Lay Groundwork For Negotiating
This article discusses the importance of laying the groundwork for a successful resolution, and then discusses the mechanics of negotiating a fair settlement.
Make a good impression. The key to a favorable resolution to your case starts earlier than you might think. Each call, each letter to your adversary affects later negotiations because he or she is likely sizing you up. Are you sloppy? Do your letters confuse the facts of the case or contain typographical errors? Do you fail to include documents necessary to understand your case? When you call, do you not have as firm a grasp of the facts or law as you should? Each encounter with the other side leaves an impression, and the impression you want to give is that you are prepared, professional, and principled. Chances are that your adversary will convey that impression to his or her client.
Know your adversary. Whether you are an adjuster, attorney or risk manager, you will likely have a better success negotiating if you know or understand your adversary. That might be the attorney on the other side, the plaintiff himself, or it might be the company you are seeking money from, whether it is the defendant company or the insurance company. A plaintiff’s attorney should give his client the benefit of his experience with the defendant and opposing lawyer or law firm. The defense attorney should gather information on both the plaintiff and counsel.
The adversary’s reputation for either caving early or putting one through the ringer will affect how the case proceeds and how expensive it is to bring to resolution. These factors affect one’s ability to negotiate a good settlement. The more experience one has, obviously the more likely one is to have knowledge of that adversary.
In those cases where there is no history, learn about your adversary by asking colleagues who may have dealt with that lawyer, law firm, or company. That attorney or his firm may have a website which can be quite revealing. If you are defending, wouldn’t you want to know that the plaintiff’s website says that his firm does mostly trusts and estates? Wouldn’t you be dismayed to learn that he specializes in products liability cases and that he has won several million dollar verdicts. Store this information in the back of your mind during negotiations.
Know the case facts cold. There is no substitute for knowing your case inside and out. That means not only the facts, but also the law that will apply. If you get a handle on both before you start negotiating, your confidence will be high and your knowledge will come across to your adversary. This serves to drive settlement value in your direction, higher if you are representing the plaintiff and lower if you are defending.
One tool that is extremely helpful in understanding case facts is a timeline of important events. This chronological list collects important data which can be referred to often during the case. It is updated each time you receive a new packet of information from your client or adversary. Studying the timeline enables you to more easily recognize weaknesses in your own case or your adversary’s. You may notice a long gap between treatment, or that the physical complaints have not always been consistent. Things tend to jump out at you after you reduce the important facts to chronological order. Even if the impression you get is not favorable to your client, the exercise was valuable in that now you know how hard of a stance you will take during negotiations.
Perhaps more importantly, reviewing this timeline prior to discussions with your adversary will leave him with the impression that you really know the case facts cold. It can be quite intimidating and cause your adversary to think, this guy knows the case better than I do. That can only help bring a resolution favorable to your client.
Remember that each call you have with an adversary will leave an impression. When your adversary calls you out of the blue when you are in the middle of writing a brief for another file, consider whether to tell your secretary that you’ll return the call. Before calling back, take ten minutes to review the file, and hopefully the timeline, re-familiarizing yourself with the case at hand. This is particularly important when you handle many files with similar factual situations. You don’t want to confuse cases and start spouting the wrong facts, leaving your adversary with the impression that you don’t know what you are talking about.
Know the law — early. Too many advocates begin to discuss settlement before they fully understand the law which applies to the case. You are bound to have a much better result for your client if you spend time very early in the case learning the law. It may be an area of law unfamiliar to you, or it may be a rare situation in a field of law with which you are familiar. In either case, research the issue before picking up the phone to call your adversary. Try to know it better than your adversary. The only way to accurately gauge your adversary’s knowledge of the topic is if you know it well.
