1. Insisting on full authority

      Mediators have no authority to insist on anything; the most they can do is refuse to mediate the dispute.  With this in mind most mediators nonetheless try to assure that parties come with full authority to settle the dispute.  Full means full but all the parties rarely come with it.  One or the other is bound to come with limited authority.  Obviously, if a party comes with no authority, the mediation cannot proceed.  But if a party comes with limited authority, mediators insist that they be informed of this prior to the mediation.

      If the limits on that authority are severe, say £100,000 to settle what may be a viable £2 million claim, and the mediator is informed of this in confidence, he may insist that the other parties be made aware of this; they can decide for themselves if they want to proceed on that basis. If an insurance carrier comes to the mediation with a £1 million limit to settle a £5 million claim, the mediator may insist that a representative of the top-up carrier be present or be available by telephone.  In cases which require final approval from a Board of Directors or some other governing body, the mediator may insist that the party present be armed with authority to “effectively recommend” the outcome.  And in cases where a party comes with £25 million of authority to settle a £100 million claim, the mediator may insist on nothing at all.  Each case is different and each presents its own problems.  But the mediator cannot effectively deal with any of them unless he knows the limits of each party’s authority -- prior to the mediation.

2. Mediator Preparation

      Some mediators do not want to know anything about the dispute prior to the mediation.  Most others require a short written submission (ten to fifteen pages at most) backed up by a handful of relevant documents and the principal legal authorities each side is relying upon.  The submission should be served upon the mediator and exchanged with the other parties no later than seven to fourteen days prior to the mediation.  This allows the mediator to become familiar with the matter and sets the stage for the pre-mediation conference.

3. Pre Mediation Conferences

      Either prior to or following receipt of the written submission, some mediators will hold a pre-mediation conference with all the parties in person or by telephone conference call.  At this conference the mediator will seek to get agreement on the “ground rules”, e.g., venue, “full” authority, confidentiality, commitment to the process, identity of persons to be present, etc., and will explain his role.  If the conference occurs after receipt of written submissions the mediator may ask the parties to clarify their respective positions or suggest issues the parties might want to consider at the mediation itself.  If, however, a party has overlooked an issue which could impact adversely on its position, the mediator will not raise this during the joint conference but will discuss it privately with the party either in person or by telephone.  Many mediators view the telephone as simply an extension of the caucus (private meeting).

4. Pre Mediation Issue Identification

      If the mediator has done his homework and is an experienced commercial litigator, he may see issues in the case that are obscured by the pleadings or have been overlooked by one or more of the parties.  Should he identify these issues to the parties prior to the mediation?  Should he do so to the parties jointly?  Separately?  Suppose he mis-identifies an issue? 

      Pre-mediation issue identification, also known as pre-mediation reality testing, is a relatively new technique some mediators use in an attempt to sharpen the issues, clarify the parties’ positions and -- because so many lawyers are in love with their cases -- cast doubt on the eventual outcome.  While I and certain other mediators never opine on the merits or predict how a court might rule on a particular issue, none of us are “potted plants”.  We ask questions.  When these questions are asked during the mediation process it is called “reality testing”.  This is an important part of the mediator’s toolkit, for his stock-in-trade is risk avoidance.  That’s what he sells.  The more doubtful the outcome, the greater the risk.  The greater the risk, the more opportunities for a negotiated resolution.

      Whether pre-mediation issue identification should be presented to the parties jointly or separately will depend on the facts of each particular case and the mediator’s assessment of the parties’ reactions.  And if the mediator should mis-identify an issue (sometimes on purpose) there is little, if any, down-side.  Mis-identification normally serves to sharpen a party’s statement of what the “real” issues are during his  “opening” at the outset of the mediation.

5. Joint Session Reality Testing

      The parties have opened, let off steam and retired to their respective break-out rooms to caucus with the mediator.  This is what CEDR calls the “safest” format for inexperienced mediators.  Other mediators will start reality testing before the first caucus.  While more confrontational, this format has the benefit of sharpening the issues at the outset, permitting each party to attempt to persuade the other of the strength of its position.  After all, the parties are there to persuade one another, not the mediator.  (The mediator, you will recall, is not an arbitrator, not a judge, does not decide who’s right and who’s wrong and does not opine on the merits).

      In one case, the parties were generally agreed on the legal issues but were strongly divided on the facts.  Each had brought four or five executives to the mediation whereupon the mediator asked each executive and his respective counterpart to describe in turn his version of the events leading up to the dispute.  At the end of the day all the executives agreed that their opposite numbers had not been lying but were either mistaken or had faulty recollections.  They also agreed that a judge would find it difficult, it not impossible, to sort out the truth.  The mediator then began caucusing with each side and a deal was concluded by mid-afternoon the following day.

