My last blog post discussed the discovery process to get your case ready for mediation and trial. This blog post discusses approaches to settlement discussions.
Settlement Discussions
North Carolina has employed mandatory mediation for several years with good success. Though we now have court-ordered mediation, you are still free to engage in settlement negotiations at any point during (and even before) litigation. That begs the first question: When should settlement negotiations begin?
1. Timing of Settlement Discussions
There is no right or wrong time to discuss settlement. However, it is generally a fact of life that the larger the case, the less likelihood there is of settling for fair value prior to filing suit. This is especially true in the medical malpractice context. In this presenter’s experience, after eighteen years of practice, it would not take the fingers on one hand to count the number of settlements achieved in medical cases prior to filing suit. For that reason, it is usually a waste of time to do more than write a demand letter prior to filing suit and provide fourteen to thirty days for a response. This time should be used to finalize the complaint and the written discovery to be served with it, so that the first promise you make to the defendant and his insurer can be fulfilled at the outset – that is, filing the case at the time you said it would be filed. Counsel should avoid the endless dialogue that can take place with insurers and their representatives, while they pry for information “to evaluate the case.”
For the same reason “early” or pre-suit mediations must be approached cautiously. Often, they are used more as fishing expeditions than serious opportunity for settlement. Most of the time, defendants and their insurers are privy to more facts about the case and can have the benefit of more expert review at the initial stage of this case than plaintiffs and their counsel will enjoy by the time suit is filed. Further, it is often the communication to the insurer that triggers the coverage event under a claims made policy which can create coverage priority. Of considerable importance, too, is that fact that interest begins to run on the case at the current rate of eight percent at the time the suit is filed in North Carolina. This can have a meaningful effect on settlement negotiations after a couple years or more of litigation. If you represent a plaintiff, don’t let the insurer unduly delay the institution of suit unless it is clear that the case is moving towards a serious attempt at resolution.
While there is no right or wrong time to settle, it is clear that a case should not be negotiated until counsel has developed all of the information needed to properly evaluate the claim. There must be sufficient opportunity to diagnose all of the potential problems that may arise from the injuries and counsel must have a grasp of all of the facts which will effect the case’s evaluation.
In most instances, plaintiffs will be better served by development of the case through discovery and presentation of plaintiff’s expert witnesses, if any, before any demand for settlement is made after suit has been filed. With the advent of mediation, it is usually better to have the benefit of testimony of plaintiff’s and defendant’s experts. In addition, it is usually fruitless to attempt settlement before the defendant and key defense witnesses have been deposed and the plaintiff and plaintiff’s key witnesses have been deposed and evaluated. Once this process has occurred, provided you were right about case selection to start with, plaintiff’s counsel will have the necessary information to proceed to trial or effect a fair settlement. Defendants, on the other hand, should fully appreciate the advisability of settling by this stage of the proceeding.
2. Total v. Partial Settlement (multiple defendants)
In case involving multiple defendants, be wary about settling with just one or some of the defendants. First, you need to consider the “empty-chair” defense. Generally, it is better to keep all the defendants in the case, particularly if they are pointing fingers at each other, rather than cutting some of them loose. Sometimes, it makes sense to settle with a defendant if they were more of a collateral player. It streamlines the litigation and removes one of the attorneys from the other side. However, if you release a major player, it will be easy for the co-defendants to point to the empty chair at trial and exclaim how the wrong defendant(s) is/are in the courtroom.
If you do decide to settle with one of multiple defendants, there are certain pitfalls to avoid. First, make sure the release you enter into with the settling defendant is a narrowly limited one. Expressly reserve all rights against the non-settling defendants. Second, if you sue an agent as well as his or her employer based on vicarious liability principles, be very careful about how you resolve your claims with the agent. Doing so improperly may extinguish your claims against the employer. In Wrenn v. Maria Parham Hosp., Inc., 135 N.C. App. 672, 522 S.E.2d 789 (1999), the plaintiff sued a physician and his employer. The plaintiff dismissed with prejudice and without payment, his negligence claim against the physician. The Court held that the plaintiff was barred from proceeding against the employer as a result. Id., at 679, 522 S.E.2d at 792. The rationale for the holding was that a dismissal with prejudice acts as a complete adjudication on the merits. Since the agent was “adjudged” not liable, then the employer could not be vicariously liable.
