Negotiation Law Blog

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I'd just posted a piece on Negotiating from a Position of Weakness when along comes Harvard Business School Working Knowledge with an article about Negotiating with Wal-Mart by Julia Hanna. associate editor at the HBS Alumni Bulletin.  Below, one successful vendor's Wal-Mart Negotiation Rules.

• When you have a problem, when there's something you engage in with Wal-Mart that requires agreement so that it becomes a negotiation, the first advice is to think in partnership terms, really focus on a common goal, of getting costs out, for example, and ask questions. Don't make demands or statements ... you know, can we do this better and so forth. If the relationship with Wal-Mart is truly a partnership, negotiating to resolve differences should not endanger the tenor of the partnership.
• Don't spend time griping. Be problem solvers instead. Approach Wal-Mart by saying, "Let's work together and drive costs down and produce it so much cheaper you don't have to replace me, because if you work with me I could do it better."
• Learn from and lobby with people and their partners who have credibility, and with people having problems in the field.
• Don't ignore small issues or let things fester.
• Do not let Wal-Mart become more than 20 percent of your company's business. It's hard to negotiate with a company that controls yours.
• Never go into a meeting without a clear agenda. Make good use of the buyers' face time. Leave with answers. Don't make small talk. Get to the point; their time is valuable. Bring underlying issues to the surface. Attack them head on and find resolution face to face.
• Trying to bluff Wal-Mart is never a good idea. There is always someone willing to do it cheaper to gain the business. You have to treat the relationship as a marriage.
• ommunication and compromise is key.
• Don't take for granted that just because the buyer is young they don't know what they are talking about or that it will be an easy sell. Most young buyers are very ambitious to move up within the company and can be some of the toughest, most educated buyers you will encounter. Know your product all the way from the production standpoint to the end use.
• Chances are your buyer does, and will expect you to be even more knowledgeable.
  

Check out today's Naked MBA post The Importance of Negotiating Your Salary.  Here's the best advice going:

Practice

Any good negotiator knows that you have to practice. Plan what you want to say and how you want to say it. Have mock negotiations with your friends or your career advisor. Practice negotiating at the drycleaner, with your cable company and with any other service you purchase. Eventually negotiating will feel natural, and you’ll appear more comfortable while you’re doing it. This is important, because you don’t want to come off as nervous or aggressive.

For the full post, click here.

Thanks to Stephanie West Allen at idealawg (channeled to me this morning via the Forbes Business and Financial Blog Network) for the Famous Trials Website from Socrates to Moussaoui (and yes of course O.J.'s there). 

(above, theDeath of Socrates by Jacques-Louis David)

Here's Stephanie's announcement:

Professor Douglas O. Linder of University of Missouri - Kansas City School of Law has created a Web site Famous Trials which presents one intriguing story after another. From Professor Linder's faculty page:

The Famous Trials website, the Web's largest and most visited collection of original essays, images, and primary documents pertaining to great trials, has been an ongoing project of Professor Linder's since 1996. Professor Linder has contributed book chapters, participated in video projects, and presented public speeches on the subject of historic trials.

BATNA for the uninitiated simply means a Better (or the Best) Alternative to a Negotiated Resolution, which is what trial is when your opponent can't negotiate a settlement within the range of reason.

Check it out!

The provocative comment we're following is Jay Welsh's remark that to settle most cases the Plaintiff has to accept a lot less than he wanted to recover and the defendant has to pay a lot more than he ever imagined paying.  And the response we're replying to is Canadian lawyer Michael Webster's:

When the issues have been crystallized into legal ones so well, you are in a lose/lose situation. The manager's dilemma then becomes counsel's dilemma: how do I manage to convince my client to lose more than I ever predicted and still maintain my own credibility.

The reason litigators settle law suits is because the outcome of litigation is uncertain and its pursuit expensive.  But that just states the problem.  How do you "tell" a client in the midst of expensive litigation that he's going to have to pay way more or accept way less than his attorney predicted (with appropriate disclaimers) long, long ago?

First, let me provide a checklist for success in commercial mediation:

1. Bring the real deal-makers to the mediation or settlement conference for it is they -- not their attorneys -- who will  make the decision to pay way more or to accept way less than they had previously imagined.   
2. Bring the parties back into the conflict as participants in its resolution again.  Businesses have commercial problems that have business solutions.  Litigation is often just the stick to force the continuation of commercial negotiations that broke down in so spectacular a way that the parties stopped talking to one another, hired lawyers, and began to fight over legal issues the parties neither care about nor understand.  The parties have now experienced how surreal their negotiation becomes when it's conducted in the courts.  They're probably ready to deal again.  Let them.  
3. Permit the parties to discuss all aspects of the conflict whether they are relevant to the legal issues or not.  The reason one party initiated litigation against the other party is not because he wanted to create precedent.  And if precedent is what a party wants, money might but often cannot settle the matter.  
4. Bring the experts along and let them talk to one another about the ways in which the matter might be resolved or even why their expert opinions are diametrically opposed.  
5. Address the parties' justice issues.  People seek out lawyers for one reason and one reason only.  Because they believe themselves to be the victims of an injustice.  And if its the defendant you represent, the injustice visited upon it is the litigation itself.  I spend a significant amount of time during a mediation discussing justice issues with the parties. 
   1. they're being extorted
   2. they're being low-balled
   3. they were defrauded
   4. their trust and confidence was betrayed
   5. their competitor's market tactics have been unfair and violative of any number of state or federal laws
   6. their intellectual property was stolen
   7. etc., etc., etc.
6. Let the mediator talk with the parties about what the justice system can do, what it should do, what it most likely cannot or will not do.  Most parties will not be happy with their attorneys if their justice issues are not addressed at the time of settlement.  And its my job to make clients happy with their attorneys.
7. Let the mediator help the parties understand that their case has -- with no one's fault -- gotten worse rather than better over time and why.   
8. When all else fails, blame the "system." 

Why Parties Pay More or Accept Less than They Want To

Jay Welsh is right.  If the parties have hired a mediator to settle complex commercial or mass tort litigation, they have done so because they need to pay more and accept less than they are prepared to do.  Otherwise, they'd settle without the assistance of a mediator.

This does not mean that the mediator bangs heads or twists arms.  There are hundreds of reasons why parties do not continue to trial and thousands of good excuses for corporate counsel to stop the bleeding.  They include:

1. the witnesses on the other side performed better in pre-trial testimony than expected
2. the Judge made pre-trial rulings that cut the heart out of your case
3. the Supreme Court (state or federal) just over-turned a hundred years of precedent making one party's legal case far worse and the other's far better than expected
4. it's the economy, stupid
5. the client realizes during the course of the mediation that there's more than one way to organize the facts and apply the law -- something lawyers are trained to do and even sophisticated clients find hard to swallow.  Having had an "aha" experience during the mediation, the client realizes there's more (or less) at risk than he's been thinking and the offer/demand now on the table looks pretty darn good after all
6. the other side becomes un-demonized during the course of the mediation, making it easier to part with money for the purpose of resolving the one thing both sides have in common -- a difficult, uncertain, expensive, dangerous lawsuit.
7. one side simply out-negotiates the other (it happens) 
8. one or both sides lose heart for the battle when they see that the delta between the their bottom lines is not as great as they expected it to be
9. the parties manage to "expand the pie" (more about this later) such that the plaintiff does not have to accept that much less nor the defendant pay all that much more than each anticipated (it happens)
10. one party genuinely develops an understanding of and empathy for the other side's position and changes a hard line attitude against settlement as a result (it happens)

This is a great video that I highly recommend to everyone interested in ending violence in our public schools -- particularly Los Angeles attorneys.  I "judge" (the DRS folks like to call it "coaching") local peer mediation "competitions" (the DRS folks don't like the word "competition)with students as young as ten and as old at 17.  And they are dynamite mediators.  If you want to get involved in some truly pro bono community service work, there's no better place to start than with LACBA's peer mediation program.

And, as always, the "kids" have a lot to teach us "adults" about collaborative vs. positional bargaining.

I am also a LACBA DRS volunteer for its community mediation programs, doing my work at the West Hollywood Community Mediation Center on Melrose under the tremendous direction of one of the world's greatest mediation conveners, Kathryn Turk.  See Part I of my interview with Kathryn below.

Finally, if you don't mind making last minute plans, come on down to the Fifteenth Annual DRS Awards Dinner this coming Tuesday, April 29, 2008, with the reception beginning at 6:00 p.m. and Dinner 7:00 p.m. at the Omni Los Angeles Hotel

                                        HONOREES

Stanton “Larry” Stein
Hon. Joyce L. Kennard

Keynote Speaker: Ambassador Peter W. Galbraith

Get your tickets here!

Part III of the CPR Jay Welsh interview with Michael McIlwrath, Senior Counsel, Litigation for GE Infrastructure - Oil & Gas.

Answer:  there's not a single style. 

I talk a lot in this blog about community; about the need for all of us to understand that when you drill a hole in the other guy's side of the boat, you sink too.  There's something about disaster on a grand scale that brings the best out in us -- creates heroes.  And maybe, if you're inclined to ask why "bad things happen to good people" the answer is that we need to be reminded of our common humanity; common fragility; and, our common obligation to serve as stewards of the planet and all life on it.

So it is with more than a small amount of pleasure that I announce the book launch for my good friend Cathy Scott's memoir of the heroic pet rescues that took place in the wake of Katrina.

