As a general rule, if all else has failed, then a mediator’s proposal might be considered as a final step before declaring an impasse.
A mediator’s proposal is a settlement proposal that the mediator presents to all parties, that each party can confidentially accept or reject. If all parties accept, settlement is then achieved. This is a one-shot deal take it or leave it proposal, binary in nature. Critical to this process is that the mediator maintains confidentiality of the responses, and only if all parties accept will the mediator then reveal the acceptance. In a two party situation, should any party choose not to accept the proposal, while another party does accept the proposal, the party that accepted can then potentially be at a strategic advantage because it knows about the rejection. By the same token, a party could strategically decide to reject the proposal where it believes the other party would accept to signal its stonewall against settlement at that level. The mediator’s proposal can happen in many types of disputes and is most common in matters related to a financial settlement.
The mediator’s proposal has certain advantages. Some of the feigned or postured offers can be overcome. The offer can be the next worst alternative to the current offer which they consider the worst offer. This could result in a reluctant acceptance. It is possible though that a mediator’s proposal could cause a breakthrough, where even if rejected, a party incorporates some of the proposal into a new offer, resulting in otherwise unpredictable negotiation progress. As the mediator is trusted by the parties to be impartial and objective, there is a reasoned presumption the mediator will offer something more so in the middle, relative to the facts and circumstances, than toward any one side. The party seeking payment tends to embrace the opportunity of a proposal because of conditional ball-in-hand cash potentially available, and the party being asked for money has the opportunity to bring closure to risk.
By the time the mediator’s proposal has occurred, the parties are invested in the mediator, literally, having compensated the mediator for the time leading up to the proposal. The parties have had the chance to build rapport with the mediator and vice versa so there can be additional trust. Moreover, the mediator will be making the proposal at or about when the mediator is most familiar with not only the facts of the matter, but also the reactions of the parties to prior discussed possible offer ranges. In addition, the more time the parties have invested in the mediation, the even more so the parties will desire the process to then succeed.
In addition, in complex cases, the mediator can help bring about settlement by resolving certain side issues that would be expressed in the mediated settlement agreement such as confidentiality, non-competition, social media and non-disparagement clauses, the means of recovery if these clauses are violated, and an approved statement that can be expressed about the opposing party following conclusion. The extra effort, time invested, and also the fact of any successes resolving these important issues in advance, helps then pave the way toward afterward resolving the monetary issues at the heart of the dispute.
Before making a mediator’s proposal, the mediator should ensure that certain conditions are met. The mediator should have engaged in presenting the option of conditional offers, in the format of “if the other side will come up from level D to level C, will you agree to move down from level A to level B? By the same token, during caucus, the opposing side is asked “if the other side will drop the demand from level A to level B, will you agree to move up what you are willing to pay from level D to level C?
These are additional criteria that should be met before offering a mediator’s proposal. The parties at the mediation are those with authority to settle. The parties understand the mediator is presenting a realistic perspective, sometimes defined in mediation parlance as serving as the “agent of reality.” The mediator is patient and diligent. The mediator has engaged already in reality testing and analyzing the risks. The parties have had the chance to open up emotionally and share what is on their minds. The mediator has decreased expectations at an appropriate pace. The mediator has not engaged in an evaluative approach with multiple parties simultaneously present, or too close to the beginning of the mediation (so as to create an expectation of one party or have lost the trust of another). The mediator has brought the parties down or up from an unrealistic expectation. The bottom line offers are not necessarily set in stone from the perspective of the mediator.
On a whole, the mediator’s proposal is an appropriate tool to be utilized toward the end of negotiations and before declaring impasse. The proposal can help break through previously feigned or established barriers to potentially bring about settlement. Even if the proposal is rejected by one or more sides, the proposal itself is a form of reality testing that may be referred to by parties evaluating their respective positions at future negotiations and even at future mediations. While settlement is ideal, a mediation may only bring the parties closer together in terms of dollar amount or perspective. The mediator’s proposal can be a short-term step to settlement or a long-term step in the later-settlement-direction.
About the author: Andrew Tolchin is an attorney and mediator in the greater Houston area, and founder of 713 Mediator, LLC and Tolchin Law Firm, PLLC.