The Danger of Mediator’s Proposals

When I was a full-time settlement judge, the sheer volume of settlement conferences required me to frequently offer a mediator’s proposal to resolve a matter so I could move on to the next case. Typically, a mediator’s proposal is made by a settlement judge or mediator to both sides and is “double-blind”; that is, neither side knows if the other accepted the proposal unless both sides accept it. The latter feature is important because it allows a party to accept the proposal without compromising its negotiating position in the event the other side rejects the proposal. When I made a mediator’s proposal, it was always in writing and required signatures by both sides to make it enforceable under Section 664.6 of the California Code of Civil Procedure. If not all decision-makers were present at the conference, I would sometimes give the parties one or two business days to respond.

The problem that arose from my frequent use of mediator’s proposals in a high-volume settlement department was that parties soon expected the settlement conference to conclude on that basis. When that was the expectation of one or both parties, they were in effect no longer negotiating with each other, but positioning themselves to influence what my proposal would be. This distorted the entire settlement process, usually foreclosed the possibility that the parties would come to an agreement on their own and caused a number of other adverse consequences.

One of the obvious adverse consequences was that if the parties were expecting me to make a mediator’s proposal, they would be less candid with me concerning their interests and objectives. While a party is rarely completely candid with the mediator, some degree of transparency can help the mediator to make constructive suggestions and to communicate with the other party. If there is a lack of transparency, there is a danger that the mediator could become merely a medium for exchanging offers and demands – a process that the parties could actually engage in on their own.

When each side digs in and makes only marginal concessions without engaging the mediator on the underlying interests and dynamics, the resulting impasse is not only an obstacle to serious negotiations, but it also prevents the mediator from obtaining information. That in turn makes it more difficult for the mediator to make an effective mediator’s proposal. To be effective, such a proposal should be an estimate of how far each side is willing to stretch in order to close a deal. A mediation in which both sides are engaged with the mediator to foster a good-faith negotiation will educate the mediator, which will enable him or her to make an effective proposal if the parties cannot close the gap on their own.

If the parties are not fully committed to using the mediator to facilitate a negotiation and are only trying to influence the mediator’s proposal, the scope of the discussions will be limited. Often a mediation is most effective when it involves the consideration of non-monetary terms and possibilities. If parties are more candid with the mediator, he or she may be able to suggest such solutions. When there is a lack of candor, the negotiation tends to be one dimensional – i.e., how much one side is willing to pay to the other.

In the context of a private mediation, where a full day is typically reserved, mediators try to avoid making a mediator’s proposal, and they discourage parties from even expecting one. The best settlements are those reached directly between the parties after a process that has vetted all the options. If parties are expecting a mediator’s proposal, it can become yet another obstacle to a real negotiation.

Finally, to get the most out of a mediation, the parties should expect the process to continue even if a settlement is not reached on the day of mediation. A mediator will often continue to engage the parties afterward. That is more difficult to do, though, when a mediator’s proposal is unsuccessful. Because a mediator’s proposal is “double-blind,” approaching the party that rejected the proposal may be read as disclosing the other side’s acceptance. A mediator should follow up only if doing so would not reveal any confidential information.

For all of the above reasons, since joining JAMS, I have shied away from using mediator’s proposals and do my best to encourage the parties to truly engage with each other. My role is to facilitate that process. Fortunately, the parties to a private mediation are usually more invested in the process than those attending mandatory settlement conferences. That usually means that, when the parties come to JAMS, they are motivated to engage in real negotiations rather than just posture for a mediator’s proposal.

Judge Wynne S. Carvill (Ret.) serves as an arbitrator, mediator and special master/referee at JAMS. His cases involve a variety of disputes, including antitrust/competition, business/commercial, class actions/mass torts, employment, insurance, intellectual property, personal injury/torts and professional liability. He can be reached at wcarvill@jamsadr.com.