      In another case the parties were in conflict on both the facts and the law.  Before the first caucus, the mediator (having alerted each of the parties beforehand) propounded a series of questions to each side beginning with, “Suppose the judge should find fact X in favour of the other side.  What is your position on the first legal issue?”  These questions were debated back and forth during the morning, after which the mediator began a series of caucuses with each of the parties.  Once the gaps had been sufficiently narrowed, the mediator excused the lawyers and put the businessmen together in a separate room.  Forty minutes later they had resolved the dispute by themselves.

      While joint session reality testing will not ordinarily eliminate reality testing in the caucus, it will cut down the number of times the mediator has to shuttle between the parties asking each side in private, “Party A says his case is controlled by Smith v. Jones.  What do you say to that?”  Persuading the other side that one’s legal and factual position is a strong one is, in my view, best done face to face. 

      Suppose the issues in a case are so emotionally charged that the parties either refuse to meet face to face or the mediator concludes that, if they did, the mediation would break up immediately.  Some mediators deal with this by keeping the parties separated, shuttling back and forth between them in an attempt to find a common ground.  Others, barristers or solicitors specialising in commercial litigation, might experiment with a different approach.  In one such case, the mediator got the defendants to agree that he would act as the plaintiff’s lawyer, explaining how he would conduct the case from the plaintiff’s point of view.  He then went to the plaintiff who agreed to let the mediator explain how he would conduct the case from the defendants’ point of view.  Without opining on the merits, the mediator got everyone to agree that each side’s case was fraught with substantial risk; the case settled shortly thereafter.

6. Positional Bargaining and How to Stop it

      Positional bargaining, also known as negotiations "Chicago Style" or the "Oriental Rug" auction, is the negotiating technique where -- if one’s settlement figure is really £1 million, he starts off by asking for £10 million and the other side counters with £100,000.  Such negotiations destroy all pretence of credibility, are usually dragged out, and often end up being thrashed out on the courthouse steps.  Unfortunately for most lawyers and for even more clients this is the only way to negotiate.  It is part of our negotiation culture.

      One well-known counter to positional bargaining is the "Untermyer Variation," developed by the late Samuel Untermyer, a turn-of-the-century litigator from New York.  Untermyer would come in with what he considered to be a reasonable initial offer -- say $100,000.  The other side would say "nonsense, we'll give you $20,000.  Untermyer would then double his figure to $200,000. 

      When the other side would be prepared to meet his initial $100,000 proposal Untermyer would say, "Too late, the number is $200,000; if you don't pay now it will go to $400,000" and so on.  Untermyer had guts enough to keep on using this technique -- and while he tried a lot of cases -- word soon got around that it was smart to take Untermyer's initial figure and not fool around.

      In nineteen years as a mediator I have seen the Untermyer approach used twice -- it worked exceptionally well (one case settled at the original offer, the other at double the original offer) but only because the “Untermyer” side had excellent cases, the other side was poorly prepared, and trial was imminent.

      Another counter to positional bargaining is the best and final offer approach developed by the late Lemuel Bulwer, for many years the chief labour negotiator for the General Electric Corporation.  At the outset of negotiations

for a new contract he would offer the unions his best and final offer.  And, notwithstanding the unions' insistence that he negotiate from their list of demands, he always refused to budge, even up to a strike deadline, or during a strike itself.  Only when he ascertained a weakening of the unions' position would he move and then only slightly -- an additional vacation day perhaps. 

       Bulwer's approach, which came to be known as "Bulwerism",¹ has a number of variations, one of the most effective of which is as follows:  “This is my best and final

offer based on the following objective criteria (explains criteria).  If you can convince me that my criteria won’t stand up, I am prepared to change my mind.”  Bulwerism and its variations are today standard negotiating techniques in many parts of American industry.  When used effectively by one side in the mediation process they often discourage positional bargaining by the other.

      Having ascertained what each party’s “bottom line” is, certain mediators will try to discourage proposals substantially above or below it.  This is done by asking the following questions, “Do you believe the other side will accept that proposal?  If not, why are you making it?”  One is soon launched into a discussion of positional bargaining and its evils, with the mediator urging all sides to make proposals that have a reasonable chance of being “sold” to the other side.  If successful the mediator has moved the parties down the road to “a deal all sides can live with.”