To settle with an agent while preserving your claims against the employer, the superior practice is to execute a covenant not to sue and/or enforce judgment against the agent. See N.C. GEN. STAT. § 1B-4 (1967). In Yates v. New South Pizza, 330 N.C. 790, 412 S.E.2d 666 (1992), the Supreme Court of North Carolina, in a divided opinion, held that settling with an agent and executing a covenant not to sue with respect to the agent and the insurer, while expressly preserving all claims against the employer, did not extinguish the claims against the employer. Id., at 796, 412 S.E.2d at 670.
3. Mediation
The prime time for settlement of medical malpractice cases occurs at Court-ordered mediation. It is usually not until the case has been developed to this point that defense counsel are willing to turn off the clock for their hourly billing. It is also unusual that an audience can be obtained with all of the necessary parties in attendance to thoroughly explore the topic of settlement. The opportunity should be thoroughly maximized. My experience is that very many and probably most serious cases do not settle at mediation. Rather, if they settle, it is because of a process started at mediation.
a. Preparation
Mediation preparation should begin well in advance of the mediation itself. Preparation extends beyond readying your presentation. You must prepare your client and, sometimes, your opponent for what is about to come.
1. Of Your Client
A common question you will field from your client prior to mediation is whether or not they can speak during the initial group session involving the mediator and all parties. While clients certainly have the right to speak, we generally encourage them to allow us to speak for them. This is not the appropriate time for clients to “get something off their chest” or “clear the air”. That only serves to further polarize parties before mediation even begins and makes settlement less likely.
The clients should be carefully instructed prior to mediation that he or she should never in the presence of the defendants or the mediator, express an opinion on whether the case should be settled or react to any communication of an offer. All discussions about offers and about how to respond to them should be conducted in private.
2. Of Your Presentation
The importance of preparing a presentation for mediation can not be overstated. This is true whether you represent the plaintiff or the defendant. Some cynical attorneys would just as soon dispense with the “dog and pony show” and cut right to the discussion about the numbers. Unless you are sure that the defendant is going to offer $0, or that the plaintiff will not settle for a penny less than an unreasonable sum of money that you are not even close to willing to pay, then you should proceed with an effective presentation.
3. Of the Opponent For What Is about to Come
From the plaintiff’s perspective, few things are more frustrating than to arrive at mediation only to find out that the adjuster in attendance only has authority for an amount that is far less than what is acceptable. To avoid this, communicate with opposing counsel ahead of time. Let them know you view the case as a substantial one. If you have prepared a Settlement Brochure, Day in the Life video or other presentation, you may consider sending copies to opposing counsel and requesting that one of the copies be provided to the adjuster in advance of the mediation so that they have a better idea of the substantial nature of the case.
It goes without saying that an adjuster needs to be present. Never consent to allowing the adjuster to participate by telephone. Generally, the same goes for the defendants. If the defendant/tortfeasor is rough in appearance and demeanor, you want them there so the adjuster (who is often setting his or her eyes on the defendant for the first time) can get a look at the insured to observe just how poor a witness he or she would be. Even when the defendant/tortfeasor is well groomed, be reluctant to permit their absence. For instance, in medical cases with good liability, it is often helpful to have the defendant physician present so that he can exert pressure on his insurers when you conduct your break-out sessions.
