Splitting the Difference
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I finished my opening statement and the plaintiff began telling her side of the situation that brought on the lawsuit which centered on some work the Defendant performed for the Plaintiff and the quality and cost of the services provided. When she completed her side of the story, I turned to the Defendant for him to explain the circumstances as he saw them in regards to the matter we were mediating. He did not give much of an explanation and cut quickly to the chase. He told her that he did not like having dissatisfied customers, and wished she would have given him the chance to remedy the situation rather than her paying someone else to redo the work. The amount she was suing him over was the cost of having the job redone. He told her, “I don’t want any bad feelings over this, can’t we just split it down the middle?”
I looked back at her and she replied, “Sure. That would be fine.” He wrote a check and the matter was settled. It was one of the quickest and easiest mediations I have been involved with, and proves that sometimes we just need to communicate with each other and we can avoid or minimize disputes and litigation over matters that are more easily resolved without lawsuits. The main point I want to make with this story is that sometimes meeting in the middle is a viable solution and an easy way to resolve problems. However, contrast this with another matter I was involved with while working as a Claims Attorney with ALPS.
The Insured was being sued for malpractice over a missed statute of limitations on a medical malpractice claim. Liability was clear regarding the legal malpractice; the complaint was not filed in time. The underlying medical malpractice claim and alleged damages were not so clear. The demand was $1.2 million and I had valued the claim between one hundred and two hundred thousand dollars, taking into consideration the expense of litigating such a claim. This was still early, but we had some very positive discovery to support this valuation including an excellent IME (Independent Medical Examination).
I flew out of state to attend an early settlement conference with the Insured and the defense counsel representing him. I wanted to personally see the Plaintiff and Plaintiff’s counsel during the negotiations. Plaintiff opened with their $1.2 million demand. We countered with a one hundred thousand dollar offer. The settlement master wanted to move us into the five to six hundred thousand dollar range, and kept telling us that is where it should settle. I was very firm in saying that we were not going to move much unless the Plaintiff moved considerably. They moved a little, and I came back with an offer of one hundred and fifty thousand. I told them we were not going any higher unless they came down into the legitimate ball park of settling the case. They moved to nine hundred and fifty thousand. The settlement master kept pressuring us to move up in increments to reach the five to six hundred thousand dollar range, again working us toward the middle.
The next move surprised everyone. I told them that was it. Our offer remained at one hundred and fifty thousand, and I was heading back to Montana. The Plaintiff and Plaintiff’s counsel were furious and the settlement master was angry, but it was not something I believed should be met in the middle. They provided nothing to change my initial valuation of the case. A few months later, when the Plaintiff came into the range that I thought the case was worth, we did settle for a little over two hundred thousand dollars.
I share these two cases to illustrate that meeting in the middle, or splitting the difference, can be an effective closing tactic in certain situations, but not always. Many times the negotiation dance leads both parties toward a particular settlement range, and once in that range, many negotiators will attempt to close by giving a summary of the negotiations and saying something like, “because things are so close, why don’t we just split the difference?”
This can be very effective, and many negotiations end this way. It is probably one of the most popular closing tactics. However, there is a presumption that both parties started with fair opening offers. If one party of the negotiation uses an exaggerated opening offer or demand, such as in my second example, and then suggests working toward the middle or splitting the difference, it can sometimes be considered more of a hardball tactic attempting to pressure the other side into doing something they would not otherwise do.
Meeting in the middle, or splitting the difference, is not necessarily going to work until you have negotiated into an acceptable settlement range of both parties. Therefore, you should not immediately look toward moving to the middle once two opening positions have been declared. In the example above there was no way I was going to move toward the middle ground of five to six hundred thousand dollars. Use this tactic only when you have negotiated into the acceptable settlement range and it appears that it will be a beneficial closing strategy to seal the deal.
Alain Burrese, J.D. is a mediator/attorney with Bennett Law Office P.C. and an author/speaker through his own company Burrese Enterprises Inc. He writes and speaks about a variety of topics focusing on the business areas of negotiation and success principles as well as self-defense and safety topics. He is the author of Hard-Won Wisdom From the School of Hard Knocks, several instructional dvds, and numerous articles. You can find out more about Alain Burrese at his websites http://www.burrese.com or http://www.bennettlawofficepc.com
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