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The Big Nuisance: A Not So Radical Proposal for Mediating Nuisance Value Conflicts – Part III

This article was co-authored by Shel Stark, a mediator and arbitrator in Ann Arbor, Michigan, and Sonal Priya, a law student at M.S. Ramaiah College of Law in the State of Bangalore, India. Mr. Stark is Chair of the State Bar of Michigan’s Alternative Dispute Resolution Section, and Ms. Priya hopes to someday be a provider of ADR Services to her clients.

In Part One and Part Two of this paper, we explored issues that should give mediators pause when one side characterizes the other side’s claims as having “nuisance value.” We also examined techniques to assist a mediator determining whether the parties have engaged in realistic risk assessment. In this third and final part, we will look at alternative approaches, techniques and interventions a mediator might employ to assist the parties in reaching an agreement.

Was Discovery Unproductive?

Sometimes responsible plaintiff counsel accepts a case for representation believing the facts will develop in discovery in a certain way. When they start digging, however, the evidence may not turn out to be that way at all. Plaintiff’s counsel is sometimes forced to admit he couldn’t find persuasive, admissible evidence of wrongdoing. They may or may not be willing to acknowledge that “the case went south,” or, turned out to be “a dry well.” That can happen. Such cases may nonetheless have SOME settlement value – especially as plaintiff’s lawyer has invested time and money and is unlikely to dismiss the case voluntarily. As a result, plaintiff may be willing to accept significantly less than was initially anticipated.  As many mediations focus on risk assessment, a claim that didn’t pan out in an evidentiary sense may still pose a risk worth managing by seeking an amicable resolution. (In addition to the risk of an adverse ruling, cases may risk collateral consequences: the departure of key employees, adverse publicity, disruption of business operations, public exposure of sensitive or embarrassing information, aggravation of customer relations, impact on banking relationships, etc.).

Cases that did not develop as expected provide ample questions to explore. Why did the case turn out to be weaker than expected?  If the discussion is candid and plaintiff concedes the obvious, negotiations may be more productive. Perhaps plaintiff’s initial demand would have been reasonable if the case had panned out, but it did not. Perhaps a lower number that factors in risk will result in a better response from defendant. Sometimes no money need change hands. In a recent mediation between two physicians who worked together in one practice, for example, one of them concluded he wasn’t being paid in accordance with his contract. He believed he’d been cheated out of substantial dollars. Just before reaching the mediation table, however, all of the billings – which had been handled by a third party, not the defendant or his staff – were produced.  Plaintiff’s counsel examined them and realized proving substantial unpaid fees was unrealistic. Fortunately, there were many non-economic issues to be horse-traded. The case settled. Both sides were happy – and no money changed hands.

Why Can’t We Agree?

Another line of inquiry to achieve the same goal is to ask the defense how such a capable, experienced plaintiff lawyer could be so wrong – assuming defense counsel knows and respects her opposition? Reasonable minds often differ about the value of a case. Two experienced, able and persuasive advocates can sometimes look at the same landscape and reach diametrically opposite conclusions. If the defense sincerely believes the dispute is limited to nuisance value, the mediation may not be over.  There remain several techniques in the mediator tool kit.

What Will the Costs Be?

One technique for moving forward is to explore “defense costs.” How much money has the defense spent already in defending this “nuisance” litigation? Is there a litigation budget moving forward? How much discovery remains? How many depositions?  Is plaintiff seeking or threatening to seek electronic records? How much will that cost? Will there be experts? How much time and effort will be expended to bring a motion for summary disposition? Is there a risk the motion will be denied? If denied, how much more money will be spent on a trial? Is there a risk that a defense verdict at trial might be appealed? How much more will an appeal cost in time, effort and disruption? Defense costs generally exceed “nuisance” value. In today’s world, defense costs of $20,000, $40,000 or $75,000 are not unusual. Many employment cases will cost over $100,000 just to reach trial. In employment litigation, prevailing plaintiff’s can recover actual attorney fees. Even if a plaintiff’s verdict is modest, an award of substantial attorney fees can exceed the demand sought at the mediation table. Defendants do not always arrive at the table having considered the risk of limiting plaintiff to a small verdict but being exposed to actual attorney fees. If defendant is willing to settle for defense costs, resolution may well be possible. Plaintiff may equally recognize great risks ahead and conclude defense costs are a reasonable way to manage them.

How Big a Nuisance Are you?

Another technique is to explore the range of “nuisance value.” $5,000 might not sound like a “nuisance” in a small claims case.  By contrast, $100,000 might be nuisance value in a death case or discharge case for a highly compensated executive. While some plaintiff lawyers may be offended to hear their claims characterized as “nuisance,” others could care less what it’s called so long as the final offer meets their goals. “Yes,” plaintiff’s counsel might say, “I recognize you call this a ‘nuisance’ case, but I consider myself a big nuisance!” Big nuisance, indeed.

A simple technique, depending on the mediator’s relationship to defense counsel, might be to ask straight out: “What is the range of nuisance value for which you’d be willing to settle this case?” If the answer is, “we’d never pay more than $35,000”, the mediator has something to work with. As this is tantamount to asking a party for its “bottom line,” however, the answer may not be reliable.

A mediator might further explore defendant’s range by using “what if” questions. “What if plaintiff brought her demand down to five figures? What could you offer then?” The answer, of course, might be so small an increase as to remain unproductive.  Defense counsel, implementing a negotiation strategy that is not working out, might be ready to provide a constructive answer.  Though not yet ready to disclose flexibility to the plaintiff, the defense may be ready to signal to the mediator that they aren’t yet close to their limits of authority.

An end game variation of the mediator “what if” question is: “I don’t have authority for this, but if I could get plaintiff to walk away at $25,000, is it possible you would pay it?” If the defense is favorably disposed, the same question could then be asked in the plaintiff’s room: “I don’t have a number yet, but if I get them up to $25,000, is it possible you would take it?” This technique permits the lawyers to achieve a resolution or closes the gap significantly without relinquishing their settlement positions should the case not settle.

Conclusion 

It is not evident that a glut of nuisance value cases is interfering with the civil justice system. Accordingly, radical changes – mandatory summary judgment motions or judicial authority to reject settlements, for example – are not necessary. Despite commentary to the contrary, there are few responsible plaintiff lawyers willing to bring nuisance value cases they would never take to trial. Sometimes, however, mediators will be faced with mediating alleged nuisance value claims. There are many time-tested and effective techniques available to mediators to deal with them. Mediators may explore the sincerity of a “nuisance” characterization, focus on the costs of going forward, determine if either side is unrealistically analyzing risk, explore the range of “nuisance” settlements and brainstorm non-economic issues resulting in resolution without payment of significant dollars.  Radical solutions are better left in the pages of law review articles, not adopted as new court rules

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The authors wish to thank Earlene Baggett-Hayes, Shel Stark’s friend and colleague at PREMi, Professional Resolution Experts of Michigan, for her ideas, advice, and suggestions.