Cathy was one of the "kids" in my neighborhood fom the time I was five years old until we all left the old neighborhood for our adult lives.  She was also a member of the first writers' group I was ever part of -- Sisters of the Pen -- a neighborhood "club" we started when I was in the sixth grade and Cathy just entering high school.

Only Cathy has truly fulfilled the dreams of that small group of children and teenagers.  This is her sixth or seventh book and the one that I just know is going to sell a million or more copies for her.

Nostalgia aside, here is the information on the book launch!  (for the r.kv.r.y. literary journal's special issue on natural disasters, click here).  

A book launch event will be held on Saturday, July 26, marking the national release of author Cathy Scott's  book, PAWPRINTS OF KATRINA: Pets Saved and Lessons Learned (to be released this summer by John Wiley & Sons).

The event will be held from 1:45 p.m. - 5 p.m. at Best Friends Animal Sanctuary's Welcome Center (5001 Angel Canyon Road, Kanab, Utah 84741, a 3-1/2-hour drive from Las Vegas). Refreshments will be served.

Attending and signing books will be actress and animal activist Ali MacGraw, who wrote the book's foreword, and photographer Clay Myers, who has more than 70 compelling photos in the book. Also signing will be police K-9 handler Cliff Deutsch, who is featured on the cover rescuing a dog.

On display at the Welcome Center patio deck during the event will be Ark, a full-sized replica of a flat-bottomed boat used to save animals from floodwaters. It was created by Cyrus Mejia, in-house artist and a co-founder of Best Friends . The 4-by-10-foot boat is covered in a unique collage of animal admissions forms (with rescued pets' pictures), photos from volunteers, satellite images of Katrina, maps of New Orleans and strips from pet product bags used during the rescue effort.


Volunteers from Katrina will be at the event, and many Best Friends staffers who worked in the region will be attending too, so it will very much be a reunion. While book signings are scheduled for other parts of the country (including New Orleans on the third anniversary of Katrina), this is the kick-off event and a great opportunity to visit the sanctuary.

To find out where to stay in Kanab, go to: http://www.bestfriends.org/atthesanctuary/angelcanyon/visitorfaq.cfm.

A new Holiday Inn Express has opened in Kanab (435-644-3100), so if the sanctuary cabins and cottages or other hotels are full, the new one will probably have openings. Summer is a busy time in the area, because of nearby Zion, Bryce and the Grand Canyon, and booking early is highly recommended.

If you'd like to take a free tour of the sanctuary, which sits on 33,000 acres in Angel Canyon with about 1,800 animals on any given day, you'll need to book a reservation by calling 435-644-2001, ext. 4537. Or, for more info, go to: http://www.bestfriends.org/atthesanctuary/angelcanyon/visitorfaq.cfm

To learn more about Pawprints of Katrina, go to: http://www.wiley.com/WileyCDA/WileyTitle/productCd-0470228512.html

It is a truism that litigation tends to get worse rather than better over time.  This is as true in the law as it is in physics -- things fall apart.  Your client's clean and righteous narrative tarnishes over time; grows more complex and filled with contradictions.  It's a little like a political campaign.  Barack's ground-breaking race relations speech and Hillary's single tear aside, Clinton and Obama tend to look worse, not better, over time. We all do.

Whether the value of your legal "case" is up today or down tomorrow turns not only upon the most recent documents produced, pre-trial motion won or witness deposed, it also turns on those things that fall apart over time -- including currency exchange rates.   

The micro-economics of settlement timing include corporate events such as quarterly and year-end financial reporting requirements; potential mergers and acquisitions; and, how much financial bleeding your client's divisional president can take this year before worrying about demotion.  

In international disputes, currency exchange rates loom large in the macro-economics of settlement timing.  My own last really "big" case before I left practice was potentially worth a quarter billion dollars in "hard" damages -- the total projected clean-up costs for 500 toxic waste sites in every Canadian province. 

The Canadian dollar was not only weak at the time, it was weakening.  Though the question of whose currency would control was contested, my client was confident that Canadian dollars would eventually govern since clean-up costs by the American plaintiff would be paid in Canadian dollars.  I remember a time when the Canadian dollar was tumbling in value so rapidly that every time I saw opposing counsel in court I'd remind him of the day's exchange rate with a warning that "your case isn't getting any better over time." 

Settlement timing in that case was motion-driven, however, and the matter did not settle until after the entry of a pre-trial judgment in my client's favor pending appeal.

Though I was (and would continue to be) driven by pre-trial losses and victories, savvy settlement counsel would be keeping an eye on macro-economics -- which would, in any international litigation, require someone to be tracking currency exchange rates.

Detail on each of these points soon.  Image and text from Babcock Business Strategies here.

This is useful in actual "at the table" negotiations.

Negotiations Made Easy

• Understand their interests.
• If necessary, change the rules of the game.
• Prepare your strategy, tactics & negotiations communications
• Understand your "BATNA" - test theirs.
• Negotiate with results and relationship in mind; create an enduring agreement.
• Remain "principled" with commitment in all of the above.

I promised you a series of posts on mediating complex and sophisticated commercial mediation. 

Here's what I'm really most interested in doing -- starting a high level conversation among commercial litigators and commercial mediators about the best way in which we can help one another help your clients to achieve the best resolution possible to their commercial dispute and the legal problem/solution associated with it. 

I'm always looking for the smartest guy or gal in the room because. I'm just a geek who really enjoys spending time with people who are savvy, astute, original well-read, and, well-spoken.  These people tend to see things more clearly than I do and that clarity of vision often results in a way of approaching problems that generates better results in a shorter amount of time than is the norm.

One of the smartest guys in any room is AAA arbitrator and Judicate West mediator, Jay McCauley.  O.K., he's Harvard Law and I'm just a state university girl.  But pedigree doesn't matter to me.  Brilliance and creativity does.  Jay and I have recently spent a lot of time talking about the way we feel that we're sometimes talking past our attorney clients and they us.  So we have plans to write some really interesting articles that we hope will help both mediators and attorneys achieve better results more consistently when they decide to settle, rather than to try, a case.

Jay's written a lot already.  And because I'm now getting around 11,000 hits/month (!!yay!!) I've decided to simply pull up his existing articles on mediating particular commercial disputes before launching our jointly written posts.  If any of those 11,000 monthly "hits" come from commercial litigators, we'd LOVE to hear back from you on this series.  

That said, here's Jay's article on Wage and Hour Class Action Mediation.     

There is no such thing as a "cookie cutter" mediation. Nonetheless, most mediations have, among other things, the following general characteristics: 

•  At least four participants whose interests are not naturally aligned - Plaintiff, Plaintiff's counsel, Defendant and Defendant's counsel. 
• Little or no genuine concern that a settlement will foster future claims. 
• Some prospect of integrative, or "value adding," resolutions. 
• A rich body of applicable case law to serve as the empirical basis for risk-based claims valuation analysis. 
• A virtually unrestricted free market where almost any resolution agreeable to the parties can be turned into a contract fully enforceable by the courts.

Wage & hour class action mediation, by contrast, has none of these characteristics.

• Mediating with Only Three Participants

All fictions aside, there are three, not four, interested participants in a wage & hour mediation. They are the defendant, its counsel, and the counsel for the class. Plaintiffs themselves (including the named representatives) are literally absent from the negotiation altogether, and are typically absent physically from the mediation sessions.

Any imbalance resulting from the absence of plaintiffs themselves is, in theory, "corrected" by an institutional device unique to class actions: the fairness hearing, in which a court imposes outside boundaries on the settlement for the protection of the plaintiffs.

Nonetheless, the absence of the plaintiffs themselves is significant. The court is not, in any sense, a substitute negotiator for the plaintiffs. It simply either approves or rejects the settlement agreement, in accordance with reasonably well-established standards, after the settlement has been negotiated by plaintiffs' counsel and the defense team.

The actual negotiators have a common interest in avoiding agreements so extreme that they will be either rejected by the court, or undermined by excessive "opt-outs" from the plaintiffs themselves. But subject to these outside limits, the three players at the negotiating table have an interest in maximizing two things: the portion of the settlement funds that goes to plaintiffs' counsel as approved fees; and the portion of the settlement funds available to be returned or otherwise used by the defendants.

The upshot is this: Plaintiff's counsel seek, and usually get, one third of the settlement funds as fees; amounts unclaimed by class members revert to the defendant to the extent the court permits ; and the stated settlement amounts include the resulting social security and FICA charges the company will have to bear as a consequence of the settlement - an amount that turns out to be 13.85% of the total paid to the class members. These terms are easily arrived at because those at the negotiating table can "give" each other these benefits, without cost to themselves.

The absence of the plaintiff also eliminates one of the most common challenges a mediator has to face in "ordinary" litigation - the challenge of plaintiffs resisting economically advantageous proposals because of a desire to use the courts to obtain perceived benefits that go beyond economics: retribution for perceived wrongs; public vindication; and principled refuge in the Rule of Law.

This not to say that the issues addressed in wage & hour class action mediations are entirely economic. But the non-economic issues characteristically arise from the defense side, and tend to break down into two categories. The first category is the common "principled" resistance to a fairly rigid statutory scheme that typically strikes defendants as entirely inconsistent with the statutory purpose and with common sense. Specifically, those rationally thought to be managers cannot be treated as exempt in California if the time they spend in identified categories of non-exempt functions (e.g. sales) happens to take up more than half their time. The "player-manager" may be thought of as a manager, but there will be exposure if he is paid like a manager, and that fact is a hard-to-swallow surprise for many companies. 

