Mediation. CELS - USC Gould School of Law

Inside the Caucus:
An Empirical Analysis of Mediation from
Dan Klerman
Lisa Klerman
Conference on Empirical Legal Studies
UC Berkeley Law School
November 7, 2014
• 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?
• 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
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
• 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
• 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 (680K10K)
• 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)
Plaintiff's offers, if 1
round of bargaining
Defendant's offers, if 1
round of bargaining
Plaintiff's offers, if 2
rounds of bargaining
Defendant's offers, if 2
rounds of bargaining
Plaintiff's offers, if 3
rounds of bargaining
Offer Amount
(Normalized) 0.6
Defendant's offers, if 3
rounds of bargaining
Plaintiff's offers, if 4
rounds of bargaining
Defendant's offers, if 4
rounds of bargaining
Plaintiff's offers, if 5
rounds of bargaining
Defendant's offers, if 5
rounds of bargaining
Plaintiff's offers, if 6
rounds of bargaining
Defendant's offers, if 6
rounds of bargaining
Plaintiff's offers, if 7
rounds of bargaining
Bargaining Round
Defendant's offers, if 7
rounds of bargaining
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?

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