Do you want to settle or do you want the best settlement possible?

Are you willing to leave money on the table?

2020 August

If you are asked the question, “Is your first priority (1) to settle or (2) making sure you don’t leave any money on the table,” most people would say, “I want both.” But the truth is that everyone needs to answer that question at some point and you can’t have both as your first priority. Let’s explore the second question first.

Did I leave any money on the table?

The first thing to know is that many times, people think they left money on the table after they agreed to settle. What is good to remember is that for every plaintiff’s attorney who believes he or she left money on the table, there is a defendant or defense counsel who believes that the Plaintiff would have settled for less. Indeed, it wouldn’t be unusual for both sides in a case to feel that way.

Many a time have I seen a Plaintiff settle a case and then believe that s/he must have left money on the table. In most of those cases, I could legitimately look at them and say, “Perhaps, but you would have taken less to settle the case.”

I am reminded of a case I mediated wherein I finally told the defense that the Plaintiff agreed to settle for the $100,000 the defense was willing to pay. Defense counsel then exclaimed, “I knew he would take less!” In other words, the defense believed that if the Plaintiff agreed to settle for $100,000, Plaintiff would have settled for $99,000 or $95,000. In the same vein, how many times have I heard Plaintiff’s counsel say, “If they’ll pay $900,000, they’ll pay $1 million.”

The fact is that both statements may or may not be true. However, in order to settle a case, both parties at some point have to commit to a number. At some point, settling the case has to become a priority over squeezing out the last dollar. Otherwise, cases would never settle.

It is also true that, in many cases, there is actually an acceptable range within which the case can settle. Bargaining to get to the very end of the range is a risk/reward proposition. The more the bargaining, the greater the chance of failure to settle.

Here is another truism. “Pigs get rich and hogs get slaughtered.” Feel free to be a “pig.” I would say, however, that once you get into “hog” territory, the odds are very good that you are going to get slaughtered in the end – or at least lose a lot of blood. And that goes for both sides. A defendant can be a hog just like a Plaintiff when it tries to settle for less than either the settlement value of the case or what it is willing to pay to settle the case.

I have had cases where both sides were willing to settle at a particular number, but one side’s attorney asked me “Can you make me a hero in front of my client and see if you can get a better deal?” When I walked into the other room, that attorney also asked, “Can you make me a hero in front of my client and see if you can get a better deal?” In order to reduce or eliminate any possibility that a settlement might fall through, my attitude is generally that it is not my role to make attorneys heroes. I am keeping my eye on the settlement because, in the end, that is what the parties have come for. Trying to make someone a hero tilts the negotiations, which could very well send the settlement off the tracks.

 You might get some kind of indication that no money was left on the table if you leave the mediation unless the other side agrees to a certain number, but even that is pretty unreliable. There will also certainly be times when the mediator is pretty confident that there is no more money available (or no reduction from the Plaintiff available) – at least at that time.

The goal of a reasonable settlement

If one of us could invent a formula to determine the exact value of a case, s/he would be very rich. There isn’t an exact value for any case. There is surely a reasonable value or perhaps a range of reasonable values. There is also a substantial cost – both economic and emotional – to obtaining a just verdict. All I can say is that the odds are stacked highly in your favor if your goal is to obtain a reasonable settlement without regard to having left money on the table. Sometimes you will. Sometimes, the defense will.

Recently, a case I mediated settled for a number I knew the case was going to settle at walking into the mediation. Would the Plaintiff have taken less? Perhaps. Would the defense have paid more? Perhaps. But both parties agreed that the number was a good, reasonable number. They settled, saved the costs and moved on to the next case.

We often hear that a good settlement is when neither party is happy. That is often true. However, it is also true that a good settlement can happen with both sides being “happy.” The defense didn’t like paying the money but recognized that it was the correct and necessary thing to do. The plaintiff may have wished for more but recognized that the settlement brought certainty and was clearly within the bounds of fairness.

Another example is a mediation wherein the defendants were all squabbling amongst themselves to get the other to put up the necessary funds. I knew what the Plaintiff would take and I knew that the defense would pay it because I knew how much each defendant would pay individually. The defense, however wanted to get the case for less and opened discussions directly with the Plaintiff’s attorney, who advised me this was acceptable. I deliberately stayed out of the discussion because that was what the parties wanted and my only role was to attempt to facilitate a settlement. The case did settle. Plaintiff took less. Both sides were happy. Plaintiff felt the settlement was fair, regardless of whether more could have been obtained and the defense felt like they had somewhat of a “victory” in a bad case. Plaintiff did a great job of being a pig and not a hog.

