BATNA, WATNA, What the …? 

Many lawyers and sometimes also their clients have an understanding of the concepts “Best Alternative To a Negotiated Agreement” and “Worst Alternative To a Negotiated Agreement”.  There is a lot of confusion as to what these acronyms mean and how the concepts can or should be used.  Instead of getting into an academic discussion of these terms, here’s what seems to work well in my own practice.

For various reasons discussed below, frequently I will ask a party and their lawyer in caucus to fill out three simple charts:  their best possible (within reason) result from trial or arbitration, their worst possible result, and their most probable result.  An example of a plaintiff’s chart is at the end of the article.

For the plaintiff or claimant, the “best result” chart starts at the top with a number representing the judgment or arbitration award that would be expected from a “really good day” in court, possibly adjusted for the risk of non-collection.  The plaintiff’s attorneys fee agreement must then be considered.  Frequently, the agreement provides for an increase in a contingency percentage if the case goes to trial or arbitration over what the percentage is at the time of the mediation.  If so, then the (increased) contingency fee is subtracted from the judgment/award.  If the contingency fee percentage does not increase if the matter were to go to hearing, then the plaintiff’s attorneys fees can be ignored in this analysis for convenience. If the plaintiff’s attorney fees are on an hourly basis, then the expected amount of fees through collection is subtracted from the judgment/award.  Finally, the probable unrecoverable costs must also be subtracted. 

The chart for the plaintiff’s “worst result” might very well start with a zero number at the top, since that is a realistic, potential result in many cases.  Here obviously nothing is subtracted for contingent attorneys fees, but any hourly fees and unrecoverable costs must still be shown.  In addition, if losing the case will result in the payment of defense costs or fees, these should be shown.

The chart for the “most probable” result is in the same form as the “best result” chart.

The defense charts are even more simple, as there usually is no contingency fee agreement with which to deal.  The “best result” ordinarily starts with a zero at the top, although it could in the rare case have a positive number for a collected award of defense fees and costs and/or cross-complaint.  The expected attorneys fees through trial/arbitration are then shown as well as the probable unrecoverable costs.  The “worst result” chart will start with the number for the judgment or award (including any plaintiff’s fees and costs), to which is added the expected defense fees and unrecoverable costs.

Logistically, these charts can take ten to fifteen minutes to fill out if the party and lawyer have a good, prior understanding of their case.  Usually I will leave the charts with the party and lawyer in the caucus and ask them to do their “homework” while I am working in another caucus.

When completed, the charts show data that needs to be factored into a party’s determination of whether going forward through judgment or arbitration will be more or less likely to satisfy the party’s interests than taking the settlement offer at hand in the mediation.

The charts do not show a party’s “bottom line” number to be staked out in the mediation.  Even with the “most probable” chart, there are too many variables and important considerations involved to simply use the net figure on the “most probable” chart as a “must have” settlement number.  The charts do not factor in the odds of prevailing.  If the “most probable” result is only a 60% probability, there needs to be an adjustment for that probability.  Particularly for plaintiffs who should be risk adverse, other adjustments need to be made.  For example, assume a young widow enjoyed the speculative options trading encouraged by her broker before she realized she lost half of the proceeds from the insurance policy on her husband.  Without posing here any further facts necessary to analyze suitability, assume there is a 30% chance the widow would lose in arbitration.  If the widow was extremely wealthy, then there might not be any reason to discount a settlement position in order to insure a positive recovery from the claim process.  If on the other hand a complete loss in arbitration would be disastrous for the widow, then her settlement strategy needs to reflect that fact.  A risk adjustment also may be necessary in the settlement strategy of a corporate defendant, for example where a loss in one case could lead to multiple further dangerous claims.  The charts also do not factor in possible occurrences between the time of the mediation and trial or arbitration, including a party’s illness or death, discovery of new evidence, loss of evidence due to inadvertent loss or intentional destruction or witness unavailability.

There are a number of reasons for doing these charts, even though parties and their lawyers usually come to mediations with an understanding of the value of their cases.  These reasons can include the following:

  1. Sometimes it becomes apparent that the party and the lawyer do not agree on the case evaluation, with one or the other much more aggressive.  Filling out and discussing these charts can help get the party and lawyer on the same page, even if they choose not to share their “real” numbers with me.
  1. The charts may help me better understand a party’s analysis.
  1. Particularly in securities brokerage cases, often the lawyers on both sides expect the mediator sooner or later to use a very heavy evaluative approach.  I can fill out the charts with my best guesses based upon more than thirty year’s experience trying securities cases and compare my charts to the parties’ charts. 
  1. One party’s charts may be useful in educating another party on the respective merits of the parties’ cases.

There are more sophisticated risk analysis tools that can be employed.  For example, one way of highlighting the risk of different outcomes would be to create a chart with ten columns showing what might be expected if the same case were tried ten times.  From the plaintiff’s perspective, maybe two trials might result in a really big win, five trials might result in a moderate award and in three trials the plaintiff would lose.  The visual display of all ten results can help significantly with case evaluation.

Use of the best, worst and most probable result charts can help parties analyze their and their opponent’s cases so that they can focus on how their interests might better be served by settlement.


PLAINTIFF’S “Best Result” 

Gross amount of judgment/award:        ____$100,000______

Less attorney’s fees:                                  ______40,000______

Less unrecoverable costs:                         ______7,000______

Net:                                                               ____$53,000______

© Copyright 2009, Robert H. Logan. All Rights Reserved

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