There are numerous places to search in order to get a firm grasp on the law which will apply to the facts of your case. Of course, attorneys usually start by reviewing appropriate statutes and case law. But don’t forget to consult your practice books, legal magazines, and articles on the internet. If you are a member of either Association of Trial Lawyers of America (ATLA) or Defense Research Institute (DRI), search their online databases for articles on the topic. Finally, consult the jury charges that will ultimately be read by the trial judge if the case gets that far. Once you have a firm grasp on the law, you will project a confidence that your adversary will notice and probably relay to his client. That can only have a positive impact on negotiations.
Assessing case value. One of the biggest services an attorney provides a client is a rational estimate of case value. You may represent plaintiffs who almost always have no basis for assessing case value, or you may represent a defendant whose risk manager has lots of experience but not necessarily with claims in the appropriate venue. Educate these clients as to case value ranges based upon your experience, but do so only after most of the facts are in. You are bound to look bad if you give a range early on and then months later, after discovery is complete, you give a much higher or lower range and try to explain that away based upon new information.
Even experienced negotiators sometimes find themselves without the necessary background to accurately assess case value. You may be unfamiliar with either the type of injury or the venue. In these cases the best thing to do is to ask others for assistance. You can describe the case facts to colleagues over lunch and ask what they think the case is worth. It is particularly helpful to hear what someone who usually represents the other side thinks about case value. You might run the case facts by an adversary on another case with whom you get along well. You might not only get an idea of case value, but also some inside information on what the other side might be thinking or planning.
Once you are at this point, you are ready for the real negotiations to start. Here are some practical tips for obtaining a good settlement for your client. Keep in mind that these general guidelines sometimes need to be thrown out the window in the odd case. For instance, if you know something about your client that the other side doesn’t but may discover in the near future, you may be inclined to settle the case quickly and for an amount you would not normally be happy about. If you represent the plaintiff and discover that your client has had a prior injury to that same part of the body, you may be inclined to demand a more reasonable amount and settle quickly. If you represent the defendant and know that the company may be sold, you may have instructions from your client to get rid of the case quickly and therefore truncate the back and forth of negotiating.
Timing of settlement. There are usually a few times in each case where the time is ripe for settlement, and a good negotiator knows when these times are. Be wary of settling a claim too early, before most of the facts are known, unless the deal is just too good to pass up no matter what the facts turn out to be.
For example, imagine you are defending a products case for a familiar client who you know likes to avoid legal costs by offering nuisance value settlements. Early in the case, the plaintiff’s attorney demands $5,000 on a case which you feel may have some value if he’s able to prove it. You surmise he will take $2,500 to get rid of it. Don’t look a gift horse in the mouth. Yes, he may know something about his client or the case facts that cause him to be willing to accept nuisance value, but it may cost you $2,500 in legal fees to ferret out that reason. Knowing your client, pay the $2,500 now for the certainty of having this case behind you, no matter what the facts. It works the same for the other side. If a defense attorney offers your plaintiff much more than you think the case is worth, encourage your client to take it and don’t be greedy.
Strategies for obtaining the best settlement. In almost all cases, as early as possible, try to get your adversary to reveal his view of case value. This is one more way of gauging your adversary. Is he appropriately tight-lipped, waiting for the facts to develop or for you to speak first? Is he a plaintiff’s attorney with an inflated opinion of the value of the case? Is he a defense attorney stuck in the no-pay mentality? Lots can be learned by skillfully broaching the topic of case value. Assure your adversary that you are not asking what his authority is on the case, only what he thinks the case is worth.
Recognize that in some cases, your settlement skills will need to be applied more to your client than your adversary. Your opponent may have a more reasonable opinion regarding case value or the likelihood of success than your client. In those situations, you need to work on your client more. If you have a hint from your adversary as to where this case might end up if settled, you can either prepare your client for the probability of trial, or start chipping away at your client’s unreasonable view of this case.
Once you are past the preliminaries and you have a handle on the case facts and the law that will apply, you are in the best position to assess liability and damages. Some negotiators will consider case value to be best case damages value multiplied by chance of winning at trial. For example, if injuries are worth $100,000 and the chance of succeeding at trial is 50%, the $50,000 is a reasonable settlement. That is a rudimentary way to assess case value and does not take into account many other important factors including the cost of litigating and your client’s willingness and ability to fund it, and your client’s willingness to actually pursue the case through trial and perhaps appeal.
