Before the Brackets
“Bracketing” is an increasingly popular tool to get a mediation moving. I have seen substantial success with it as both a Mediator and as a mediation advocate – some thoughts on this approach follow.
In traditional bargaining, the parties work toward an agreed settlement through a series of increasing offers and decreasing demands. Pulling some random numbers, a mediation might start with Plaintiff having demanded US$1.5Million. The opening offer might be US$50,000.00. Of course, both parties enter into the mediation with their own ideas of the value of the case and what they might be willing to pay/accept to resolve it. Let’s assume that the Plaintiff enters the mediation with an expectation of resolving the dispute for no less than US$500,000. Defendant hopes to spend no more than US$400,000. Assume further that the ball is in Plaintiff’s court to move off the initial US$1.5 Million demand. It would not be uncommon for Plaintiff to respond to the opening offer by an “in-kind” movement of US$50,000, down to US$1.45 Million.
At this point, Defendant, doing some quick math and coming to a midpoint of US$750,000, might express some pessimism, having hoped for a more dramatic reduction in response to the offer. Common refrains are: “If they think we’re going to match them dollar for dollar, we should just call it day” or “If they don’t get down quickly into six figures, we’re wasting our time.”
Plaintiff, likely somewhat put off by the opening offer, and having made only a modest reduction in the demand, may be similarly discouraged.
Let’s dissect this a bit further: The US$750,000 midpoint Defendant is assuming is much more than he will need to resolve the case. He really needs only US$500,000, as this case is now postured. In the Defendant’s mind, US$350,000 separates his best offer of US$400,000 from the US$750,000 that he thinks the Plaintiff is looking for. The real differential is the more traversable US$100,000 from US$400,000 to US$500,000. Thus, the “battle line” for resolving this matter is likely around US$450,000, with both sides hoping to edge this in their direction.
So, Why Don’t We Try Bracketing?
Although Bracketing may be premature at such an early stage in mediation, it is, in a larger sense, well-suited for precisely this situation: When the parties are closer than they think and perhaps moving at a glacial pace toward some potentially promising, middle ground.
A Bracket is a conditional demand or offer that seeks to set new goal posts in a negotiation by conditioning the offer/demand on some reciprocal movement from the other side. Following up on our negotiation above, a Bracket response from the Defendant might be something like, “we’ll increase our offer to US$125,000 if Plaintiff will reduce her demand to US$500,000. Mediator’s admonitions notwithstanding, Plaintiff will immediately calculate the new midpoint at US$312,500 – still well below the Plaintiff’s bottom line of US$500,000. Note however that Defendant’s midpoint is broadcasting below what he is actually willing to pay. There is more money available. Note to negotiator: Don’t get too seduced by midpoints, particularly in the early going.
Let’s freeze-frame here. What has the defense signaled? Without a doubt, even though conditional, they have signaled that they will pay more than US$125,000, to settle the case. This is implicit in offering a bracket anchored at this number. Plaintiff’s takeaway might be taking some [small] comfort in moving the negotiation into six figures, tempered by the obvious fact that the high point of Defendant’s bracket is at the very bottom of Plaintiff’s settlement range. Plaintiff is unlikely to start bargaining within a bracket at this low end of the spectrum knowing that settlement in this Bracket will dip her well below her bottom line..
So, What’s Plaintiff’s Next Move Here?
Turning briefly back to basics, mediation is a voluntary process. A party responding to a bracket may respond in any way they see fit and need not even buy into the Bracket concept. Options include: responding with a new pure dollar demand, rejecting the Bracket and asking for a new offer, and responding with a Bracket of her own – one that will certainly “project” a higher midpoint than the Bracket just rejected.
Indeed, there may be several Brackets exchanged before negotiating within a given bracket begins. Let’s imagine that Plaintiff responds with a counter bracket of US$400,000/US$900,000. Here, the midpoint is US$650,000 and the low end of this Bracket is Defendants “bottom line.” This midpoint is now nonetheless US$100,000 closer to Defendant’s best offer than we were at the start of the mediation. Progress? Perhaps. Clearly, the parties have some work to do.
The menu of responses is now with the Defendant. Although, I would not anticipate such an acceptance on the facts presented, accepting a Bracket can be a powerful tool and may be the closest you ever get in mediation to getting your adversary to bid against itself. Considering that the Bracket is in the form of an offer seeking nothing more than acceptance, it is perfectly appropriate for the party that accepts the bracket to then turn it to the proposing party and demand the first “real number” within the accepted Bracket. A good faith offer within this Bracket moves the settlement figure closer to the party accepting the Bracket before the party must respond with its own number. This is important to bear in mind as the things get close; a party may be better served by accepting a Bracket and returning it for a new offer/demand than responding with a counter-Bracket and reversing roles.
Typically, a few Brackets are exchange with each party trying to obtain and project a midpoint to their liking. As this goes on, in our scenario, I would expect the Brackets to eventually encompass US$400,000 and US$500,000 within more distant goal posts. At some point, the Brackets will give way to traditional bargaining with the Brackets, hopefully, having facilitated some momentum.
A Mediator’s Subtext
If you follow my musings, you know by now that I am an advocate of pre-mediation teleconferences and discussions with the mediator. Of the many things that may be achieved during these teleconferences, is the mediator’s understanding of the parties bargaining range and flexibility outside of that range. Mediators have a keen ear for words like “until,” and “unless” that may suggest some flexibility beyond an official bottom line.
Bound by confidentiality, in our scenario, a mediator could not announce at the onset “you’re only US$100,000 apart, so let’s get this done!” Moreover, even if not ethically precluded from doing so, it would likely be “too much too soon” in the day’s negotiations to force such and early outcome. We all must pay some homage to the mediation ritual.
However, a mediator’s suggestion of bracketing, perhaps a bit earlier than you might expect, may well be a signal that the parties are closer than they realize. While all parties to mediation play some cards close to the vest, the mediator nonetheless has unique access to both sides’ confidential positions, and subtexts. Perhaps there is more reason to be optimistic than you realize, and perhaps Bracketing will move things along.
At the end of the day, Brackets are a tool. As negotiation often start with stratospheric demands and subterranean offers, Bracketing can bring the negotiations more swiftly into the realm of reason – assuming of course, reasonable parties with somewhat similar – but certainly not necessarily overlapping – evaluations.
Conversely, a continued exchange of Brackets in which the proposed high end of Defendant’s Brackets does not even rise to the low end of Plaintiff’s proposed Brackets, may signal that the case is simply not yet ripe for settlement. This is nonetheless a lesson better learned sooner than later.