Approaching Damages with a Mediation Mindset
| N. Denise Asher | ||||||||||||||||
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Not very helpful, huh? But because the mediation process is inherently flexible, that’s really the only short answer. The factors which shape a more specific (and more enlightening) response are myriad, including:
- The identity of the parties, decision makers, and counsel;
- The type of case;
- The timing of the mediation;
- The value of the case;
- The identity, background and approach of the mediator; and
- The quality of the damage presentation, and demeanor of the presenter.
The approach to presenting damages in a personal injury case with an experienced adjuster will necessarily be different than one involving an employment dispute with uninsured claims where the defendant employer has never been through the process before. The relative sophistication level of the parties and decision makers dictates in some measure the type of information which will be most effective.
Also important is the timing of the mediation: At what point along the litigation continuum are the parties situated? Is the mediation taking place pre-litigation, or after the parties have exchanged substantial discovery? Is there a dispositive motion pending? Have expert depositions been completed and trial is a week away? The amount of information available to the parties, and whether they wish to share it, is often directly related to the timing of the mediation.
For obvious practical reasons, the value of the case also plays a huge part in how damages are addressed at mediation. A plaintiff in a serious injury case seeking hundreds of thousands of dollars in damages might break out all the bells and whistles to present their damages at mediation: detailed life care plans, day-in-the-life videos, charts and graphs, detailed reports or even live presentations by key experts. That type of approach would not be necessary, nor economically feasible, in a case involving a more modest damage claim. Likewise, depending on the value of the case, a defendant may invest considerable financial resources to conduct surveillance to defeat or minimize damage claims, and present the fruits of that surveillance at the mediation.
The mediator’s background and style also play a role, not just at the selection stage, but in how damages are presented during the mediation process. Does the mediator have subject-matter expertise with regard to the types of damages recoverable in the case being presented, or do you need to brief the mediator on those issues? Does the mediator have experience valuing the claims being mediated, including knowledge of the settlement and verdict range of the case? Will the mediator’s background allow them to understand and persuasively convey your damage positions to your adversary? Will the mediator be able to assist you in helping your client fully understand the strengths and weaknesses of the parties’ respective damage evaluations, in order to assess the potential outcomes if the case is not resolved?
Finally, and perhaps most importantly, mediation is about convincing and persuading the other side to see your point of view. Not because the other party is likely to ever agree with you, but rather because it translates to your opponent being able to appreciate the risks of not resolving the case at mediation. Practically speaking, this means addressing damages in the same way you would to a jury. For the plaintiff, this means claiming only damages recoverable under the theories plead, with evidence to back it up. For the defense, it means asserting only defenses which are supported by the evidence. A well-prepared, evidence-based, professionally-delivered presentation is going to be far more persuasive than one filled with ranting, raving, and hyperbole. The former educates and convinces; the latter frustrates and polarizes, offering your client little hope of resolving the dispute.
2. PRESENTING AND DISPUTING DAMAGES AT MEDIATION
Effectively presenting damages at mediation starts long before the actual session. So much can, and should, be done in advance of the mediation to maximize the potential for settlement.
(1) Briefs: Confidential v. Exchanged
One of the most effective and cost-efficient ways of helping the other side evaluate your position on damages is to provide a written brief, supported by key evidence. For those presenting claims, damages should be itemized and back-up documentation provided. Similarly, when arguments are being made to minimize or defeat damages, supporting evidence should be provided. To maximize effectiveness, briefs should be exchanged sufficiently in advance of the mediation to allow decision-makers adequate time to review and thoroughly digest the information presented.
Despite the benefits of exchanging briefs, many parties remain reluctant to do so and insist on submitting briefs confidentially to the mediator only. While that decision certainly remains within the sound discretion of counsel, it should be made after considering the pros and cons of exchanging briefs in any given case. Waiting until the mediation to give the other side your damage analysis can result in delays necessitated by having to get the information to decision-makers not present at the mediation.
(2) Preparing the Client
For many clients, this will be the first time they have ever participated in a mediation. Many don’t know what to expect, and the process of negotiating damages by trading demands and offers is foreign at best, and sometimes, downright distasteful. A person injured in an accident who hurts every day wants to know why the insurance company is being so unfair. An employer who feels betrayed and taken advantage of because they are being sued by a former employee wants to know why they have to pay money for what they believe is extortion.
