Inside the Caucus:
An Empirical Analysis of Mediation from
Within
Dan Klerman
Lisa Klerman
Conference on Empirical Legal Studies
UC 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 (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)
1
Plaintiff's offers, if 1
round of bargaining
0.9
Defendant's offers, if 1
round of bargaining
0.8
Plaintiff's offers, if 2
rounds of bargaining
Defendant's offers, if 2
rounds of bargaining
0.7
Plaintiff's offers, if 3
rounds of bargaining
Offer Amount
(Normalized) 0.6
Defendant's offers, if 3
rounds of bargaining
0.5
Plaintiff's offers, if 4
rounds of bargaining
0.4
Defendant's offers, if 4
rounds of bargaining
Plaintiff's offers, if 5
rounds of bargaining
0.3
Defendant's offers, if 5
rounds of bargaining
0.2
Plaintiff's offers, if 6
rounds of bargaining
Defendant's offers, if 6
rounds of bargaining
0.1
Plaintiff's offers, if 7
rounds of bargaining
0
1
2
3
4
5
Bargaining Round
6
7
8
Defendant's offers, if 7
rounds 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?