Friday, April 13, 2012


Oftentimes, all we need to do to resolve a dispute is arrive at an agreed-upon value for the subject of the dispute--whether that is a lawsuit, or a company, or a piece of property. It therefore behooves the parties to come to mediation armed with as much objective information as they can get that would support the value they are seeking. In the case of property, that might be an appraisal. In the case of a lawsuit, that might be legal authority or jury verdict information. I mediated a case recently where the parties were on the verge of signing a deal, based on a shared understanding of an item's potential value. In reviewing their file before making this commitment, however, one side discovered some new information that changed their opinion, and walked out. Better preparation might have avoided this outcome.

I was involved in another situation where one of the parties might have been overly focused on obtaining objective information about the value of the subject of the dispute, wanting more and more detailed information about how a judge might rule on some issues, and how the item in dispute might be appraised, before even commencing a negotiation. I say "overly focused" because it is often impossible to arrive at an objective evaluation of the value of what is at stake in a dispute. A range of outcomes is possible in every case, based on how different judges or juries might decide certain issues, or how the evidence might be presented. Those decisions are not always based on objective or rational factors.

Parties are often uncomfortable with that inherent uncertainty. Sometimes even more importantly, parties lose sight of the fact that their continued litigation over the value of whatever is in dispute could wholly destroy any value to be gained. In other words, it may cost more to fight over something than the thing is worth. That means the parties need to trust themselves to arrive at an evaluation of a reasonable price at which a dispute can be settled.

Sometimes parties come to mediation expecting the neutral to provide the objective valuation they are looking for. They might be shortchanging themselves if they do that. Even an expert in the field, or an experienced judge, can only arrive at one possible independent valuation of the problem, which may not be any more accurate than another. A neutral's recommendation may well be skewed toward one end or the other of the range of possible valuations of the subject of the dispute. Accepting that recommendation may not lead to a better result than the parties could have obtained themselves. I'll let people in on a mediator's trade secret: The fact is that most mediators' recommendations are not entirely based on a true objective determination of the value of the item, but rather on what the mediator thinks both sides are likely to be able to agree on. In other words, when you ask for a neutral evaluation, you might just be getting the neutral's evaluation of what you yourself are thinking.

The true value of the subject of a dispute is the value that the parties arrive at themselves, just as the true value of any piece of property in a commercial transaction is the amount that a willing buyer would pay a willing seller for it. Today, our local bankruptcy court approved the acquisition of the LA Dodgers by a group led by Magic Johnson, for more than $2 billion. Many experts seem to think the buyers paid too much, based on objective measures of future business projections. But nobody can say that for sure. The buyers and the seller both seem happy with the deal. The buyers had many reasons, not wholly based on an objective appraisal of team's value, for wanting to pay whatever it took to acquire this unique asset. Maximizing their return on investment may not be their only goal. The only way we can measure whether the buyers  made a wise decision, will be to check back and see if Magic is still smiling in a couple of years.

I like to ask parties at the conclusion of a negotiation how they think they will feel about their decision the next morning, or perhaps a year from the date of settlement. Most likely the amount they paid, or accepted, to resolve the dispute, will recede in significance, and they will be glad they put the dispute behind them.

(AP photo)

1 comment:

Lighthouse Mediation said...

Assessing the value is difficult. During mediations where the parties have disagreed about the value of an item or piece of property, I ask them to consider a range of values. For the sake of an easy example party A may feel the value of a car is $25,000 whereas party B may feel the value is closer to $15,000. I’ll ask them to consider the high range and low range for the car. Party A may concede that the maximum value of the car is $30,000 and the low end the car may be worth $12,000. Party B may say $22,000 is the high end and $12,000 is the low end. When parties are able to see where their ranges overlap it helps negotiations move forward.
Also, in the case of the client who discovered new information and it stopped the negotiations that probably wasn’t a bad thing. Whenever clients need more information before signing an agreement, I encourage it! I find that scheduling a second session helps make sure the agreements that the clients reach are durable and that they are made with all the necessary information.
Ivy Roberts
Seattle Based Mediator