1. 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

2. 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?

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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 (680K- 10K) 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

9. Plaintiff’s and Defendant’s Offers (Normalized)

10. 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?