Strategies for Managing Multi-Defendant Mediations

It can be difficult to settle cases where opposing parties have strong disagreements over case value. This difficulty can rise exponentially when multiple defendants participate in a mediation, with divergent ideas about responsibility, exposure and appropriate levels of participation.

At times, disputes between different defendants can become intractable, threatening to derail the entire mediation process. If the defendants can’t even agree on how to divide up a starting offer, how can a negotiation proceed? There are, however, some creative strategies to keep multi-defendant mediations on track and headed to resolution.

Fixed Percentage Allocations

The simplest approach for handling participation by multiple defendants is a straight allocation on a percentage basis: for instance, two defendants going 50/50; three defendants going 50/25/25 or some other agreed-to method of sharing offers. While the amount of each combined offer requires consultation and concurrence, the apportionment is fixed going forward.

Occasionally, I will walk into a mediation where proactive counsel have worked out percentages ahead of time. Those mediations are more efficient and more likely to succeed.

Provisional Allocations with an Opt-Out

In certain cases, however, one or more defendants comes to the mediation with limited exposure and limited settlement funds, while another defendant has more exposure and resources. The defendant with limited funds may voice concern that at some point in the process they may not be able to continue to participate on a percentage basis.

A useful tool for addressing this concern is to agree to a provisional allocation with an “opt-out”: for instance, one party puts in 75 percent and the other 25 percent of each offer, but all agree in advance that any party can drop out or try to renegotiate their participation at any point in the process. The primary virtue of this approach is allowing offers to be extended to the plaintiff in a timely fashion without locking anyone into participation beyond their comfort zone or authority.

“Black Box” Approaches

There are times when defendants simply cannot or will not work together. They either fail to agree on percentages or try to impose preconditions on their participation that stop all progress. An interesting response is the use of a “black box,” by which offers by each defendant are pooled on a blind basis and extended to the plaintiff. Each defendant knows its own offer but does not know the offer by other defendants or the collective amount extended. This allows the negotiation to proceed forward despite the profound disagreements among the defendants without anyone feeling that their level of participation is unfair.

With one variant of the black box approach — a “true black box” — the defendants are not advised of the combined offer and the plaintiff is not advised of the breakdown as between the various defendants: each defendant contributes on a blind basis into the box and the plaintiff is simply told of the combined amount in the box: contributions are extended anonymously as a package.

Another variant, which adds slightly more illumination to the process, is to agree to keep participation levels confidential among the defendants while sharing them with the plaintiff. This partial transparency can create some incentive for recalcitrant defendants to contribute at a level that appears meaningful.

Black boxes can get mediations off and running, but they contain an inherent problem: the defendants never know how close their combined offer is to the demand of the plaintiff, and therefore can’t tell if overall progress is being made. Accordingly, the defendants may decide to change the rules after starting off with a black box and agree to full transparency at a certain point, allowing a better assessment of where the mediation stands, as well as clarity on relative participation levels.

Freeze-Outs

There are times when one or more defendants shows up at a mediation with money and motivation to settle, but another defendant is perceived as showing up looking for a free ride. Employing terms like “frosting on the cake” or “sweetener,” one defendant may refuse to offer any money until the case is nearly settled and then only offer to help close the gap with a very small contribution.

If a defendant refuses to participate, sometimes the plaintiff and other defendants will decide to freeze the non-participating defendant out of the negotiations in the hope of striking a separate settlement and leaving the last defendant standing. This is the negotiation equivalent of musical chairs.

There are cases where cross-claims or indemnification issues make this option impossible, and there are states, like New Hampshire, where contribution rules can make partial settlements challenging. However, a freeze-out approach and threat of being left off a release sometimes can bring the non-participating defendant back into the negotiation.

Non-Allocated Offers with a Postponed True-Up

In-fighting among defendants about how to carve up an initial settlement offer can cause tremendous delays in the mediation process. If a plaintiff or counsel gets frustrated and discouraged, in-fighting can even lead to the collapse of negotiations. One approach that avoids delay by putting money on the table is for defendants to simply agree on the total amount of offers, without finalizing how those offers will be apportioned.