As their counsel, you can help your clients through the process by preparing them in advance regarding what to expect. Explain the negotiation process, and the roles of the parties present. The more your clients understand about the process coming in, the less chance there will be for fear and distrust to create roadblocks to resolution.
(3) Pre-Mediation Contact with Mediator
Unlike other forums which prohibit ex parte contact, it is entirely permissible to contact the mediator in advance of the mediation session to discuss issues or concerns better handled outside the briefing process. Whether by email, telephone call, personal meeting, or a separate “for mediator’s eyes only” brief, don’t hesitate to let the mediator know any information you believe might assist or hinder resolving the case.
B. Preparing and Presenting Damages and Defenses
As discussed previously, the best damage presentations at mediation are ones which most closely resemble those which would be presented at trial. Not surprisingly, one good approach to crafting a damage presentation is to look to applicable jury instructions for guidance on what will be required to prove a claim or defense. See Judicial Council of California, Civil Jury Instructions (CACI Instructions).
To determine or confirm the types of recoverable damages in any given case, you may search the Table of Instructions by theory of liability, or the Index by type of damage sought. These will lead you to specific jury instructions which set forth the elements required to be proven, as well as Directions for Use of the instruction and Sources and Authority discussing the element of damages.
Once an outline of types of recoverable damages is prepared, gather evidence to support or defeat each element of the types of damages sought. If you will be relying on documents at trial to prove or dispute damages, provide them at mediation. If witness testimony is critical to support a certain element of damage, present the testimony in some compelling fashion at mediation.
With those basics in mind, what follows are suggestions for preparing convincing presentations as to certain types of damages.
(1) Special Damages:
Special damages are usually straightforward and fairly simple to present and dispute in mediation, and include medical expenses (CACI 3903A), loss of earnings and earning capacity (CACI 3903C and 3903D), loss of the value of household services (CACI 3903E), damages for breach of employment contract (CACI 2406), and damages for wrongful termination in violation of public policy (CACI 2433). For any type of special damage being sought, plaintiff should ensure defendant has an itemized summary of the amounts claimed, as well as appropriate back-up documentation to support those damages.
Currently, one of the most common disputes regarding special damages concerns the amount of medical expenses recoverable by plaintiff in personal injury cases when some portion of those expenses has been paid by a collateral source. This issue is the subject of numerous appellate court decisions, and is currently under review by the California Supreme Court. Accordingly, the details concerning that dispute are better left for discussion another day. Suffice it to say, if recovery of medical expenses is an issue in your case, you should be intimately familiar with this line of cases. (See, e.g., Hanif v. Housing Authority of Yolo County (1988) 200 Cal.App.3d 635; Nishihama v. San Francisco (2001) 93 Cal.App.4th 298); Greer v. Buzgeheia (2006) 141 Cal.App.4th 1150; and Howell v. Hamilton Meats (2009) 179 Cal.App.4th 686, rev. granted.)
(2) Defenses to Special Damages
Defenses to special damages include:
- The medical treatment sought was not reasonably necessary and/or the amount of the expenses is unreasonably high based on market standards;
- The damages sought were not caused by the defendant’s conduct, but rather were related to a pre-existing injury or some other cause;
- Plaintiff failed to mitigate his/her damages.
If the defendant is asserting such defenses, a summary of the arguments should be provided to plaintiff, along with supporting evidence. This would include reports by medical experts as to the reasonable value of medical expenses, medical testimony regarding the cause of plaintiff’s injuries, including pre-existing injuries, and medical records demonstrating pre-existing same or similar injuries.
(3) Liens
Another common impediment to resolving a personal injury case is the presence and/or amount of liens which must be satisfied in order to resolve the claim. Liens take many shapes and sizes. They can range from hundreds of dollars to hundreds of thousands of dollars. They can be asserted by medical providers, private health insurers, worker’s compensation carriers, governmental entities (local, state and federal), prior counsel, and the list goes on. Failure to satisfy certain liens (i.e., Medicare) can subject counsel and carriers to personal liability, and many insurers will not resolve a case without proof that such liens have been satisfied.
