Using Mediation Effectively to Manage Competitive Advantage and Maximize Value for You and Your Clients

This article originally appeared in Trial Talk October-December 2021 Volume 70 Issue 4 edition. Reproduced by permission. ©2021 Trial Talk. All rights reserved. Modified from its original publication in Trial Talk.

By Chad Atkins and Joe Epstein

Mediation has become a staple of the litigation process nationwide and in Colorado.¹ Many jurisdictions require mediation prior to conducting a trial. The point of court ordered mediation for the court is to settle cases, reduce trials, and alleviate court congestion. The point of mediation for the defense counsel is to settle the case for the lowest settlement value, within coverage limits. The point of mediation for decision makers, composed of insurance adjusters and their supervisors, authority setters, and corporate counsel, is to settle under the estimated value to litigate. The point of mediation for plaintiff’s counsel is to cost effectively reach a maximum value resolution for your client. If done correctly, mediation remains the most effective tool and the best means to achieve a successful resolution of disputes.³

Most disputes involve an aggrieved party seeking monetary compensation from an insured individual or business entity who the plaintiff has alleged was, in some way, wrongful. The participants are rarely similarly situated. Litigation for an insurer and counsel is part of business, and the decisions are evaluated, measured, and justified empirically as good business decisions. Most aggrieved parties are not as business savvy. Often, aggrieved parties will evaluate cases emotionally and not empirically. This is to the aggrieved party’s disadvantage.

While insurance companies organize and incorporate to manage risk and litigate, injured parties do not typically organize their lives to participate with maximum effectiveness in litigation evaluation. Typically, an aggrieved party and counsel will seek compensation from an insurer or corporation with deep pockets, expensive litigation processes and tools, significant litigation budgets, and defense counsel who receive full compensation throughout the litigation process. Rarely, if ever, do the aggrieved party and counsel have any of those luxuries.

For the insurer, corporation, and defense counsel, income is not dependent on the outcome of the case. For the plain- tiff and you, the outcome is the sole determination of income for that dispute. Moreover, corporations and insurers do not have to take time off work to recover from injuries or litigate while trying to manage pain. Nor do they have to take time off work to attend a mediation conference. Corporations and insurers do not have to contend with managing disability or loss of function throughout the litigation process.

As a result of these differences between the parties, the litigation process is “zero sum” and almost always puts the aggrieved party at “competitive disadvantage” while putting the insured individual or business entity, counsel, and decision maker at “competitive advantage.”

As a business concept, “competitive advantage” results in one participant having an advantage of position and/or kinetics over another party.⁵ As a result, the entity possessing this competitive advantage, competes better and obtains superior results. Nowhere is this more apparent than in the civil litigation system.

The effective use of mediation helps manage and minimize competitive disadvantage and maximize competitive advantage for the aggrieved party, expanding the result and value for your client and your firm.

This article examines preparing for and conducting mediation efficiently to manage competitive advantage and maximize the effectiveness and value of mediation for you and your client. To examine using mediation effectively to manage competitive advantage and maximize value we will use the acronym “P DEAL” (Preparation, Damages, Evaluation, Advise, and Learn).

Preparation

The first key to managing competitive advantage and maximizing effectiveness at mediation is effective preparation prior to mediation. Preparation aimed towards effective presentation of your position in a manner that resonates with the decision maker maximizes value.

The first consideration before you decide on mediation is cost. Cost falls on the aggrieved party disproportionally and presents a competitive disadvantage. The aggrieved party, unlike defense counsel and the decision makers, probably does not possess a budget with funds available for mediation. To your client, mediation means paying money out of pocket or incurring a debt to their lawyer. Evaluate the mediation costs— is there enough at stake to justify a full day mediation, or should you consider a shorter mediation? Should the mediation be flat rate or by the hour? Inquire about and examine pricing to maximize efficiency for the mediation and manage competitive advantage.

The second consideration is time. Focused presentation of synthesized material to the mediator is key.⁶ If the mediation is hourly, you can maximize value by summarizing case facts, deposition transcripts, medical records, and damages for a faster, focused presentation., The mediator may absorb the information more quickly. Less time spent on the hourly rate means a lower bill for your client. There is little value in having the mediator charge your client preparation time spent wading through volumes of records that do not significantly enhance the value of the case. Prepare the mediation with an emphasis toward the biggest impact of the materials you disclose and present to the mediator and defense decision maker. Effective summaries are cost- saving tools and can help you manage competitive advantage.