4. Use of Settlement Brochures
Often, we will create a comprehensive Settlement Brochure to provide to opposing counsel in advance of mediation. Attorneys need to be involved in the creation of the brochure – it is not a project you should rely entirely on a staff member to complete. A cheap looking brochure that is sparse in detail will not only fail to impress the other side, it may embolden them, especially if you are dealing with the defense counsel for the first time. Our brochures typically contain a detailed overview of the case which includes a persuasive summary of the facts, evidence and the law. Include any documentary or photographic evidence such as accident reports, witness statement and medical records. Select favorable verdict/settlement summaries in comparable cases. Be sure to include photographs and other evidence relating to damages such as family photos, obituaries, etc. Also, create a Calculation of Damages which summarizes the elements of damages you are seeking in this case. This will inform your opponent of how you view the case from a damages perspective.
In most cases where we create a Day in the Life or other documentary video, we will also create a Settlement Brochure, which we will forward to opposing counsel in advance of the mediation. This notifies opposing counsel of the substantial nature of the case ahead of time. Then, we may opt to save the video for playing at mediation for the first time so as to effect the greatest emotional impact. It is not uncommon for defendants and/or their insurers to emote during a well-done video at mediation.
5. Use of Technology, Exhibits and Witnesses
Indeed a good mediation presentation is much more than a dog and pony show. An effective presentation, which often involves the use of technology, exhibits and/or witnesses, can pave the way for meaningful settlement discussions. For plaintiffs, it is a good chance to educate the defendants and/or insurance adjusters about the strength of your case. It’s your chance to speak directly to the people with the pocketbooks. For defendants, it’s a good chance to point out the problems with the plaintiff’s case. The fact is, sometimes parties arrive at mediation overconfident in their position due to bias or insufficient communication with their attorneys. The mediation presentation is your opportunity to put a dent in the misplaced confidence and to get the other side thinking about the strengths of your case. The use of technology, exhibits and witnesses can help you achieve this purpose.
A good presentation serves another valuable purpose. Namely, it makes for good trial preparation. It forces you to sit down, review the entire file, and determine what evidence you want to put on. It forces you to think about how you want to present evidence at trial. Further, many of the exhibits you create for mediation can also be used at trial. Consequently, by the time you prepare for mediation, you will have a leg up on the trial preparation and will enter mediation from a position of strength. Your preparedness communicates to the other side that you are ready to try that case today if necessary. It’s also one less thing to worry about during trial preparation.
a. PowerPoint and Blow-Ups
If you are a “techno-phobe” as many attorneys are, you need to overcome that fear and learn how to use PowerPoint. If you are an older attorney who is resistant to the idea, then order one of your associates or staff members to learn it! PowerPoint is an extremely effective tool for litigators for use at mediation and trial. It essentially allows you to create a slide show involving pertinent photographs, records and other exhibits. These days, there are courses geared to training lawyers in the art of PowerPoint. In fact, the National Institute for Trial Advocacy (NITA) published a book entitled PowerPoint for Litigators which will make a PowerPoint expert out of even the most uninitiated. See DEANNE C. SIEMERET AL., POWERPOINT FOR LITIGATORS: HOW TO CREATE DEMONSTRATIVE EXHIBITS AND ILLUSTRATIVE AIDS FOR TRIAL, MEDIATION, ARBITRATION AND APPEAL (Kenneth S. Broun, et al. eds., National Institute for Trial Advocacy 2000).
A typical PowerPoint mediation presentation for our firm will include slides of pertinent records. In a motor vehicle case, we may scan in the accident report or other contents of the investigating Trooper’s file. In medical cases, we’ll scan in the relevant medical records. PowerPoint allows you to “call out” or blow-up certain portions of these records in order to call attention to the evidence you want the other side to focus on. Then, we usually scan in relevant pages of deposition testimony, or may simply summarize important testimony with the use of “text boxes.” If a certain point of law is critical to your case, you may scan in the case law or simply provide a summary. To illustrate damages, we generally create slides containing photographs of the client/decedent and/or family members to illustrate the loss that has been suffered. Photos of accident scenes in wreck cases are also very effective.
