditions. This may seem to be overkill and may even put the mediator in the position of having to defend the actual application of his or her mediation techniques, compared to what was discussed in the pre-mediation conference. But the watchword for all mediations is collaboration, and if the mediator and counsel agree not only on the usefulness of evaluative inputs from the mediator but also the conditions for their use, for example only in caucus and after an impasse has been reached, then the mediator will likely be more confident in applying these evaluative inputs and counsel will be more receptive when they are made.


Thursday, February 28, 2008

Mediation Quality Task Force (Case-by-Case Customization)

I have posted on the American Bar Association's Section of Dispute Resolution Task Force on Improving Mediation Quality report and its first finding, Mediation Preparation, here. In this post, I will review and comment upon the report's second finding, Case-by-Case Customization. Surprisingly, the report seems to assume that mediation customization is easier said than (I have found) done.

This portion of the report starts with a plea for mediator flexibility and customization of the mediation to the particulars of the conflict.

"Customization is the element of preparation that involves planning a mediation process tailored to the needs of the parties and the dispute. According to focus group participants, the timing of the mediation, exchange of information before the session, and whether to have opening statements, are all elements that can be customized to each dispute. One participant in our first interview group complained that mediators too often handle their cases with a “cookie cutter” approach. Many others voiced essentially the same sentiment, and praised flexibility as a quality desirable in mediators."

The report goes on to mention the question as to whether to have counsel make opening statements as the most important element of a mediation that may be customized to a conflict, by either having opening statements where it is thought that each side needs to communicate to the other side the strength of the case or its necessary objectives, or by omitting opening statements where they could be too inflammatory and counterproductive.

I believe that opening statements are almost always useful, and I have omitted them only when the parties have confirmed to me that they have had substantial prior settlement negotiations; in such a case, the parties usually want to try to pick up where they have left off, reviewing what progress had been made or not made and why, on the theory that an opening statement will only rehash old ground.

Perhaps the most important customization issue, as far as I am concerned and which the report does not discuss, is the extent to which caucuses are to be used. As an ideal, I believe caucuses should be minimized if the parties are comfortable discussing their interests and objectives openly, and are able to listen to the other side carefully. If a mediator is able to limit caucuses solely to the private consideration of options and valuation of proposals, promoting careful consideration before a suggested deal is proposed or responded to, the mediation can take on an active rhythm that creates its own momentum, and caucuses can become productive. If everything is to be done in caucus and the mediator becomes a shuttle diplomat, the mediation becomes a torpid affair and the parties loses whatever effectiveness they might have had to engage and reconcile with each other.


Sunday, February 24, 2008

Mediation Quality Task Force (Mediation Preparation)

The American Bar Association's Section of Dispute Resolution Task Force on Improving Mediation Quality has issued its final report, and you can download a copy here. I summarize in this post the report's findings and will discuss these findings over the course of the next few posts, beginning in this post with mediator and user preparation for mediation. Every mediator and mediation user should read this report. Here's why.

The Report focused on four main issues that are important and contributed to mediation quality (the report focused on mediation in civil cases involving large commercial or other disputes in which parties are represented by counsel):

1. Preparation for mediation by the mediator, parties, and counsel
2. Case-by-case customization of the mediation process
3. “Analytical” assistance from the mediator
4. “Persistence” by the mediator

The report found that mediators and mediation users (by which it means counsel) believe preparation for mediation is an important criterion of success. Recommended preparation includes review by the mediator of existing documents and briefing regarding the claim, production by users of a mediation statement (designed in collaboration among the users and the mediator) for the mediator to review prior to the mediation, and holding pre-mediation telephone or in-person conferences to discuss issues and concerns that might be anticipated to arise in the mediation. These conferences can be separate meetings between the mediator and each party, or joint meetings.

An interesting conclusion in the report concerns whether mediation users should provide input with respect to process issues concerning the mediation in pre-mediation conferences.

"Perhaps the most interesting finding about the preparation phase was that sophisticated repeat mediation users wanted to have substantive input into the mediation process itself. Traditionally, the mediation process is controlled by the mediator and the outcome is controlled by the parties. We found, however, that in pre-mediation discussions, many users wanted to advise the mediator about process issues such as whether opening statements would be useful in a particular case, or about which issues in the case would best be handled in joint sessions and which in caucuses."

