The Five Stages Of Mediation


by Jeffrey Krivis

This article appeared in the September 1997 edition of "Alternatives to the High Cost of Litigation," a publication of the CPR Institute for Dispute Resolution

December 1999

Jeffrey Krivis

Bob McDowell followed a common routine each morning. He would get up early, take a two mile walk, and stop by the Canterbury Bakery for hot tea and scones. This morning was no different, except that his 27-year-old daughter Meg joined him at the bakery.

Having purchased his tea and pastry, Bob sat down at his usual table in front of the window overlooking the sidewalk and parking lot of what had become a mini-mall. As he was taking a sip of his tea, he heard a crashing sound, which would be the last thing he could remember when he woke up in intensive care with broken arms and legs, a cracked skull and third degree burns on his chest and arms.

Miriam Wendel was 82 years old at the time Bob was hurt. She drove a 1984 Oldsmobile which she bought new. She had just done some shopping at the pharmacy and was hoping to pull out of her parking space in front of the bakery and drive the three blocks to her daughter's home. Unfortunately, Miriam accidentally put the car in "drive" instead of "reverse" and stepped on the gas, crashing through the front window of the Canterbury Bakery. Miriam survived the accident, but Bob sustained permanent injuries. Meg had some minor cuts from the glass window but was generally unhurt.

At the time of the accident, Miriam had an insurance policy that provided up to $50,000 in coverage per occurrence. Because of the severe injuries to Bob, the insurer offered to pay him the entire policy limits, which was rejected. The case ended up in litigation and the judge urged the parties to consider mediation. That's where I came in.

When I get a call inquiring about mediation, I first attempt to assess the temperature in the case, i.e., how hot is the dispute. I'm interested in knowing not only the facts of the case and the status of negotiations, if any, but also why the parties think mediation might be useful. Once I gather that information, which comes together in the first phone call with the attorney(s), I then follow a very strategic pattern or template which can be used in almost any case.

The pattern I often follow was developed by Professor Randy Lowry of Pepperdine Law School. This approach is based on the idea that mediation sessions are generally broken down into five distinct segments or "Stages," and that within each stage there is a "Task," the objective--what the mediator is trying to accomplish; an "Action," how the mediator is going to accomplish the objective; and a "Result," the outcome which the mediator expects to achieve. Once you have gone through all Five Stages of the mediation, the goal is to achieve a final and durable settlement of the dispute.

Stage One: Convening The Mediation

In the McDowell case, it was the defense who contacted me about setting up a mediation. The first TASK was to speak to Bob's counsel about his response to the judge's suggestion to participate in mediation. I was initially concerned that Bob's counsel would think that I was biased since I was calling at the recommendation of defense counsel. That problem was avoided, however, since the defense counsel had already sent a letter with my profile, indicating my experience and high level of impartiality. The ACTION I took was to get counsel to start talking about the case by first connecting or building a personal rapport on the phone. We had a brief conversation on general topics until I sensed a rapport had been built. We then moved the discussion to the McDowell case, and he indicated that although he wanted to settle, he was concerned that mediation might be a waste of time. He felt that his client might want to get a judgment and try to collect from Miriam's assets, which, though not tremendous, included two modest homes which were paid in full. I asked him if he had anything to lose by at least spending a couple of hours talking about how his client could be compensated. Upon further reflection, he allowed that it might be worthwhile and was willing to try it. We then discussed the process in general, what he could expect and the costs, and selected a tentative date for the mediation.

Rather than sell mediation as a panacea, the RESULT I was simply trying to achieve in the Convening stage was to create a "willingness" to come to the table, not to actually settle the case.

Stage Two: Opening Session

Once the mediation got started, my TASK in stage two was to describe the process so that the parties would know what to expect from the session. The ACTION I took to complete the task was to advise the parties that we would explore a risk analysis of the likelihood and amount of recovery. I further told them that we would meet privately at which point they should be prepared to discuss a realistic assessment of what they expected to pay and receive. For Bob, this turned out to be the key to the case. He knew he had a strong case, but the question in his mind was whether he could recover from Miriam's estate, or whether he had the heart to put Miriam in a vulnerable financial position. The RESULT I tried to achieve was a sense of "Safety and Hope" about the process of mediation and prospect for settlement. I wanted to allow the parties to feel comfortable enough to speak candidly with me about their objectives, and open enough to accept new information or at minimum a new spin on old information.

