You are representing a client in a multi-party dispute, and no one wants to offer more than the other party to settle the case. Everyone is pointing at someone else or trying to lay low in order to avoid attention. The parties are dug in and heading full steam toward an expensive trial. A unique mediation approach for this type of multi-party dispute is a “blind mediation.” In a blind mediation, the mediator obtains confidential numbers from all the parties and discloses only the gap between the plaintiff’s demand and the defendants’ collective offers. Individual contributions and the final settlement amount remain confidential throughout the mediation and in the settlement documentation. You need to know some important details about this mediation approach.
When the parties agree to negotiate under a blind mediation format, the amount of information provided to each party during the negotiations is dramatically reduced. The mediator will publish the plaintiff’s opening demand to all the defendants. However, going forward, the mediator will not disclose a single defendant’s settlement offer to any of the other parties – not the plaintiff nor the other defendants. The defendants each make confidential contributions to the settlement pot, and the mediator going forward simply discloses to each defendant the gap between the plaintiff’s new demand and the defendant’s collective offer. The plaintiff will know the total amount offered by the defendants but will not know any individual contribution from a specific defendant. When a settlement is reached, the plaintiff will know the total amount accepted to settle the case, but will not know how much each defendant contributed.
The advantage in this process is that the mediator has the opportunity to diffuse hard bargaining tactics in which one defendant may open with an unrealistically low number that may chill the process. This extreme positioning may be set off in a blind mediation by a more realistic contribution from other defendants, which ultimately will produce a more encouraging gap. Once the gap begins to narrow, all defendants may be willing to help close the gap in order to have a successful settlement.
One significant advantage to blind mediation is that it avoids one party conditioning an offer upon a proportionate move from other parties. Parties rarely agree on the same proportionality, and a blind negotiation prevents those types of demands in negotiations. The defendants are blind to the amount that the others contributed to the settlement pot. There will be no conditioning the next offer “so long as the other defendant offers more.”
One significant disadvantage to blind negotiation is the constant attempt to gain information from the mediator (or other lawyers) that slow the process. We all know that information is gold during negotiation. Lawyers are constantly looking for leakage of information from the mediator so that they can gain an upper hand in settlement negotiation. The mediator must guard each party’s position zealously. Any leakage of the parties’ positions will dramatically reduce the chances of settlement. The same is true if the lawyers give up information in the hallway. The negotiations need to be kept blind in order to increase the chances of success. But it also may make the mediation process a bit slower.
The successful blind mediation will result in a settlement agreement which contains confidential attachments for each party’s contribution. The mediator retains the original document with the confidential attachments confirming the contribution from each defendant. The settlement funds are paid through the mediator’s trust account to protect the blind status of negotiations. The funds are released consistent with the terms agreed to by the parties in the settlement agreement.
A blind mediation is used often in construction disputes, but is also beneficial for multi-party business dispute. Like any mediation, lawyers that come prepared to participate in this type of mediation will be able to better advocate for their clients. For more detail, please read more at Mark J. Heley, Mediation of Construction Cases Using “Blind Negotiations”: Can Providing Less Information Generate Better Results?, 34 Wm. Mitchell L. Rev. 273 (2007).