April 12, 2007 ~

 

Mediation and the F-Word: Reflections on the Use of Final Offers

​

As most of you may know, the majority of my work involves insurance-related disputes, usually in the context of motor vehicle litigation. The parties to this type of litigation usually come to the table with a range of expectations and approaches (more on that in an upcoming article), and after openings, proceed to their respective breakout rooms and usually -- hopefully -- engage in a series of offers and counter-offers which gradually reduce the daylight between their respective positions. 

 

At some point down this path, one party or the other eventually makes use of the "f-word", labeling their latest offer as "final", and instructing me, as the mediator, to convey that message to the other room. 

 

In my experience, there are two types of final offers made at this point: The first, “upper-case” Final Offer, is exactly what it purports to be — a point reached by one party or the other beyond which there can be no further flexibility, no matter what variables or further information may arise. Effective counsel making such an offer will do so only after already factoring in any facts or evidence which may reasonably arise after the conclusion of the mediation.

​

The second, “lower case” final offer, is more strategic in nature: While couched as a “final” offer, it may in fact be counsel’s way of either: (a) testing the resolve of the opposing party by attempting to force them into accepting the settlement number being proposed; or (b) representing the offeror’s position unless new or further facts or evidence come to light which may alter the offeror’s position further. 

 

The problem, of course, is that it is often impossible to tell what kind of "final" offer is being put on the table. In nearly every mediation in my experience, the final offer comes with no explanation, leaving the recipient guessing -- and having the chilling effect of allowing the recipient's counsel a convenient excuse to throw up his or her hands and declare the mediation failed without any further discussion. In these cases, how does an effective counsel (and mediator) work through this impasse?

 

The first step is for effective counsel to make the final offer as clear as possible: Rather than proffering an offer with the bare word "final" takes onto a number, effective counsel will clarify the terms of this offer. For example, counsel could make a final offer with a proviso along the lines of: "This is the final offer we are prepared to make at this time, unless you can bring further facts or evidence to the table to assist us in re-evaluating our position." 

 

This approach signals two things to the recipient of the offer: First, that the offering party has listened to what was said and evaluated the facts and evidence presented, and is not merely throwing an arbitrary number at the claim; and second (and more importantly), that the final offer is not carved in stone, but is amenable to change should the litigation landscape be altered. This leaves the door open to conditional offers, or even further negotiation, even if that negotiation takes place after the formal mediation has ended.

 

The second step involves an effective mediator, who will test the final offer before delivering it to the other party, whether it be conducting a thorough reality check of all the factors the offeror has taken into account in formulating the offer, or exploring whether a counter to the final offer will be given a fair hearing. Oftentimes, I have found that a "final" offer turns out not be as inflexible as it is first characterized -- especially if the reply to the offer contains an acknowledgement or concession that shows the recipient of the offer is listening to the points being raised by his or her opponent and is fairly responding to them.

 

This is not to say, of course, that firm, upper-case Final Offers do not have their place. Every party comes to the table with a point beyond which it can compromise no further, and all good mediators respect this. As always, though, the most effective mediators will not give up until they have explored every avenue towards resolution. If the claim fails to resolve at the mediation proper, the best mediators will work to keep the conversation going afterwards, via telephone, text or other means, until all parties are assured that every effort has been made to bridge the gap and resolve the claim on terms everyone can live with.