I have found that a mediator can "set the tone" for a constructive mediation in the pre-mediation conference, and to do this it is very useful for a mediator to invite suggestions from counsel regarding process. An inquiry into process is much more likely to lead to agreement among the parties and the mediator than any preliminary inquiry into substance, so a process inquiry can both help the mediator anticipate how to proceed as well as to garner party goodwill to proceed cooperatively. Process questions are more likely to represent low-hanging fruit than substantive questions, from the mediator's standpoint, and counsel truly appreciate the opportunity to help shape the process (as opposed to their experience in most courtrooms). Process inquiry is a good way to start off on the right foot.

The other interesting focus of the report was the question of the importance of the mediator's subject matter knowledge.

"To a very substantial degree, users endorsed the importance of subject matter knowledge, and in complex areas, subject matter expertise may be preferred. Those who value subject matter knowledge may be influenced in reaching their viewpoint by the understanding that a mediator may provide parties and counsel with opinions, analyses, or evaluations about certain aspects of the case or suggestions or proposals about how to settle—and that those with subject matter knowledge would be better suited to these tasks. Even in cases where users do not want the mediator to provide analytical assistance or to offer opinions, it is still often useful for mediators to have enough subject matter knowledge to understand the details and implications of the dispute, without requiring explanations from the participants during mediation sessions. This does not, however, take precedence over process expertise, which is essential for high quality mediation."

Subject matter knowledge is both a blessing and a curse for the mediator. It can be a blessing if the mediator uses his or her knowledge of the law and general practice in the subject matter field of the conflict to ask better and more probing questions, and to generate more insightful and realistic options. It can be a curse if the mediator starts to take a position on the merits of the conflict, sacrificing neutrality and losing effectiveness by doing so. The more I think I know in a mediation about the merits of a conflict, the less acutely I listen. As I always say to the parties in my introduction, I as a mediator decide nothing. I find no facts and I pronounce no law. Primarily, I say this to remind myself.


Wednesday, February 20, 2008

When Mediation Works

If you are interested in finding out how to improve the practice of mediation, one way of going about that task is to consider what types of conflict does mediation resolve well. If there are categories of disputes that lend themselves well to resolution by mediation and other categories that don't, then perhaps one can figure out what it is about mediation that fits well with one category or not with the other. If you understand how a tool is designed for some jobs but not others, then perhaps you can proceed to improve the tool.

Thinking about this some, it occurs to me that a mediator's effectiveness depends upon the absence of an outside authority. Essentially, a mediator is most effective when everything a mediator needs to help resolve a dispute is right there in the room...the mediator and the parties. If the mediator has to make an appeal to an external rule or authority to resolve the dispute, especially where the mediator can make no special claim of competence in applying that rule or authority, the mediator is probably working in a field outside mediation's best application.

Take, for example, disputes in the workplace. Human resource administrators are increasingly using mediation to resolve intra-employee disputes. Before considering whether mediation can be useful in a particular dispute, the employer should determine whether the nature of the dispute requires the employer to exercise its authority. If there is a legal question involved, for example, then the employer's legal department will need to get involved, assert the employer's authority and apply the appropriate legal rule. There is no benefit to be obtained by resorting to a mediator in this type of situation. This would also be the case in situations where there are important questions of broadly-applicable company policy that should not be implemented in an ad hoc manner, one mediation at a time.

However, it is not practicable to resolve many disputes that arise in the workplace by making continuous appeals to an employer's authority. These disputes may be referred to as social/political issues, in the sense that there are many questions of social recognition and power allocation among employees in the workplace that do not arise to a level of concern that affects the firm's economic results or general employee satisfaction. In these situations, if the employer stepped into each dispute, the employer would be trying to resolve what are essentially private matters where its authority is not necessarily dispositive; overuse of authority can tend to weaken it, and questions of consistency of treatment might erode the employer's claim that it is exercising its authority in an impartial matter. These private matters can only really be resolved once the parties agree that they have been resolved; hence, enter the mediator.

On the other hand, consider the workplace situation of disputes between partners of law firms. The principal disputes between law partners tend to revolve around compensation, conflicts (whether a partner can take on a new client where this representation may conflict with another firm representation) and allocation of associates (quantity and quality) to partner matters. Here, the law firm's preeminent authoritative rule agreed to by all partners in advance is to increase profitability. Every intra-partner dispute is understood by all partners to be properly decided by reference to whether any particular result will further the firm's objective of enhancing profits. Each firm will develop its own metric to determine how it should go about compensating rainmakers vs. the worker-bee partners, which new clients to take on, how to best allocate associate help to various kind of matters, and other questions that may create partner disputes. A mediator would not be helpful in this situation since no mediator can be adept at discerning or applying the balancing of interests that constitutes the particular firm's profit-enhancing modus operandi (which the firm may need to change on the fly as it responds to changing events). A managing partner or firm committee will decide these matters, as best they can, and all partners agree in advance that these are not private matters, but rather matters that relate to the profitability of all partners in the firm.