• The Defendant's Need to Deter Future Claims
  
  Then there is the second form of defendant resistance to otherwise attractive settlement opportunities. This one is born of a genuine dilemma: the company concludes it cannot "turn managers into foremen" without losing the critical work incentives or esprit-de-corps or "company culture" that it concludes comes with classifying class members as exempt; but to "buy off" the class action claim through settlement without also turning class members into non-exempt workers for the future would be to inspire, by that act, endless waves, every three or four years, of new wage and hour claims.

These claims would come from new employees who are not collaterally estopped or otherwise bound by the class action judgment supporting the settlement. It would also come from its current employees, class members, who have a basis to argue their release can only apply to past "wrongs," but cannot release the continuing "wrongs" that take place after the release is entered into. Such companies are sorely tested take their chances at trial to escape the dilemma. The prominence of that question is an unusual hallmark of wage & hour mediations. And much of the focus of mediations I have handled has involved finding creative solutions to this very dilemma.

• The Absence of Integrative Bargaining Opportunities
  
  While there is a need to find creative techniques to subdue extraordinary needs for deterrence that wage & hour defendants will often have, there is a curious absence of opportunity to employ another form of creativity - that of finding integrative (rather than purely distributive) resolutions to the dispute. With one obvious exception , the "Jack Sprat" non-monetary exchanges that are the special joy of mediators - where parties give what's cheap to get what's dear, and thereby optimize the likelihood, as well as the quality, of the resolution - are not to be found in this arena.
  
  The reason is not that negotiators in this specialty are not creative, but simply that the inherent nature of class actions virtually eliminates any prospect that the form of any exchange will be anything other than money. Specifically, one stricture of class actions is that similarly situated class members be treated uniformly, and the only uniform needs the members will have is the presumptively universal need for money. As a result, the nature of class action bargaining is heavily distributive, not integrative. 
• The Absence of a Rich Body of Case Law to Support Risk-Based Claims Valuation Analysis
  
  It is a bit of an irony that a field which is so tilted toward distributive bargaining is also one in which mediators are essentially deprived of a major tool used to facilitate such bargaining - a substantial body of actual outcomes at trial in analogous cases to provide a realistic assessment of the actual risk of trial, and therefore the reasonable settlement value of a release. Because the large volume of wage & hour class actions is historically new, and because so few that do exist go to trial, little such evidence of likely outcomes in fact exists.
  
  What girds the negotiation in the absence of that evidence? It is four things. First, the statutory scheme in this area is fairly administrable, and results are arguably more predictable for this reason even in the absence of extensive actual results.
  
  Second, there is an extensive and ever increasing body of evidence of actual class certification decisions, and the factors relevant to class certification decisions in wage & hour actions are more closely related to the ultimate issues at trial than they are in other actions (compare, for example, securities fraud class actions, where the class certification issues have almost nothing to do with the significant issues at trial).
  
  Third, some narrowing of the range of potential settlement is achieved by the fact that extreme low ball offers typically are not made, even preliminarily, because both sides know (or can be reminded) that there is a certain threshold that will not survive a fairness hearing, nor sustain the plaintiff's counsels basic need to preserve reputation in the context of a settlement record that (unlike the settlement of individual claims) is always public.
  
  Finally, and perhaps most importantly, parties tend to be guided by a kind of "market price" for these claims - settlements tend to fall within a fairly well defined band established by publicly available information of what other cases have settled for relative to the total potential exposure in the case.
  
  What is notable is that, given the fairly strict and administrable standards of liability set forth in the statutes, the market price of the claims is probably materially below the amounts that a standard risk-based discounted claims valuation analysis would yield. This probably makes sense in light of the various incentives of the participants. Defendants need attractive offers (relative to exposure) to overcome both non-economic resistance factors as well as the lack of extensive palpable evidence of trial results. Defense counsel, paid hourly, have, if anything, an economic advantage to honor the client's resistance, as well as reputational and self-fulfillment benefits to keeping at least some quota of cases to try.

Plaintiffs' counsel, particularly specialists in demand, reach a certain threshold where the economically optimal course is to declare the offered amount to be enough and free up their time to fry another fish. And that threshold, in turn, need be no greater than a respectable outcome as compared only to the settlement market price itself. The Court, for its part, is institutionally loath to second-guess the norm, and institutionally dependant on most large cases settling in any event. Finally plaintiffs, themselves, are, for all practical purposes, absent from the process. They can opt out, and thereby preserve the right to bring claims on an individual basis, but the value of individual claims is rarely enough to warrant the transaction costs.

• Role of the Mediator
  
  It helps immensely for the mediator to have substantive familiarity with the rhythms and restrictions of class actions generally, and specific familiarity with the rights and duties of employers regarding wage and hour matters. That is the environment in which the mediator is applying his or her skills. But the mediator's primary contributions come from the use of more general "process skills" to anticipate, analyze and avert impasse in the negotiation process. Those skills are not unique to wage & hour mediations.
  
  Some taste of the actual process of analyzing and averting impasse may be provided by an actual example of an email I sent to defendant's counsel to overcome an impasse in a wage & hour class action I was mediating. The text - attached as "Attachment 1" - has been left in its raw form, with one exception: all names appearing in the original have been made generic so as to fully protect confidentiality. The case settled shortly after the email was sent.

John (Jay) McCauley is a mediator who also serves as an arbitrator on the Complex Commercial Panel of the American Arbitration Association and an Adjunct Professor at the Straus Institute for Dispute Resolution at Pepperdine University School of Law.  He is also a hearing officer for the ADR firm Judicate West.  

Website: www.mediate.com/mccauley.

E-mail: mailto:info@mccauleylaw.com

Phone number: (800) 848-5591.

As I promised last week, we'll be providing our readers with a series of posts about the use of settlement counsel in sophisticated and complex commercial litigation.

While searching the internet for pertinent articles, I came upon an interview with a New York attorney, Lew Goldfarb, whose entire practice is devoted to settling cases for clients already represented in litigation by other law firms.  Mr. Goldfarb's credentials are impressive, his observations shrewd and his opinions about the use of settlement counsel closely match those of our colleague Jay McCauley whose article we published earlier today here.

Here's the link to Mr. Goldfarb's firm and another to the interview (from Metropolitan Corporate Counsel) with a tantalizing excerpt below:

Typically, I am retained by the defense side as part of a dual-track approach. The litigation continues on one track, while I advise the plaintiffs' lawyers that I have been retained by the defense to take a look at the possibility of settlement. At the outset, I make it clear that I have been given only a 30 day window to attempt settlement and that my involvement should not be construed as a lack of resolve to litigate the case.

Following this initial dialog, I review the strengths and weaknesses of defendant's position. Class action litigation often produces a contentious dynamic that polarizes positions based more on emotion than factual disagreements. One of my most important tasks is to identify the true elements of disagreement. When I have a good understanding of these factors, I make recommendations to my client and obtain parameters for my discussions with plaintiffs' counsel.

I then meet with the plaintiffs' counsel, preferably one who is not involved in the litigation, to focus on ways to settle the case. Plaintiffs' lawyers are usually receptive to this approach, because they are looking for ways to get relief for their clients and to get their legal fees without the costs and risks of further litigation.

In some cases I am first approached by plaintiffs' counsel who are interested in settling a case and who know me from years of litigating class actions. I will then take this overture to the corporate defendant who will decide whether to retain me to attempt a settlement. I have resolved a number of cases in this manner.

I have also found success in ending class actions by combining the resolution of a government investigation with additional relief to class members. Very often class actions follow on the heels of a government investigation. In negotiating a settlement with a government agency, it is often possible to synchronize the remedies that the government wants with those that plaintiffs' counsel is seeking and put them all into one package. This serves not only to end the government's involvement, but also to satisfy the claims of the plaintiffs, and provide a compelling argument for ending the class action. I would then go back to the plaintiffs' lawyers, demonstrate how their clients' claims have been fully satisfied, and offer them appropriate attorneys' fees.

In some cases plaintiffs' counsel demand greater relief for the class, in part, to justify higher attorneys' fees. If agreement is not reached, the client can attempt to persuade the court that the relief to the class is adequate. If the court agrees, the lawsuit becomes a catalyst case where the only issue is whether the plaintiffs' lawyers are entitled to attorneys' fees for achieving results for the class. The defendant often is in a much stronger position arguing this issue rather than the merits of the case.

Continue reading here.

Thanks to Geoff Sharp for leading me to John Day's terrific series of posts on What it Takes to Be a Great Trial Lawyer particularly Part 11, The Courage to Tell the Client the Truth, excerpt below.

As information is learned in a given case, great trial lawyers also tell their client the truth. They give an opinion about whether to make, accept or reject a settlement proposal, or indicate that the proposal is so within the range of reason to make it a toss-up. They give these honest opinions whether the client likes the advice or not, and explain the basis for the opinion.

A great trial lawyer will not hesitate to tell a client that the client is making a mistake by not taking a recommendation of the lawyer, but then will follow the client's wishes so long as the course of action is legal and ethical.

