How to avoid impasse in settlement negotiations

By Hon. Patrick J. Mahoney (Ret.)

Hon. Patrick Mahoney (Ret.) joined JAMS after more than 40 years of experience as a judge and civil litigator.  He is based in San Francisco and can be reached at pmahoney@jamsadr.com.

A successful mediation requires preparation and an understanding of the process so as to avoid impasse, the breakdown of the process.  It is important to understand why impasse occurs and how to move beyond impasse to achieve a successful settlement.

The consequences of impasse in mediation can be significant and severe. If a case does not settle, the result of any one trial is anecdotal information. There is, however, a study of more than 9,000 settlement decisions that found that 61 percent of the time plaintiffs recovered less than the last pre-trial offer and 24 percent of the time defendants paid more. Plaintiffs’ errors cost on average $43,100 and defendants’ $1,140,000. Errors increased in contingent fee cases and where insurance was not available, factors consistent with the established finding that parties take greater risks when they have something to lose.

Impasse arises from a failure of communications, poor negotiating skills, lack of information, emotional investment in a principle, disagreement over likely results, lack of authority, or a need for an authoritative ruling. The latter need results in impasse. The other impediments are overcome by facilitating communications, the exchange of information and focus on the parties’ positions and needs. Outcome disagreements are reduced by exploring the best and worst outcomes. Emotional responses are acknowledged and thereby overcome. Lack of authority requires bringing the right person to the table. There are also ways of proceeding with mediation that can both prevent and overcome impasses.

Questions & Tasks: Mediators use facts and logic to cause the parties to reexamine perceptions and inconsistencies.

Blind bidding: The parties submit confidential “final” offers with agreement as to how the offers are to be treated, for example, if the difference is X, the mediator discloses the offers and negotiations continue or the parties split the difference.

Zone of agreement negotiation is where the mediator does not convey offers and counteroffers. The mediator holds alternative discussions seeking indications as to what each side would do working toward each side’s reasonable offer and then zone of agreement.

Multi- party Assessments are used in multi-party cases. The parties work separately in confidence to draw a pie sliced by a percentage representing each party’s view of liability. The mediator assembles the results, averages of the assessments and presents the sliced pie based on the collective average. Separate caucuses resume based on the collective thinking of the parties.

The vast majority of cases resolve prior to trial. That is reason alone to seek to settle a case sooner rather than later and where the parties are unable to do so to seek the assistance of an experienced mediator. To achieve the best result requires preparation, critical analysis of the merits, a willingness to listen to the other side and in the final analysis the ability to appreciate what is obtainable as contrasted with what is desirable.

For the rest of Judge Mahoney’s tips on avoiding settlement impasse, please read his full Daily Journal article by clicking here.