I sense that mediators often think mediation is potentially applicable to all kinds of disputes. But if a mediator senses that the proper method of settling a dispute is by resorting to the application of some rule or authority, with respect to which the mediator has no special competence, and not solely by obtaining the parties mutual consent, that mediator is probably involved in a dispute that should not be resolved by mediation.


Friday, February 8, 2008

Gains, Losses and Reference Points

I think no academic research has more relevance to mediation than Prospect Theory. If a mediator is sensitve to the principal tenets of Prospect Theory, there is a far greater chance that the mediator can convert party intransigence into movement towards settlement.

Falling under the general rubric of Behavioral Economics and developed by Nobel Prize winning psychologists and economists such as Daniel Kahneman, Amos Tversky and Richard Thaler, Prospect Theory examines what really concerns and motivates people who make real life decisions under conditions of risk or uncertainty...such as whether to settle a conflict. Prospect Theory's single most important surprise to me, as a mediator, is that parties are not really concerned with the actual end result of any decision. To a greater extent, parties care about the subjective value that they perceive that result to have, and this subjective value is determined by whether the end result is perceived to be a gain or loss.

Here's the rub....the same end result can be perceived to be a gain or a loss, depending upon the party's reference point.

At the risk of oversimplication, Prospect Theory holds, with relevance to mediation, that when people evaluate risky prospects, value is not assessed in the abstract based upon some end result but rather in terms of whether there has been a gain or loss relative to some reference point, and losses loom larger than corresponding gains such that there is risk seeking in trying to avoid losses and risk aversion in trying to achieve gains.

Risk aversion with respect to gains and risk seeking with respect to losses can be illustrated by the following problems posed to two different groups of subjects.

Problem 1. You are given $1,000. You are now asked to choose between A: 50% chance of winning $1,000 (and 50% chance of winning nothing), or B: a certain win of $500. 86% of the subjects chose B, the certain gain of $500 over the 50% chance to win $1,000, although the probablistic value of each choice is the same, an end result of $1,500.

Problem 2. You are given $2,000. You are now asked to choose between C: 50% chance of losing $1,000 (and 50% chance of losing nothing), or D: a certain loss of $500. 69% of the subjects chose C, the 50% chance to lose nothing over the certain loss of $500, although the probabilistic value of each choice is the same, an end result of $1,500.

So, the end results A, B, C and D each had equivalent end results (probabilistic value of ending with $1,500), but their respective perceived values are different, depending upon whether a loss or gain is entertained. Of course, whether a loss or gain is entertained depends upon the subject's reference point.

This example from Prospect Theory is relevant to mediators on many levels. First, a mediator has to be sensitive in the settlement of a conflict to exchanges of value between parties; the value being lost is more dear than the value being gained, even where the parties agree that the end result is appropriate. A corollary to this concept is that in any offer and counteroffer scenario, the party increasing an offer to pay the other party (and thereby incur an out of pocket loss), views that loss as being more valuable, a greater concession, than a decision by the other party to reduce its ask by a comparable amount (and thereby forgo a comparable gain). In effect, a $100 climb uphill is harder than a $100 slide downhill.

On a deeper level, though, I believe that many parties in conflict cling to their ex ante expectations prior to conflict, which is a different reference point than they find themselves in settlement ex post the conflict, so that even gains when measured from the reference point of conflict are in fact viewed by parties as losses when measured from the reference point of expectation held prior to conflict.

Especially when parties are negotiating a settlement in the shadow of litigation, a plaintiff's best alternative to a negotiated settlement (BATNA) is measured by the probabilistic return the plaintiff expects from litigation. In litigation, the plaintiff is seeking to be restored to its position ex ante the conflict, or to be placed in the position the plaintiff would have been in had the defendant performed, by being awarded damages equal to the benefit of the plaintiff's bargain. Any settlement offer made ex post the conflict, when measured from the ex ante reference point of what the party expects the court will award (which may be an unrealistically high value), is a loss, even though that offer is a gain when viewed from the reference point of the settlement conference room.

