Inside the Caucus:An Empirical Analysis of Mediation from

Within

Dan KlermanLisa Klerman

Conference on Empirical Legal StudiesUC Berkeley Law School

November 7, 2014

Summary• Empirical study of mediation practice– 400 employment related cases

• Unique, because mediation and settlement negotiations are confidential

• 94% overall settlement rate• Analyzed– Factors influencing settlement– Factors influencing settlement amount– Pattern of offers and counter-offers

• Welcome suggestions– What else can do with these data?– What data should collect in future?

Context• 2011 Survey of Fortune 1000 Corporate Counsel– Mediation is most common form of ADR• Used “Frequently” or “Always” by 48% of companies• Use increasing since 1997 Survey

– Contrast to arbitration• Used “Frequently” or “Always” by only 19% of companies• Use decreasing since 1997 Survey

• Very little known about mediation, because process usually confidential

Lisa’s Mediation Practice• Private• Consensual• Paid• Parties represented by lawyers• Los Angeles County• Employment disputes– Discrimination, Whistleblower, Wrongful termination– Class Actions

• One intense day plus preparation & follow-up• Average settlement amount: $176,210

Mediation Techniques• Evaluative versus facilitative mediation• Caucusing• Bracketed offers– Defendant says, “I will offer $200,000 if plaintiff reduces

its demand to $400,000”– Plaintiff says, “I will reduce my demand to $500,000, if

defendant increases its offer to $300,00”• Mediator’s proposal– Mediator proposes settlement to parties– If both parties accept, case settled– If only one party accepts, acceptance is not

communicated to the other party

Factors Influencing Settlement Rate• 94% overall settlement rate• Class Actions: 85%• Plaintiff lawyer mixed practice: 87%• Pro-bono cases: 80%• Mediator’s Proposal: 99%• 98% settlement rate if four or more rounds of bargaining• 88% settlement rate if plaintiff’s first offer more than 75

times as high as defendant’s first offer• No significant differences by– Plaintiff gender– Lawyer gender– Law firm size

Bargaining• Plaintiff usually made the first offer• Parties start very far apart–On average, plaintiff’s first offer was 68 times

higher than defendant’s first offer• Median rounds of bargaining: 4• Mediator’s proposal in 89% of cases• If case settles without mediator’s proposal, plaintiff

accepts defendant’s offer• Condition in bracketed offer seldom accepted– But bracketed bargaining induces 40% larger concessions

Settlement Amounts• Cases settle much closer to defendant’s opening offer– ¼ of difference between plaintiff’s and defendant’s first offer– E.g. if defendant’s first offer was 10K, and plaintiff’s first offer was

680K, then average settlement was 175K = 10K + 0.25 x (680K-10K)

• Settlements closer to plaintiff’s initial offer if initial offers are closer– 1/3 if ratio of plaintiff to defendant’s offers is less than 15– 16% if ratio is greater than 75– Explicable if defendants’ offers are not significantly affected by

plaintiffs’ offers• But some plaintiffs start with more realistic offers, while others

“shoot the moon.”– Or explicable if plaintiffs’ offers are not much affected by

defendants’ offers

Plaintiff’s and Defendant’s Offers (Normalized)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1 2 3 4 5 6 7 8

Offer Amount(Normalized)

Bargaining Round

Plaintiff's offers, if 1round of bargaining

Defendant's offers, if 1round of bargaining

Plaintiff's offers, if 2rounds of bargaining

Defendant's offers, if 2rounds of bargaining

Plaintiff's offers, if 3rounds of bargaining

Defendant's offers, if 3rounds of bargaining

Plaintiff's offers, if 4rounds of bargaining

Defendant's offers, if 4rounds of bargaining

Plaintiff's offers, if 5rounds of bargaining

Defendant's offers, if 5rounds of bargaining

Plaintiff's offers, if 6rounds of bargaining

Defendant's offers, if 6rounds of bargaining

Plaintiff's offers, if 7rounds of bargaining

Defendant's offers, if 7rounds of bargaining

Conclusion• No significant gender differences• Mediation can be very successful• Parties settle, in spite of starting very far apart• Mediator’s proposal is most important technique• Caution about interpreting data– Cases are not random selection of all cases– Party strategies and mediator techniques are not

randomly chosen• Further empirical work– What else could do with these data?– What data should collect in future cases?