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Expedite your Settlement Using Bracketing

Expedite your Settlement Using Bracketing

Source: Law.com
Date: January 13, 2017

Shirish Gupta
Give brackets a chance. No seri- ously, what have you got to lose? Lawyers often groan when the idea of bracketing comes up in media- tion. But brackets can fast forward negotiations and avoid energy suck- ing baby steps when parties are still orders of magnitude apart. Whether they know it or not, par- ties are always bracketing—they’re moving and expecting the other side to move a certain amount in response. And if the other side doesn’t, they feel wronged and question everything—the process, the parties, their strategy and, yes, even the mediator using phrases like, “we’re getting nowhere,” or “they’re not being serious.” So, rather than negotiating within an implicit bracket, consider making your expectations known, if not to the other side, then at least to the mediator, who can help you craft an effective bracketing strategy. 1. Bracketing Defined Bracketing is offering to negoti- ate in an explicitly stated range, ideally substantially narrower than the last bid/offer. A proposed bracket can be phrased as “if you move to X, I’ll move to Y.” It shows how much you’re willing to recip- rocate the other side’s big move. They are an offer to settle for an undisclosed amount anywhere within a range. For example, if the last offer was $100K and the demand was $1M, the parties are implicitly negotiating in a [$100K-$1M] bracket. From there, either side can expressly propose a smaller bracket within that set, such as [$250K-$750K], [$400K-$550K] or [$800K-$900K]. In practice, a bracket where only one endpoint is moved is likely to be rejected. Typically, the first party-proposed bracket is rarely accepted. Instead, it invites a counter-bracket and then another round of bracket/counter- bracket. At some point, bracket fatigue sets in and parties either accept a bracket or resume tradi- tional negotiating from their last bid/ ask but with a better understanding of how far each side is willing to go. If a bracket is accepted, the parties return to turn-by-turn negotiating, but Expedite your Settlement Using Bracketing January 13, 2017 By Shirish Gupta & Paulina Torres Shirish Guptain a smaller range. Emboldened by reaching agreement on a bracket, some parties propose even narrower brackets. Brackets are a meta-step to set- tlement—a way for parties to signal moves without commitment if the bracket is rejected. And if no bracket is accepted, negotiations resume from the last bid/offer but now with a road- map of the other side’s expectations. By contrast, brackets proposed by the mediator are usually accepted in the first round because media- tors implicitly vet brackets before we propose them. Also, some parties are wary of accepting anything that the other side proposes, so having a neutral propose it is seen as less risky (aka Reactive Devaluation). The downside is that parties, know- ing that a bracket is coming, often try to sway the mediator into proposing a bracket in their favor. 2. Benefits of Bracketing The biggest benefit is fast-forward- ing negotiations—skipping the little moves that dampen the hopes of ever reaching a settlement. Another ben- efit is ensuring that a “big” move will be adequately reciprocated. Parties are justifiably cautious to make big concessions if they suspect the other side will barely move in response. Brackets also allow for richer com- munications. In traditional monetary negotiations, parties convey one number at a time. With brackets, however, they convey: • four numbers (the endpoints, the midpoint and the spread), • an offer of who goes next, • frustration with traditional negotiation, • impatience with the speed the process, • an attempted anchor, and • optimism in getting a deal done. 3. Problems with Bracketing Bracketing can feel like a detour, especially if no bracket is accepted and the parties resume turn-by-turn bargaining from their last positions. Attorneys complain that bracketing wastes precious hours and energy. What this criticism misses is the par- ties now have richer information than if they had continued with turn-by- turn negotiation. They also now know monetarily how the other side sees the claim—ambiguous words like “rea- sonable,” “real,” “serious” and “fair” have been translated into dollars. Another problem is parties might also feel offended by proposed brackets, just as they are by offers, leading to recriminations about intent to settle. This kind of situation, while resolvable, creates a negative atmo- sphere between the parties at the outset of the negotiation. The biggest tactical problem is if the recipient focuses only on the mid- point of the proposed bracket. And in those instances, if the negotiations deviate materially from that midpoint target, the party may feel misled. While brackets are used to narrow the negotiating range, it is a mistake to presume that the midpoint of the range is both parties’ goal. 4. Bracketing and the Mediator A good mediator will add value to your bracketing moves in three ways. First, the mediator will help you craft a bracket that materially moves the parties closer to settlement. Second, the mediator will effectively message your bracket in the other room. And third, the mediator will help the other side craft a counter-bracket that hope- fully overlaps with your negotiation strategy, thereby leading to settlement. In sum, because parties are implic- itly bracketing, we encourage them to do it in the open, if not with the oppos- ing party then at least with the media- tor. Used effectively, brackets can speed up negotiations and increase party satisfaction with the process. Shirish Gupta is a mediator with JAMS and an Adjunct Professor of Negotiation and Mediation at UC Hastings College of the Law. He can be reached at sgupta@jamsadr. com. Paulina Torres is a JD candi- date at UC Hastings. January 13, 2017 Reprinted with permission from the January 13, 2017 edition of LAW.COM © 2017 ALM Media Properties, LLC. This article appears online only. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com. # 087-01-17-02