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Initial Demands: Do You Set a Realistic Dollar Amount?

By George Khoury, Esq. | Last updated on

Setting an amount for an initial demand can often be a rather nerve-wracking exercise in futility. You know the other side isn't going to just say yes, but on the off chance they do, are you going to regret coming in too low?

If you value the case at a certain dollar amount, what's the litmus for settlement value on an initial demand? If you go too low and still get rejected, will you sour future negotiation attempts? Can you even negotiate in reverse?

Of Ballparks and Universes

When counsel receive or make initial demands that are just out of the universe of possibility, trying to figure out which ballpark either party sees the case settling in is important. And while some lawyers see these other-worldly demands as a requirement to get the ball rolling, others see it as a complete barrier to productive discussions.

An initial demand is a unique quagmire and conundrum where parties cannot just reveal their bottom lines, but at the same time, are positioned to actually benefit the most from the lowest acceptable dollar figures. The settlement problem usually hinges on getting adverse parties to see the overlap before needless money is spent.

Settling Early Without Betraying Your Bottom Line

Traditionally, as cases drag on, plaintiffs may back off from the high demands they initially insisted upon, but not before money has been spent. Similarly, defendants will be willing to pay more, but also, after having spent quite a bit. Additionally, compounding the problem, as the hours of casework add up, plaintiffs' attorneys are less willing to bend on contingency fees, and money earmarked by defendants for a case quickly disappears. Being proactive saves money (and that makes clients happy).

For either side of a legal battle, an early negotiated resolution and settlement of a case can actually be more economical than winning. Early resolutions are generally better for everyone, including attorneys that are paid by the hour (despite what the plaintiff's bar may think). A creative approach involves getting the help of a mediator for an initial Russian roulette style settlement negotiation. Parties can simply submit confidential bottom lines (and nothing more) to the mediator, and if overlap exists, the mediator can just split the difference and draw up the terms.

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