In other words, great trial lawyers understand that client is the boss, and unless the client is demanding illegal or unethical action or the relationship between lawyer and client has become so impaired that the lawyer cannot adequately represent the client, the lawyer yields to the client's wishes.

Passover is my favorite Jewish holiday and one of the few days of the year for which I'm willing to spend at least two days grocery shopping, cleaning, cooking, buying flowers, and setting the table, not to mention printing out numerous Haggadahs from the internet for our dinner guests. 

All this activity precludes me from writing about Passover, which is why I'm giving you two sources and not my own thoughts this morning (something's cooking in the kitchen). 

First, from Jewish Current Issues Passover 2005:

Michael Tolkin writes in “Faith and Proof” that the story comes from a book that is beyond history -- “written over a thousand years by a thousand writers . . . proposing a model society of frail humans who need justice, sacrifice, joy, rest and atonement . . . . a collection of voices [that] is a hint of the sound of God.” It does not matter whether it is literally true:

If Abraham did not send Hagar and Ishmael into the desert, but we imagined it; if we had not been slaves but imagined it; if we had not been 600,000 strong at Sinai, but imagined it; if God did not let us cross into the land until a generation had died in the wilderness, but we imagined it; if David did not have Uriah killed so he could marry Bathsheba, but we imagined it; if we imagined the need for a land to create a light for the world . . . if all the contradiction and paradox were not dictated on Sinai in 40 days, but heard by us over those thousand years, and our errors written down and not denied or blamed on someone else -- then the book is all the miracle anyone should ask for, and to read it as literal is idolatry.

Less seriously, but to stay on topic -- the Passover negotiation story from an online Passover Haggadah from the Seder of the Seder here

Yachatz

the middle matza is broken in two, with the larger portion put aside for the Afikoman.

Here we are expressing the essence of Matza, the poor-man's bread: A poor person never knows from where and when his next meal is coming - he always puts a bit away for emergencies.

One of the well-known customs is for the leader of the seder to put the Afikoman in a small bag. The children of the house "steal" the Afikoman, and later they are promised a present for its return. Somehow, when I negotiated for a car it didn't work...

(right, the must-read Google Story) 

If the point of litigation is winning what is the point of settlement negotiations?  Winning, right? 

Wrong.  The point of settlement negotiations is to create durable agreements that sufficiently serve the parties' interests so that they will either stop bothering one another -- for which the LawGod created iron-clad releases -- or flourish in their mutual business venture.

I mention The Google Story in this post because it contains a small narrative about a  business deal that killed its host.  

In Google years, this story arises at the beginning of time -- the year 2000.  Back then, Google was renting space by the square foot in the air-conditioned warehouses that store online company "servers." Google's stripped-down, high-powered hardware was so small (took up so few square feet) and so powerful (used so much electricity) that its lessor's electric bills drove the warehouse out of business.  The narrative doesn't suggest that Google intentionally negotiated this deal to "get the better of" its bargaining partner.  Nevertheless, a truly competitive negotiator, on hearing this story, would likely experience a little adrenalin rush -- the agreement being quite literally a "killer deal."  

I tell this story because I want to begin a series of posts about competitive and collaborative negotiation in the context of "bet the company" commercial litigation.  At the same time, I want to suggest the need for specially designated 'settlement' counsel to work alongside of (but not with) the litigation team.  The Google story will have relevance to those issues as we proceed.

If I can free up a little of the time of my friend and colleague, AAA arbitrator and Judicate West mediator Jay McCauley to help me out, you'll be hearing from him on these topics during the next several weeks as well.

For now, I'm leaving you with this 2004 article, Negotiation is not a competitive sport by Steven P. Cohen, President of The Negotiation Skills Company in Pride's Crossing, Massachusetts, together with his concluding remark.  

Competitive negotiation yields winners and losers and reduces the likelihood that losing parties will be fully committed to the resulting agreement. If the agreement falls apart, the negotiation must be deemed a failure. If parties are compelled to fulfill their part of the agreement but end up with a bad taste in their mouths, they will approach future negotiations with the winner with reluctance, paranoia, and distrust. The long-term consequences of competitive negotiation are unfavorable, yielding reduced enthusiasm and commitment as well as damaged relationships. Negotiation is about how the parties are going to bring about added value from having worked together. It is not a competitive sport.

See also Hard Bargaining:  What's Machiavelli Got to Do with It at the IP ADR Blog here.

. . . you tend to escape gravity in a fury of creative activity.

Like this!  The Spring issue of the r.kv.r.y. quarterly literary journal, which has just been published and is quickly approaching it's fourth anniversary.  (see also r.kv.r.y.'s blog here!)

If you, like me, chose law as the default profession of the liberal arts major (Literature here, natch) check out our latest issue, which is full of great stuff -- more than a little of which has been written by lawyers.

Don't get me wrong -- I LOVED legal practice and am even more passionate about mediating the resolution of the type of case I litigated for 25 years -- complex commercial litigation.  

NEGOTIATING the resolution of these cases is really just the final part of my legal career -- a turn in the road that I'm more than pleased to have followed, particularly as our national recession deepens. 

Why?  Because negotiated resolutions don't depend upon court calendars, cranky and often unpredicatable Judges (my friends on the Bench excluded) or someone else's idea (12 people good and true; three arbitrators; one Judge, etc.) of what the most beneficial and fair solution to a business problem might be.

It's all of a piece, you see, because story -- as in those written by r.kv.r.y.'s contributors -- is more important to the mediated settlement of a dispute than a litigated resolution.  In mediation, we dress the "legal case" back up in all of its compelling though often messy particulars; we put the flesh and blood people back into the business problems that led them to lawyers in the first instance, permitting them do with their mutual conflict what they do best -- create a commercial solution to a business problem.  

Story. Self-determination.  Justice.

I'll soon be teaching a short session on career development over at the Straus Institute with one of the hottest mediators in town --  the busily brilliant Lisa Klerman, formerly of Morrison & Foerster and for the past few years the head of the USC Law School's Mediation Clinic.

I have my own short list of practice development principles in How to Start a Mediation Practice.  These broad guidelines have taken me farther in the first four years of my mediation career than I should reasonably have expected though, of course, I remain impatient to simply be booked three months in advance right now! ("instant gratification takes too long").   Here they are:

1. be conscious, i.e., be alert to conflict escalation, the parties' needs and fears, and your own true goals and genuine strengths.
2. be teachable
3. be of service
4. always say "yes" to a mediation request
5. be the exception to any rule that would guarantee your failure

I'd be remiss if I didn't mention mediator and educator Tammy Lenski's meticulously crafted guide book to the perils and opportunities of mediation practice -- Making Mediation Your Day Job here, which I'll be putting on the bibliography list for Jack's class.  (Diane Levin's and my reviews of this book can be found here)

Meanwhile, Lisa Klerman has passed along to Jack McCrory, guru to LL.M Dispute Resolution students over at Straus, the following article on business development for the final LL.M seminar before the students graduate from that program.  It is well worth re-printing here.

Yes, There Is Money in Mediation! Ten Success Secrets from Top (Non-Starving) Mediators.

It isn't exactly easy to make big bucks as a mediator, but industry standout
Jeffrey Krivis says it is possible. In his new book, he has teamed up with
some of his successful colleagues to share a few lucrative tricks of the trade.

Doctor. Teacher. Firefighter. Professional athlete. And mediator? Actually, yes. While few second-graders are naming this career on What-I-Want-to-Be-When-I-Grow-Up Day, mediation is becoming a hot career choice. Since the early 1990s many people, lawyers in particular, have jumped on the mediation bandwagon. No wonder. Its high success rate and lower costs (compared to those of a court case) have led to a boom in mediators. And surprise! Some of them are making serious money.

"Mediation is a career of extremes," says mediator Jeffrey Krivis, co-author (along with Naomi Lucks) of the new book How to Make Money as a Mediator (And Create Value for Everyone): 30 Top Mediators Share Secrets to Building a Successful Practice. /1

"This is a field in which it's possible to become wildly successful-think Tiger Woods, Martina Navratilova, Lance Armstrong-but only a relative few make it to that top tier. "There are many mediators who struggle," he adds. "And because they consider their career a calling, they accept the struggle. They'll tell you they can't imagine doing anything else. But the truth is, you can fulfill your calling and build up a healthy bank account."

Krivis and Lucks have written a book for mediators-and aspiring mediators-who want to do just that. It's an invaluable resource filled with practical, proven, and down-to-earth information on how you can develop a satisfying and lucrative career as a mediator, no matter what your area of interest. The book provides advice from 30 top mediators, who give a behind-the-scenes look at how they achieved success in this highly competitive profession.

Here are 10 great tips from How to Make Money as a Mediator that can put any new (or struggling) mediator on the path to success:

1. Inspire trust. You must ensure that your clients and potential clients-whether they are lawyers, helping professionals, families, or community leaders-feel they can trust you to be fair. They must believe you can help them grapple with the life-changing issues that arise in mediated negotiations. All top-tier mediators will tell you that inspiring trust is paramount.

2. Cultivate champions. A passion for mediating and terrific natural skills can take you only so far. You need to cultivate champions-influential people who believe in you as a mediator and who are happy to help you get your name out there to larger groups. "I have had several champions who paved the way for me, introducing me to important potential clients and polishing my reputation," says Krivis. "If you have even one such champion, you can consider yourself fortunate indeed. But note: they will not always come into your life by chance. You need to cultivate these relationships."