What the plaintiff “needs” to settle

How many times has a Plaintiff said, “I need so much to settle this case?” Without question, Plaintiffs come up with values of cases in their own minds and start figuring out what they are going to do with the money when they get it. They may have debts to pay off, or a house or car they want to purchase or schooling they want for their children. They desperately want to net a certain sum from a case. In their minds, they “need” that much money for their case.

Unfortunately, what a Plaintiff “needs” is irrelevant to settlement of the case. An excellent mediator once told me as we walked down the hall together, “All we are doing here is buying and selling this file. How much will the Plaintiff sell it for and how much will the defendant pay for it?” And, that is pretty much true.

When I was practicing and clients told me that they needed so much money for a case, I had a little speech I gave them. I would tell them that every case has a settlement value even if the parties disagree about what the value of that case is. I would pick up the file and tell them that this case has a settlement value. All I can do for you is try to obtain the highest value I can for this case. And if we can’t settle the case, to try it and advocate as strongly as I can. However, the settlement can only be based on the value of the case, not a Plaintiff’s need.

If you had a 2005 Toyota Corolla with a blue book value of say $3,000 and you came to me and said, “I need $15,000 for this car,” I would tell you that I can’t get you what you need. The car only has a value of $3,000. I can’t sell a $3,000 car for $15,000. I can certainly promise that I will sell it for $3,000, but I can’t sell it for what you need. All I can sell it for is its top reasonable value. The same is true of a lawsuit. What the Plaintiff “needs” has little bearing on the value of the case, nor does the defendant generally care about what a Plaintiff may “need.” And a mediator who tries to convince a defendant that it should pay what a Plaintiff “needs” is barking up an empty tree.

Does the truth really matter?

The truth of what actually happened is often extremely important to one or more of the parties. A Plaintiff who has been injured either physically, emotionally or both often wants in the worst way to establish the truth either through a trial or a settlement that reflects what actually happened. In a mediation, it is very important for both counsel, the mediator and the defendant, to honor and respect that desire. It is also important that it not overwhelm the mediation.

Again, I faced this many times as an attorney. It is sometimes a difficult conversation to have with a client. In my experience, three words help solve this issue. I have told clients and Plaintiffs in mediation, that, unfortunately, for purposes of today, the truth of what actually happened is not really what is going to drive the settlement of this case. In fact, the actual truth really does not matter. What really matters is what we believe the jury will ultimately determine to be the truth. That “truth” may not be what actually happened. But it will determine the ultimate value of this case. So, if we want to settle the case, we need to focus on what “truth” the jury is most likely to find. I then mention the three magic words. “O. J. Simpson.”

Mediator’s proposals

Sometimes they work and sometimes they don’t. Recall that a mediator’s proposal is not an attempt to define the correct value of the case. It is an attempt by the mediator to select the one number that has the highest chance of acceptance by both sides, regardless of the actual value of the case. They can be put out in three situations: (1) where the mediator has an indication from both sides that the number would be acceptable but won’t commit to it unless the other side does and (2) where one party agrees but the other will only agree if it knows that it will settle the case and (3) where neither side will commit to settle at the same number.

My practice is that I will only put out a mediator’s proposal if all sides agree that they are amenable to one – even though I may not give them the exact number until I put out the proposal. It is then my job to put out the number I think has the best chance of all sides swallowing hard and saying yes.

That number is an art, not a science. I have had situations where a party swore up and down that a certain number was not acceptable. Nonetheless, a settlement would have gotten away if I didn’t pick that number. I have had situations where a party adamantly refused to settle at a particular number. However, after a mediator’s proposal with a different, lower number, the party said it would accept the original number. At that point, however, settling is easier said than done.

The disadvantage of a mediator’s proposal is that it terminates all current negotiations. Indeed, that is why it works. If a party says no, that party does not know whether the other side accepted or rejected, unless the accepting party shares that information with the other side. In that event negotiations go back to where they were before the proposal and that is the end of it. A settlement can be obtained if one party permits the mediator to disclose to the rejecting party that it has accepted the proposal and would accept a less favorable number.

Conclusion

Hopefully, these suggestions will help to keep your eyes on the prize instead of what’s not in the prize and, in turn, more and better settlements.