As a mediator in labour and employment matters, I can tell you that a big part of getting a deal involves keeping the parties grounded in the realm of the reality of a negotiated settlement.
Although it’s difficult to put your finger on one reason why cases settle, I think we can say with a pretty high degree of certainty that the most significant reason cases that should settle don’t is because one or both parties come into the mediation with an unrealistic or inflated expectation of what a negotiated settlement looks like.
One or both parties are looking to “hit a home run” and expound a proverbial “pound of flesh” through a negotiated settlement – they want to “prove” that they are “right” and the party opposite is “wrong”. They want to “right a wrong” and I get that, but mediation (or even litigation) is an ineffective way to achieve that.
Unrealistic expectations once they have taken hold are hard to shake and certainly hard to shake in the heat of negotiations.
At times, counsel contribute to the setting of inflated settlement expectations in their client. Clients, who are sometimes unfamiliar with the process of litigation, come to counsel for advice and, rightly, put significant trust and weight in what they are told.
Providing advice, without pointing out the risks in a fair, balanced and realistic way, and without explaining the difference between a settlement outcome and what may follow a hearing on the merits, will serve to reinforce an unrealistic settlement expectation.
Clients tend to latch onto opinions that support their own. The demand letter and statement of claim, unless put into context, may well plant the seed for an unrealistic belief in a settled outcome. The pleadings set out what is the clients’ best case. Employees who may be unfamiliar with the process, may become emboldened by their best case and those numbers which then become set as the expectation and anything less is unacceptable. They equate a demand or claim with a legal entitlement and that becomes entrenched and difficult to move past. In fact, it has spawned many professional complaints against counsel.
Even where counsel tries to moderate the clients expectations by laying out the parameters of a likely settlement and explaining the costs and risks of litigation and the difference between a negotiated and litigated outcome, clients sometimes hear what they want to hear. They listen and then Google (a dangerous thing), or prefer the “advice” of a well meaning friend or family member to that of their lawyer, particularly where that advice is in line with their particular position and hoped-for outcome.
The clients mind becomes poisoned by “notions”. A fun read and a discussion on the dangers of the Internet on litigants is R. v. Duncan, 2013 ONCJ 160 (CanLII).
When one or both parties come to the mediation with unrealistic expectations, the mediation can turn rocky, and take time as the process must run its course and the expectations moderated “under fire”, as it were. In these circumstances, the mediator and counsel must be patient and deliberate and plant the seeds of reality.
There is a good chance, however, that a negotiated settlement will not be achieved where unreasonable expectations have taken root and choked off reality.
Counsel play a central role in moderating the expectations of their client and this starts at their first meeting and at every meaningful interaction thereafter.
Plaintiff counsel should explain that a demand is not a legal entitlement and that a statement of claim sets out the best case position. Explain the difference between mediation and litigation, and between a realistic negotiated settlement and one that, potentially, follows from a full hearing on the merits.
Defendant counsel should prepare their client for the inevitable “first offer” that will likely be inflated, but is “just a number” and not an indication that it is time to run for the exit. Ensure that someone in authority is at the mediation (preferable) or available over the phone (not preferable, but sometimes unavoidable).
Counsel should not exacerbate the challenge created by inflated client expectations by fuelling those by attaching your legal fiat. Providing an opinion of the likely outcome of the case without all of the facts is a dangerous thing as it will set the expectations based on partial information.
Neither party should expect to achieve, through a negotiated settlement at mediation what they may well (possibly) achieve after a hearing (assuming everything goes their way, and the adjudicator decides entirely in their favour). Litigation is unpredictable as so much is out of our control. Positions that seem unassailable prior to litigation are weakened under the weight of cross-examination. We have all lost cases we thought we would win and we have all won cases we had no business winning.
Setting realistic expectations is critically important to success in mediation and a failure to do so is probably the most significant factor in the failure to achieve a negotiated settlement.