The third consideration is logistics— how are the participants appearing at mediation? Will the decision maker be live, by video conference, or available by phone? Access to the decision maker is particularly important to minimize competitive advantage, and a live or video conference is preferable. This gives the participants—including your client—the ability to potentially interact directly. This can be very impactful. Draft any document that summarizes the plaintiff’s positions with an eye towards effective presentation and impact through the medium in which the decision maker will appear. Tailoring impactful materials and presentation based on the logistics of the participants will reduce competitive disadvantage and gain competitive advantage.

Finally, sharing evidence and documents with the mediator and decision maker prior to the mediation is almost always effective for adding value because it gives the mediator understanding and the decision maker a chance to obtain additional authority prior to mediation day. Sharing documents ahead of mediation is effective at minimizing competitive disadvantage and enhancing competitive advantage even where the decision maker is not present at mediation. Prior disclosure of strong documents reduces the competitive advantage for the decision maker because they have to evaluate the material and must have an answer for it at mediation. Early disclosure means that they cannot dismiss it as untimely, and therefore claim that it is not at issue in the mediation. Sharing with the decision maker also costs your client nothing. Sharing information prior to the mediation increases the impact of the information and maximizes its value. This is an invaluable strategy to manage competitive advantage.

Mediation effectiveness and value can be lost through poorly prepared materials. What should you cover in your mediation materials to maximize value and competitive advantage?

The mediation statement should cover each of the basic elements of the claim you are making. As a simple example:

Defendant was driving a vehicle, breached their duty of care and rear-ended plaintiff’s vehicle, directly causing $143,500.00 in damages, injuries, and losses. Because defendant was speeding 25 miles over the speed limit and was intoxicated with a BAC three times the legal limit, plaintiff is confident that they can meet the beyond-a-reasonable-doubt standard and are amending to add punitive damages.

Those two sentences cover duty, breach, causation, damages, and punitive damages. Most disputes are more complex, but counsel should establish the basic elements of any claim in the mediation statement fully, but succinctly. Effective and concise coverage of the elements minimizes competitive disadvantage and maximizes effectiveness and value at mediation.

The mediation statement should cover both the strengths and weaknesses of the case, from each perspective. Do not ignore weakness, but face it head on. Point out the weaknesses of the arguments against your client, of course. But also spend time and preparation addressing the weaknesses of your client’s case. Addressing and neutralizing the weaknesses of your client’s case diminishes positional advantage for the decision maker and adds value to your case because it gives the mediator and counsel in the other room arguments to work with to convince the decision maker to add value. This alone is a mighty strategy for minimizing competitive disadvantage and maximizing effectiveness and value at mediation for your client.

Finally, do not ignore the logistics of the deal. You can add value by reviewing the settlement documents prior to mediation and hashing out acceptable terms. Work out issues such as liens, indemnification, and confidentiality ahead of time through e-mail. This can save significant, and more expensive, time on the day of mediation. Where possible, work up your costs, bills, and liens prior to mediation. This will always be a factor to settling the action. It is better to consider these matters prior to mediation, which will lead to an efficient and less costly mediation.

Damages

The best way to minimize the competitive advantage of the defense and maximize mediation effectiveness is to think like the decision maker you are trying to persuade. Insurance companies manage risk and have system protocols, forms, and programs that they use to compile damages for risk evaluation.

Present a summary of damages to the mediator and the decision maker, and you are speaking their language. Damages are the main component of the estimated value of litigation (EVL).

Maximizing EVL maximizes case value. Cover each category of special and general damages, in your mediation materials even if you are not making a claim for them. That way, the mediator and decision maker know that you considered these. Strongly consider sharing a revised version of the entire mediation statement with the decision maker. At a minimum, sharing the damage information forces the decision maker to evaluate damages, and causes the insurer to review and re-set reserves.⁷ This is a powerful tool, and increases your competitive advantage.

What should you include in your damage summary? Here is a partial list:

Past Medical bills.
Future medical bills.
Past wage loss.
Future wage loss.
Pain and suffering.
Permanent impairment and disability.
Disfigurement.
Inconvenience and general disruption of life.
Effect on daily activities.
Property damage.
Prejudgment interest.
Potential Penalties.
Consortium claims (effect on family relationships).

A simple chart or table that shows the claimed value for each of these will resonate with the decision maker, their authority setters, and will minimize their competitive advantage while increasing yours. This evaluation alone as an effective mediation value maximizer cannot be overstated.