In such a situation, a mediator can try to bring a party back to the reference point of the settlement discussion, a reference point that is ex post the conflict, by engaging in reality testing and going over all of the risks and transaction costs of litigation, and by contrasting this with the quick and certain gain offered through settlement. But in so doing, the mediator will have to be patient, knowing that the party must make the Janus-faced decision of perceiving the gain, rather than perceiving the loss.


Monday, February 4, 2008

Splitting the Difference

Every mediation is different. Different parties, different conflict, different methods and strategies that can be employed by the mediator. I tend to try to tailor my approach to the particular situation of the conflict. Sometimes, I wonder if there isn't a mediation strategy that is one size fits all (I would settle for one size fits most)?

Thinking about it some, I think that there probably is.

I was thinking about the Ultimatum Game, and its implication for mediation. In the Ultimatum Game, there are two players; the first player proposes a split of a sum of money to be shared by the two players, and the second player's only move is to accept or reject the first player's proposal. If accepted, the players split the money accordingly. If not accepted, the players receive nothing. In this sense, the proposal is a take it or leave it ultimatum. There is no further move.

Typically, the least self-interested proposal to be made by the first player is a 50-50 split, which surely would be perceived by the second player as fair and therefore accepted. The first player may strategically try to improve upon this proposal for itself somewhat, trying to profit from the first-mover advantage, but the question is, by how much?

If the first player proposes a 99-1 split, the first player may believe that the second player would prefer to receive a token 1 than nothing at all, even though that results in the second player watching the first player walk off with 99. The first player would be smart to rein in this strategic temptation, in order to make sure that the first player won't be too insulted to accept a result in which the first player walks off with too much more than the second player (even though this is still a result that is better, moneywise, for the second player to accept than reject).

Often, in this type of situation, a proposal by the first player that marries respect for the second player to the first player's self-interest will carry the day; a 60-40 split proposed by the first player is likely to be viewed as acceptable by the second player. If the first party respects the second party, it is more likely that a fair proposal to split the difference will be made, which of course increases the likelihood that a deal will be made. Likewise, if the second party respects the first party, it is more likely that the second party will allow the first party to get more, but only just a little more, than the second party might think would be justified in an ideal world.

The implication for the mediator is that if the mediator can get the parties to recognize each other as deserving of their respect, then the mediator can then, but only then, proceed to the question of how to split the difference. Parties in conflict often do not have, or have temporarily lost, their respect for the other party. If the mediator tries to get the parties to split the difference that separates them before this respect is (re)established, it is less likely that a fair proposal will be made, or seen to have been made.

Parties in commercial disputes often say that "it is all about the money;" the dispute may only be about the money, but the settlement is about respect.


Sunday, January 27, 2008

False Mediation

Can mediation be falsifiable?

Is there a right mediation practice? Need there be transformation? Or facilitation? Or is it "Just settle, baby?"

Who is to say that a mediator is truly practicing true or false mediation?

I attended a conference regarding mediation in personal injury cases, where insurance company defendants were discussing the relative merits of mediation versus showing willingness to go to trial. I was appalled to hear a panel member, a sitting judge, describe what he referred to as the mediation that he practices in his cases. He described his mediation by invoking the law of the jungle, predators and predation, excoriating "weak" plaintiffs and coercing them to settle by telling them in chambers that the strong defendant would devour them at trial. He seemed impressed by his analogy. I remember talking to another panel member, a retired judge, after the conference, shaking our heads as we agreed that if this can pass for mediation, then there is no useful meaning to the practice.

I think that national, state and bar accreditation of mediators is important and will eventually arrive as more courts look to mediation to relieve docket congestion. But even before we embark on a licensing initiative, we need to be able to discriminate between mediation and false mediation. Mediation is falsifiable if it parades as something other than facilitating party agreement and self-determination. To be hesitant to call out false mediation is to betray an inability to even consider taking the path to any form of mediation accreditation.


Thursday, January 24, 2008

Zone of Possible Agreement

In Beyond Winning, Robert Mnookin discusses how parties may fail to reach an agreement even if it is valuable and efficient for them to do so. The problem is that parties may not be aware that there is a "zone of possible agreement," where the range of values that the parties assign to the dispute overlap, so that a settlement value acceptable to each party would also be acceptable to the other party. This situation is a classic call for facilitation by a mediator. How does the mediator increase the likelihood of a settlement where the parties' valuations overlap to create a "zone of possible agreement?"

