Mediation Strategies in LTD and ERISA
How to Think About Mediation
Mediation is a form of conflict resolution between two or more parties to litigation. It is undertaken with the help of a trained mediator, who tries to resolve the conflict between the litigants in order to settle the case in lieu of further litigation.
If the parties to a mediation take the conflict personally, that may jeopardize the mediation. Even the mediator may do that, if he or she isn't careful. That's because during the mediation, there are what psychologists call issues of self-identity, self-esteem, and ego. Simply put, “saving face” may develop into a powerful obstacle to settlement.
Therefore, a willingness to compromise is essential. Settlement is an opportunity to avoid the uncertainties of trial and achieve a “win-win” for both sides as opposed to a zero-sum outcome that a trial will inevitably produce. It has often been said that a successful settlement is when both parties agree but feel like they've given up something. No one may be “happy,” but everyone is “satisfied.”
In addition to a willingness to compromise, being prepared at the mediation helps move things along and creates an atmosphere of professionalism. There are three numbers that both sides must discuss with their clients prior to mediation and keep in mind during the mediation. They are the starting number (initial demand or offer), the target number (what you really want), and the reserve number (the number at which you walk away).
Your strategy is to make the other side think your “target” number is your “reserve” number.
No matter how far apart the parties may be at the outset of mediation, it is important to keep in mind that you are never “too far apart.” Being patient and working at a compromise can bridge almost any gap between a plaintiff's demand and the defendant's offer.
Of course, the representatives of both parties must have “settlement authority” at the mediation for it to go well.
There are two types of mediators. They are sometimes referred to as “facilitators” or “evaluators.” The facilitator seeks to promote meaningful communication between the parties. He/she often engages in a “shuttle diplomacy,” going back and forth between the parties (in a private caucus), carrying not only the demand and offer but also communicating with both sides to get them to appreciate the other side's position.
The “evaluator” does more than “shuttle diplomacy.” He/she may discuss the strengths and weakness of the case and discuss with the parties how they plan to deal with their “weaknesses.” He/she may offer an opinion as to the value of the case, to move both sides to a more realistic negotiating position. Many mediators do a little of both, and a skilled mediator will know how much “facilitating” and “evaluating” is required.
It is not uncommon for both parties to begin settlement discussions with extreme positions. The demand is unrealistically high, and the offer is much too low. This initial encounter may lead to intense feelings of defensiveness and disappointment on both sides. Both sides may be dismayed that the settlement may be far more difficult than they had counted on. The parties may react with hostility, grandiosity, and entitlement. These are basic emotional reactions that can interfere with mediation.
The parties should understand that this is how it usually works and to not get frustrated early in the negotiations. Both sides should understand that with every mediation, there is what sometimes is called a “realistic zone of bargaining,” and the sooner both sides get into that zone, the more likelihood of a successful settlement.
What is the Case Worth?
A case is worth whatever the defendant is willing to pay and what the plaintiff is willing to accept in negotiation. A case won't settle for a number that is either more or less, but getting to that number takes time, patience, and negotiating skill.
From an insurer's standpoint, a settlement is predicated on an insurer's estimate of their exposure.
In an ERISA Case, Understand the Benefits
In an ERISA case, it is particularly important to have a good understanding of the benefits during mediation. While the benefit award at trial is typically a reinstatement of the benefits under the plan (putting the plaintiff “back on claim”), in a settlement it's usually a “lump sum” payment that is negotiated during mediation.
The “lump sum” includes past due benefits plus future benefits discounted to “present value.” http://www.moneychimp.com/calculator/present_value_calculator.htm
Be sure to consider offsets from other sources, such as SSDI or workers' compensation. Your client may wish to split the settlement proceeds between two tax years for tax purposes.
There are no consequential or punitive damages in ERISA cases. An award of attorney's fees and interest is discretionary with the court under 29 U.S.C. § 1132(g). However, there is a presumption in favor of a fee award to a successful ERISA plaintiff “unless special circumstances would render such an award unjust. McElwaine v. US West, Inc., 176 F.3d 1167, 1172 (9th Cir. 1999) (ERISA should be liberally construed to further the statute's remedial purpose); Perryman v. Provident Life & Accident Ins. Co., 690 F. Supp. 2d 917, 955-956 (D. Ariz. 2010) (spelling out the 5-factors test.); Hummel v. SE Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980).