3. Practice authenticity. Authenticity is the bedrock on which trust is built. For a mediator, authenticity means being strong enough to work with ambiguity day in and day out, and to face the internal conflicts it sometimes engenders. You can't always know where things are going or how you are going to get there, but you must lead from an honest heart. This will give you the ability to walk the fine line between deception and honesty and to make the parties feel that you always have their best interests at heart.

4. Create value. Great mediators are always working to provide direction and encouragement, giving clients new tools for solving problems, guiding them around potential land mines, and helping them discover new opportunities. Krivis calls this creating value. In fact, he says, creating value might well be the foundation for getting clients and settling cases. When marketing your services, you can create value by finding out from the parties what their pain threshold is, what's causing them the most concern, and what has to happen in order for them to select you as the person who can help them solve their problem. Once you have this information, you can innovate regarding how to solve their problem.

5. Embrace rejection. Mediation is an isolated world. For every case you get, there are 10 you didn't. To be really successful, you have to expect rejection and embrace it. You must hold the view that when you've been rejected, it means that someone who believes in you has tried to sell you. He or she will keep putting your name out there, and eventually you'll achieve critical mass. "I hear the statement, 'Oh, your name comes up all the time' from people who have never used me," says Krivis. "Don't let rejection get to you. You may be on every lawyer's list of three top mediators, but you've got to remember that there are two other mediators up there with you. You just can't take the decision personally. It may be based on timing or scheduling, or the would-be clients just plain prefer another mediator over you that day."

6. Practice the Three Ps: Patience, Perseverance, and Persistence. Every single mediator who made it to the top did so because he or she understood the importance of the Three Ps. It can take three to five years to build a successful mediation practice, so relax, dig in your heels, and prepare to be there for the long haul. Believe in your abilities, believe that you can and will build a successful career, back up that assurance with real skills and real successes, and then stay the course.

7. Learn to deal with emotional overload. Sometimes, especially after a particularly rough or draining session, you just have to put the day out of your mind and move on.

8. Make yourself a standout. Here's the brutal reality: there are far more mediators than there are mediation opportunities. Think hard about who you are and what makes you unique, and how you can help your clients and potential clients recognize that uniqueness. Find creative, compelling ways to help yourself stand out from the pack whether it's through teaching courses, writing, or attending CLE programs. Put your name and face in front of your clients with enough frequency that you become familiar-a known quantity they respect. Whatever you do, be discriminating in the marketing choices you make for your practice. Interestingly, says Krivis, standing out doesn't mean tooting your own horn. "You're not out there to tell people how great you are, but to find out what's going on in their practice and how you can help. When they remember your name and face, that's the subliminal message they should receive on their radar screen."

9. Market yourself as a professional. What does it take to establish yourself, to be the name that repeatedly shows up on the ledgers of people who are looking for mediators? You must think of yourself as a professional mediator, believe in yourself, and live the part every day. You must develop a reputation for mediating well and staying with a case until it closes. But beyond these fundamentals, you must understand how to market yourself as a mediator: what it takes to get the power players on your side and what you need to do to be seen as-and become-part of their inner circle. Don't inadvertently market yourself as a fringe player.

10. Stay fresh to survive. Yes, everyone gets tired at some point. But you'll survive in this business by making an effort to stay fresh in your approach and your outlook toward your practice. Do all you can to maintain your compassion for the parties you serve. If, despite your best efforts, you find yourself getting stale or robotic in your approach, take corrective measures fast. You can get your blood pumping again by collaborating on ideas with other mediators or taking "educational vacations" to exercise your mind by learning about faraway places and far-out ideas. 

______________________

1/ See local mediator Charles Parselle's review of Krivis' book here.
 

9:00 a.m. sesstion:  Culture, Tradition and Language in Cross-Border Negotiations and International Conflict presented by Professor John Barkai, University of Hawaii; Andrew Aglionby, Baker & McKenzie; and, Michael Zacharia, Former Exec. VP of Bus. Development General Counsel, DFS group., Ltd., Hong Kong.

Here in Los Angeles, mediators deal with cross-cultural negotiation issues every day of the week.  Today, the Straus Institute in Malibu is hosting a conference to equip us to deal with the issues that arise in those negotiations.

ASIAN CULTURES

• relationship essential
  • business cards:  give with both hands; take with both hands; read or you will be considered disrespectful -- you are not interested in who this person is
• comfortable with uncertainty
• principal to principal negotiations:  negotiators need to be of equal status
• high context culture, i.e., the context is as important or more important than what is said
• lack of transparency
• 50 ways to say "no"  -- ambivalent answers
  • perhaps
  • I'm not sure
  • I'll think about it
  • We'll see
  • there are many difficulties
• 36 Chinese Negotiation Strategies, i.e.,
  • Deceive the sky to cross the ocean.
    • Moving about in the darkness and shadows, occupying isolated places, or hiding behind screens will only attract suspicious attention. 
  • Create something from nothing.
    • You use the same feint twice. Having reacted to the first and often the second feint as well, the enemy will be hesitant to react to a third feint. Therefore the third feint is the actual attack catching your enemy with his guard down. 
  • Startle the snake by hitting the grass around it.
    • When preparing for battle, do not alert your enemy to your intentions or give away your strategy prematurely. 
  • Remove the firewood under the cooking pot.
    • When faced with an enemy too powerful to engage directly you must first weaken him by undermining his foundation and attacking his source of power. 
  • Replace the beams with rotten timbers.
    • Disrupt the enemy's formations, interfere with their methods of operations, change the rules in which they are used to following, go contrary to their standard training. 
  • The honey trap.
    • Send your enemy beautiful women to cause discord within his camp. This strategy can work on three levels. First, the ruler becomes so enamoured with the beauty that he neglects his duties and allows his vigilance to wane.
• constantly question your assumptions:  am I really understanding what this person is saying or their body language is communicating
• exercise patience, persistence and humility
• show respect
• Americans have different cultural backgrounds even when they "look" American because  cultural background is not always apparent from physical appearance, accent, gesture and the like
• suing Asians
  • very difficult thereafter to settle
  • very public -- impacts "face"
  • NEGOTIATE FIRST
• people will always find ways of working together 

IN CULTURES WHERE COURTS ARE CORRUPT (AND THE SPEAKER IS NOT SPEAKING TO ANY PARTICULAR CULTURE, BUT THERE ARE MANY WHERE COURTS ARE CORRUPT) YOU DON'T RELY UPON CONTRACTS, YOU RELY UPON RELATIONSHIPS 

11:15 Session:  The Global Evolution of Business Mediation with John Hinchey of King & Spaulding; Paul Grossman of Paul Hastings; Jay Welsh, General Counsel, JAMS; Madame Wang Hongson, Secretary General, Beijing Arbitration Comission; and, Professor Hal Abramson of Touro School of Law (Long Island).

Paul Grossman on What Objectives are And What He Wants from Mediators

• early evaluation of objective
• who should the mediator be?
  • subperb mediator will settle almost everything
  • arbitration:  retired judges:  preferences
  • mediations:  prefers professional non-judge mediators
    • judges judge
    • are used to being obeyed
    • professional mediators are good at persuading
  • he prefers to use mediation organizations to convene the mediation after telling the mediation organization who he wants to use
  • best way to get the mediator you want is to call the mediator's organizations
• prefers confidential and extensive legal briefs
  • facts and law
  • but also pressure points on the other party
• he brings settlement agreement, lap top and printer
• believes in using a mediation book
  • contains deposition excerpts, cases, exhibits
  • everything he'll use in his opening statement
  • gives it to everyone in the joint session
  • aids the mediator in persuading the other side (or reducing party expectations)
• believes in joint sessions where both parties get to address the mediator
  • like mediators who will "speed talk" the presentation back
  • likes mediators who take notes
  • builds confidence that the mediator "got it."
• tone:  mediation statement is to the mediator but truly it's a presentation to the party on the other side
• mediators he uses use psychological techniques to persuade the other side
  • I'm dealing with an impressive opponent
  • I need your help
  • build confidence
• He like mediators who charge flat fee for a really long day
  • he pays an enormous fee for a long day
  • so that the parties will see it through without worrying about hourly rates
  • once the other side is invested in the process, they tend to settle
• How does mediator get party to settle
  • persuading the other side
  • interim mediator's proposal or bracketing
    • he thinks the mediator should say if the parties aren't willing to negotiate in that bracket, the mediation is over
    • requires great skill of the mediator -- guts 
• most of his mediations settle with a mediator's proposal
  • a good mediator develops an unerring sense of where he can get two "yeses."
• if settlement is truly impossible, good mediators go for partial settlements
• sometimes agree on a binding med-arb with a retired judge
  • baseball arbitration and mediators' proposals (described here)
  • work within bracket