Take as Mnookin does the example of a negotiation to sell a used car between two parties. The seller has a reservation value of $7,000, below which she will not sell the car to the other party. She has set $7,000 as her reservation value because she has identified her BATNA, her best alternative transaction to a negotiated agreement with this buyer, as a sale to a dealer at a "blue book" price of $6,900. Seller would like to get more than this easy-to-obtain "wholesale" price, and is asking a "retail" price of $9,500.

Buyer also has a reservation price above which he will not spend for this car. He has set this maximum price at $9,000, because he could purchase a similar used car from a dealer for $11,500. Buyer thinks the dealer's warranty and quality inspection of the car before sale is worth the incremental $2,500, but is willing to forgo it in order to pay the lesser price to seller. However, buyer would like to pay as little as possible, and he counters with an offer of $6,000.

In this case, the zone of possible agreement is $7,000-9,000, and any transaction in this range would be beneficial for both parties. There is a $2,000 surplus to be distributed, which is a measure of the potential economic benefit to each party to doing the deal in addition to simply acquiring or disposing of the car. It is in each party's self interest to obtain as much of that surplus as possible, and dividing up the surplus is a zero sum game. However, if each party is unaware of the other party's valuations and objectives, they run the risk of failing to reach a deal if they only seek to maximize their personal self-interest.

Mnookin identifies information asymmetries and strategic opportunism as the principal barriers to settlement even where parties share a zone of possible agreement. Information asymmetries concern the differences in knowledge that each party has about the other party's objectives and concerns, as well as about the quality of the good being sold. As Mnookin states, "[i]ronically, the more successful a buyer is at negotiating a bargain price, the more suspicious he should be that he is being sold a lemon." Strategic opportunism can be briefly identified as that urge each negotiator has to "win" the negotiation, to outdo the other party. Often a party will seek to manipulate the perception of the party's alternatives and "bottom line." To put it bluntly, each party seeks to not only do the deal but also exploit the other party to boot.

This is a useful example to explore how a mediator can facilitate a settlement...a settlement that is in the parties mutual self-interest to make. The parties might be able to agree that a "fair" price would be $8,000 (the middle point of the zone of possible agreement) if they can collaborate to understand each other's objectives and alternatives in a way that doesn't render them vulnerable in the process, and if any questions regarding the quality of the car could be answered by structuring a process that satisfies the buyer but doesn't create unacceptable transaction costs for the seller.

The best way to discover whether there is a zone of possible agreement without rendering each party vulnerable to the other party's opportunism is for the mediator to identify each party's valuation range separately in caucus, and apply any reality-testing that may be necessary based upon the mediator's understanding of the facts and issues presented. The mediator must also be willing to sniff out the difference between a true reservation price and a purported "bottom line."

The mediator will need to continue the separate caucusing until the mediator is ready to report in open session that a settlement is possible, because there is a zone of possible agreement. Once the parties are aware that settlement is achievable, the parties can then in open session begin to explore with some more confidence each others' interests in a way that seeks in a collaborative way to determine where the surplus may be "fairly" divided.


Monday, January 21, 2008

The Mediator's Settlement Compass

One of the most unnerving aspects of mediation when I started as a mediator was the uncharted nature of the enterprise. I realized that I should not anticipate a settlement path, but rather should explore the conflict without any preconception as to what a settlement might look like, and let the parties' interests, needs, objectives etc emerge and blaze the settlement path. The question is to what extent a mediator may facilitate the settlement by gently pushing the parties to go in directions they initially resist. In other words, should the mediator use a settlement compass to select or change the direction of the settlement process?

Mind you, I use the analogy of a compass, which in my hand would always seem to jump and spin around as I moved in any direction, yielding a multiplicity of true norths. I wouldn't presume to invoke a mediator's gps, where one might plug in the conflicted start and settlement destination and call upon a detailed and certain route. Even a mediator's compass in a gps world would be a handy tool, were a mediator able to conjure it up.

Here are two thoughts to consider in conjuring a mediator's compass.

First, I believe that a mediator needs a detailed understanding of the parties' prior settlement activity, if any, before taking a first step. If there has been any prior negotiations, the mediator needs to understand what was said, how, when, and to what effect. In a case where there have been prior settlement discussions, the mediation does not really start with your arrival as mediator. After you have been briefed by the parties of prior discussions, which often can take place in separate pre-mediation conferences, the mediator may have a sense of a plausible first step.