This approach recognizes the reality that the first half-dozen offers in most mediations are never accepted and constitute placeholders while the divide between the parties is decreased. The rationale for this approach is that allocation issues should not hold the central negotiation with the plaintiff hostage and, if by some miracle, the case settles for a low amount, the defendants will figure something out. After starting off with non-allocated offers, the defendants will sometimes work out allocations among themselves or with the mediator’s assistance once resolution looks more promising.

Provisional Allocations with Subsequent Arbitration

There are cases that need to be settled by defendants even if allocation of percentages cannot be agreed to. There may be facts that have not come out yet that will make settlement later on more difficult or impossible, there may be a trial date approaching that requires resolution of the case, or there may be room to settle at a figure that all defendants find reasonable.

In this situation, the defendants may agree to a provisional allocation for purposes of paying the settlement and subsequently resolve their percentage contributions with a post-mediation arbitration. For instance, three insurance carriers might provisionally go thirds on a million-dollar settlement but agree that a jointly selected arbitrator will determine final percentages, post-mediation. Alternatively, the carriers might ask the mediator to make a final determination of percentages at the conclusion of the mediation if they are not able to work this out themselves: a med/arb arrangement.

Bifurcated Mediations

I once mediated a complex case arising from construction accident with close to two dozen participants. There were complicated indemnification and coverage issues impacting the participation of each of the many defendants in the case. If we could not work these issues out, the case was not going to resolve.

Experienced counsel wisely suggested that we convene the defense and coverage participants for a morning mediation and ask the plaintiff to not even show up until the afternoon.

By the time the plaintiff arrived, the participation levels of all the defendants was almost completely squared away, allowing an afternoon session devoted to resolving the injury claim. The case settled the same day.

In an appropriate case, a mediation can be conducted in two days, the first day dealing solely with apportionment among defendants and the second dealing solely with settlement with the plaintiff. The primary advantage, of course, is allowing focused attention on sorting out the multi-defendant issues without keeping the plaintiff waiting and wondering why progress appears to have halted.

Conclusion

Cases with multiple defendants pose unique challenges for both the mediator and participants. Fortunately, there are many creative solutions to help work past these challenges and allow meaningful progress toward resolution.


This article originally appeared in the October 16, 2019 issue of New Hampshire Bar News. Reprinted with permission.

Are you Prepared for Your Personal Injury Mediation? — Plaintiff’s Case

Abraham Lincoln once said that if he were given six hours to cut down a tree, he would spend four hours sharpening his axe. This may seem a bit anachronistic in the digital era but the essential point rings true; especially when it comes to mediation of personal injury cases.

Many attorneys see a day spent in mediation as not particularly heavy lifting: drafting a mediation statement and scribbling a few ideas on a legal pad. A day in mediation is a lot easier than taking an expert’s deposition and far, far easier than time in trial.

Comfort zones, however, can instill complacency. If we view mediation of a personal injury case as the client’s day in court, is there any room for casual lawyering? Let’s focus on how plaintiff’s counsel can prepare to make a personal injury mediation both meaningful for clients and successful.

Eliminate surprises.

While “Perry Mason moments” may have a place in the courtroom, they don’t help you in dealing with insurance adjusters who roundtable, value, and reserve cases weeks before the mediation. Update your medical specials well in advance, share tax returns and lost income information, and ask if the adjuster and defense counsel have everything they need to assess the case. If the case is grossly under-reserved, you are not going work miracles at mediation and the case is unlikely to resolve. Proper reserving is as much a function of advance work by plaintiff’s counsel as proper evaluation by the carrier.

Get liens under control.

Contact the lienholders to try to negotiate liens well ahead of the mediation. Let them know of the date and time of the mediation and get phone numbers where they can be reached during the mediation if lien issues become important. If you are dealing with CMS (Centers for Medicare and Medicaid Services), get a conditional payment letter ahead of time. If you have a large workers comp lien, invite the carrier to attend the mediation with counsel.

Make a demand well before the mediation.

This goes back to the concept of surprise elimination. Don’t walk into the mediation without a prior written demand on the table. Demands assist the reserving process. They also ensure that the claims person who shows up at the mediation is someone with appropriate settlement authority.

Prepare a negotiation game plan.

