I doubt many of us have seen a dispute settle at a mediation session based on the opening number.
Because no one expects the matter to resolve in the first round of bargaining, too little attention is paid to the crafting of opening positions. Some lawyers view opening numbers as irrelevant.
They feel it is just an arbitrary number because “you have to start somewhere.”
But in practice, initial positions can have a profound impact on the nature of the bargaining. A poor start may determine whether the case settles at all, or at what number it finally resolves.
Oftentimes, ill-conceived numbers result in exasperation, anger, accusations of bad faith and hurt feelings. Even if opposing counsel does not get up and leave, an opportunity may have been lost to establish an atmosphere of good faith.
Part of the responsibility of a skilled mediator is to assist counsel in setting the parameters for a successful mediation in the earliest phase of the process.
This is one reason confidential submissions are requested in advance of the mediation. These submissions provide the mediator with valuable information to understand the case and to assist the parties in their negotiation.
Research by behavioral economists has shown that the first “reasonable number proposed” in a negotiation, (i.e. a number which is not absurdly high from the defendant’s perspective or absurdly low from the plaintiff’s perspective) will set the parameters for bargaining. The settlement number will usually fall somewhere near the middle between the two extremes. Researchers call this the zone of acceptance. Of course, the plaintiff’s number will be at the higher end of the zone and the defendant’s will be at the lower end.
But most interesting, the research shows that it is to your advantage to establish a reasonable range at the outset in order to anchor the negotiation. As the plaintiff, opening with a high number that is aspirational, but not unreasonable, sets the “anchor.” The anchor is the number from which the other side unconsciously starts to deal.
The challenge for lawyers when deciding where to anchor negotiations is a strategic one: Will the number be reasonable enough to have weight yet leave enough room for further negotiation leading to settlement?
As I have witnessed many times, an opening number that cannot be objectively justified will not generate the “anchor and adjustment” reaction from the other side that you want. It might, at a minimum, be counterproductive and may even result in irreversible damage to continued discussion.