In any case, when the time comes to seriously negotiate, who should speak first? There are two schools of thought, the first being that no matter whether you are defending or pursuing the claim, take the opportunity to set the tone and parameters of the negotiations by imprinting it with your low or high figure. The other school of thought says to keep your mouth shut and make the other side commit first, hoping he has not accurately assessed the case value.
Negotiators for the defense usually want the plaintiff to provide a demand figure first so that they can gauge counsel’s understanding of the case and willingness to be reasonable.
Plaintiffs who eschew placing a figure on the case lose an opportunity to impress upon their adversary that they take the plaintiff’s complaints and injuries seriously, but they can gain something, too. In a small percentage of cases, the opening offer from the defendant will be even higher than plaintiff would have initially demanded! When the haggling back and forth is over, the plaintiff is bound to be happy.
You can learn a lot more by listening than you can by talking. Consider that the next time you negotiate, whether advocating for the plaintiff or the defendant.
Practical tips. Negotiations often proceed over the course of weeks or months. Given that we all have lots of files to monitor, be smart and take good notes. A good case management software will allow you to log your phone calls with your adversary so that you can review the substance of that conversation when negotiations resume. Don’t just write down, “offered $x” but also type into the phone note your adversary’s reaction to it. Did he pause, huff or laugh? Did he say he would recommend that to his client? Did he say he would never accept half that or double that amount? These are all important impressions to take away from each negotiating session, and should guide you when you resume your settlement talks.
Alternative Dispute Resolution. Mediation and arbitration are familiar to most of us. It means different things in different cases, but the most important factor is whether the result will be binding on the parties. As a general rule, mediation is non-binding and occurs only when all parties agree to it. Usually a fee is involved. If you are a fair and reasonable negotiator, you may not have to resort to this avenue unless you have an unreasonable adversary or if numerous parties are involved who can’t seem to get on the same page. In these rare cases, the presence of a neutral, experienced mediator may help the sides view the case objectively.
Arbitration also comes in various shapes and forms, but in products cases in New Jersey under Best Practices, we mean the mandatory session after the close of discovery. The hope is that if the adversaries disagree on the amount and the neutral arbitrator places a figure on the file, the parties may gravitate towards that amount as the more objective view. However, rarely will this type of arbitration help the case settle. Four times out of five, one party or the other rejects the award within 30 days and a trial is scheduled. Negotiations may continue, and one party or another may point to the arbitrator’s figure as an appropriate settlement figure, but the opponent is largely to excuse it away as one person’s view of the case without hearing the main witnesses or experts.
Consider your reputation. In a relatively small area of the law like products liability where we tend to see many of the same adversaries again, it is important to establish a consistent pattern. You don’t want to establish a reputation as always demanding pie in the sky figures when the case doesn’t warrant it. You don’t want to have the reputation of playing hard ball defense attorney who always caves in on the eve of trial. Perhaps the best thing you can do is show your adversary that you have assessed the case reasonably and plan on sticking to, or near, that figure.
Ethical considerations. Throughout the negotiating process, attorneys must remember to act ethically and professionally, not just to avoid disciplinary problems, but because each negotiation can affect their reputation in this small community. Attorneys must not demand or offer money on a case without having such authority from their client at the given number. In those situations where ranges are discussed preliminarily, be sure to preface your comments with the caveat to the effect that, “I haven’t spoken with my client regarding value, and I don’t have authority, but my feeling is that this case may have a value in the range of X. What are your thoughts?” Once one side or the other does make an official offer or demand, that figure must be relayed to the client in a timely manner. It is not only ethically required, but it can lead to embarrassment with your client if not malpractice if your adversary was to withdraw that offer or demand before it was relayed to the client. In no case should the attorney reject or counteroffer (which by operation of law serves to reject the latest offer or demand) without speaking with his client.