MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 80
No aspect of mediation is more misunderstood than the use of brackets (less commonly known as “ranges”) in negotiating settlements. As a result, I’m using this message to clarify that process. (By the way, any similarity between mediation brackets and NCAA basketball tournament “bracketology” is purely coincidental and unintended.)
What are brackets? Brackets are the use of two contrasting numbers to create a range for continued negotiations. For example, a plaintiff first demands $300,000 and then successively reduces her demands to $275,000, $265,000 and $255,000 and the defendant, in turn, offers $5,000, $7,500, $9,500 and $11,000. The plaintiff then proposes that she will demand $175,000 if the defendant will offer $50,000. Frequently, the responding party does not accept the first offered bracket so, in this example, the defendant may answer with a bracket of $20,000 and $80,000.
Bracket positives. Generally, brackets are used after normal “market place” bargaining (i.e., the back-and-forth exchange of single numbers) has bogged down. There is no set number of demands and offers when market place bargaining loses its effectiveness; it occurs when those exchanges no longer produce significant movement and, as a result, a different approach is needed to invigorate the negotiations. Brackets bring new energy because they enable the parties to make bigger moves without compromising their credibility. Thus, for example, instead of lowering her demand from $255,000 to $250,000, the plaintiff, by proposing a bracket, can make a bigger move because, at the same time, she is also asking the defendant to increase its offer.
Brackets also send a message about a party’s settlement intentions or goals. An opening $400,000 demand, with successive moves of $375,000, $350,000 and $325,000 in response to offers of $15,000, $20,000 and $25,000, generally suggests that the plaintiff hopes to settle between $100,000 to $200,000, but a subsequent bracket of $100,000 and $175,000 is more telling not only because the plaintiff has dropped below $200,000 but also because the midpoint of that bracket is $137,500.
Bracket negatives. Bracket recipients (particularly plaintiffs) tend to rely on the opposing party’s bracket midpoint, which can be misleading since a midpoint is not always a party’s goal. Also, because there are no rules regarding brackets, subsequent demands or offers can bring consternation and confusion when one of the parties reverts to single numbers or changes its midpoint. For example, assume competing brackets of $30,000-$75,000 by the defendant and $100,000-$175,000 by the plaintiff. Not “appreciating” the plaintiff’s bracket, the defendant goes back to a single number offer of $27,500, which is only $2,500 above its last market place offer of $25,000 and below the bottom number of its $30,000-$75,000 bracket. The defendant also advises the mediator to tell the plaintiff it considers her last demand to be $175,000, which was the top number of her bracket, but well below her last single number demand of $325,000. Or, consider that the defendant, in response to the plaintiff’s $100,000-$175,000 bracket, offers a new bracket of $35,000-$65,000, which has a midpoint lower than that of the $30,000-$75,000 bracket. The plaintiff, most probably, will not be pleased about either of these moves but there is nothing procedural she can do to stop the defendant from having done so. The alternative for the plaintiff in the first instance is to come back with a single number demand greater than $175,000, the top number of her bracket or, in response to the new bracket, Increase her midpoint. These types of tactical moves test the mediator’s abilities to calm the waters and keep the negotiations moving forward.
Bracket protocol. Ideally, parties proposing a bracket should also advise that they will make the next move if their bracket is accepted. Thus, if a bracket has been made and accepted, the party suggesting that bracket can either come up with a new bracket or a single number. Obviously, that responsibility is negated if the recipient rejects the brackets and responds with a different set of numbers.
How to interpret or respond to brackets. Bracket confusion is caused, in part, when the parties propose competing brackets instead of agreeing to a certain range. Assume that the two initial brackets are $30,000-$75,000 and $100,000-$175,000, with respective midpoints of $52,500 and $137,500. Depending on their goals, both parties have several subsequent options: they can compress their brackets without changing the midpoints (e.g., $40,000-$65,000 and $115,000-$160,000), which signals that the midpoints are fairly accurate; change only one number in the bracket, which also changes the midpoint (e.g., $30,000-$65,000 and $100,000-$165,000); refuse to provide a new bracket because the opponent’s last bracket is “unreasonable”; go back to single numbers now that the brackets, although not agreed to, have still moved the parties’ positions closer together, ask the mediator to propose a bracket of his or her own or, with the mediator’s leadership, move onto other negotiating tactics such as split the baby, baseball, “wouldja-couldja,” “take it or leave it” and a mediator’s proposal. A discussion of those latter processes is reserved for another day.
Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
Copyright Michael D. Marcus, October 2012
Please visit my website at www.marcusmediation.com for information about my mediation and arbitration background and experience. Copies of my previous Mediation Messages and Arbitration Insights are available by going to the articles link on the website.