Often, the mediator will ask parties to prepare separate mediation statements in advance of the mediation to apprise the mediator of the nature of the conflict, the alleged facts and the parties' pre-mediation view of the merits of their case. Often, counsel treat this simply as an opportunity to rehash their court papers, and the effort is truly worthless. A twist on this, especially if there have been any prior settlement discussions, is for the mediator to ask both counsel to collaborate and present a statement of the facts that are not in dispute, and even a mutually acceptable range of settlement values. Again, if there have been prior settlement discussion, a useful first step for a mediator is to ask counsel to identify what the parties can agree to in advance of the mediator's participation.

Second, in the case of a failed transaction, a mediator must learn what each party was seeking to obtain from the transaction. One reason the transaction may have failed is that the parties' objectives were not reasonable, or not as carefully thought out as they would have been had the parties known then what they know now. The perfect may have been the enemy of the good, or self-interest was overweaning. If a sensible end result can still be achieved, an end result which a party might not have rejected at the start if the party had thought of it then, then the settlement path can be made to look (almost) like just another fresh start, as opposed to the more distasteful attempt to clean up a failure.

Of course, one party may wish to move on, as the other party wishes to restart. In this situation, there is no true north path towards settlement.


Friday, January 18, 2008

The Mediator and Party Fatigue

By party fatigue I am not referring to when you decide it is time to leave a party. I am talking about that point in the mediation when the mediator would like to (a) leave the parties to their own devices, because they deserve each other, (b) wring a party's neck (at least just a little), (c) charge a premium rate, in the nature of hazardous duty pay, or (d) take a breath, smile and do none of the above.

If you choose (d), congratulations. But how does the mediator deal with difficult or unlikeable parties in a way that is conducive to settlement without being adversely affected by party fatigue?

The mediator has to empathize with and actively listen to the parties in order to get the parties to do likewise. All of the mediator's devices, such as focusing on interests rather than positions and finding common interests and needs among the many opposing incentives, will be useless if applied to parties unsympathetic to the process.

But what happens when for all of the mediator's empathy and patience, the parties remain disengaged and resistant? In one mediation involving a conflict arising out of a failed joint venture, I could not move the parties into a position of even possible accommodation. One party, the money partner, smugly presented a position of strength. It didn't help matters that it was mostly right on the merits, so in their view, why accommodate? The other partner, who needed the money and labored long and hard to develop and present the business opportunity, was tiresomely incompetent, if the truth be told. I found that not only was I frustrated in my efforts to develop common ground, I was frustrated in my effort to identify with either party empathetically to the extent necessary to effectively explore options.

I found that, in this case, it was important to be a vigilant champion of the process even if I couldn't readily become an empathetic champion of the parties themselves. This mediation ended in settlement and, to the extent I contributed to this result, it was only because I was tenacious in pursuing the process towards settlement...even though I had developed party fatigue well before the end.


Thursday, January 17, 2008

Mediation, Emotion and Regret

When I discuss mediation with other mediators, I find the most enlightening discussions do not concern negotiating strategy or what tactical tips may be pulled out of the mediator's quiver at an opportune moment, but rather the importance of understanding the parties emotion as a necessary precursor to engaging the parties in the analytic journey towards settlement.

At the start of a mediation, I usually tell the parties that I expect them to be civil, not to interrupt each other, and engage in active listening, but I also tell them that I do not insist that they refrain from expressing emotion. If a party wants the other party to understand the depth of the upset and disappointment that party is experiencing, that emotion is better expressed than repressed.

Usually counsel, rather than the parties themselves, initially take me up on the offer. Inviting a lawyer to vent can be likened to throwing red meat to a wolf. But that's fine, as the parties often seem to derive emotional release vicariously. Yet sometimes in a caucus, when I will be reality testing a party, speaking directly to the party and bypassing counsel, I will be pushed back by a party in strong terms. Parties sometime seem surprised when I ask why they don't forcefully express their views and feelings directly to the other party in open session. They often reply that they wonder whether that would be proper.

I have come to believe that when people are trying to resolve a conflict, the greatest barrier to analysis and judgment, which are necessary for settlement, is the emotional condition of the parties. For some parties, venting will suffice to clear up enough mental space for the party to collaborate in the settlement process. I believe for many parties, however, they have to go further; they must come to understand the regret they feel with respect to the matter in conflict, and dispense with it as a condition to partaking in real settlement activity.

Working through regret is essentially a process of forgiving oneself before one can empathize and collaborate with the other party in the conflict. It is an important way to permit the regretting party to become free to engage in meaningful analysis (almost as if the party must grieve at the death of the transaction that was to be).