John Hinchey of King and Spaulding

• was present at the famous Pound Conference on Judicial Reform where the idea of the multi-door courthouse was hatched
• he's involved in construction litigation and construction contracts are "dispute generating machines"
• PREVENTIVE DISPUTES RESOLUTION IN RELATIONSHIP CONTRACT
  • contract carefully, anticipating what might go wrong -- the contract itself is an "early dispute resolution mechanism"
  • partnering:  hot-tubbing:  align objectives
  • allocating risk in a thoughtful, fair and appropriate way -- don't load all of the risk on any one party
• RESOLUTION OF DISPUTES DURING TERM OF THE CONTRACT
  • the contract requires the parties to negotiate before they mediate, arbitrate or litigate
  • designate who will negotiate -- project manager or executives for instance
  • mediation or conciliation:  required by contract 
  • some people see mediation as water-carrying & others say conciliation involves an more active role of the mediator -- reality-testing
  • AAA says mediator works to bring the parties together
    • help the parties engage and communicate so they understand real interests and real positions of the other side
    • when parties are invested in a dispute, business people need help
    • mediator is a reality-tester
    • once you start representing a client, you look for everything to strengthen client's position
    • thought important to understand the other side -- often need help to take the other side's arguments seriously
• DISPOSITIVE:  SOMEONE HAS TO DECIDE DISPUTES
  • can arbitrate just one part of the contract; one parties' alleged failure to perform
  • online arbitration by documents only:   much speedier
  • med-arb (here's a Straus training video on problems with this method)
  • baseball arbitration

JAY WELSH OF JAMS:  HISTORY

• in 1990s, venture capital company invested in JAMS wanting it to be the next FED EX
• led to growth of JAMS
• Straus, together with JAMS, taught claims adjusters about the potential for mediation
• JAMS did the convening
  • the defense was instrumental in starting the business
  • JAMS would convene -- call Plaintiff's attorneys at the end of the month when they needed to pay their bills to suggest mediation
• the mediation of cases is static but training is growing worldwide
  • EU promoting a universal dispute resolution method that won't have cross-border jurisdiction fights
  • many EU companies are vying for this training business
• NOW 22 offices -- new office in New York City to do international dispute resolution
• industry has to grow faster and larger than it has:  10% per year
• got here because courts clogged & people dissatisfied
  • true in other parts of the world
• built cadre of trained mediators
  • when began, used Judges
  • lawyers came in in mid-90's
  • the Judges in Europe aren't held in the same esteem in Europe as they were in the States
• mediation had to be sold and marketed
  • that will have to be done in Europe and the Far East
  • awareness training
  • taught in the law schools
  • in 1990, maybe 4 lawschools in the country with ADR courses
  • now nearly every American law school has mediation courses
  • managing partners in worldwide law firms has dramatically changed
  • nearly all managing partners had ADR courses available to them

Madame Wang Hongson of Beijing Arbitration Commission

• interest-based mediation of any type of dispute brought to them
• values
  • party autonomy:  mediators chosen from inside or outside the BAC panel
    • facilitate settlement
  •   more freedom in payment options and less costly than arbitration
  • confidentiality
  • voluntary:  parties may terminate process at any time
• independent procdure: no relationship to arbitration
• the parties may make mediation agreement an arbitration award if they wish
• the BAC conducts a training program

KEYNOTE SPEAKER:  MARY WALKER, GENERAL COUNSEL, U.S. AIR FORCE on Effective Conflict Management and the Commitment to an Ethical Culture. (see also here)

• 60,000 contracts in 2007 between air force and its contractors
• contracts include an ADR pledge
• new way of approaching business partners and employees
  • shared values
  • fostering relationships
• suspension and debarment for contractor wrongful conduct
• she asked the various divisions that worked under her supervision to collaborate
• connection between dispute resolution and ethical culture
  • Sarbanes Oxley Act
    • hasn't addressed root causes of malfeasance
    • doesn't provide sufficient guidelines to corporate world
  • Reliance on legal framework insufficient to change an unethical culture
  • foster genuine ethical conduct
    • necessary to trust
    • trust necessary to collaboration
  • market value of trust
• air force pioneered conflict management system
• conflict management system should empower employees to resolve dispute at the lowest level
• "ethics"
  • service before self
  • excellence
• values-based training helps air force to negotiate in gray areas and make ethical decisions where there are no rules
• dispute resolution initiatives
  • commitment to dispute resolution in all contracts -- buy in or opt out
  • pursuing written commitments to
  • cross-cultural training
  • inter-space negotiations
  • expedited review of employment discrimination complaints
    • goes to root causes
  • embrace and teach negotiation skills at every level of air force
    • inter-space models
    • 2005:  Air Force Negotiation Center for Excellence
      • not a lawyers program
      • not at JAG school
      • not just a problem for lawyers
      • training for acquisition work force
      • special focus on cross-cultural negotiations
        • any communication where parties don't have common frame of reference or common cultural understanding
        • this includes other American cultures
    • new civil service system for defense department
      • employees must negotiate performance objectives and salaries
      • provided interpersonal skills training
      • equip managers, supervisors and employees to manage change
      • 30,000 air force supervisors trained in interspace negotiation and communication skills
  • employment discrimination complaints
    • mediation:  2006:  EEO complaints resolved in 59 days with voluntary dispute resolution compared to 2 years
    • resolved 73% of the cases
    • stepped beyond allegations of the complaint to the root cause (which is often not discrimination but something else that is disturbing to the relationship)
    • improves morale
    • resolution can affect entire work group
  • dispute resolution for contractors
    • contracting officers should offer dispute resolution in every contract dispute with limited exceptions
  • contractors accused of misconduct or sub-standard performance
  • want to know that the contractor has a commitment to an ethical culture
    • need to trust contractor to tell the truth when asked
    • examples later
• "war" story
  • pursue disputes central to individual's core beliefs
  • policies regarding religious expression
    • free exercise vs. non-establishment
    • forced to resolve in light of day (publicity)
• arose at AF Academy
  • senior leadership examined scope of dispute
  • executive staff served as mediators
  • town hall meetings
  • members of congress
  • small focus groups
  • attorneys involved to interpret the constitution but lawyers were not at heart of this process
  • one page policy on religious expression
  • rooted in cultural ethic -- respect for the dignity of each person
  • sought wide range of views:  religious and legal scholars; public; officials; individuals

(above:  Kathleen Bryan, CPR President and CEO)

EARLY AND EFFECTIVE CONFLICT MANAGEMENT FOR ORGANIZATIONS with Phillip Armstrong, litigation attorney for Georgia Pacific; Kathleen Bryan, President and CEO, International Institute for Conflict Prevention & Resolution; Stephen Gates, Former Senior Vice Pesident and Group General Counsel ConocoPhillips; Deborah Masucci, V.P. AIG and Chargle Morgan, Managing Director of FTI Consulting

• corporation isn't one mind:  must recognize everyone asks same question -- how will the resolution of this case going to affect my career; my relationship with the CEO or General Counsel or shareholders
• CPR certified experts in electronic discovery to assist with arbitration or mediation
• one thing that's pushing counsel is electronic discovery
  • see federal rules
  • have to get together with other party to discuss information about electronic systems and how to get at them and exchange that information with one another
• what about discovery's effect on early mediation?  Kathleen Bryan addresses "how much information is enough?"
  • in-house people believe they can pull together documents in 60 days
  • outside counsel think it will take 6 months to a year
  • case management
    • voluntary exchange on expedited basis
    • followed by mediation or arbitration
  • in house counsel does own in-house investigation
    • gather documents
    • interview witnesses
    • set settlement authority
  • early case assessment in-house necessary to set reserves, prepare financial statements
    • too many cases languished waiting for outside counsel opinion
    • no piece of litigation that ever improves with age
  • guage time when want to "invent" an ADR approach 
  • setting reserves
    • particularly important to get right in light of Sarbanes Oxley
  • See CPR's FIVE STEPS for ADR Design for Corporate Law Departments 
  • Businesses are just now trying to resolve these matters -- commercial disputes -- without resource to litigation or eve outside counsel 
  • See also NEGOTIATING ENDURING CORPORATE CHANGE  A Case Study on the
    Task Force on Equality and Fairness In Roberts v. Texaco Inc. 94 Civ. 2015 (CLB)
    U. S. D. Ct., S.D.N.Y. by Cathy Cronin-Harris, Esq. and David M. White, Esq.
    

(top: we assimilate and organize data in our own favor:  click here for full size chart)

Despite our own beliefs that we've adequately analyzed the weaknesses in our own cases, we have all been told at one time or another that we are "buying our own bull%#@^."

Is there a remedy?

First the Social Science Research

According to Bargaining Impediments and Settlement Behavior, studies of self-serving bias on estimates of probable damage awards provide strong evidence that:

• we assimilate information based on our existing biases (remember the OJ verdict);
• even when told we're doing so, we continue to organize information in such a way that it supports our existing opinions;
• the receipt of additional information, without more, will simply "confirm" existing biases; and,
• to make a difference in the parties' views of the merits of their case, mediation practices must include techniques for de-biasing the parties.

The Research

Research subjects were given the identical "case" materials and randomly assigned roles as "Plaintiff" or "Defendant." The subjects were put into bargaining pairs and asked to: (1) estimate a "fair" award by a Court to the Plaintiff; and, (2) to attempt to settle the dispute.

