Negotiating is a method that can be used to resolve a dispute that involves one or more parties. Ideally, there are mutual concessions and compromises, information exchanged, hopefully mutual understanding and, at the end, a resolution that at least partially meets both sides’ needs. Generally, the party filing a lawsuit is the one who asks for or submits a demand to settle the matter. How can the amount of the demand be justified?
However much the demand, it needs to be grounded in the facts and applicable law. If facts are being fabricated and claims are being based on laws that have been changed or superseded, any amount asked for is too much. If there is truly no case there is no basis, in good faith, to make a demand.
An additional way to ask for too much is acting in bad faith. If the client has no real interest in settling or negotiating and an outlandish settlement demand is being requested, the attorney as well as the client will get nowhere. There needs to be elements, even if they’re slight, of trust and good faith by both sides.
Demanding a million dollars to settle a case that’s realistically only worth $100,000 will most likely ruin any good faith and trust there may have been between the parties. No one appreciates having their time wasted or wants to feel like they’re being bamboozled. The legal system is not a child’s game; the client needs to be mature and behave like an adult.
When a demand is made, it is necessary to consider the likelihood of success. If the case “goes all the way” to a verdict, as best as you can guess, how likely are the odds the client will be successful? The greater the odds, the higher the demand. If the attorney feels that perhaps the odds are not necessarily on their side, the lower the demand.
It is imperative to justify the demand. A beneficial aspect of deciding on the amount for a demand is doing research on settlements and verdicts of similar cases — associating the case to a comparable matter is a helpful way to validate your reasoning.
If the client lacks the resources to “go all the way” and the other side does not lack in these resources, it may be a reason for a discount. The client’s acceptance of a lower settlement agreement is better than him burning up resources in a battle of motions and court appearances with nothing left to pay the costs that a trial would require. In that case, the client may end up with nothing and the attorney could be waiting a substantial amount of time to be paid.
With that in mind,
- Negotiations are made up of anchors (the number you put on the table), counteroffers and concessions by one or both parties.
- It is important to know the target (what the client realistically wants) and the reservation point (when the client walks away).
- If the client has no reservation point and is unwilling or unable to walk away no matter how low the offer, the attorney is not negotiating a settlement — he or she is negotiating a surrender.
If the offer given is the desired target, in all likelihood in the end, the amount received will be less than the anticipated target. The trick is to maximize the settlement by walking away with at least the wanted target and ideally more than that. The devil is in the details. Ask for too much and the other party might not take the demand seriously or become angry. Ask for too little and the client will not be benefiting from the optimal negotiation result.
Negotiation isn’t just pitching numbers back and forth. It is important to understand what the other side desires. Both sides need to feel they’ve been at least in some regard successful. The attorney needs to explain how meeting the client’s demand will be in the opposing sides’ best interest. The other party is not just there to make the client happy, they need to profit from the negotiation as well.
An additional way to make the negotiating process a bit simpler is my MidPoint Calculator. This tool helps calculate hypothetical offers with ease, track offers and demands, keep track of the negotiation data, email your history to yourself and save valuable mediation time. The clients that have used this tool have found it to be extremely useful in evaluating their negotiating options. This tool is just one more way to justify your demand and give your client the optimal mediation outcome.