7. A Deal All Sides Can Live With

      A deal all sides can live with is one in which each side eventually agrees to give to the other side the other side's "bottom line", despite the fact that at the outset neither side hardly ever knows what his or the other side's "bottom line" really is.  Experienced mediators are therefore not surprised that one’s “bottom line” in the late afternoon or evening is different from one’s “bottom line” early in the mediation.

       This is perhaps best illustrated by what happened in a mediation in a personal injury case.  Prior to the mediation, one side had made a reasoned decision that it would not settle for less than a £1,000,000.  During the second day of mediation, the other side opened up a briefcase, dumped £850,000 in cash on the table, and said, "That's it, take it or leave it".  The first side took it.  The first side almost always takes it.  The reason?  A party hardly ever knows what his bottom line is until he sees the money on the table.

8. Multi-Party Litigation

      Multi-party litigation is becoming common-place worldwide.  It often  arises in cases where one or a group of plaintiffs sue a number of defendants in construction cases, on product liability grounds, for damages arising out of environmental disasters or for violation of some national or local law.  In such cases, the parties may be called upon to resolve three kinds of disputes simultaneously: (1) between the plaintiffs as a group and the defendants as a group, (2) among the defendants themselves (how much each should pay) and (3) between each individual defendant and its insurer. 

      Many experienced mediators will tell you that it is often more difficult to negotiate a sharing agreement among defendants than it is to negotiate an overall deal between all the plaintiffs and all the defendants.  In cases where liability is joint and several (and many of them are) the negotiations often turn on the following three factors:  (1) market share, (2) degree of fault, and (3) ability to pay².

      Given the fact that well-heeled defendants with small market share and little degree of fault generally balk at paying for “deadbeat” defendants with a substantial market share, the mediator may eschew such negotiations and try to raise contributions to a “pot” among the various defendants without telling them what the others have agreed to pay.  This is difficult (but not impossible) to do in the absence of an agreement that that is the “ground rule” to be followed.

9. Challenge Mediations

      Multi-party cases are sometimes more easy to resolve than one-on-one disputes.  This is particularly true if the mediator is able to persuade the parties at the outset to engage in a “challenge mediation”.  In this mediation format, each of the parties is challenged by the mediator to come up with a solution that will find favour with all the disputants.  As a general rule this approach works best when the various solutions are laid out in the written submissions prior to the mediation.  More often than not the parties gravitate toward a particular solution during the mediation itself with an exception here or a modification there.  With the mediator’s help this is the start of building a consensus each party can eventually buy into.

10 Going for the “Bottom Line”

      One experienced non-lawyer mediator (he claims to have mediated over 400 cases) says he invariably asks one side during the very first caucus:  “How much do you reallywant?” and the other side, “How much are you really prepared to pay?”  And with those two benchmarks as a starting point, he proceeds to close the gap – usually in half a day or less.  This approach has its advantages in certain cases – personal injury, for example – where for the most part the only issue is “how much?”  Provided each side gives the mediator a truthful answer, this is another way to stop positional bargaining.

      CEDR, on the other hand, says that as a general rule the mediator should not ask for bottom lines since the “bottom” will vary throughout the mediation as negotiations develop.  CEDR has a point; at the outset parties hardly ever know what their or the other side’s bottom line really is.  Furthermore, if the mediator asks that question too early, he cannot be sure whether a party is engaging in positional bargaining with him and, through him as the intermediary, with the other side.

      Bottom lines emerge at different times in different kinds of cases depending on the parties, their particular level of mediation experience and whether they have been “nudged” by the mediator to tell him in confidence what it is.  In a £10 million case the plaintiffs surprised the mediator by saying, “Our bottom line is £5 million.  We don’t need to discuss the strength and weaknesses of our case, we need you to negotiate a settlement for us at £5 million.”  In that case, the mediator, shuttling from one caucus to another, got the case settled on the second day for £4 million.

      If an insurance company is involved the mediator at some time during the mediation will probably ask the insurer the amount of its “reserve”.  If he gets an answer, the insurer will undoubtedly say, “but I want to pay less than my reserve.”  “Less” or not the mediator now has at least one objective benchmark to work from.  In that case the mediator settled the case in five hours for the reserve less 10%.  Many insurers will not tell the mediator what their reserve is; notwithstanding this, the mediator should know what the insurer’s “limit” is (he will have found this out during the discussion of limited authority prior to the mediation); from that he ought to be able to deduce the reserve.  If not, he still has an objective benchmark to work from – only this time it’s the limit not the reserve.