The experimental results and their implications were reported as follows:

• Plaintiffs' predictions of the [probable award] were, on average, $14,527 higher than defendants'.
• Mean plaintiffs' fair settlement values were $17,709 higher than defendants'.
• Not surprisingly, the settling parties' assessments of what a fair settlement would be and what a judge would likely award were closer together than were those who did not settle.
• Among the 59 pairs who settled, the mean difference between the plaintiffs' and defendants' predictions of the judge's award was $9,050.
• For the 21 pairs who did not settle, the average difference was $29,917.
• The strong correlation between the magnitude of the bias in a bargaining pair and non- settlement supports the conclusion that the self-serving bias often prevents parties from settling disputes at the most advantageous time and for optimal mutual benefit.
• Even when asked to tell the "other side's" story in an essay before predicting possible awards or when told about the existence of the bias, the subjects continued to evaluate the case according to their own material interests.
• Only in one experimental setting where subjects were both informed of the bias and made to write an essay substantiating the other side's case was the effect of the bias mitigated.
• That subjects were unable to rid themselves of the bias when informed of its existence demonstrates that it is not a deliberate strategy.

Other findings of the experiments point to biased assimilation of information as the likely psychological mechanism underlying the self-serving bias.

When subjects were presented with eight arguments favoring the side they had been assigned (plaintiff or defendant) and eight arguments favoring the other side and were asked to rate the importance of the arguments as perceived by a neutral third party, there was a strong tendency to view the arguments supporting one's own position as more convincing than those supporting the other side, suggesting that the bias operates by distorting one's interpretation of evidence.

This study suggests that litigants may not be seeking to maximize their own payoff, but are rather trying to obtain what they deem to be fair.  

Conclusions from the Experimental Data 

The application of the self-serving bias to bargaining behavior led the authors of the study to tentatively conclude that 

• exchanges of information are not in themselves necessarily conducive to settlement, i.e., obtaining more discovery before the dispute is "ripe" for settlement may be neither cost-efficient nor an effective settlement strategy;
• the importance of information exchanges to the settlement of a dispute can only be analyzed in terms of how that information may effect preexisting biases, which suggests that attorneys pay greater attention to their opposition's case theories when analyzing information obtained during discovery; and,
• to act as an effective counter to the self-serving bias of both "sides," mediation practices should be, at least in part, directed at de-biasing parties rather than simply facilitating information exchange.
  

HERE IS THE LINK TO THE ALLSTATE MCKINSEY DOCUMENTS; YOU MUST AGREE TO VIEW THE DOCUMENTS FOR NEWS OR INFORMATIONAL PURPOSES:  CLICK "ACCEPT" AND YOU WILL BE DIRECTED TO A PAGE CONTAINING ALL OF THE DOCUMENTS MENTIONED HERE

See also Tort Burger's Post on the Zero Sum Game Aspect of this Controversy here.

I have had a lot of traffic to this post and comments here and elsewhere on the internet about it and the Slabbed post it excerpts.

Because I never meant to "take sides" on a matter I know next to nothing about, I'm now including along with the Slabbed excerpt originally posted, an excerpt of a recent article from Bloomberg.com - Allstate Releases McKinsey Records (etc.) below.        

This post was originally meant to highlight Allstate's (or its consultant's) unfortunate use of the term "Zero Sum Game," when discussing claims handling procedures.  My original comment was that "those who continue to play it often get their  . . . uh . . . soft parts caught in a wringer."

The Slabbed post highlights the damage done to an admitted "Zero Sum Game Player" who is engaged in a human-harm-cost-benefit analysis.  The Pinto punitive damages award came readily to mind because the case was decided while I was in law school learning about negligence.      

For my non-attorney readers, I need to stress that it's not wrong to engage in a cost-benefit analysis for the compensation of injury under a negligence system.  In fact, this is what the law itself (and injured Plaintiff's attorneys) do, i.e., "calculate" the risk of harm + the potential severity of the injury against the cost of avoiding that harm.

People react badly when they see that type of calculation being applied to human injury or the loss of human life because those losses are considered to be "incommensurable," i.e., no amount of money can recompense someone for, say, the loss of a child. For an excerpt from my own article discussing the concept of incommensurability -- The Cost of a Thing is Your Life, click here.

I'm hoping my non-attorney readers will understand that these formal monetary calculations are routinely made by businesses and governments when making decisions about how much risk to human life is worth taking when they engage in potentially dangerous activities for the purpose of creating a significant benefit for many. 

That said, I give you again this excerpt from Slabbed's post on the McKinsey Allstate document furor -- The Herald Tribune Takes the Allstate Challenge --

In a previous post that received a notice in the Silicon Investor BB I spoke of insurers and their lawyers using the court system as instruments of institutionalized bad faith. Indeed Allstate has taken much criticism for ignoring lawful subpoenas over these documents as well as substantial fines as noted by Ms St John. This brings me to the beginning of the main story.

For more than a decade, Allstate Insurance Co. kept a secret from its auto policyholders — a national strategy to force customers to accept reduced cash payouts or face years in court.

Thousands of pages of Allstate documents reviewed by the Herald-Tribune detail how the nation’s second-largest insurer systematically cut payments to customers as a way to boost profits.

The documents describe a two-pronged strategy.

First, the company evaluates claims with a computer program designed to reduce payouts by as much as 20 percent of what the company once paid for the same injuries.

Second, Allstate pushes policyholders to accept quick settlements without the help of lawyers. Policyholders who try to fight for more money face Allstate attorneys coached to refuse to negotiate and to drag out litigation.

The approach often forces car accident victims to take what Allstate offers right away or spend years in court while their bills go unpaid — a strategy Allstate spelled out in guidelines for claims adjusters that “forces the claimant and attorney to think about the obstacles they must overcome …”

Indeed it appears we have a road map of how tort reform is being used against us. Limits on damages only make it easier for these large insurers to get away with outrageous behavior. The story continues:

It was a “Zero Sum Economic Game. Allstate gains … others must lose,” declared a consultant’s PowerPoint slide from a 1994 presentation to executives.

During the next five years of Allstate’s claims overhaul, the same consultant, New York-based McKinsey & Co., chose confrontational words to describe the new system. In PowerPoint presentations and discussion papers drawn up for Allstate executives, McKinsey used “boxing gloves” to characterize how Allstate should treat policyholders who balk at settlements. For customers who hired lawyers, McKinsey urged, “align alligators,” adding these instructions: “sit and wait.”

The documents also show:

Allstate removed much of the discretion of local claims agents to set payouts, requiring them to base their recommendations on a computer program called Colossus. Under that program, average payouts for bodily injuries dropped more than 20 percent in the first few years, internal documents show, a big step toward reaching McKinsey’s goal of “establishing a new fair market value” of such injuries.

Allstate recognized that when an injured driver hired a lawyer, the insurer lost money. In repeated presentations to Allstate executives, McKinsey coached tougher and increased legal action. By 1996, Allstate had doubled its legal force, hiring 225 more lawyers. “The bottom line is that Allstate is trying more cases than ever before,” a corporate newsletter said . . .

For full post from Slabbed click here.

Bloomberg.com's article, Allstate Releases McKinsey Records (etc.) Update No. 2 is here.

Excerpt from Bloomberg.com article below:

Allstate Corp., the second-biggest U.S. home and auto insurer, released 150,000 pages of documents sought by opposition lawyers and company critics related to McKinsey & Co.'s review of claims-handling practices.

McKinsey suggested strategies for the company to become more profitable by paying less in claims, according to videotaped evidence presented in Fayette Circuit Court in Lexington, Kentucky, in a civil case involving a 1997 car accident. Lawyers for policyholders said Allstate's previous refusal to release the documents showed the company wasn't treating its customers fairly. The insurer has said the documents include trade secrets.

``Public criticisms by people with a vested interest in creating an inaccurate picture of the company's claim practices have been based unfairly on only snippets from the documents taken out of context,'' the Northbrook, Illinois-based insurer said in a statement today. ``Because of the need to address misunderstandings resulting from the growing misplaced focus by our critics on very small pieces of the whole, we have decided to make the documents public.''

One slide the consultant prepared for Allstate was entitled ``Good Hands or Boxing Gloves,'' and recommended the insurer put on ``boxing gloves'' to deter about 10 percent of claims deemed to be exaggerated, padded, or fraudulent, according to portions of the report shown to the Kentucky jury. For more than 50 years, Allstate has advertised its employees as the ``Good Hands People,'' telling customers they will be well cared for in times of need.

Rising Claims

The strategy proposed by McKinsey would ``send a message to the attorneys of our proactive defense stance'' in cases dealing with minor impact soft tissue injuries, the consultant said in the document. Lawyers would have to ``think about the obstacles they must overcome to recover significant settlement or the benefits of a smaller, walk-away settlement.''

Allstate implemented the plan in the 1990s because studies showed more people were submitting claims even though accident rates were declining and cars were safer, Allstate lawyer Floyd Bienstock told the Kentucky jury. The McKinsey report found Allstate was overpaying bodily injury claims by 16 percent, Bienstock said.

``It was never a plan to intimidate people,'' he said.

To continue reading, click here.

I didn't realize until I got onto the plane out of Seattle that Linda Babcock and Sara Laschever -- our morning plenary session speakers (Women Don't Ask:  Negotiation and the Gender Divide) -- have written a new book -- Ask for It -- How Women Can Use the Power of Negotiation to Get What They Really Want.

(Listen to their WNYC interview here)

Here are the statistics from Women Don't Ask that should make every woman who reads this blog sharpen her negotiation skills by picking up Ask for It today.

• Women report salary expectations up to 24% lower than men for the same jobs
• Women will pay over $1,000 more to avoid negotiating the price of a car.
• 20% of adult women (22 million people) say they never negotiate at all.
• 2.5 times more women than men say they fear negotiation.

