Special Problems In Mediation: Negotiating Case-Value Relativity In Catastrophic,

Mass-Tort and Class Action Cases Where Inadequate Insurance Or Other Settlement
Funds Exist
By: James Laflin, Esq. 1
Thomson-West, Insurance Litigation Reporter, 2005.
Thomson-West, California Tort Reporter, 2005.
Thomson-West, California Insurance Law & Regulation Reporter, 2005.

Introduction
When a catastrophic accident results in multiple plaintiffs represented by different
counsel all vying for the same inadequate source of settlement funds, the resulting
allocation of funds to the different cases is frequently determined through some form of
judicial or arbitral process. Nevertheless, there are efficient and effective consensual
alternatives that should not be overlooked. What follows is a discussion of one such
alternative process that has been used successfully by the author to allocate inadequate
insurance proceeds among multiple plaintiffs represented by different law firms. In order
to protect client confidentiality, certain case facts have been altered. In all respects,
however, the mediation process described is faithful and accurate.

The Case
Ten people were riding in a small tour bus when it was struck head-on by a vehicle
traveling the opposite direction on the wrong side of the road. Eight of the
plaintiff/occupants were senior citizens on a vacation tour. The two others were the bus
driver and the tour guide. Six of the plaintiffs were killed immediately in the crash; i.e.
the driver and five passengers. The four remaining occupants, the tour guide and three
seniors, were seriously injured though in varying degrees. Each of the dead or injured
plaintiffs, personally or through their estates, retained counsel. Eventually, eight separate
law firms represented the different claimants; seven representing individual plaintiffs and
an eighth representing the remaining three. Even by the most conservative estimates, the
aggregate value of the ten claims well exceeded the amount of available insurance.

The Negotiation
The negotiations described in this article took place over three successive days. The first
two days focused heavily on two sets of issues; 1) resolving purely defense insurance
policy valuation and primary/excess funding issues, and 2) resolving as between

1James Laflin: Concilium, Mediated Negotiations, 505 Montgomery Street, Suite 1100,
San Francisco, CA., 94111, telephone 415-395-9656, EM jlaflin@concilium.net, web
www.concilium.net.
defendants and plaintiffs, at least provisionally, the aggregate amount of the settlement
fund. These two sets of negotiating initiatives went forward simultaneously with the
understanding that any eventual settlement would require that all plaintiffs agree to the
ultimate division of settlement funds. Absent such agreement, there would be no
settlement. The third day focused on negotiating agreement about the relative case-
values of the ten cases. Since the threshold aspects of the mediation are not the focus of
this article, the events of the first two days are not described in further detail. Rather, the
remainder of this article profiles the third (final) day of allocation negotiations between
the members of the plaintiff group.

First, all plaintiff counsel agreed that it would not be viable for the mediator to simply
develop an apportionment scheme of his own and impose it on the plaintiff group. Had
they been willing to support such a process, they would have simply submitted the
settlement fund to division by an arbitrator. This was not acceptable.

Problematically, of course, the different lawyers held different and conflicting views
concerning the absolute and relative values of each’s case vis-a-vis the others. Moreover,
with respect to their own case(s) they tended, at least publicly, to overvalue them in
comparison to how the other lawyers valued the same case. Hence, the problem became
one of how to negotiate and bring into alignment each counsel’s self assessment of their
own case’s value(s) vis-à-vis the group’s assessment. Or more accurately, the problem
became one of how to simultaneously negotiate 1) each plaintiff’s settlement goal and 2)
the group’s collective vision of a “fair enough” allocation of limited settlement dollars.

To begin this process, all eight counsel were asked, and agreed, to anonymously assess
all ten cases on two axes; first, they ranked the ten cases from high to low in terms of
their relative, or ordinal, value vis-à-vis one another. Second, they ranked the ten cases
in terms of their settlement value as a percentage (i.e. fractional share) of the entire
settlement fund.

The results of this two-tier exercise were informative. First, there was near unanimous
agreement about the relative ordinal values of the cases, i.e. how they ranked from one to
ten. That is, despite initial posturing, privately all lawyers agreed on the extremes;
which two cases were the most and least valuable. In the mid-range there was only
minimal disagreement by two lawyers as to whether two of the mid-range cases should be
switched with one another in terms of their relative ordinal ranking. Interestingly, the
two cases were their own; each overvalued his case relative to the other. Nevertheless, it
bears emphasis that these differences were only minor and that the private ordinal
assessments revealed a broad consensus. Eventually, all counsel agreed to have the
private ordinal rankings information shared with the group. There was, moreover,
general public consensus over this ranking.

The second axis of comparison, in which value was expressed as a percentage of the total
settlement, was even more revealing. Again, in this ranking each lawyer was asked to

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privately rate the percentage of the settlement funds that should be allocated to each of
the ten cases. The results were compiled and, for each case, three metrics were
examined: 1) the range of percent values (high to low) attributed to each case, 2) the
average percentage value attributed to each case, and 3) the average percentage value
attributed to each case after throwing out the high and low ratings. With regard to the
first metric, the ranges varied most at the extremes; i.e. disagreement was the greatest
with respect to the highest value case and lowest value case. Ranges were very tight, i.e.
only a few percentage point differences, as to the middle value cases. The second and,
especially, third “averaging” metrics were useful to place percentage values on the ten
cases that had some legitimacy at least as reflecting a credible version of the collective
consensus about what a fair allocation might be. The third metric in particular was
preferred by the group as it eliminated the influence of potential overvaluation by
retained counsel. In sum, it provided the best collective expression of consensus yet to
emerge.

Next, private caucuses were held with each attorney regarding case-specific risk factors,
settlement targets, and further refinement of his or her view of the comparative value of
all cases. After meeting with all attorneys on all ten cases, the aggregate value of all ten
potential settlements was tabulated; a twelve percent shortfall existed between the
amount of settlement funds available and what was required to fund the dollar targets
identified by each lawyer as a “bottom line”.

A straightforward solution to this funding shortfall would have been for each lawyer to
accept a twelve percent reduction in his or her settlement position. Lacking consensus
for this approach, other solutions were considered. Eventually, all plaintiffs agreed to
consider an up or down confidential proposal by the mediator regarding a settlement
figure that he or she could either accept or reject. If all ten plaintiffs accepted the
mediator’s ten separate proposals, a global settlement would be achieved. As it turned
out, only six of the ten agreed to the mediator’s proposal. Hence, a global settlement was
not reached; a shortfall still remained. With the permission of all counsel, the amount of
the remaining shortfall was revealed to the group; it was only five percent (i.e. the
difference between what the four plaintiffs who had rejected the mediator’s proposal
wanted versus what they had rejected in the form of the mediator’s proposal).
Knowledge that the “gap” had been reduced to a mere five percent resulted in further
negotiations between all counsel in joint session. Some plaintiffs who had accepted the
mediator’s proposal agreed to further reductions that augmented the positions of the four
who had rejected the mediator’s proposals. Through a series of such concessions, a
global resolution was eventually reached.

Conclusion
With advances in mediation practice it is now entirely feasible to efficiently resolve
multi-plaintiff claims, including mass tort, class and mini-class actions, through
mediation and avoid the time and expense of arbitral and special master processes. In
this case study, a range of techniques are described which were applied in actual

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mediations to negotiate and build consensus among multiple trial counsel regarding the
value of multiple wrongful death and serious injury claims that, of necessity, had to be
settled, if at all, out of the same, single fund of insurance proceeds. Parties and
practitioners who value agreement and choice over the time, expense and uncertainty of
adjudicative outcomes might consider such a process.