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| Stuart Rudner |
The first offer
Although many people hold firm to their beliefs that you should never make the first offer, or that your first offer should be way beyond what you reasonably expect to achieve in order to leave room to negotiate, there is no reasonable basis for any of these “rules.” In fact, making the first offer can allow you to send a clear message that you are there to make a genuine effort to reach a settlement.
Unfortunately, many negotiations still begin with what I referred to as the “silly season.” That involves one party making an absolutely ridiculous offer to settle, which angers or at least annoys the other side and simply generates an equally ridiculous counteroffer. When that happens, I usually say that now that the parties have gotten that out of their system, we can get down to the real negotiations. However, it’s an unnecessary waste of time and if we can avoid it, we can use our short time at mediation even more efficiently.
Rather than making a ridiculous offer, a strategic party at mediation can deliver a first offer that, while certainly not their bottom line, approaches a realistic assessment of where the case should settle. Doing so will send a very clear signal to the other side that you are there to make a legitimate effort to reach a resolution and should result in an equally reasonable counteroffer.
I note that when one party starts with a ridiculously high or low first offer, they should not subsequently bemoan the fact that they have moved much farther than the other side and use that to suggest that the other side is not negotiating in good faith. By way of example, if a case should realistically settle between $200,000 and $250,000, it is not particularly compelling if the plaintiff initially offers to settle for $1 million, and then complains about how much they have compromised when we get to the point where the offers are in the $300,000 range.
As an aside, I would encourage readers to read Never Split the Difference, a book written by former FBI hostage negotiator Chris Voss. I love his point that if you are negotiating for the safe return of 10 hostages, you cannot simply split the difference by agreeing that you’ll take five.
When I encourage parties to begin with a reasonable offer, I’m often confronted with the fear that if they start too close to their bottom line, then they will be somehow forced to accept less than they should. I don’t buy that. The bottom line is that you will all either reach a settlement or you won’t; whether you get there after two rounds of offers or 20 does not change anything, as you should either accept the deal that is achievable or decide that it is not in your best interests.
This is one of those circumstances in which it is better to focus on the destination and not the journey. To continue my example from above, if the plaintiff starts by making an offer to accept $300,000, and subsequent rounds get the parties to $200,000, the plaintiff does not have to accept less than that if, in their view, it would be better to proceed with litigation. At some point, the parties will decide how far they are willing to go. I encourage them to do so with my advice, but the bottom line is that no matter where they start the negotiations, they cannot be forced to accept something less than they are willing to. Starting with a reasonable position will simply allow us to either reach a settlement, or determine that settlement is not possible, more quickly.
Use the brief effectively
Unfortunately, many of the mediations that I conduct still begin with extensive debate regarding the facts of the case and the supporting evidence. When you only have three hours, it’s hard to justify spending a good portion of that time debating the case rather than engaging in settlement discussion.
As I have written in the past, I encourage counsel to use strategic mediation briefs in order to clearly and concisely set out their position. The brief should include the evidence, which can be easily incorporated by inserting photos or videos or using links to the appropriate documents. It should also include a realistic assessment of the costs of proceeding with litigation, so that the parties can make an informed decision regarding which path would be better for them to go down. Taking the time to prepare a strategic brief will reduce the time we spend at trial discussing the facts and evidence.
Pith and substance
Counsel should not waste valuable mediation time doing what they could have done in their brief: setting out their position clearly and concisely, with supporting evidence. Further, they should not waste time with offers that are not designed to further the parties along the road towards settlement (assuming that they want to settle).
Consider making the first offer, and making it one that is designed to send a clear message that you are there to see if a reasonable resolution can be reached. As I often tell the parties, it does not matter whether we have one round of negotiations or 100. At some point, we will either reach a resolution that works for everyone, or determine that settlement is not possible at that time. Why not get there sooner rather than later?
Stuart Rudner is a leading Canadian employment lawyer and mediator at Rudner Law. He is the author of You’re Fired! Just Cause for Dismissal in Canada. He can be reached at 905-209-6999 or stuart@rudnerlaw.ca.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, LexisNexis Canada, Law360 Canada, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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