Negotiation Law Blog

In Hijacked on the High Seas When Somali Pirates Attacked, They Kicked Off 56 Days of Drama Over the Fate of a Ship and 28 Crewmen, The Wall Street Journal details the negotiation strategy and tactics that resulted in the release of the hijacked ship and its crew.

(pirate photo from the cat dirl sez blog)

Excerpt below - "Mr. Christodoulou," the shipping company's negotiator, called himself "Gus."

Mr. Christodoulou made an initial offer, which he declines to reveal. The Somali negotiators -- first a man named Hussein, then another who called himself Abbas -- took the offer to the pirates. They called back the next day with a response.

"Hey Mr. Gus, the Somali gentlemen say the money is very less," Abbas said, according to Mr. Christodoulou. "They need more money."

Mr. Christodoulou didn't budge. The Somalis needed to feel they had squeezed every dollar out of the ship's owners, he had been advised, so he shouldn't increase his offer early.

"We want you to get the money and move onto another project," Mr. Christodoulou recalls saying. "But you have to understand, we have our limitations."

The conversations continued daily through December, with little progress. By the end of the month, the families in India were feeling desperate...

Tom Rozycki, Mr. Christodoulou's public-relations adviser, says he decided a new approach was needed to keep the families hopeful -- and away from the media. Publicity could empower the captors and delay the hostages' release, he believed. It would also be embarrassing for the company, making it even more difficult to face the families.

On Jan. 6, at the Hyatt Regency Hotel near Mumbai's international airport, Mr. Christodoulou met with the families of the crewmen.

Seeing Mr. Sharma's hunger-striking grandmother in the front row, he knelt beside her and held her hand. "Granny, your grandson is going to get out. And we want him to get out and come back to the healthy loving family that he left," he said, according to Mrs. Sharma and Mr. Christodoulou. That night, Mrs. Sharma ate some strawberry ice cream, her son recalls.

By mid-January, the pirates on the Biscaglia were growing frustrated. "They told us they were going to take us off the ship and hide us in the mountains," Mr. Khan, the crewman, says. The pirates gave him and the others a mobile phone to call home. "We all told our families that unless the company gave more money, we would be killed," Mr. Khan says.

Mr. Kapade, the chief engineer, says he realized the pirates were trying to pressure the company by terrifying the crew. When he spoke to his wife on Jan. 14, he lowered his voice and spoke in Hindi. "Pass on to others that we're fine," he whispered.

By then, Mr. Christodoulou says, he thought it was time to raise his offer. He declines to say what he offered, but says it was close to what he thought the Somalis would accept based on the range provided to him by experts: $700,000 to $3 million.

He set about trying to raise the money. He approached his own company's biggest investor, Regent Private Capital LLC, a private-equity firm based in Tulsa, Okla. Lawrence Field, Regent Private Capital's managing director, declined to discuss the conversation with Mr. Christodoulou. "Regent does not negotiate with terrorists or pirates or any kind of criminal," he said on Friday.

That evening, Mr. Christodoulou called Per Gullestrup, the Danish chief executive officer of Clipper A/S, a larger competitor in the chemical-transport industry. The two men hadn't known one another until both had vessels hijacked by Somalis. They had often commiserated.

Mr. Christodoulou told Mr. Gullestrup he was struggling to raise the funds. A few days later, Mr. Gullestrup called back. "We'd be happy to advance the money if that's what it takes," he said. That promise allowed Mr. Christodoulou to secure a loan for the purpose.

Buoyed by that success, Mr. Christodoulou decided to apply some pressure. He raised his offer slightly, he says, and told the negotiator: "You have 24 hours to accept this offer, or we have to retract it."

Over the next 24 hours, the two sides exchanged at least 20 phone calls. "Mr. Gus, this isn't enough money for the Somali gentlemen," the negotiator said several times, according to Mr. Christodoulou.

The next day, Mr. Christodoulou went a little higher, he says. At 12:30 p.m. on Jan. 16, Abbas called back: "The Somalis accept your offer. Thank you very much. It's really been a pleasure to work with you on this project."

Savvy Lawyers Value Their Human Capital by Victoria Pynchon and Gini Nelson at The Complete Lawyer.