Prior to mediation, make certain that you have fully disclosed the documents that support damages. The decision maker cannot effectively evaluate documents if you disclose them too close to mediation—or even worse, on the morning of mediation. Decision makers increase their positional advantage by taking the stance at mediation that un- documented injuries do not exist, and the late records cannot be considered and add no value. Often, the decision maker will start negotiation with a statement to the mediator that they are not considering X or Y damage, and that their top line number reflects this lack of record or record you disclosed late. This is not an admission that the damages are not valid—but rather a statement that they will not be considered. Destroy this decision maker’s competitively advantageous stance by proactively and timely disclosing your support documents.

Evaluation

Do not show up to a mediation without assessing value. Estimate what your highest trial award, lowest trial award and most likely award will be. Decision makers do this to maintain their competitive advantage. Consider the jurisdiction, the jury pool, and how the witnesses will present. Be prepared to discuss this on mediation day with the mediator, and if necessary, counsel and the decision maker. Evaluate the settlement value range of the case before you begin mediation. Know what the value range of your case is for settlement and through trial. Is the case a soft tissue case with $10,000.00 in damages, a $25,000.00 policy limit, and a judgment proof defendant currently residing in the department of corrections? Or is this a permanently life changing disability case with sufficient coverage and a well-heeled defendant? Evaluate your acceptable ranges and prepare to dis- cuss these on mediation day.

After you develop your value range, take the time to develop your opening demand and your projected final demand. Think about how you will move and respond to offers. Showing up to mediation without these numbers is usually a costly mistake and gives away competitive advantage. In effect, if you fail to develop your range, your first and last moves allow the decision maker to dictate the progress and result of the mediation without meaningful input from you. Use the prior objective evaluation of the strengths and weak- nesses of your client’s case to develop your numbers and range. Be prepared to justify your results and you will enhance your competitive advantage. Developing your range before mediation will give you an efficient map for negotiation and maximize efficiency and value.

Take the time before mediation to consider the strategies that you can use to get to a settlement on mediation day. Consider whether or not you will use a bracket or ask the mediator for a mediator’s proposal. If the parties cannot make a deal, should you suggest a high- low for trial? If the defense threatens or makes a statutory offer, will you reject, negotiate, or accept? How much would a statutory offer have to be to work for your client? Evaluating potential strategies and scenarios before mediation day will save time and add value during mediation. Better still, it will move competitive advantage closer to equality for the participants.

Advise

On mediation day, the mediator should discuss with and inform your client about the mediation. The mediator should discuss who is present and participating in the mediation. The mediator should discuss with your client at the first meeting of mediation day the process of mediation and the roles of the participants. The mediator should discuss the goal of mediation. The mediator should cover the finality of a settlement, the confidentiality and lack of admissibility of the negotiations under Rule 408, and all of the parameters of the mediation process. This is often important for the client to hear from the mediator and is worth the time spent covering these topics.

The mediator’s discussion should never be the only discussion concerning the parameters of the mediation. One of the smartest ways to maximize value and efficiency at mediation is to fully advise your client—prior to mediation day—of the projected course of the mediation. An uninformed client is a weak client. A weak client gives away competitive advantage.

Another consideration is while your firm case load is high, your client likely only has this one case. It is the most important case to your client. An uninformed client is a dangerous client. It is easy for a disgruntled client to contact Attorney Regulation Counsel and start an ethics complaint. Therefore, do not fail to advise your client prior to mediation. Take the time to prepare them for the process. Discuss the strengths and weaknesses of the case. Discuss the elements, and what evidence and testimony you require to meet the burden of proof. Discuss damages in depth. Often during this discussion your client will reveal damages that you did not know about that add value. Discuss the value range of your client’s case for settlement and for trial. Develop with the client a value that makes business sense for you and your client to demand and accept. Explain different strategies that can get the offer to the demand number or even higher and mistakes that make the offer number lower. Let the client be an active participant in the process. As a benefit, when you do this with the client, you will increase trust and your power in the room and in the mediation, and that minimizes client control problems. It gives you more competitive advantage. It leads to referrals and more business. This alone is always worth the time invested.

Learn

Use the mediation process to learn the arguments you will face at trial. If you leave without hearing these arguments, you have lost competitive advantage in this room and later in the courtroom. Prepare questions ahead of time. Write them down if necessary. Have the mediator ask your specific questions concerning these arguments, and relay to you the answers. Listen to the answers and consider the impact on your position. Learn the case against your case.

