A common situation in legal negotiation and mediation occurs when you face an unrealistic case valuation from the opposition. At first glance, this situation appears frustrating. Uninformed counsel may become angry at each other, accusing the other of “negotiating in bad faith,” or asserting that the other side is “ridiculous,” “not in this universe,” and so forth.
I say uninformed, because any emotional upset caused by the other side is cause for grave concern. As I have taught and written about, the worst thing a lawyer can do in a negotiation or mediation is become emotional. The science is clear: once the emotional centers of the brain are activated, the prefrontal cortex shuts down. Worse, the condition persists for some time so even if angry, upset lawyer calms down outwardly, his or her prefrontal cortex will remain offline. Therefore, don’t let the other side upset you.
Returning to the problem at hand. Your first defense against unrealistic case valuations is complete and thorough negotiation preparation. If you need a quick refresher on this, download my free e-book, The 10 Essential Steps to Legal Negotiation, and implement the 10 steps before every mediation.
If you have prepared properly, you should not be surprised by unrealistic case valuations. You will have done your homework on the case and on the opposing side of the case. You will have modeled the other side’s best case and understood its claims or defenses as well as your own case. You will thoroughly understand the other side’s damage analysis. Thus, you should face any surprises.
Assuming you are prepared, if the other side comes in with a completely unexpected settlement valuation, you need to ask some questions. First, did you err in your assumptions about the case? Second, what is the basis for the opposition’s surprising claim? Is it based on anything empirical or is it more subjective? I find that most case valuation differences are based on subjective belief, not on empirical analysis.
If you determine that your assumptions and analysis remain valid and that the divergence is due to subjective belief, you are dealing with emotionality on the other side. The number one rule in this situation is: You cannot solve an emotional problem with logic. If you attempt to influence the other side with cogent analysis of facts and law, you will only entrench the subjective belief deeper into the opposition brains. Again, the science shows us that when people with strong beliefs are confronted with empirically valid information that contradicts the beliefs, dopamine is released in their brains to strengthen the belief against objective reality. You will make things worse by arguing against the belief structure.
The better approach is to place the negotiation into a different frame. Sometimes, the case valuation diverges from reality because it has become a symbol of other conflict issues. For example, in an employment case, a terminated employee may experience deep injustice, unfairness, and betrayal. Regardless of the justification for those emotions, the emotions exist. Many people lack emotional granularity, which is the ability to parse out what they are actually feeling. Instead, they substitute their lawsuit and case valuation as a proxy for their feelings. This effect, called the substitutionary effect, is well-documented in the decision-making and social psychology literature. It is a common occurrence in legal negotiation. If you have a well-trained and experienced mediator, he or she will be able to connect empathically with the other party and de-escalate the strong emotions, thereby eliminating the substitutionary effect.
Assume the worst. You did not have time to prepare thoroughly and you learn for the first time that the other side’s case valuation is wildly different than your own. What to do? First, do not get upset. Second, be very, very patient. Third, make reasonable concessions as long as you can. Fourth, give every indication that you are trying to make a deal. Fifth, let your mediator manage the auction, if he or she has that skill. Sixth, be patient. You are facing a long day of negotiation. However, I have seen plenty of cases settle where one side starts at $5 million and the other side offers $5,000. The statistics are in your favor if you are reasonable and patient. The odds stack up against you if you become emotional, intransigent, and stubborn.