Blow-ups are also a very effective tool. I recommend that you do not wait until trial to create your blow-ups. Use of these devices at mediation shows the other side that you’re ready to go. As with PowerPoint, the only thing limiting what you can enlarge is your imagination. Create blow-ups of the accident scene, pertinent records, the wrongful death statute, your calculation of damages, etc. In the medical context, there are many companies that specialize in creating medical blow-up boards that will incorporate, for example, the relevant x-ray, will illustrate the injury, and will identify relevant parts of the anatomy. If you are practicing on a shoestring budget and can not afford the technology to go along with PowerPoint, then consider creating blow-ups of a few key exhibits. Even if you have the technology, blow-ups can be effectively employed to supplement your PowerPoint presentation.
b. Day in the Life or Surveillance Videos
If you represent the plaintiff/decedent, in most serious cases involving personal injury, it is advantageous to prepare a “Day in the Life” or other settlement video to personalize the plaintiff or the decedent and show the impact that the injury has had on plaintiff and his family. In a death case, it is a great opportunity to show the decision-makers how the loss of the decedent has affected the family. These films should be no longer than thirty minutes, with twenty minutes the optimum time. They should be carefully edited and professionally prepared. The cost of these documentaries range from $5,000 to $15,000. In most instances, the cost is well-justified.
If you represent the defendant, consider hiring a private detective to create a surveillance video if you have any suspicion that the plaintiff is exaggerating his or her injuries. Playing a video at mediation of the plaintiff walking around town shopping after listening to the plaintiff’s presentation about how the plaintiff requires a wheelchair to get around will drastically reduce the settlement value of the case. For various strategic reasons, you may elect to save the surveillance tape until trial for impeachment or other purposes (unless the plaintiff requests such information in discovery).
c. Other Exhibits and Witnesses
In some instances, it may be helpful to have an attending physician available at mediation in addition to exhibits. We have brought pediatric neurologists to the mediation to thoroughly explain plaintiff’s injuries and the consequences to plaintiff. We have even had these doctors conduct a physical examination in the presence of the defendants and their insurers to demonstrate the magnitude of the injuries. This is particularly impressive in the case of brain-damaged babies or paraplegic plaintiffs. Even more impressive than a “Day in the Life” film is a demonstration, such as stretching exercises of a quadriplegic patient performed daily to prevent strictures, or watching a nurse insert a PEG tube for feeding a brain damaged child.
X-rays or other films can also make for an effective presentation. Sometimes, defense counsel will request that these films be sent to them for delivery to the “home office” prior to mediation. Generally this request should be denied. Instead, tell the defense that the people who need to see the film need to be at the mediation. I have found that the films are much more effective when shown for the first time in the confines of the mediation room while everyone’s attention is focused on the case. It is that point in time that the defendant and the decision-makers for its insurers can be made to fully appreciate the problems of bringing the case before a jury. In fact, if this environment cannot be concocted at mediation, it is unlikely that a compelling trial can be presented.
In addition to a key person such as a life care planner or physician for mediation, it is helpful to have a key piece of evidence or two, in addition to the damages chart. This may include critical x-rays, excerpts from depositions which contain damaging admissions or inconsistencies, medical literature which is either unimpeachable or specifically found reliable by the defense and key blow-ups or power point presentations which include key medical records.
For example, I handled a case where our client had suffered injury when the driver of a passenger van in which he was riding lost control of the vehicle and went off the side of the road at a high rate of speed. The client had suffered extensive damage to his arm, leg and spine, as well as closed-head injuries. He required implantation of hardware in his arm, leg and spine, some of which will remain with him for the rest of his life. However, much of the hardware (plates, screws and rods) was removed during yet another surgery many months prior to the mediation. For mediation, we took the hardware that had been removed, arranged it around a ruler and a pencil for scale, and took photographs which we displayed during our PowerPoint presentation. We also put the hardware in a plastic bag which we passed around the mediation table to allow everyone to feel its weight. Not only did defense counsel and their insurance adjusters hear us talk about damages, they were able to see the injuries when we displayed pictures of our scarred client in his hospital bed as well as the hardware. When we passed around the bag of hardware, counsel and their adjusters were able to feel a component of our client’s injury. While we thought this was a valuable case from the beginning, we settled at mediation for a sum that was even greater than we expected.
