Negotiation: When to Bid Against Yourself

When negotiating a settlement, you always want to get the most out of the other party as you can.  Because of this, often neither side wants to make the first settlement offer.  The plaintiff feels that if she makes the first move off of her initial demand then she is “bidding against herself.”  It feels like she is giving in or that she has just closed the possibility of getting as much out of the deal as she otherwise would have if the defendant made the first move.  However, that is not always the case.  When done properly, it can be a good negotiating tool to get the process moving and ultimately reach an agreement.

Both Sides Need to Move:

One of the biggest obstacles to making the first offer in a settlement negotiation is pride; or the fear of looking weak.  That is true for both sides:  the plaintiff does not want to look desperate or weak by making the first offer; the defendant does not want to look like he does not trust his case by making the first move.  However, the reality is that, if a settlement will ever be reached, both sides will need to make a move off of their original position. 

In a negotiated settlement, the plaintiff will never get 100% of what she is asking for in the lawsuit.  If she did, it would not be a settlement and there would likely not be a lawsuit as the defendant has simply given in entirely.  When the defendant answers the lawsuit and denies he is liable, he has rejected the 100% offer.  That means that if a settlement will be reached before trial, the plaintiff will have to accept less than 100% of what she is asking for.  In that regard, there is no harm in the plaintiff making an appropriate first offer and coming down off the 100%.

Get the Ball Rolling:

Making the first offer can often get the ball rolling towards an eventual settlement.  In a case where there is a stalemate and neither side wants to make the first move, settlement talks are often unnecessarily delayed until one side finally makes an opening offer.  Once that first offer is made, the case can then progress to a possible settlement.

Attorneys are ethically obligated to take every settlement offer to their clients, unless they have previously received clear direction and authority regarding the same.  As a result, if you make an opening offer, even if it is one that the other attorney believes his client would never agree to, he may be obligated to still present that to his client.  That will often then prompt the other party to make a counteroffer, and the negotiation has begun.

Sign of Good Faith:

Making an opening offer can be a sign of good faith and show the other side that you are in fact interested in resolving the matter without the costs of formal litigation.  Such an olive branch or show of good faith can help encourage the opposing party to approach the dispute reasonably.

Amount of Initial Offer:

If you have decided to make the first offer, the next question then becomes how much of a reduction should the plaintiff make when presenting her initial offer?  That answer is a bit harder, and depends greatly on the specific facts and issues in a particular case.  Generally, if the plaintiff makes the initial offer it should be an amount that will not give away the farm but will also show the plaintiff’s willingness.  For example, if the plaintiff’s opening offer is only reduced by $10.00 from the initial demand in the lawsuit, the defendant will likely just laugh at it and it will not serve the purpose of getting the settlement talks started.  But, obviously, if the plaintiff were to offer to accept 50% of their demand as an opening offer then that would foreclose any possibility of the plaintiff getting more than that in the negotiations.

A skilled trial attorney can help you to evaluate the strengths and weaknesses of your case.  Such an attorney can give you a better idea as to whether it is needed for the plaintiff to make the opening offer and also help determine what an appropriate opening offer is.  If you are involved in a lawsuit, call the experienced trial attorneys at the Goosmann Law Firm, PLC, in our Omaha, Sioux City, and Sioux Falls offices.  We can help you evaluate your case and determine the best course of action to get you the best outcome possible.