Every mediation, it seems, begins with a plaintiff’s attorney who is absolutely certain that their client’s case is worth every penny being sought. Together they enter negotiations seeking their top dollar (often times arbitrarily determined) and vowing never to settle for a penny less. Their posture assumes that if their case was presented before a jury, the panel would ultimately find the defendant liable, and that the jury would award them their full panoply of damages. From the plaintiff’s perspective, a dollar sought is a dollar earned. A plaintiff’ who has this attitude is either mediating in the best of all possible worlds or chooses ignore a reality that is neither easy nor uncomplicated.

Often opposing the plaintiff’s pie-in-the-sky outlook is an equally unrealistic defense attorney whose position is not only 180 degrees opposed, but also one who is convinced of the abject frivolity the plaintiff’s case. The defense attorney is frequently just as obstinate in the conviction that a jury could never find any liability on the part of their angelic client. Of course, one of these attorneys is wrong.

With such extreme, unrealistic, and inflexible beliefs by counsel, the challenge for the mediator is to bring the attorneys and their clients back down to earth by giving them a dose or two of reality. Unchecked unrealistic expectations are an impasses’ best friend. One of the goals for an adept and nimble mediator is to quickly inject some realism into the discussion so that the parties will arrive at an objective assessment of their case.

Simple Math to the Rescue

Don’t be tempted to stop reading this article merely because I used the word “math” in the sub-heading. If we can be candid with one another, I’ll clue you into to a little secret - most lawyers don’t like math. If they had, there would be many more practicing accountants than there are today. Simple math can help the parties manage their expectations, and it can do so simply.

Several years ago I had the good fortune of attending an advanced course in Law and Economics taught at Northwestern Law in Chicago, Illinois. One of the instructors was Professor Jason Johnston, who is currently a law professor at Virginia Law. Professor Johnston provided the class with an equation designed to assist a judge in determining whether a case should settle. The equation is based upon not only the parties’ expectations of winning, but also on the continued costs of litigating. With just three simple pieces of data quickly derived from each party, a judge can quickly assess, based upon the parties’ actual expectations, whether their pending case should resolve.

As a circuit court judge in Florida’s Eleventh Judicial Circuit, I used Professor Johnston’s equation at the beginning of every trial (bench and jury). I have since realized that a mediator can use the equation with great affect on the parties during their caucuses.

The equation:

If (Pp x Dp) – T   < (Pd x Dd) + T, then the case should be settled

If (Pp x Dp) – T   > (Pd x Dd) + T, then the case should be tried
 
Pp =  Plaintiff’s perceived probability of winning at trial
Dp =  Plaintiff’s perceived expected recovery at trial
T = Costs of going to trial
Pd = Defendant’s perceived probability of Plaintiff’s victory at trial
Dd =  Defendant’s perceived expected liability at trial

A Surreptitious Use of the Equation

In my opinion, the manner in which the mediator approaches the equation with each party is important. In my view, it is better to be indirect than direct. Being direct may make a party not only defensive, but also give the impression that their demands are simply being plugged into an impersonal mathematical formula. Being direct may also cause a party to give a less than candid assessment.

At no time should the data be solicited during a joint session. Doing so would likely cause the parties’ predictions to be skewed or exaggerated, since neither party is expected to be frank before the other. Simply put, a plaintiff will not suggest to a defendant that their expected recovery is less than their demand and that there is a less than even chance of their prevailing before a jury. In that same vain, a defendant will not be prone to concede that a plaintiff should achieve a victory at the trial. Frankness about the parties’ probabilities and expectations during the joint session could severely undercut their bargaining positions, so it shouldn’t be expected.

The mediator should not ask each party during the caucus, “What do you think is the plaintiff’s probability of winning?” Instead, the mediator should inquire, “If you were to try this case 50 times, how many times do you think the plaintiff would win?” Take the number you are given and multiply it by two. Your answer will be, “Plaintiff’s perceived probability of winning at trial.” For example, if the plaintiff says he expects to win the case 45 times for every 50 times it’s tried, the plaintiff’s perceived probability of winning at trial is 90%. Likewise, if the defendant believes the plaintiff should win just 5 times if the case is tried 50 times, the defendant’s perceived probability that the plaintiff would win is 10%.

With this information in hand, you might want to talk about other issues before coming back to the equation. You’ll want to ask the plaintiff, “If you win, what do you think a jury will award?” With the defendant you’ll ask, “How much money do you believe the jury will award the plaintiff?” Assuming the plaintiff says, “$100,000” and the defendant says, “$20,000,” the equation would look like this:

Plaintiff Defendant
(.90 x $100,000) – T and (.10 x $20,000) + T

The next subject to be broached with both parties that will provide the last piece of data to conduct a complete analysis is the costs of going to trial. To obtain that information, you should inquire of each party, “If this case does not resolve in mediation, how much will it cost you to get this case to a jury and obtain a verdict?” You should make clear that these costs should include, transcripts, subpoenas, expert witnesses fees, attorneys’ fees, mail, travel, copies, bonds, etc. The amount provided by the plaintiff is deducted from their side of the equation and for the defendant the amount is added. For example, if the plaintiff predicts his costs will be $26,000 and the defendant predicts their expenses will be $15,000, the full equation would be:

Plaintiff Defendant
(.90 x $100,000) – $26,000 and (.10 x $20,000) + $15,000

After performing the calculations, the actual value of the plaintiff’s case based upon his own probability of winning and recovery is $64,000. Similarly, the defendant’s evaluation of his risk of loss is $17,000. Since the plaintiff’s perceived recovery subject to his costs and probability of winning exceeds the defendant’s amount, this is a case that needs to be tried. In deed, if this were an actual case before a judge, the judge would look at the results and know that based upon these expectations the case is one that should go to a jury.

However, since this is a mediation, these numbers present a good starting point from which to commence the negotiations. If anything, the parties own expectations will compel them to come down from their lofty and rigid positions and review their cases in a real world setting. If the plaintiff came into the mediation demanding $100,000 and the defendant wanted to pay $0, the parties will quickly come to the realization that the initial values they set for their respective cases were distorted and unreliable.

Conclusion

Don’t be hesitant to engage in some basic math. During your next mediation, be bold and unafraid by giving the equation a try. If for whatever reason you don’t want to provide your results to the parties, at least take a look at them for your own edification. You might find that during the course of the mediation, the results will help you and the disputants move to the next level of the negotiations and avoid the dreaded “I” word.