In another post, I discussed forces that impact our judgment in valuing cases.

Today I want to discuss forces that negatively affect our ability to negotiate cases; forces which, It’s important to note, generally influence us subconsciously. Parties aren’t even aware they’re at play. My role as mediator is to anticipate any such influences, and try to work around or through them.

Negative Feelings

The first of these is known as Attribution Bias — which largely based on how we feel about the person with whom we are negotiating. Do we like them? Do we trust them?

When we have a negative view of the person on the other side, we have a tendency to assume the worst about them. We attribute bad intent to their offers, demands and actions. These negative assumptions can easily impact how we interpret their offers.

As a mediator, when I see this problem impacting a case, I may suggest that I (the mediator) present offers, rather than having offers ostensibly come from the other party. It’s one way to eliminate (or at least minimize) attribution bias. Other times, I may identify the bias problem, and encourage the biased party to factor it into negotiations.

Negative Assumptions

A second force at work in negotiations is Reactive Devaluation, and it works this way: Assume you’re the plaintiff’s attorney and you’ve made a $100,000 demand to settle your case. The defendant agrees to pay $100,000. Are you pleased? Probably not — because you’re probably thinking you undervalued the case, and left money on the table.

The only thing that changed is the defendant agreed to pay your demand. This is reactive devaluation at work — and it can happen even after a lengthy negotiation process. We automatically assume that anything done, or offered, by our opponent is suspect. As a mediator, I counter this by asking a party, “If I can get you X dollars, would you accept it?” This way, the mediator is seen as the one suggesting the amount, rather than the opposition.

Unrealistic Expectations

The third and possibly the most difficult force to deal with is known as Loss Aversion. This occurs when parties form an opinion early on about what the right outcome should be. For example, if a plaintiff is told her case is worth $250,000 at the start of the case. Maybe a friend settled a similar claim for $250,000, or her attorney told her that’s what the case was worth.

Two years later, when the case finally makes it to mediation, it’s very difficult for the plaintiff to accept $100,000 — even when discovery reduces the plaintiff’s chance of winning, and even if $100,000 is an excellent and fair result. The plaintiff will experience a strong sense of loss that’s difficult to overcome.

Adjusting Expectations

That said, Loss Aversion’s effect can be minimized with objective facts and persuasive, patient effort by the mediator — whose primary responsibility is helping the party change his or her perspective. Those built-in biases must be overcome for the negotiation to be successful. A disinterested, and trusted, third party mediator’s opinions and advice can change those biases — and ultimately lead to a good outcome.

Negotiations are never conducted in a vacuum. There are a myriad of forces impacting and influencing a party’s willingness and ability to negotiate and settle disputes. Part of our job as attorneys and mediators is to identify those forces, then determine if we can counter them and use them to our advantage.

As a teacher of mediation at the University of Alabama School of Law for several years now, I’ve studied these influences — and how they impact mediations.

Consider This Harvard Study Of Case-Outcome Prediction.

Students preparing to negotiate a personal injury case were asked to privately predict their client’s chance of winning based on their “confidential instructions.” What the students didn’t know was that the information they received was not confidential. Both sides were seeing the same data. You’d think, with both sides having the same data, they’d agree on the outcome, right? Wrong.

Law students negotiating for the plaintiff assessed their client’s chance of winning 20% higher than those assigned to the defense. What’s more, negotiators for the plaintiff estimated their client’s damage at an average of $264,000 — while negotiators for the defendant estimated the plaintiff’s recovery at $188,000.

MBA students were virtually the same. Negotiators for the plaintiff assessed their client’s chance of winning 18% higher than negotiators representing the defendant. At the same time, negotiators for the plaintiff estimated their client’s damages at $286,000 — compared to negotiators for the defendant, who estimated plaintiff’s recovery at $189,000.

What’s particularly interesting is, veteran litigators assigned the same roles made similarly diverging predictions.

These kinds of contrasting opinions are serious barriers to settlement. In real cases, disagreements in judgment are compounded because litigants don’t share the same information.

Here are a few forces I’ve identified that can create diverging opinions:

Selective Perception

Humans instinctively form viewpoints as “frames” into which we place information we’ve received, and the frames of reference we use to view information significantly impacts how we perceive it. Which is why information outside those frames is often unconsciously disregarded or discounted.

Confirmation Bias

Humans also tend to judge conflicting data by giving more weight to information that fits our preexisting beliefs. For example, if you read an article on the benefits of red wine, and you like red wine, you’re likelier remember the article and believe it. If you don’t like red wine, you’re likelier to discount or dismiss the article. Similarly, litigants tend to give extra weight to facts that fit their agendas or support their cases, and downplay evidence that contradicts their positions.

Excessive Optimism

Humans are overly optimistic about the future. Most people, for instance, will predict that they’ll live longer and earn more than other people. Litigants are no different. They tend to be overly optimistic about their cases. Which can lead them to overlook problems with their cases— or to conclude that their cases are “special or different” in some respect.

The Endowment Effect

People typically place a higher value on their own possessions than others do — which can lead sellers to view what they have as more valuable than similar items sold by others. In litigation, plaintiffs are the sellers — because they’re offering to give-up their claims for money. The endowment effect can cause them to over-value their claims.

So What’s The Solution?

Mediation is often the ideal forum for keeping these forces in check. When a neutral third party (who doesn’t have a proverbial “dog in the fight”) is placed in a position to objectively review the information presented by both sides, human perceptions and biases can be identified and overcome. Whether you want to call it being a “devil’s advocate” or just a “pain in the ass,” good mediators serve a critical function to plaintiffs and defendants seeking to agree on a fair settlement value for their cases.