The best negotiators prepare hard. Instead of just coming up with a “bottom line,” it may be useful to work up three settlement ranges: (1) the “home run” settlement that would exceed expectations; (2) the good settlement that makes everyone reasonably happy; and (3) the difficult settlement that will be a challenge but possibly could work. It also may help to anticipate starting offers and responses, and to identify information that can be provided to the mediator to help in the other room. If there are key documents that refute anticipated defense arguments, prepare extra copies to provide to the mediator. Come to the mediation armed with a breakdown prepared of litigation costs to date and expected litigation costs through trial, so you can counsel your client on the true economic value of a settlement today versus taking the case through trial.

Meet your client in advance.

Most personal injury clients are unfamiliar with mediation and come into the process, at best, nervous and uncertain; and at worst, terrified. Sitting down with clients to explain the process in person a few days before the mediation is time well-spent:

  • Walk through the nature of mediation and how a typical personal injury negotiation may go.

  • Talk about the role of opposing counsel and the role of the mediator.

  • Cover the confidentiality of the process and the need to stay off social media.

  • Discuss issues that may come up in the mediation and potential settlement ranges.

  • Decide together if your client will have a speaking role in a joint session and what might be said.

  • Provide the client with a copy of mediation submissions by opposing counsel and go over these.

Bring along a structured settlement advisor.

If this is a large value case where a structured settlement might have a role, consider inviting your own structured settlement advisor to the mediation. There are capable people in this field who will attend mediations without charge and assist your client in understanding ways to invest a settlement to provide tax-free income, protection, and growth. While structures are not suited to every case, they can play an important part in a significant case.

Plan something to say.

Hopefully, you have shared a detailed written mediation summary with both the mediator and opposing counsel in advance of the mediation. This should be an advocacy piece that fully and fairly presents your case. Your written submission, however, does not take the place of oral advocacy. If there is going to be a joint session, use this as a chance to highlight “big picture” issues or to directly address issues that you know will be important to the defense. The most effective counsel do not use the opening statement for chest pounding and threats, but instead focus on being persuasive to their target audience: the adjuster. Credibility is just as important in mediation as in trial, so concede points you can’t win, but offer compelling reasons why the case creates risk for the defense side. Visuals or handouts can be effective in this process, if judiciously employed.

Mediations count.

They are an opportunity to give defense counsel and the adjuster a chance to see what they may face at trial. They are a chance to present your case in person rather than on paper. They are also a vitally important day for clients, who have a day to participate and decide whether to resolve their case or take it to trial. Taking the time to properly sharpen your axe can make a real difference in what could be the most important day in your client’s case.


This article originally appeared in the June 27, 2019 issue of Maine Lawyers Review. Reprinted with permission.

Civility as a Negotiation Strategy

When I teach Negotiation, I am sometimes amazed at how much I learn from the law students I am supposed to be teaching.  A good example is the perceptive observation by one of my students that “good people skills should be the low-hanging fruit in a negotiation.”  

The point is this:  While many aspects of negotiation are difficult, the seemingly easiest is just working well with others -- being polite, acknowledging opposing viewpoints, showing respect and paying attention.  These, and other active listening skills, should be a given in any negotiation, setting the stage for effective communication, information sharing and working together toward resolution.

Most of us who mediate see occasional lapses in these most basic undertakings from otherwise capable counsel:  answering cell phones in the middle of a mediation; remaining on the phone when a mediator returns to the room; or worse, typing on a phone while opposing counsel is delivering opening remarks.  Phones are not the only culprit:  eye-rolling, head shaking, derogatory comments, and interruption of presentations all can set a negotiation on a backwards path.

Civility can be as simple as thinking to ask the other side if they would like to join in a food order if a mediation is going into evening hours.  If clients or counsel have a deadline by which they need to conclude the mediation, mention this early and explain the reasons instead of springing this on the other side at the last minute.

Bad manners ultimately communicate a lack of respect.  They do not encourage compromise.  Instead, they have a polarizing effect, driving parties with conflicting positions further apart.  They elicit visceral responses, increasing the perceived areas of dispute and undermining the effectiveness of the boorish party.  Rudeness is not persuasive.

If parties honestly want to explore resolution in a negotiation setting, people skills should be the easiest part of the process.  Good manners, social skills and professionalism should be as important as our position papers.  Civility is the low-hanging fruit that enhances the effectiveness of negotiators and facilitates meaningful conflict resolution.

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Thanks to William R. LaBarge, J.D. Candidate at Vermont Law School, for inspiring this post.