The Mediator's Proposal - A Useful Settlement Tool
A mediator’s proposal is best described as settlement terms presented by the mediator to parties that have reached an impasse in their settlement negotiations. Generally speaking, the proposal should not invite a counter-offer or new terms. It is important that the parties either accept or reject the mediator’s proposal as written within the time specified. Most often, such proposals are “double blind”. The following language taken from a mediator’s proposal illustrates how this works: If both parties accept this Proposal, I will advise you accordingly and you may wish to enter into a settlement agreement. However, if one or both parties reject this Proposal, I will simply report back to you that there is no agreement. In that instance, I will not report on the position of either party. Mediator’s proposals should be used judiciously. My practice is to first ask the parties and counsel if they will consider receiving a mediator’s proposal. While I may introduce the concept of a mediator’s proposal to the parties--I don’t always wait for the parties to ask for one. Additionally, I will not proceed with a mediator’s proposal unless each party is represented by counsel. I recognize the fact that a party unrepresented by counsel may see me as an authoritative figure and construe my proposal as legal advice. Timing is key. Well before advancing a mediator’s proposal, it is important to let the mediation naturally unfold. Each party must be given an opportunity to tell their story and be heard. There needs to be an exchange of information. Probing and open-ended questions is an important part of the process. The mediator should establish trust with the parties and their counsel. Ultimately the parties will exchange offers and demands. The mediator will try to “test the waters” in private caucus with each party. This process of testing may involve an inquiry such as “if your opposing party came down to $X, would you come up to $Y?” Sometimes, when back and forth positional bargaining is slowing to a halt, I will suggest a possible bracket and ask each side to respond confidentially. I will not reveal the response of either party unless both sides respond with a “yes”. If and when a mediator’s proposal is appropriate, I will sometimes (but not always) discuss the terms of the proposal with counsel before presenting the proposal. After all, if counsel will agree to recommend the proposal to their clients, that greatly increases the chance of acceptance. I try not to present a proposal that is likely to fail. Of course, there is no guarantee the proposal will be accepted. My practice is to present the mediator’s proposal to counsel in the form of an email. The proposal will outline the key settlement terms. Other mediators handle this differently and some present the proposal in the form of a settlement agreement. Some critics argue that a mediator’s proposal interferes with the parties’ ability to make a decision independent from mediator influence. They argue that the actual stakeholders are removed from taking responsibility for the outcome. However, I believe this is less of a concern when the parties can rely on advice of counsel. Also, a mediator’s proposal often overcomes the posturing that takes place in negotiations. In my experience, most parties repose some degree of trust in the mediator. If a mediator’s proposal is perceived as the vehicle to achieve settlement, the parties and their counsel are generally receptive to the concept. Of course, either party can choose to accept or reject the proposal. At a minimum, the proposal provides a settlement opportunity and alternative to litigation. Other critics express a concern that the mediator’s proposal may undermine the appearance of impartiality as it may seemingly create the impression that it favors one party over another. However, my practice is to make it clear, in the language of the proposal itself, that the proposal does not reflect the value of the case or even an estimate of a verdict at trial. Additionally, at some point in the mediation, I remind the parties that I have no stake in the outcome. My “client” is the settlement and my only agenda is to assist the parties in reaching that goal. One potential pitfall may relate to the mediator that has a reputation for repetitively using mediator’s proposals. Where counsel or the parties know that a mediator’s proposal is on the horizon, compromise may no longer be the goal. Instead, the “game” may be to spin the mediator with each party attempting to maximize their share of the zone of possible agreement. Practically speaking, most mediators make judicious use of mediator’s proposals and are not so predictable. Regardless, the mediator must be careful not to be overly influenced by what the parties state is their bottom line in the private caucuses. Ideally, if the mediator has adequately “tested the waters”, this potential problem can be overcome. Many mediators try to choose a number that they believe has a chance of being accepted by both parties without taking into account what the mediator believes is the value of the case. Other mediators endeavor to select a number that, in addition to its likely acceptance by the parties, is in the range of the mediator’s objective analysis of the value of the case. Some mediators might not be comfortable proposing a number merely because they think it might be accepted by both parties. My personal preference is geared towards recommending a settlement based on my view of the highest probability of acceptance regardless of how I might evaluate the case. Oftentimes it makes sense to provide the parties with a few days to respond to the proposal. One or both of the parties may need to consult with other decision makers before agreeing to the proposal. A decision maker may not want to assume sole responsibility for accepting the proposal. An insurance adjuster may need to time to roundtable the proposal with upper management. The parties may need a few days to think about the proposal and not feel pressured into acceptance on the day of the mediation. Counsel may need time to educate their clients as to the merits of the proposal. On the other hand, in some mediations, endeavoring to lock in responses on the day of the mediation may be the best approach. What works best really depends on the dynamics of a particular mediation. It is important to note that even if both parties accept the mediator’s proposal, buyer’s remorse can later set in with one or both parties. Mere acceptance of the proposal itself is not generally a binding and enforceable settlement. The parties are well advised to enter into a written settlement agreement or recite their settlement on the record. Where the parties appear to be at an impasse, it is wise for the mediator to consider the potential viability of a mediator’s proposal and not simply adjourn the mediation and “give up the ship.” It is interesting to note that oftentimes a party will agree to a mediator’s proposal even though it is apparent that the party would reject that very same number if presented as a “take it or leave it” offer from the opposing party. That is how a mediator’s proposal can overcome impasse and settle a case. Finally, it is important to recognize that even in those instances where the mediator’s proposal is unsuccessful, the result may be that the process moves one or more of the parties partway down the road to settlement. That can set the stage for resolution at a later date.