Stage Three: Communication

The TASK at this stage is to allow the parties an opportunity to explain their positions both in front of each other and in private meetings with me. The ACTION is a series of open-ended questions followed by active feedback which permits me to listen for clues about what is driving the parties. This is much more difficult than cross examination in court since I don't have the benefit of having deposed the person in advance. It therefore requires delicate questions, skillfully posed to keep the conversation moving forward, while continuing to build credibility and rapport with the parties. The RESULT in this stage is that the parties have a chance to air their perspectives and feel confident that they have been heard. Often, too, this communication discloses hidden values and interests.

The fact that Miriam had no available cash and a minimal insurance policy was already known to the attorneys. However, Miriam did have two properties which she worked her entire life to own, and the thought of losing her estate at this point in her life was hard to fathom. Miriam's daughter, also present at the mediation, commented in our initial joint session that she was scared that her family would end up homeless if Bob won the case. This explanation, I learned later in private caucus, had a tremendous heart-rending effect on Bob, who concluded in his mind during the mediation that he couldn't live with himself by possibly ruining their lives through a jury verdict.

Bob explained in front of Miriam and her counsel how this incident had had a devastating affect on his health, though after about one year he felt fairly recovered, with the exception of some scars from the coffee.

While I could have jumped directly into the Negotiation stage of the mediation at this point, I decided to stick with the Communication process. I find it critical to the success of a case to spend some time in the Communication stage in order to surface all sides of the conflict and in essence let the parties have their day in court. Inevitably when I am anxious to cut to the chase and begin the negotiations, I find the parties are more apt to get locked up in positions that could have been softened up in the communication stage.

Stage Four: The Negotiation

I sensed that it was the right time to move into the Negotiation stage when the parties were starting to repeat themselves and I could see that the attorneys were anxious to work on what they came to the table for--the deal. To accomplish this, the TASK was to begin the bargaining dance between the parties. In this case, Bob understood from his counsel that he could expect a verdict in excess of $500,000 in court, but that such a verdict might be a pyrrhic victory due to the limitations on cash available from Miriam's estate. The ACTION I took was to suggest to Bob that he and his attorney start considering other options that would require courageous thinking on his part, including significantly reducing his expectations so that Miriam could start figuring out some ways to free up some of the cash in her estate. The RESULT we were trying to achieve was "flexibility and innovation." This would allow us to close the gap in the negotiation and ultimately come together.

In our private meeting, the first thing I heard was that if Bob pushed this case any further, Miriam would let him get a judgment and file for bankruptcy, virtually eliminating any chance for recovery. I asked permission to share that information with Bob but Miriam's counsel declined. He wanted to see what Bob was willing to do before he pushed the bankruptcy button. I then asked Miriam and her counsel if they would consider taking steps to free up some cash from the equity in her homes. Bingo! The question was something they had already considered and though they preferred not to, they checked with the bank and could access about $50,000 in an equity line on the homes. That was the most they could get and encouraged me to sell it to Bob. I understood that if that wasn't acceptable, Bob would then be presented with the bankruptcy option.

I then caucused with Bob and asked him if he was able to reduce his expectations and come up with some creative ideas to solving this dispute. I was pleased to learn that Bob did not want to put Miriam and her family out on the street, and that they were willing to consider settling for something in the neighborhood of $200,000 - $250,000, which would be the amount that could be realized if one of Miriam's homes was sold. Though I knew that Miriam would not consider selling one of her homes, I thanked Bob for coming up with such a creative option and I would see if there was any interest.

At that point I knew that we had narrowed the gap from $500,000 as a demand and $50,000 as an offer to $200,000 as a demand and $100,000 as monies available to settle. In short, we were only $100,000 apart.