Some attorneys include a presumptive award of attorney's fees in their settlement discussions.
Some Do's and Don'ts
It's not uncommon to have some anxiety before starting a mediation. Even experience negotiators have that.
Be respectful, empathetic, and always professional. Try to understand the other side's position.
Maintain credibility and build trust as you negotiate … trust with the other side and with the negotiator. You are all there for a common purpose. Don't sabotage that purpose with “saving face.”
Some attorneys like to exchange their mediation briefs, but others don't. Often, defense counsel will not share their mediation brief. Plaintiffs are more like to do that, especially if they have what they consider to be a strong case and want to persuade the other side before even starting the mediation process. Remember that your job is to persuade the other party, not the mediator.
Carefully consider the costs of going to trial if you are unable to reach a settlement. It may make the choice to settle easier.
Even though mediation is a “competitive negotiation,” adopt and maintain a non-adversarial approach with your mediator and with the other party throughout the mediation.
Remember that if you have discussed settlement before the mediation with the other party, any settlement number is an “anchor.” Likely, you will have to start with that number and work downwards, and in your negotiations, do not backtrack to a higher number. That's a good way to shut down any meaningful negotiations.
Don't negotiate from an overconfident position. Studies show that parties enter settlement negotiations with overconfident expectations. No case is “perfect.” Anything can happen at trial, so do some “reality testing.”
Start your negotiation at a high number. That's what the other side will do. Then keep an eye on the midpoint as you negotiate. Be patient and try to create an impression that you are coming down to your “target” number. To do that, as you approach that number, decrease your offer or demand by a smaller amount each time. That will create the impression that you're getting very near to your “reserve” number, when it's actually your “target” number.
Be careful about using “brackets” in your negotiations. Defendants typically like using brackets. A “bracket” is a negotiation strategy in which one party will go to this number if the other party will go to that number. If you're experienced with brackets, then that may work for you. If not, you probably shouldn't do it.
Don't negotiate with yourself. Give a concession only if you get a concession. Don't move twice before your opponent moves. If the other party moves up a small amount, go down a small amount. Be careful about percentages. Look at the absolute number of dollars involved in the up and down negotiations.
If there are ancillary issues to negotiate, resolve the “lump settlement” first. Then talk about other issues that may need resolution.
If you are the plaintiff, it's usually alright to let the other side pick a mediator. Mediators are going to be neutral, and you'll know right away if they're not.
Don't argue the merits, or whose right or wrong. Argue the dollars.
Check your litigating mind frame at the door. Meditation should not be litigation.
Don't let emotions, like aggression, interfere with rational thinking. Even acceptable offers may be rejected out of spite. Don't be “reactive” but maintain and inner and outward calm.
Listen carefully. It's better to talk less and listen more.
Project that you are confident, patient, and in control of yourself, the facts, and your client.
Remember that 95% of ERISA cases settle. Try to work around an impasse, let go of negative emotions and personal feelings that may be blocking things, keep at it, and stay patient. Depersonalize the impasse.
Tricks to Watch For
There are certain negotiating tactics that may be called “dirty tricks” to watch for. They include: (1) “bad cop/good cop;” (2) having to call a higher authority (your “boss”) to get permission to accept a demand or offer; (3) walking-out on a negotiation; (4) re-opening settled points that already have been resolved; (5) asking for a last-minute concession when the negotiations are “over.”
Wrapping it Up
If you have reached a settlement, get something in writing before you adjourn. When it's time to sign the Release, read it carefully. You may want to negotiate the confidentially clause. That's something to consider. Watch for offsets.
Tell your client that mediation is confidential. It is not transcribed or recorded. The “back and forth” negotiation that takes place in mediation is not subject to the formal rules of evidence. And, a successful settlement means that there is “finality” and no appeal.