During my former service as a United States Magistrate Judge, I conducted many settlement conferences. As anyone who has participated in a settlement or mediation conference knows, much of the process centers on evaluating the parties’ monetary positions at each step of the negotiations. The plaintiff makes a demand, the defendant counters, and the parties try to divine from the numbers the other side’s real settlement valuation and strategy. This exchange is inherent in the negotiation process because no matter how much emotion or principle may be at stake in the litigation, successful settlement depends on reaching mutually agreeable terms that almost always include a monetary component.
One approach to evaluating the raw numbers in the process is to calculate the mathematical midpoint (or average) between the plaintiff’s position on monetary terms (i.e., the demand) and the defendant’s position (i.e., the counter). The midpoint reflects the halfway point between the parties’ respective monetary positions. In other words, it is the number that results when the parties “split the difference” between their monetary positions.
The formula for calculating the midpoint is typically expressed as the total of the plaintiff’s demand plus the defendant’s counter, all divided in half. In other words:
For example, if the plaintiff demands $100,000 and the defendant counters with $10,000, the midpoint for settlement purposes is $55,000 ($100,000 + $10,000 = $110,000; $110,000 / 2 = $55,000).
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