To the extent plaintiff’s counsel is aware of liens, it is helpful to have made contact with the lienholders prior to mediation to determine whether a reduction of the lien can be negotiated and, if so, the likely final amount. If contact with the lienholders is left to the time of the mediation, it can prevent settlement of the case and/or necessitate delays and subsequent sessions while these issues are worked out.
(4) Presenting and Disputing General Damages
Because general damages are not subject to calculation by reference to a formula or other precise mathematical computation, they are obviously more difficult to present, dispute, and value in mediation. As discussed below, creativity and specificity are critical to effectively presenting and disputing general damages in mediation.
(A) Claims for General Damages
As with special claims, the CACI instructions provide helpful guidance for presenting general damages in mediation. For example, with regard to physical injuries, CACI 3905A provides a list of the types of harm for which an injured person may seek damages, including: physical pain, mental suffering, loss of enjoyment of life, disfigurement, physical impairment, inconvenience, grief, anxiety, humiliation, and emotional distress. Similarly, CACI 3921 sets forth the general damages available in wrongful death cases including the loss of the decedent’s love, companionship, comfort, care, assistance, protection, affection, society, and moral support.
At mediation, a plaintiff seeking general damages should be prepared to present specific examples and evidence to support each of the types of harm sought to be recovered. Generalizations are not helpful. For example, “I hurt all the time” does very little to help a defendant evaluate the claim. On the other hand, specific examples of how an injury affects the plaintiff’s activities of daily living, work, recreation, and family activities can be much more persuasive, such as: “The pain keeps me up all night;” “the scar is really embarrassing whenever I wear a sleeveless blouse;” “I can’t play basketball in the driveway with my kids anymore”, etc. Likewise, a family seeking damages for the death of a loved one will be most effective in conveying their loss if they provide examples of the family’s life before and after the death. For example, “Mom won’t be here to help me learn how to put on makeup;” “Dad used to always help me with my homework and now I’m struggling in school;” “my husband and I were best friends and traveled everywhere together, and now I have to go alone.” Knowing your client and learning how the injury has affected their life are paramount to conveying a solid general damage picture at mediation.
Almost without exception, a picture is worth a thousand words, and a video is even more compelling. If the case warrants the expense, consider using trial presentation software such as Trial Director or Sanction to present your damages to the mediator and opposing party via photographs, video clips, day-in-the-life videos, or other demonstrative evidence. If the case has a more modest value, think about other creative ways to present key evidence and testimony. For example, almost everyone has a cell phone with a video recorder that can be used to record short witness statements which can be played at mediation. Or for long-distance witnesses, consider having them appear by Skype or other video-conferencing technology. The time and effort invested to marshal the evidence in a compelling fashion are usually far outweighed by the benefits achieved in effectively telling the plaintiff’s story.
(B) Minimizing or Defeating General Damages
The same advice against making generalized arguments holds true for disputing or limiting damages. Arguments that plaintiff “doesn’t seem all that hurt” or “she’s exaggerating” do little to cause plaintiff’s counsel to reevaluate the demand for general damages. However, evidence contradicting or undermining the plaintiff’s damages or credibility can be very effective.
For example, reference to medical records in which the plaintiff denies pain or shows no objective signs of pain (i.e., no tenderness to palpation) can be quite persuasive. Documented delays in treatment, failure to appear for appointments, or other evidence demonstrating a plaintiff was non-compliant in care can also be damaging to a plaintiff’s general damage claim at trial.
Probably most effective in defeating or minimizing a plaintiff’s general damage claim is evidence which impeaches the plaintiff’s credibility. Surveillance photographs and/or videos of plaintiff engaging in activities they claim to be impossible or painful can be highly effective in discrediting plaintiff, and can cause the jury to mistrust other aspects of the plaintiff’s claims.
A tool being used with increasing regularity to impeach the plaintiff’s credibility and damages is mining information from social networking sites. Photographs posted by plaintiff doing the limbo at a party three weeks after an accident when she was allegedly unable to get out of bed can be fatal to a plaintiff’s claims. Comments posted by an employee about his lawsuit against his former employer, bragging he will soon be getting rich off the case, can be similarly deadly in front of a jury.