These are hard times and none of us is immune. I’ve been here before. In the early 1990s, my law firm announced we would ride out the economic crisis by henceforth buying legal pads without our firm name embossed on the binding. Layoffs of partners, associates and staff quickly followed. Some caught life rafts to other law firms; some were not so lucky. Those who stepped on others going up the compensation ladder were not treated well on their way back down. The water was cold and filled with sharks.

Read full article here.

Other great articles in this month's issue of The Complete Lawyer:

How Will You Thrive in an Uncertain Economy by by Sandee Magliozzi and Susan Beneville

Solos Have Unique Advantages During Harsh Economic Times by the indefigitable Susan Cartier Liebel

Your Firm's Future is Tied to Your Referral Sources by Shawn McNalis

. . . and much much more!

While you're on the topic, read The Top Five Reasons Why Clients Leave and How You Can Prevent It by Jeffrey Miller and Jill Kohn.

If you live in Ohio, there's some hope that you can negotiate your way out of foreclosure with a Court-annexed foreclosure mediation program.  See Foreclosure filings rise in five counties at the the Crescent News. Excerpt below.

UPDATE:  Connecticut also has a foreclosure mediation program: See
Success For Mortgage Mediation in Connecticut?

Effective July 1, 2008, Connecticut established a mediation program for foreclosures.  Statistics available for the latest period ending November 30 2008 reveal some interesting detail.  Mediators are working diligently to rescue residential homes from the auctioneer.  However, the program is missing important components.

In the period of July 1st to November 30th, there were 9,917 foreclosures filed in the state, an average of 450 cases per week.  In that period, mediators successfully negotiated 519 cases so that homeowners got to remain in their homes.  This is just slightly over 5% of all cases filed.  Only 380 cases or 3.83% resulted in a modification of the mortgage terms.  Despite the hard work of Connecticut’s mediators, the state’s residents are not being protected from foreclosure.

UPDATE:  You can find a podcast about the New Jersey foreclosure mediation program on the New Jersey Law Blog here!  Here's the New Jersey Court's material for that program.

UPDATE:  Thanks to the ABA Dispute Resolution Magazine for informing us that Minnesota now also has a foreclosure mediation program.  See Minnesota Law Offers Foreclosure Mediation to Homeowners at the Foreclosure Listings blog here.

UPDATE:  Foreclosure Mediation Programs Commenced Under Local Ordinance in Providence, Rhode Island: Providence Foreclosure Ordinance Aims to Protect Renters (excerpt below):

 PROVIDENCE, R.I. (WPRI) - In an effort to protect families from foreclosure, Providence Mayor David Cicilline unveiled two ordinances Monday morning during a news conference in the city's Olneyville neighborhood.

The first proposal, Tenants Protection Against Foreclosures Ordinance , is meant to protect renters from eviction when their apartments are subject to foreclosure proceedings.

A proposed state law, that would have provided similar requirements, failed in the General Assembly last year. Rhode Island Housing Executive Director Richard Godfrey applauded Providence for stepping in to provide that protection.

The second proposal, Foreclosure Mediation Ordinance , would require financial institutions and property owners to engage in mediation with a HUD-approved counselor before moving ahead with a foreclosure.

UPDATE:  Lawsuit stops eviction in predatory lending case in California here.

"We have a court adjunct mediation program," said Schmenk. "The worst thing people can do is do nothing. The best thing is to get an answer filed on their behalf and open up a discussion with the mortgage holder to avoid it going to the foreclosure sale. Often times they can get something worked out with the lending institution short of losing their home."

When a foreclosed home goes up for auction bids start at two-thirds of the property's appraised value.

"Most time the lenders are holding significantly more than that in debt," said Schmenk. "We've noticed in a number of cases things get worked out and they are able to enter into some kind of accommodation that works for lender and mortgage borrower."

Schmenk encourages individuals facing foreclosure to take part in mediation programs.

There was a mediation just last week in Defiance County, said Cheryl Timbrook of the common pleas court. Overall, she said that they haven't had many requests for mediation so far.

Sonnenberg said Henry County has had a mediation program available for foreclosure for a year. She said there has been an increase in requests for mediation since the court started sending out information about the program as well as how to file an answer to the foreclosure summons received by defendants.

"I don't think many people knew about it before," she said.

