CLM’s Retail, Restaurant & Hospitality Community recently held a webinar entitled “Anchors Aweigh! The Anchoring Effect at Trial and in Negotiation,” which discussed strategies by plaintiffs’ attorneys to use “anchor” numbers at settlement or trial in an attempt to tie negotiations to that figure, which is usually unrealistically high. Below are a few takeaways from the presentation.
12:00:00 p.m.
THE SPEAKERS
Brian J. Donnelly, Partner, Cullen and Dykman LLP
Adam Cohen, Partner, Davids & Cohen, P.C.
Stacey Jurado, Auto PD & Subrogation Manager, Kingstone Insurance Company
12:05:30 p.m.
Brian J. Donnelly
“[Anchoring is] putting a number out there at the beginning of a negotiation in an effort to fix the negotiations around that high number. And what the plaintiff’s attorneys do—they want to set the anchor far, far away from where the defendant or defendants place the value of the case.”
12:06:39 p.m.
Brian J. Donnelly
“We all see this in the property and casualty area in every settlement conference we attend, in every mediation we attend, and—we’ll talk about this as well—we see it at trial. There’s a lot of attention these days to nuclear verdicts, and anchoring plays a major role in that.”
12:10:34 p.m.
Stacey Jurado
“Something that I’ve done throughout my career in these mediation-type situations is highlight some of the main points for strengths to try to get the mediator to acknowledge the fact that the anchor is just not realistic and it’s not a good starting place. I feel like if you are able to get the mediator to acknowledge that, they can help with the other party to get them to a more realistic spot to start.”
12:11:23 p.m.
Adam Cohen
“I’m not shy about using terms like ‘absurd,’ and ‘out of this world,’ and ‘unrealistic’ to describe a first demand, which, as most of the 320 or so people on this call are aware, the first demand usually has no bearing, relevance, or relationship to where the settlement number eventually lies.”
12:12:10 p.m.
Brian J. Donnelly
“On the defense side, we’re attempting to set an anchor far away from where the plaintiff is. But we’re trying to also condition the mediator in a mediation to start to think about the case from our perspective right out of the box, from the first time the plaintiff makes what we typically feel is an absurdly high demand or anchor.”
12:13:20 p.m.
Stacey Jurado
“I do think [setting an anchor too low] is a possibility, just as the plaintiff’s demand could be absurdly high or unrealistic. We can have the same effect on the defense side because the mediator or judge then feels that we’re not prepared to actually look to resolve the case. It’s about finding that sweet spot where everyone is comfortable.”
12:15:14 p.m.
Brian J. Donnelly
“I do think Stacey is right. You have to find that sweet spot—that initial offer that you can say with a straight face, that you can attach some reason to, that sends a message that says, ‘Listen, the number on the other side is an insane number. We’re the reasonable ones here. Here’s a reasonable initial offer. It’s low, but it’s reasonable—it’s a start.’”
12:18:09 p.m.
Adam Cohen
“I have a trial that’s happening, and the plaintiff’s lawyer started at $534,000. The case has a value under $50,000. Each time we’ve increased our offer by $2,000-$3,000, the lawyer has moved to $425,000, then $375,000, then $325,000, then says, ‘You’re only coming up $3,000. I’ve made all these great moves!’ My response always is, ‘My numbers are real numbers.’”