Defendants are often reluctant to reveal at mediation that they are in possession of this type of evidence, or at least the details of it, as they want to hold it for trial. It should be remembered, however, that plaintiff’s counsel who would otherwise stand firm on a demand, may well change their evaluation of the case if they know their client’s credibility will be under attack at trial.
(C) Use of Verdicts and Settlement Reports
The utility of verdict and settlement reports is directly proportionate to the level of care counsel uses to locate results which are substantially similar to the case being mediated. If time is dedicated to finding substantially similar results, they can be very helpful and informative. On the other hand, it does no good to produce a stack of million dollar verdicts which include the injury at issue (i.e., a fractured ankle or torn rotator cuff), but which also involve a multi-level spinal fusion or loss of a major league pitching career. Likewise, submitting defense verdicts in cases involving similar injuries offered in the mediation of a case with clear liability are similarly worthless. If you’re going to submit reports, look for results involving substantially similar injuries and specials, which are fairly recent, and from the same or similar jurisdiction
Although the “American Rule” requires each party to pay its own attorney’s fees, many exceptions exist. These include disputes involving a contract with an attorney’s fees provision, elder abuse claims, certain employment cases, and other claims as established by statute.
In situations where attorney’s fees are recoverable, it is often advisable to seek mediation early in the process to minimize the potential that attorney’s fees begin to drive the negotiation. For example, in an employment discrimination claim where the economic damages are relatively low, pre-litigation mediation may be ideal as the claim can be resolved based on the actual damages, before considerable attorney’s fees are generated. If that same case is mediated after substantial discovery, law and motion, and trial preparation have been done, the attorney’s fees claim is likely to dwarf the amount of actual damages, and may become an impediment to resolving of the claim.
Every case is unique, and the timing of the mediation must be made on a case-by-case basis. But when attorney’s fees may be recoverable, it is a factor which should be considered in the decision making process.
(6) Punitive Damages
Except in unusual cases, the availability of punitive damages on a particular claim is given little weight by defendants in mediation. Simply because punitive damages are available on a certain claim does not mean a jury is likely to award them; indeed, such awards are rare.
If the plaintiff intends to seriously argue punitive damages as part of their damage claims in mediation, they must come loaded for bear to have any effect on the evaluation by the defense team. This means presenting at mediation clear and convincing evidence of malice, oppression or fraud in such a compelling fashion that a defendant is convinced to include the exposure to punitive damages as part of their risk analysis.
One situation in which claims for punitive damages may have an effect on negotiations is when a defendant is insured against some claims, but is facing personal exposure on other theories which carry the potential of punitive damages. This issue is discussed in greater detail below in the section on The Intangibles.
(7) Non-Monetary Options and Equitable Remedies
Sometimes damages aren’t about money. Or perhaps more aptly, damages aren’t always about just money. When that’s the case, mediation is the best way to resolve disputes because almost anything can be accomplished if the parties agree. For example:
- In a medical malpractice case, what would otherwise be an unacceptable monetary settlement may be enough if accompanied by a sincere apology or expression of condolence regarding the loss of a loved one — something which can never be achieved at trial;
- In an employment case which doesn’t involve termination, facilitating a discussion in a safe forum in which everyone can have their say will often dissipate emotions enough to allow the parties to move forward in the working relationship;
- While a business entity defendant may refuse to pay its opposing party money to resolve a claim, that same business may happily agree to make a donation to charity in the other party’s name due to the tax benefits and goodwill generated by such a gesture;
- In a wrongful termination case, a letter of recommendation may help to seal a deal when dollars alone won’t;
- Protection from adverse publicity can be invaluable and unattainable in trial, but can be obtained in mediation by way of private resolution coupled with confidentiality provisions, non-disparagement clauses, and the like;
- Parties can voluntarily agree to certain limitations on their behavior which may or may not be available by way of formal court proceedings (i.e., declaratory relief action, restraining order or permanent injunction). This type of agreement can be helpful in resolving homeowners’ association disputes, claims involving trade secrets, and personal injury/battery claims.
In short, mediation provides a world of creative opportunities which simply aren’t available in a trial which only produces a winner and loser.