d. Presentation of Damages
Rather than making a formal demand at mediation, a preferred practice is to carefully identify and compartmentalize all elements of damages. If the case is for wrongful death, it is helpful to follow the exact form of the wrongful death statute in listing damages. If injuries lend themselves to per diem calculations, this is an excellent opportunity to breakdown the different times for calculations, show excruciating periods of pain immediately following surgery, followed by severe but perhaps less intensive pain during recuperation, and finally showing calculations for the remainder of plaintiff’s life during which she or he will have to endure constant pain and suffering.
It is usually an excellent approach to list, as the first element of damages, past medical expenses. These can be carefully calculated, thoroughly itemized and not subject to attack. This should be followed by a listing of future damages, as enunciated in the life care plan. The conclusion of the damages can then consist of pain and suffering, loss of quality of life, loss of enjoyment of life, such as the inability to participate in family activities or hobbies and other elements of damages.
In wrongful death cases, plaintiff’s counsel can proceed right down the statute, starting with general expenses, proceeding through medical bills incurred prior to death, loss of services, loss of income and finally, to the most important element of damages, loss of society, companionship and kindly offices and advice.
When these damages are presented in the context of a Day in the Life film or thoughtful and carefully produced films dealing with wrongful death the effect can be very substantial. It is important to understand that advocacy applies at mediation, just as it does at trial. But, the techniques are more subtle and less openly adversarial. Once damages have been documented, that is an excellent time to conclude the general session of a mediation, without ever communicating a demand. During the first break-out session, when the mediator asks for the demand, an excellent response is to point out the damages exhibit that has been left with the defendant and ask that the defense respond to those damages. Point out that this calculation, or one very similar, will be presented to the jury if the case is tried.
6. Techniques at Mediation
I believe that it is important to allow room for negotiations at mediation but also important to at some point communicate a firm demand, set definite time limits and not move appreciably from that number. A plan of how to arrive at that number or range should be carefully thought out and discussed and approved by the client prior to mediation or settlement negotiations. Once the plan is made, it should be adhered to.
In the settlement or mediation process, the integrity of the trial attorney is always on the line – just as it is in other phases of the case. The facts should never be misrepresented at this stage of the proceedings, just as they would not be misrepresented at trial. Absolute honesty, professional courtesy and respect should be demonstrated to the opposition. Failing to be candid can not only torpedo settlement in the present case but will have a chilling effect on all negotiations with the defendants, their insurers or their colleagues in future cases.
In reaching a settlement, it is plaintiff’s counsel’s responsibility to fairly and accurately evaluate the case and maneuver settlement to the range that has been established. Counsel should not be concerned with whether the defendant has offered every last dollar that it will pay. Instead, the primary concern must be whether the settlement represents fair compensation.
7. Structured Settlements
Structuring settlements can be an effective means by which your client can be virtually assured of receiving periodic payments for a specific period of time and, perhaps even for your client’s lifetime. There may also be tax benefits associated with structured settlements. Such settlements are particularly useful when there are minor beneficiaries. They do not make sense in every case, however. For example, if the client is elderly, they will benefit more from a one-time lump sum settlement. Also, depending on the market, the rate of return may or may not make a structured settlement worthwhile.
Be wary of defense counsel who bring structured settlement people with them to mediation. A common defense tactic is to work up a structured settlement which pays your client say, $1 million over his lifetime. It sounds pretty good until you realize that the present value of the settlement paid by the insurer might be in the neighborhood of $200,000. Thus, it’s not a million dollar settlement – it is a $200,000 settlement. Such an amount is likely grossly inadequate for severe injuries. Consequently, when you negotiate, you should only negotiate in present day values. If you arrive at a reasonable number, then you are free to contact your own structured settlement people to present options to your client regarding the payout of the settlement.
My next blog post will discuss the trial phase of litigation.
