Best Alternative to a Negotiated Agreement - BATNA
Instructions for use of the Negotiation Planning Worksheet
When you are assigned to a Break-Out Room, or in the old days, when the Mediator was out of the room during a Hearing, it is time to reflect on the state of settlement negotiations.. You should think about future concessions, and continuing questioning whether the terms being discussed at Mediation are better or worse than the outcome should the matter proceed to trial and judgment.
This exercise is the classic Best Alternative to a Negotiated Agreement, or BATNA. The theory is that we continue negotiating as long as there is a "Zone of Possible Agreement". I have prepared a Negotiating Planning Worksheet to organize the exercise, and a set of simple instructions to guide counsel in working though the BATNA analysis.
This form is intended to organize the conversation about the estimated strengths and weaknesses of each party’s “legal case”, and to incorporate the element of risk and uncertainty with respect to a possible judicial determination of the dispute.
There is a sidebar on the Form describing common risk factors, strengths and weaknesses of various aspects of typical litigation.
Based on the discussion and review of the sidebar information, counsel will be able to provide estimates for the best possible outcome at trial, the most adverse possible outcome at trial, and a mid-range outcome.Each of these estimates should then be matched with an estimate of the probability of achieving the outcome. No one can be expected to guarantee outcomes, and the narrative is often presented as, if I had to try this case 100 times, the likelihood, or per cent for each "outcome" would be x%.
Multiply each of the “outcomes” by the percent or likelihood of achieving the “outcome”. The total percentages must add up to 100%. Now add all the column. This is what I have termed the Net Equivalent Value of your claim.
Next, recall the candid discussion between the client and the attorney about the litigation budget going forward. This is also an estimate, and may range significantly. If you are expecting money as the result of a settlement, you will subtract the amount of the “litigation budget” from your Net Equivalent Value, or expected proceeds. After all, if the matter is settled, you won’t have to pay that “litigation budget”. If you are the party that is expected to pay money, you should add the “litigation budget” to the expected payout if the dispute goes to litigation.
Now compare your Net Equivalent Value (as adjusted by the Litigation Budgets), to the current Settlement Offer. Complete the form several times, adjusting the best and worst case outcomes as well as the percentages. Continue to negotiate until you feel the outcome at Mediation is a better overall deal that your chances in litigation.