3. INSURANCE COVERAGE AND COLLECTION ISSUES
One of the key issues in resolving disputes is how they are to be funded, and insurance is often the primary vehicle. When insurance coverage is involved, it is imperative to determine who the key decision-makers are with regard to the dispute, and
make sure they are available when the negotiations are headed down the home stretch. For example:
- Does the adjuster appearing at the mediation have full authority to resolve the claim, and if not, can the decision-maker be reached during the mediation process? If the adjuster with the final say is on the East Coast, it is probably better not to schedule a half day mediation in the afternoon as the key decision maker is likely to be long gone when you need to reach them.
- Is there a consent provision applicable to the coverage? In medical malpractice cases the health care provider must consent to any settlement. If he or she has refused to provide consent, and is not present to be convinced otherwise, the claim cannot be resolved even if defense counsel and the carrier would recommend settlement.
- Are there both covered and uncovered claims? In this situation, issues of allocation become critical, and decision makers from both the carrier and defendant must be engaged in the negotiation to structure a full resolution.
- Are there damages being claimed which are not covered by insurance, i.e., punitive damages? Here, issues of conflict may require a waiver by the insured, or even separate representation by independent counsel. If these issues have not been resolved before mediation, they can create stumbling blocks to reaching a settlement.
Other issues come in to play when the defendant does not have insurance coverage for all or some part of the claims. Chief among these is the financial solvency of the defendant. Even the strongest claim involving admitted liability and significant damages will have little chance of resolving against a defendant who has no money to pay the claim unless the parties are willing to get creative.
If there is a sincere desire to resolve the case, the mediator can help the parties explore other options such as payment plans protected by a stipulated judgment, transfer of non-liquid assets (real property, vehicles, equipment), provision of goods and services in lieu of cash, and the list goes on. A lack of liquid assets does not have to spell the end of the mediation. Instead, it can be the beginning of a discussion regarding more creative solutions.
The risk and exposure associated with trial go far beyond the issues of liability, causation and damages. Often times, a party may be more concerned with The Intangibles – adverse publicity, exposure to additional claims once the current claim comes to light, and disclosing trade secrets and other products/processes in a public forum, to name a few. During mediation (in separate caucus, of course), a party’s concerns about these intangible risks can be candidly discussed and evaluated.
Also of critical importance to the parties is the cost of litigation. Most parties are keenly aware of the financial costs they have incurred to date including attorney’s fees and out-of-pocket costs. However, they may not have thoroughly considered how those costs affect the net result at various stages of the litigation. For example, a party reluctant to agree to a settlement at one level, may feel quite differently when shown how the net result to them in settlement compares to the same number achieved by way of verdict. Grabbing a pencil and paper and doing some basic math often helps a party understand that the net result between the demand and what is being offered, is not what it appears, once costs of going to trial are considered.
There are other financial considerations which may not be quite as apparent, but may be just as important to a party in litigation. For example, how much time and money will the plaintiff lose having to take time off from work during the litigation process? For a business, what will the financial impact be when the owner and key employees are called away for depositions and trial? While these costs are harder to quantify, they may tip the scales when a party is trying to decide whether to resolve a case or go to trial.
The emotional costs associated with going to trial may also play a role in the decision making process for some clients. How does your client feel about going to trial? Does it cause them stress? Create financial uncertainty? How will they withstand sitting through the other party’s case when it feels like people are not being honest? For some parties, there is little to no emotional impact. For others, they’d rather have their toe nails pulled out than sit through a trial.
A final note about The Intangibles. Sometimes, it is difficult for an attorney to talk to their client about the negative aspects of their case as it can create in the client’s mind an impression that their advocate is not fighting hard enough for them. While that is obviously not the case, it can lead to a breakdown in trust between client and attorney, particularly if the client has not been well prepared ahead of time. Remember, the mediator is there to help explain the hard stuff to your client, and you should never hesitate to enlist help if you believe something might be better heard from someone other than you.
When all is said and done, the Mediation Mindset simply means sharing information with the other party in a way which helps them understand your position. They are unlikely to end up agreeing with you, but they may come to believe a jury will –and that’s when agreements happen.
