MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 127
THE MEDIATOR’S PROPOSAL, PART III
This Mediation Message is called “The Mediator’s Proposal, Part III” because I’ve written about the process twice before (Messages 51 and 81), but it’s very much worth a third visit because mediator’s proposals, in the intervening period, have become the most effective method of settling cases.
What is a mediator’s proposal? Most often, it is a proposal by a mediator to settle litigation between the parties. (Much less frequently, it is used to break an impasse on interim issues, such as suggesting an acceptable bracket in the negotiations.) Generally, the proposal has two approaches: it either reflects the mediator’s educated guess as to settlement terms that will be acceptable to everyone or, alternatively, it is the mediator’s evaluation of what the case is “worth.” In the second approach, for example, the mediator might have opined that the plaintiff’s case has a substantial chance of being “defensed” at a motion or trial. In that situation, the proposal will have a lesser value than the first type that attempts to bridge the expectations of all parties. Because of the potential disparity between the two types of proposals, mediators should advise the parties which approach they are using.
When is a mediator’s proposal made? There are no rules when it should be made. Experience, has shown, however, that a proposal is most effective when the parties have reached a stalemate and all other settlement techniques have been considered and/or exhausted. By that time, a reasoned proposal has a substantial chance of being accepted, because the mediator, after much discussion and negotiation, should be seen by all concerned as informed, knowledgeable, fair and credible.
Why has the mediator’s proposal become so popular? It has proven to be an extremely effective mechanism for resolving disputes and attorneys have found it helpful, in dealing with hesitant clients, to point to the mediator’s (a neutral third party) opinion about the value of the case.
Should a proposal be made without the consent of the parties? A mediator’s proposal should not be imposed on a party who does not want it. It is extremely unusual for parties to reject the concept, since it is not binding and, because of confidentiality, does not set a floor for future discussions; regardless, a mediator should not submit one if a party says, “Don’t do it.”
Is the proposal oral or in writing? A proposal should be in writing so that there is no ambiguity or confusion about the recommended terms and conditions.
What terms or subject matter should be in the proposal? It is not uncommon for parties to suggest that a proposal include certain terms or language, such as, if by a defendant, that the settlement be confidential, there be liquidated damages for a breach of confidentiality and the settlement sums be paid in installments or, if by a plaintiff, that all sums be paid in full within a certain period of time after execution of the release and settlement. If specific requests have not been made, the proposal should cover all material issues discussed by the parties, such as, for example, the monetary amount in controversy or who is to obtain possession of the contested property. As a practical matter, parties have little problem in subsequently resolving less important issues not covered in the proposal when the major ones have been agreed to.
When should the parties respond to a proposal? The timing of the response is up to the parties. It is preferable to obtain immediate answers to a proposal so that, should it be accepted, a settlement agreement can be finalized right away, thus preventing anyone from having second thoughts. However, persons with the authority to accept or reject a proposal may not be present or attorneys may need additional time to talk to their respective clients or adjusters about the proposal’s terms. When that occurs, attorneys should advise the mediator the period of time the proposal should be kept “open,” which can be for one day or more.
Is a proposal binding if accepted only by the attorneys for the parties? A mediator’s proposal can ask for just the attorneys’ responses or both the attorneys’ and the clients’ responses or just the clients’. The proposal is generally not binding if signed only by attorneys since the parties, themselves, have not executed it. (Note that an insurer can settle a case without the insured’s consent if the policy gives the insurer that right [see Fiege v. Cooke (2004) 125 Cal.App.4th 1350].) If all of the parties have signed and agreed to the proposal, it can become a binding document. The downside of a binding mediator’s proposal, in this instance, is it may not contain all necessary terms, such as waivers of all claims under Civil Code section 1542. Therefore, it is better to first obtain only the participating attorneys’ approvals of the proposal and then allow them to create a comprehensive release and settlement executed by their clients.
What if everyone agrees to the proposal? In that instance, the mediator advises the parties that they have a “deal” and should finalize the terms in a written settlement
What if one party accepts the proposal and the other rejects it? If that occurs, the mediator should not tell the rejecting party that the other side accepted it because that would give the rejecting party an unfair advantage in future negotiations. The rejecting party should know only how it responded. The accepting party knows, however, that the other side rejected the proposal and, to obtain a settlement, will probably have to change its settlement position.
What are the parties’ options if a proposal is rejected? The world has not come to an end. As for the accepting party, the mediator should ask how much more it can “move”; as for the rejecting party, the mediator should attempt to determine what its settlement terms are. In either instance, the mediator should find out how far apart the parties are and continue, either in person, by e-mail or on the telephone, to discuss settlement prospects with them.
Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
Copyright Michael D. Marcus, November 2016