As the handout from Bantam Books on Women Don't Ask reports:

By neglecting to negotiate her starting salary for her first job, a woman may sacrifice over half a million dollars in earnings by the end of her career.  Yet, as research reveals, men are four times more likely than women with the same qualifications to ask for higher pay.  From career promotions to help with child care, studies show time and again that women don't ask -- and frequently don't even realize they can.

So let's equip ourselves for the 21st century friends because Harvard studies have also shown that women negotiate every bit as well as men when they're negotiating for someone else.  This means bringing a negotiation partner with you or simply pretending that you're negotiating for a friend when asking for what you deserve yourself!

And While You're At It, Check Out Diane Levin's Mediation Channel Review of Ask for It Here.  Excerpt below:

Phase One teaches women to recognize that “Everything Is Negotiable”. As anyone knows, the toughest negotiation can be with yourself, and the authors help readers begin by asking questions of themselves to identify and clarify their professional and personal goals. Phase Two teaches readers how to “Lay the Groundwork”, reviewing the skills and concepts of basic negotiation strategy. Among the most important lessons? Information is power — and the authors explain how and where to get it to strengthen your bargaining position.

Phase Three, “Get Ready”, pushes women to aim high when it comes to negotiating. It covers cooperative bargaining; ascertaining your worth; using logrolling or trade-offs to get past jams and build value; and how to make the first offer. Best of all, it even comes equipped with a “Negotiation Gym” — a six-week program of increasingly difficult negotiation exercises that will help women build negotiation muscles and develop stamina and strength in preparation for tougher negotiation challenges. No one will ever kick sand in your face again.

Phase Four shows how women can “Put It All Together” — to practice in advance by role playing with a friend, to avoid making concessions prematurely, to create the right impression to influence your counterpart at the table, and, finally, to close the deal. 

What makes this book a must-read for men, too, and not just for women are its unpleasant revelations about the realities of hidden bias against women at the negotiation table. The authors exhort readers to take responsibility themselves for combating gender bias, not just that of others but particularly their own. They remind readers that all of us regardless of gender possess assumptions and unexamined beliefs about women in negotiation. They point to studies that indicate that while aggression earns men points at the negotiation table, it punishes women with backlash and disapproval. And, while the authors fiercely advocate for women at the negotiation table, the chapter on “Likability” with its insistence that women avoid aggressive tactics and “be nice” while bargaining, will no doubt leave some readers bristling. However, until the world changes how it views women in negotiation, it’s hard to argue with the studies the authors cite.

continue reading here

Though I don't often avert to religion or spirituality, my own values are firmly grounded in mid-century mainstream Protestantism -- most prominent of which are compassion, tolerance, apology, forgiveness, reconciliation and the very real and ever present potential for the redemption of the human spirit.

Resentment, bitterness, anger, vindictiveness and the desire for retribution are all emotions that interfere with the expression of the forgiving side of our spirits. 

More than one friend has likened the holding of resentments against others to "drinking poison and expecting the other guy to die."  Because I have personally reaped the soul-soothing benefits of the challenging practice of apology and forgiveness, my posts on apology -- though calculated to ease business negotiations -- are as grounded in reconciliation's spiritual as well as its material value.

For those interested in following the spiritual vein of this practice, see the Original Faith Blog's series on Forgiveness -- this excerpt from Paul Martin's Spirit of Clarification post. 

To forgive is to let go of a form of anger – specifically, resentment. Even more specifically, the resentment we feel toward someone who has wronged us is a deep and long-lasting blame. Blame is based on judgment: he or she shouldn’t have done that because they should have known better; or because it was unjust; or because, in the same situation, I wouldn’t have done that…

In most cases where we struggle with the issue of how to forgive someone, the primary motive is our own peace of mind, not how to help the person who has wronged us. This is because the odds are that we, as the wronged party, remain disturbed over the incident long after the person who wronged us has moved on.

Forgiveness is related to love. To understand just how, we’d need to know just what we mean by love – a big topic. But to briefly mention one angle on this, we can easily see that forgiveness is related to self love when we realize that to forgive someone else is to promote our own mental health and spiritual peace.

I found Mr. Martin's blog when he stopped by to comment on our post concerning the male/female forgiveness quotient -- a comment well worth reading here.

Once again, from my article Shame by Any Other Name (etc.) here:

Understanding the differences between guilt and shame make even ordinary attempts to apologize and mend relationships damaged by careless, selfish or unkind acts, easier to understand and manage.

Use as an example the revelation that a spouse has had an affair. The anger, even rage, of the betrayed partner in this scenario is both understandable and familiar to all of us. A typical shame-suffused unfaithful spouse would more readily respond with shame-based confessions of powerlessness and helplessness than a guilt-ridden partner ("I couldn't help myself; I'm bad through and through; I wouldn't have done it if I were able to stop myself, but I was helpless against my desire") or aggression ("if you weren't so involved with your work, if you weren't so cold and distant, if you satisfied my needs more often, I wouldn't have had to seek solace in the arms of another").

Not only are these shame-based confessions unlikely to lead to a change in the unfaithful spouse's behavior, they are almost certain to further anger the betrayed spouse who likely wishes, at a minimum, an acknowledgement of wrong-doing, accountability, sincere apology and a promise not to offend again.

A typical guilt-based confession would have an entirely different focus. The guilty party, knowing himself to be the "locus of control," is far more apt to hold himself accountable for wrongdoing once it has been discovered. Guilty expressions of remorse would include "I'm sorry; I know I could have behaved better but I chose to ignore my better judgment" or "I have felt you to be distant and cold and I do feel my needs are not being met, but I understand that is no excuse for this bad behavior."

An individual who feels in control of his actions is more likely to feel accountable for them, and therefore, more likely to accept responsibility for them, apologizing and atempting to make amends.

As I go on to note in recommending to restorative justice practitioners some of the practices of 12-step programs, the widely misunderstood custom of "making amends" has much to recommend it for "restoring" criminal offenders to their communities.

As the Big Book [of Alcoholics Anonymous] explains:  

[We must] launch ... out on a course of vigorous action, the first step of which is a personal housecleaning, which many of us had never attempted. Though our decision [to stop drinking] was a vital and crucial step, it could have little permanent effect unless at once followed by a strenuous effort to face, and to be rid of, the things in ourselves which had been blocking us. Our liquor was but a symptom . . . . Putting out of our minds the wrongs others hand done, we resolutely looked for our own mistakes. Where had we been selfish, dishonest, self-seeking and frightened? Though a situation had not been entirely our fault, we tried to disregard the other person involved entirely. Where were we to blame? The inventory was ours, not the other man's. When we saw our faults we listed them. We placed them before us in black and white.  

The moral accounting created by the recovering alcoholic "working" Step Four is not simply a record of "bad deeds" committed. It is a means to put one's actions in perspective and to enable the alcoholic to create a new moral order from the ashes of his life. By way of Step Four, the AA member can mitigate his harsh self-condemnation while nevertheless taking responsibility for his misdeeds.

Indeed, in making amends, the Big Book advises [12-step] members to be "sensible, tactful, considerate and humble without being servile or scraping."  Only after putting his faults down in "black and white," admitting his wrongs honestly and becoming willing to set matters straight, does the [recovering individual] begin to learn "tolerance, patience and good will toward all men." 

The [12-step] member does not acknowledge these "sins" alone nor store his "inventory" in a bottom drawer, continuing to hide his shame. Rather, Step Five makes quite explicit the need to admit these wrongs to another human being. This step is the first opportunity to be freed from one's shameful secrets and any continued resistance to group participation. 

By reading their inventory to sponsors who have "been there," members recognize they are fallible rather than evil. They come to understand that they can set right many, if not all, of the things they put wrong. 

This set of suggestions pertains to the soul-searching necessary to locate "one's own part in" conflicts, particularly those concerning harm caused by one person to another.  The actual making of amends -- successful apologies -- is another of the 12 steps in all manner of recovery programs.

[After] a [recovering] member [of a 12-step community] brings his . . . list [of persons he has harmed] to his sponsor . . . [they discuss and] agree upon the details of restitution. 

For those victims who are dead or untraceable, amends must be indirect. So-called living amends are required under these circumstances. Members vow to be generous where once they had been selfish, faithful where treacherous, honest where deceitful. They agree to practice "restraint of pen and tongue" lest they lash out too quickly or too harshly at those they love. 

For other wrongs, making amends is direct and simple, if not easy. Money is paid back, even if it takes years. If a crime was committed, after much contemplation and discussion with sponsors, friends and family, some members consider confession to the authorities and may serve jail or prison time as a result. 

Members do not stop there. Recognizing that God will not relieve them of human fallibility, a commitment is made in Step Ten to continue to take personal inventory and when wrong to promptly admit it. Members keep their own side of the street clean and try not to take a broom to anyone else's. They do not "take another person's inventory." 

Finally, members agree to "be of service" to others. "Being of service" is not only repeatedly stressed in [12-step communities] it is recognized as one of the most effective avenues to achieving lasting [recovery].  Many opportunities exist for members to serve others - from making the coffee or setting up chairs at a meeting, to becoming a sponsor one's self, assisting even newer members in working the steps.

Through these twelve steps, [12-step groups] achieve[] the moral education and esteem building necessary for a productive norm-abiding life in a community of mutual trust and respect.

For references used in this article, click here.