      Whether the mediator should jump-start bottom line disclosures is not an either/or.  Some experienced mediators believe that once the parties are comfortable with the mediator (and he with them) he should not feel inhibited about asking during the caucus, “How much?”  Notwithstanding the fact that (1) bottom lines will shift during the negotiations, and (2) parties may be engaging in positional bargaining through the mediator as intermediary, these mediators more often than not will take a chance and seek a benchmark.  The issue for them is timing.

11. Opening Statements – Are They Necessary?

      Many experienced mediators get impatient during opening statements.  Some jump in to ask questions. Yet conventional wisdom dictates that the mediator should let the parties engage in their catharsis uninterrupted  There are two problems with this.  First, lawyers not clients usually deliver the opening so it is rarely a catharsis for anyone save the lawyer.  Second, too many lawyers hear only so much of the other side’s case as is necessary to refute it.  As CEDR correctly points out:  “There is a difference between hearing and listening.  Hearing involves the capacity to be aware of and to receive sound; listening involves not only receiving sounds but understanding their meaning.”  That is why so many experienced mediator-advocates are today waiving their openings, insisting instead that the other side – particularly the other side’s executives – read their written submissions in lieu of an oral presentation.  If “openings” are used to let a party have his (not his lawyer’s) “day in court” and allow him to express his anger they are invaluable.  If not, written submissions are more effective.

      In cross-cultural cases the mediator must be patient no matter who delivers the opening.  In such cases the mediator must go extra miles to earn the trust of a party from a different culture. One way of doing that is to convince that party that (1) the mediator is listening -- listening sympathetically -- to his or his lawyer’s opening peroration and (2) he understands his case, his anger and his frustration.  While the mediator can limit the time of the openings, say 15 to 30 minutes a side, he must give each party, particularly one from a foreign country, a fair opportunity to speak its piece.  And if that party exceeds its allotted time the mediator should gently point this out, inquiring how much longer he needs.  The answer in most cases will be anywhere from 2 to 5 minutes.  Remember, cross-cultural cases are different.  The same language does not always have the same meaning.  Even after 20 years, I still do not know what my English wife means when she says, “I don’t mind.”

12. Stopping the Mediation

      Almost all mediation agreements contain a clause enabling the mediator to stop the mediation if he concludes that further attempts at settlement would be fruitless.  In addition, the Law Society’s Code of Conduct for Mediators enables the mediator to stop the mediation if he believes any party is abusing the mediation process, the parties are proposing a result which appears so unfair that it would be a manifest miscarriage of justice, or that the actions of a party during the mediation have made it impossible for the mediator to proceed impartially.  See Code of Conduct §§ 3.1 and 3.2.

      If one party is using the mediation process to get an advanced look at the other side’s case, an experienced mediator will spot this almost immediately and terminate the mediation.  If the mediator believes a party has dissembled on some essential fact going to the heart of the process and, as a result, believes he cannot continue to act impartially, he will terminate the mediation. If the mediator believes that he has become a stumbling block to settlement he will terminate the mediation.  And if the mediator believes a party is using the mediation process as a way of wearing down the other side he may or may not terminate the mediation -- depending on the circumstances.

      In a case in Europe involving some twenty individual parties which eventually boiled down to four different positions, the parties started out several billion apart.  After fourteen days of intense negotiations the parties were only several millions apart; yet no side would budge or attempt to “split the difference”.  Exhausting all attempts to break the deadlock, the mediator concluded that he had pushed the parties too hard and had become an obstacle to resolution.  He thereupon terminated the mediation and departed for the airport.  The dispute was settled three hours later.

      In another kind of case the parties started out millions apart.  By the end of the second day they were only £75,000 apart and stuck in concrete.  It was obvious to the mediator that one party was trying to get the other to “feel some pain” while the other insisted it could not justify reducing its proposal any further.  The parties were now involved in a macho contest -- each side determined that the other would blink first.  The mediator, having had enough of this nonsense, informed the parties he was going upstairs to pack.  One of the parties, taken aback by the mediator’s refusal to participate in the game, changed its position; the case settled before the mediator came downstairs.

      When in the latter kind of case parties stop negotiating in good faith and start pursuing another agenda, it is as much an abuse of the mediation process as when parties mediate only to get an advance look at the other side’s case.  Mediators should avoid becoming a party to this.  Indeed, experience has shown that when a mediation breaks down in these circumstances, the parties often telephone the mediator to request that he reconvene the mediation or they settle the case by themselves.

CONCLUSION

      One final word: If parties really want to settle their dispute each must learn to trust the mediator.  Believe it or not, he’s there to help!