Thursday, March 5, 2015

What Happens at Mediation?

           At some point, most, if not all, of my clients participate in mediation.   Mediation is a meeting with a neutral party, often a retired judge, who attempts to facilitate settlement discussions.  The majority of cases settle as a result of mediation.  Some do not.   In many ways, it is like a trip to the used car sales lot where both sides have the opportunity to kick the tires, look under the hood, and share their opinions as to what the car, in this case, the claim, is worth.   Even if unsuccessful, I believe mediation is important because it gives the client a clear choice as to whether it is wise to go to trial or not.  Some choices are easy.  Some are not.  

            While I encourage clients to participate in mediation, I discourage optimism that mediation will lead to settlement.  Otherwise, the client is set up for disappointment and a belief that, regardless of the fairness of the offer, the case must settle even for an unsatisfactory low amount.    I always point out the unlimited number of reasons why cases do not settle, including:

1.      The insurance representative does not have sufficient information to value the case.
2.      The defense lawyer has not done the work necessary to value the case.
3.      Either the insurance representative or the defense lawyer has an unrealistic view of the case and the other person is unwilling to change that view.
4.      The insurer recognizes the potential value of the case but, if a jury finds a certain way, the case could be worth much less.

Like any trip to the sales car sales lot, sometimes an insurer may agree to a mediation just to test a client’s willingness to go to trial.  This happened to clients of mine recently when an insurer stuck to an unreasonable valuation position for most of a day.

            At the same time, I emphasize that my clients must know their case in order to decide whether settlement offers are sufficiently fair to justify not going to trial. This includes knowing:
1.      The strong parts of the case.
2.      The weak parts of the case (I call this “understanding how your case can be lost.”)
3.      The unknowns in a case, e.g., how a jury determines non-economic loss.
4.      The maximum amounts of losses that the evidence will support in a jury verdict.
5.      How a jury can award less than the amount of losses requested.
6.      The possibility that recovery can be reduced by fault on the part of the client.
7.      The risk of attorneys’ fees if recovery is less than what was offered in settlement.
8.      The costs and fees in the case so that the net recovery can be calculated.
9.      The pressure on the client to settle their case that is in all mediations.  They must be psychologically prepared to leave if the offers are unfairly low.

In the end, it is my goal to have the important decision of settlement made in the same way other important decisions,  like buying a house, are made, i.e., with thought and the maximum possible information.   In the case mentioned above, my clients did their analysis and decided to leave the used car sales lot without settling their case.

            You have to play your cards smartly.  See