The next step in the negotiation was to explore Bob's idea, though I knew Miriam wouldn't accept it. What came out of that round was that the house that Bob wanted Miriam to sell was only worth about $150,000 after paying a broker's commission. Bob knew the area where the house was located and agreed with that assessment. He indicated that he would be willing to accept the $150,000 if the house were sold. Now we were $50,000 apart and I was the only person who knew it.

Bob's counsel pressured me to reveal what Miriam was willing to do financially. I told him that I wasn't at liberty to disclose what she can offer, but that I felt that the parties were making good progress and that Miriam would find a way to pull out some money from the houses. Realizing that the last $50,000 would be the hardest gap to fill, I asked for more time to speak to Miriam's counsel so that I could get them a solid offer.

I then met privately with Miriam's counsel to inquire if there was any possibility of getting more money out of the equity line. I was convinced that $50,000 was the maximum and spent the next several minutes discussing the appropriate negotiation strategy to present to Bob. We agreed that offering the entire $100,000 at this point might not give them any room to move later, and I received permission to offer $85,000 with an explanation of the potential that Miriam might file bankruptcy.

I then presented the $85,000 offer to Bob and his counsel, explaining the risk of collecting if they forced Miriam to judgment. They pressed me on where Miriam was getting the extra money without selling a house and I informed them that it would be from an equity line she would set up with a bank. Bob was fascinated by the concept of the equity line and had questions about the effect of a bankruptcy on any potential judgment. His counsel conceded that a bankruptcy would make collection difficult, but still felt that the amount offered was too low. I asked him if he would consider anything less then "six figures." The answer was probably not, but at least I got a sense that they weren't adamant in their position. I suggested that they allow me to determine the most that could be obtained from the equity line, and to report my findings to them. I suggested that they be prepared to close a deal at whatever that number might be. They agreed to listen.

At this point I felt like the entertainer who did the spinning plates routine on the Ed Sullivan show, going back and forth trying to keep the plates spinning simultaneously until the time was ripe to close the deal. I then advised Miriam's counsel progress was being made but that the only way to find out if we could settle the case would be to give me permission to offer the entire $100,000. He agreed.

Moving back to private caucus with Bob, I submitted that there was a good possibility that the bank would allow up to $50,000 on the equity line, and that if that were so, I would encourage Miriam to offer it. I didn't want to propose it unless I was certain that Bob would accept it. I asked him to speak to his counsel privately and let me know in a few minutes what he wanted to do. Sensing that the spinning plates were slowing down, I waited a few minutes with Miriam, her daughter and counsel. I then went back into the room and learned that Bob would settle for $100,000 if it was offered, but not a penny less.

Stage Five: Closure

Knowing that a settlement was imminent, my remaining TASK was to finalize the agreement. The ACTION I took was to discuss with Miriam and her counsel the paperwork involved in getting the equity line, the commitment she must make to the bank to pay off the $50,000, and importantly, what it meant to her to put this case behind her. She understood everything and was ready to finalize the deal. The insurance company was waiting in the wings with their additional $50,000 and couldn't have been happier. The RESULT here was that both parties would make an "Informed Decision" about settlement, and that everyone could deliver on their promises.

I then congratulated Bob and his counsel for their hard work and confirmed that we had a deal at $100,000. I emphasized that Miriam was willing to stretch to make it happen and that Bob could finally put this chapter of his life behind him. I then prepared a Memorandum of Understanding and called everyone together in the conference room to sign the agreement. I also discussed the specifics about finalizing the deal, such as signing releases, dismissal of the lawsuit, the time it would take to fund the settlement, and other details necessary to implement the agreement. It was obvious that all parties were satisfied with the terms of the settlement, and the case was closed.



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Biography




Jeffrey Krivis is the author of two books: Improvisational Negotiation: A Mediator’s Stories of Conflict about Love, Money, Anger—and the Strategies that Resolved Them, and How To Make Money As A Mediator And Provide Value To Everyone (Wiley/Jossey Bass publisher). He has been a successful mediator and a pioneer in the field for eighteen years. Krivis is on the board of visitors of Pepperdine Law School and serves as an adjunct professor of law at the Straus Institute for Dispute Resolution. Contact him at his website, www.firstmediation.com.



Website: www.firstmediation.com

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