Everyone negotiates differently, but certain patterns emerge over time. Often, a plaintiff will have a much too high settlement demand which will lead to a much too low response to that demand. There are two outcomes when this pattern emerges. Either the parties will methodically make small settlement moves until an agreement on a dollar amount is reached, or the parties will never make any meaningful settlement moves and the case does not settle. To get out of this settlement stagnation pattern, I often encourage parties to make a substantial move to encourage the other party to make a substantial move in return. Two recent mediations illustrate this point.
In one case, defense counsel threatened to leave the mediation because he was so frustrated by plaintiff’s refusal to make significant moves off its initial high seven-figure settlement demand. Instead of leaving the mediation, I encouraged the defendant to make a more substantial settlement offer approaching -- but not offering -- the defendant’s entire settlement authority. The defendant followed my advice and was absolutely shocked by the plaintiff’s response. Plaintiff dropped its demand by forty percent, resulting in the case settling just thirty minutes later.
In another case, it was plaintiff who was frustrated by the lack of movement on defendant’s side. Instead of moving in the same small $5,000 increments, I encouraged plaintiff to make a $40,000 move to test how defendant would respond. Sure enough, defendant met plaintiff’s $40,000 move with a $40,000 increase to its last offer. The case settled in short order.
Being too stingy in negotiations may prevent a case from settling. While an old proverb states that less is more, to reach settlement, you may need to give more to get more.