There is an experiment by Tversky and Kahneman that illustrates how powerful a force regret is at inhibiting clear judgment:

Paul owns shares in company A. During the past year he considered
switching to stock in company B, but he decided against it. He now
finds out that he would have been better off by $1,200 if he had
switched to the stock of company B. George owned shares in company
B. During the past year he switched to stock in company A. He now
finds out that he would have been better off by $1,200 if he had kept
his stock in Company B. Who feels more regret?

By far, experiment subjects state that they would feel more regret if they were George than Paul (even though, analytically, they are in the same economic position).

Taking the experiment one step farther and putting it into a mediation context, where Paul and George each are seeking to mediate a conflict after following the advice of their stock broker, who was incorrectly bullish on company A and bearish on company B, who would you expect to have the more difficult time reaching settlement? What would you, as a mediator, have to do additionally with George that would you would not likely have to address with Paul?


Wednesday, January 16, 2008

Mediator as Neutral

The core principles of mediation practice for a mediator are to act as a neutral and to maintain confidentiality. Notice I said act as a neutral, not be fair. For important reasons that I explain below, the mediator has no business trying to be fair as long as the mediator is neutral.

By being a neutral, the mediator has no interest in the conflict other than its resolution. The mediator decides nothing as to matters of fact or law. The mediator's role is to try to understand each parties' interests and objectives, and move each party to a point of resolution under circumstances where the parties, acting on their own, would find such movement difficult.

By conceptualizing a mediator's role as being fair, two problems are introduced: first, fairness implies that each party is receiving their due by means of the mediated resolution. This creates an impediment to resolution because it causes the parties to analyze their claims in terms of their ex ante expectations that they had when they entered into the deal or situation that gives rise to the conflict. It is for the courts to provide parties their expectancy damges, to place the parties where they would have been had the conflict not arisen. In order to do this, the court must make findings of law and fact, and presumably do so in a fair manner.

On the other hand, the mediator works most efficiently if the mediator can move the parties off of their claims of frustrated expectation to the ex post analysis of what their respective interests are, here and now, and how each party may constructively move on in a way that satisfies both parties' reasonable objectives. To do this, the mediator is best served by helping each party to distinguish reasonable from unreasonable interests and objectives, given the current facts and circumstances. To be successful, the mediator should be seen as not taking sides or playing favorites; being fair necessarily means taking sides, at least that will be the way it is perceived by one (or both) of the parties.

Secondly, being a neutral may, at times, require "unfair" treatment of the parties, in the sense, that the mediator must treat the parties differently in order to create movement towards resolution. This is best done during caucuses, where a mediator may find that different types of analysis or argumentation are required for each party, based upon the parties' situations and the stage of the mediation. In a theme that I will explore elsewhere on this blog, one of the parties may require more focused and specialized effort by the mediator at certain stages of the mediation; one party may, in other words, be the party best suited to move at a "pivot point" of the mediation. The other party may be inclined to make a substantial accomodation, provided the first party resolves an issue that may only be resolvable by that party (hence, the notion that the resolution pivots around the first party).

If a mediator's true interest is to neutrally puruse a resolution, rather than to act fairly, then the mediator must be both sensitive enough to discern where and when these pivot points arise, and also free to deal with these pivot points in a manner that best promotes the process towards resolution without focusing on the substantive fairness of the result. One can be neutral and still insist that the resolution of a pivot point in the mediation should rest with the party that is in the best position to deal constructively with it. It is simply a category mistake to question whether it is "fair" to do so. Indeed, the mediator has no general competence to do so, for it is always the parties, themselves, that are the best guardians of their own fair and just deserts.


How Confidential is Confidential?

Can a mediator use confidentiality selectively as a tool, compromising it at the margins when the mediator believes doing so will promote the settlement process?

Statements by parties in mediation are not admissible in court, either by court rule or by agreement of the parties when entering into mediation. (If there is no court rule, the parties entering into the mediation must address the issue with the mediator in a written agreement before the mediation begins). Likewise, the mediator may not be called to testify regarding the subject matter of the mediation in any court proceeding. (Section 8 of the Uniform Mediation Act speaks to confidentiality where enacted.)

