The Mediator’s Proposal

Good mediators have many tools for breaking impasse: bracketing, decision-tree analysis, anchoring and reframing among them.   In the past few years, the mediator’s proposal has become a popular approach to settling cases at the end of the day when neither party wants to make further concessions.

What is a mediator’s proposal?  It is a compromise amount presented in writing, privately, to each party, to which they can respond, also in writing, “yes” or “no.”   The amount usually is the mediator’s educated guess as to what settlement terms may be acceptable to everyone, but sometimes it may reflect a mediator’s judgment of what the case is worth.  Mediators should tell the parties which approach they are using. If there are two “yes’s,” the case is settled.  One or two “no’s” means there is no settlement.

Should a proposal be made without the consent of the parties?  No.  Parties may perceive an unsolicited proposal by the mediator as trying to impose a settlement they may not want or are not ready to consider.   It should be made when the parties have made progress toward settlement, there is a manageable gap between their positions, and they want the mediator’s input.

What terms should be included in the proposal?   The proposal should be in writing to avoid ambiguity and possible confusion about its terms.  Sometimes, the parties may just want an amount and, if they agree, they will work out the additional terms, e.g., whether it will be paid in a lump sum or installments; if the latter, whether it will bear interest or require security.  In more complex cases, the parties may want other terms and conditions to be spelled out.  In practice, parties who accept the mediator’s proposal generally have no problem fleshing out the details.

When should parties respond to a proposal?   It’s up to the parties.  Sometimes they are willing to respond immediately after a brief period for conferring.  In other cases, they may want several days, especially when the decision-maker or adjuster is not present at the mediation.

What happens when one party accepts the proposal and the other rejects it?  If both parties say “yes,” the mediator congratulates them on reaching a settlement.  If there is a “no” or two “no’s,” the mediator simply says there is no settlement without disclosing either side’s response.  The rejecting party will not know how the other party responded.  The accepting party will know how the adversary responded, but its own negotiating position will be preserved because the adversary will not know it said “yes.”

Is an accepted proposal binding if signed only by counsel?  CPLR 2104 makes settlement agreements binding when signed by a party or his attorney. Settlement agreements signed only by counsel are binding only if the attorney had actual or apparent authority, Hallock v State of New York, 198464 N.Y.2d 224, 45 N.Y.S.2d 510.   To avoid collateral litigation when a client later contests her attorney‘s authority, it is best to have both the client and the attorney sign the accepted proposal.

What happens if the mediator’s proposal is not accepted by both parties?  In some cases, the mediation is over.   But sometimes, when the parties remain interested in settlement, the mediator may continue to try to bridge the gap.  Since the rejecting party does not know what the other party did, and the accepting party knows it will have to modify its offer to get a settlement, there is room for more negotiation.

What are the benefits of a mediator’s proposal?   It may give parties who want to settle but have reached an impasse one last chance to reach agreement.  It avoids the problem of reactive devaluation, the tendency to reject any proposal made by an opponent, because the proposal is made by a neutral person.  And sometimes it may allow the party representative to tell his boss that he stayed firm but “the mediator made me do it.”  In short, in many cases, it works.

What are the possible disadvantages of a mediator’s proposal?  Some suggest that experienced counsel may try to game the mediator by posturing and taking unrealistic positions in order to create an impasse, knowing the mediator, especially one who has a reputation for frequently using mediator’s proposals, will make a proposal.   This notion ignores the fact that sophisticated lawyers frequently “play” the mediator anyway.  And rumor has it that mediators themselves sometimes game the parties, for example, by presenting a settlement idea as their own when it really was suggested by a party.   Another perceived disadvantage is that by making a proposal that one side believes unfair, the mediator may be perceived as biased, making it more difficult to settle the case if the proposal is not accepted.

Not every mediator uses mediator’s proposals.  Among those who do, there is variety in how they formulate and present their proposals.  Attorneys choosing a mediator are well-advised to ask mediators being considered whether and how they use mediator’s proposals.


Copyright Richard S. Weil, February 2017