MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 81
THE MEDIATOR’S PROPOSAL
I first wrote about mediator’s proposals in June 2009. (See Mediation Message no. 51.) It’s appropriate to discuss this process once again, and in greater detail, since it is an integral part of the settlement process.
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 for ongoing negotiations.) Generally, the proposal has two approaches: it is either a mediator’s educated guess as to the settlement terms that will be acceptable to all of the parties or, alternatively, 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 trial. In that situation, the proposal will have a lesser monetary value than the proposal that attempts to bridge the expectations of all of the parties. Because of this potential disparity in the proposed settlement terms between the two approaches, parties who have agreed to accept a mediator’s proposal should ask the mediator whether it consists of an educated guess as to the terms that will be acceptable by all or is the mediator’s opinion of the value of the case.
When is a mediator’s proposal made? There are no rules when it should be made, just as there are no formal rules for how any other part of a mediation should be conducted, other than it must be held under a cloak of confidentiality. Experience, however, has shown that a proposal is most effective when the parties have reached a stalemate and all other settlement techniques have been considered or exhausted. By that time, the 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.
Should a proposal be made without the consent of the parties? A mediator’s proposal should not be imposed on a party which does not want to participate. It is extremely unusual for a party to at least not look at a proposal, since it is not binding and 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 the proposal include? It is not uncommon for a party which has agreed to consider a mediator’s proposal to suggest that the 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 short 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, who is to obtain possession of subject property or how a right in question is to be relinquished. 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 any of the parties from having second thoughts. On the other hand, 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 insurance adjusters about the proposal’s implications and consequences. When that occurs, attorneys should advise the mediator how long 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, both the attorneys’ and the clients’ responses or just the clients’. The proposal is not binding if signed only by attorneys since the parties, themselves, have not executed it. 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 is it may not contain all necessary language, such as waivers of all claims under Civil Code section 1542; the terms to enforce the settlement, pursuant to Code of Civil Procedure section 664.6 and language, pursuant to Simmons v. Ghaderi (2008) 44 Cal.4th 570, which holds that a settlement made during a mediation, to be enforceable, must clearly and unambiguously waive mediation confidentiality. As a result, it is better to first obtain the participating attorneys’ assents to the proposal and then formalize those terms in a more comprehensive release and settlement executed by the parties.
What if everyone agrees to a 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 a proposal and the other rejects it? Should that occur, the mediator should not tell the rejecting party that the other side accepted it because, to do so, would give the rejecting party an unfair advantage in future negotiations. The rejecting party should know only how it responded to the proposal. The accepting party knows, however, that the other side has rejected the proposal and, to obtain a settlement, will most probably have to change its valuation of the case.
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 will attempt to learn how much more it can “move”; as for the rejecting party or parties (yes, it is rare but both sides can reject a proposal), the mediator will attempt to determine what their positions 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 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.