With this confidentiality privilege in place, the parties are encouraged to seek a settlement without recourse to strategic behavior. Strategic behavior is the sort of bluffing, posturing and otherwise negotiating in bad faith that parties often engage in when when negotiating face to face without a mediator. The mediator's role is to entice concessions by each party without each party fearing that it will be taken advantage of by the other party. Confidential caucus sessions are one means to do this, since the mediator can try various approaches out on a party in confidence, without the other party present to opportunistically sense weakness or doubt. This is a second level of confidentiality in mediation: without a party's consent, that party's statements in caucus cannot be conveyed by the mediator to the other party, as well as to the outside world. In other words, what is said in the Vegas of the caucus stays in Vegas. (Of course, the mediator often struggles to keep each party in caucus simply from engaging in the same strategic behavior with the mediator that the parties engage in with each other).

This second level of confidentiality in a caucus can help the mediator gain a better understanding of a party's interests, objectives and thought process when pursued in isolation. A mediation may involve more shuttle diplomacy by the mediator, going into separate causcus rooms with each party in an effort to bring each party closer to a range of compromise, than there is discussion between the parties with the mediator present in open session.

The mediator will often want to communicate to the other side some movement or concession granted by a party in caucus, and it is in that party's interest for the mediator to do so if that party believes the mediator will be able to obtain a reciprocating concession from the other party in the other party's causcus. To do this, the mediator obtains the explicit permission of the party in caucus to make that communication.

That is the theory, but in practice every party wonders whether it can be confident that what is said in caucus will be faithfully represented by the mediator, if permission is granted, or indeed not communicated by the mediator if permission is not granted. This is the underlying tension of the caucus process, and only the adept and trusted mediator can reduce it to an acceptable minimum so that it doesn't inhibit the settlement process.

The mediator must build trust with the parties in order to encourage honest and open discussion in caucus, but many parties, at least initially, view the mediator with suspicion. At some point in a mediation, if the mediator senses that a party in caucus is not being honest and forthright, or is resisting making concessions that are well within that party's capacity, the mediator may feel the need to take a step that tests the confidential relationship with a party in caucus.

For example, suppose that the mediator in separate caucus sessions finds that one party expresses a belief that it has a 60% likelihood of prevailing on the merits, and the other party believes it has a 95% chance to win in court. Based upon a summary inquiry into the parties' statement of the facts that gave rise to the conflict and the mediator's understanding of the applicable law, the mediator thinks the second party is not being realistic. Understand, the mediator has no substantive view of the merits other than to try to assess whether each party is being realistic. Once a mediator reaches a view on the merits, is the mediator still being neutral?

If a party is not being realistic, in the good faith assessment of the mediator, the mediator has found a pivot point: the mediator must work with the unrealistic party to assess the underlying assumptions and arguments that is causing the unrealistic party to maintain excessive confidence. This excessive confidence by the unrealistic party is the pivot point that the mediator must resolve in order for the parties to approach a range of settlement. The settlement pivots around whether this obstacle is overcome.

If the mediator is not able to move the unrealistic party off of his excessive optimism in caucus, and the unrealistic party insists on complete confidentiality regarding their confidence, the mediator faces a difficult situation since the realistic party will want to get some assurance of movement by the unrealistic party before it contemplates movement. If the mediator has nothing new, much less encouraging, to report to the realistic party about the unrealistic party's caucus session, the mediator is stuck at the pivot point.

Suppose the mediator tells the unrealistic party in causcus that the mediator is prepared to go into open session and state that the unrealistic party is being unrealistic and is frustrating the mediation effort. In essence, the mediator would be seeking to shame the unrealistic party into adopting an attitude more conducive to settlement. A high stakes gambit, but the mediator may consider this if the process is stuck at the pivot point. Does this violate the mediator's neutrality? The mediator would argue, no, that it has assessed the parties' self-expression of their likelihood of success in a neutral manner, and it is because of this neutral analysis that the mediator has reached the judgment that one party is being unrealistic.

The greater question, in my mind, is, Does this violate the mediator's confidentiality? The mediator has only come to this conclusion based upon a confidential caucus discussion with the unrealistic party. The unrealistic party will feel its caucus confidences violated, since had the unrealistic party known this would be the result of the discussion, the unrealistic party would likely not have been as forthcoming in the caucus.

Is it better for the mediator to not rock the boat in open session, and "merely" express the mediator's view of the unrealistic party to the realistic party in a subsequent caucus? Is it better, in other words, to violate the confidentiality with the unrealistic party in secret? When the realistic party asks in the subsequest caucus how things went in the caucus with the unrealistic party, what can the mediator say? Is the caucus process, when observed in the cold light, someting akin to a sausage factory?