Rarely should you leave a mediation without getting the last, best offer. Leaving without the last best number leaves you without knowing what the defense valued the case for settlement. Sometimes to get the last best number would require going lower than the evaluation, and you should consider whether to do that before mediation day. Be prepared to consider the ramifications of that on the day of mediation, especially because some decision makers are reluctant to let a low demand go high later in negotiations. To preserve your position, and not give up competitive advantage, consider the possibilities prior to mediation.

Conclusion

Mediation will continue to be a means of effective dispute resolution for the foreseeable future. You can maximize the effectiveness of mediation and manage the competitive advantage for the benefit of you client. Work P DEAL for maximum effectiveness. Preparing before the mediation by sub- mitting effective materials enhances your competitive advantage and adds value. Compiling and timely disclosing an effective and complete Damages analysis will enhance case value. Evaluating your case values and projected demands will enhance your competitive advantage and add value. Advising your client and developing your mediation day approach with a focus on working with the client and mediator to Learn the case you face at trial will enhance your competitive advantage and add value, making your mediations efficient and cost effective.

Prior to graduating from law school, Chad Atkins studied economics and business. Chad has 26 years as an attorney with more than 100 trials. Chad served as a plaintiff’s and defense attorney for multiple Fortune 100 global insurance carriers, and as named Managing Attorney for Colorado for Liberty Mutual/Safeco. Chad understands case evaluation from the viewpoint of the litigants, claims adjuster and claims supervisor, with a focus on settlement. Chad handles personal injury, trucking, wrongful death, product liability business, industrial, employment, and contract litigation. Reach Chad at 303-667-0528 or chad@crs-adr.com

Joe Epstein has 25 years as a mediator with over 4,000 mediations. Colorado Law Week has selected him four times as Colorado’s “Barrister’s Best Mediator.” He has served as a Vice-President of the International Academy of Mediators. He is a member of the National Academy of Distinguished Neutrals. He is a panelist with AB Conflict Resolution Services. His mediation focus is on complex high value cases. Joe handles personal injury, wrongful death, trucking, product liabil- ity, employment, civil rights, and other complex matters. Reach Joe at 303-359-1459 or joe@crs-adr.com

Endnotes:

1 Colorado established its Office of Dispute Resolution (ODR) in 1983. Mediation services made up approximately 98.8% percent of ODR’s services in fiscal year 2020. ODR estimates that the overall agreement rate after alternate dispute resolution (full or partial) was 51.3%. Colorado Judicial Branch Annual Statistical Report, Fiscal Year 2020. While self-reported, private mediators reporting success rates that exceed 80% are quite common.

2 The estimated value to litigate, or EVL, is the dollar amount below which it is worth settling the case for the insurer, and over which it is worth taking the case to verdict.

3 While 2020 statistics are not representative because of the state’s pandemic- related shutdown, recent Colorado Judicial Department Statistics indicate that 99% of civil district and county court cases settle before a trial or final hearing. Colorado Supreme Court, Mediation Guide for Colorado Courts (Oct. 5, 2018), available at https://www.courts.state.co.us/Administration/Unit.cfm?Unit=odr.

4 A simple two party “zero sum” situation is one in which a gain for one party corresponds with a loss for the other party, whether equally proportional or not.

5 “The essence of competitive advantage can be interpreted as the asymmetry or differential among firms along any com- parable dimension that allows one firm to compete better than its rivals.” Hao Ma, Of Competitive Advantage: Kinetic and Positional, 43 BSNS. HORIZONS 53- 64 (Jan. 2000). While beyond the scope of this article, Hao Ma divides competitive advantage into two types:

“Positional advantage often derives from ownership or access-based sources. Specifically, it comes from a company’s unique endowment of resources, market positions, established accesses, and other traits that are relatively static in nature. And it is based on the company’s status, social or economical, actual or perceived, in the eyes of customers, competitors, partners, regulators, and other stakeholders. In contrast, kin- etic advantage typically arises from a firm’s knowledge, expertise, competence, or capabilities—including those gained from accessing or tap- ping other firms’ knowledge and capabilities. It is based on a firm’s competence and skill in conducting business activities, including, but not limited to, the ability to identify market opportunities, knowledge of customers, technical know-how and capability, speed of action and response in the marketplace, and efficiency and flexibility of business or organizational processes.”

Hao Ma (available at https://www.research gate.net/publication/222053979_Of_com petitive_advantage_Kinetic_and_positional

6 For an in-depth analysis of considerations for a successful mediation, Joe Epstein and Chad Atkins, An Insider’s View of Mediation, TRIAL TALK (Feb/Mar 2020).

7 Reserves are a percentage of insurance premium held “in reserve” by insurance carriers that, by law, must be kept liquid for the payment of claims