Chris DelFavero, mediation coordinator for the state's Northwest Ohio Court Mediation Services, said he's seen an increase in individuals asking for foreclosure mediation. Northwest Ohio Court Mediation Services covers Henry, Defiance, Fulton, Paulding, Williams and Putnam counties. The program started last spring.

"With the help of the (Ohio) Supreme Court we established a process for referrals through the (county) clerk's offices," said DelFavero, who added that referrals started to pick up this summer. "Last month I had the most referrals since we started. I had 11 referred this past month. We started with just two or three a month, and now we have two a week."

DelFavero said that many cases involve jumps in interest rates, causing payments to increase or individuals who have seen a decrease in pay.

"Those are the cases we hopefully can resolve and come up with a repayment plan or refinance their rates," he said. "The general problem in the industry was the subprime rates. Some of it is the economy, with people losing their overtime. Sometimes loans are given based on people making $40,000 and then they lose their overtime so now they are making $30,000. They are working, but may have fallen four to five months behind. The lender usually will work with them."

The anger, suspicion and ill will that has characterized the first eight hours of this mutli-party, eight-figure antitrust mediation is about to heightened as I deliver Defendants' terms:  they will pay the settlement agreed upon in six equal yearly installments over three full years without any security to back it up.

Are you wondering what your mediator is thinking at times like this?

Aaaarrrrggggghhhhhhhhhhhhhhhhh!!!!!!!!!!!

That "thought" is momentary, however, like the cry you squelch when the trial judge does something like, say, grant the other side's motion to disqualify your expert witness during the second week of trial. 

I don't have a plan, but I do have ideas.  Just as my suggestion that we use a bracketed offer to break impasse had eventually done just that, I'm already thinking of ways that the parties' most intractable and conflicting positions might move them toward agreement.

"They can wait," defense counsel is saying, "or they can try the case in February and see if they can collect it," to which a principal adds,  "this puts them on our side for a change.  If we make the money we believe we can, they'll benefit too."

"I thought you said you knew you could," I say, laying groundwork for the contingency ahead. 

"Yes, absolutely.  We know we can."

Back in the Plaintiffs' caucus room, the parties and their counsel aren't simply angry; they're flabbergasted.

"They sand-bagged us," says Plaintiffs' counsel.  "We'll report this to the Judge.  They didn't come here in good faith.  They're deliberately wasting our time."  

After some calming discussion about why the cash-poor defense would deliberately pay their own attorney and one-half of my daily fee in bad faith . . . a question to which no answer ever eventuated . . . Plaintiffs and their counsel begin to confidently predict the defense's inability to make a single installment payment.  Plaintiffs believe the defendants have resources - secreted away somewhere - but will never use them to settle this case.

When the temperature of the room has diminished to that of the sun's surface rather than its core, I ask about the possibility of a stipulated judgment in the event of default. 

"In a sum you hope the jury will award you at trial," I proffer.  "If you're right; if they have no intention, nor any ability, to pay even the first installment, you'll be in the same position on default that you'd be in if you prevailed at trial.  And if they're capable of paying, they're much more likely to do so if the alternative is a mutl-million dollar judgment against them."

Though the total sum of the Stipulated Judgment is the main topic of discussion over the following two hours, the parties' insistent conflicting predictions for the future make it all but inevitable they will eventually reach agreement.  If the defense never pays, the Plaintiffs will have their judgment more or less immediately, without the burden of proving it up.  And if the defendants are good for their word that they can service the "debt" the settlement agreement creates, they never have to worry about this potential judgment becoming a reality. 

The Stipulated Judgment as Contingency Contract

As Professor Leigh Thompson of the Kellogg School of Management, Northwestern University, writes in The Mind and Heart of the Negotiator, the contingencies built into the parties' agreement (and the Stipulated Judgment providing for its enforcement) permit them to use their differences to reach agreement - betting on their own predictions for the future and protecting themselves against their worst fears about the other.  As Professor Thompson instructs:

Often, a major obstacle to reaching negotiated agreements concerns negotiators' beliefs about some future event or outcome.  Impasses often result from conflicting beliefs that are difficult to surmount, especially when each side is confident about the accuracy of his or her prediction and consequently uspicious of the other side's forecasts.  Often, compromise is not a viable solution, and each party may be reluctant to change his or her point of view.

Fortunately, contingent contracts can provide a way out of the mire.  With a contingency . . . differences of opinion among negotiators concerning future events do not have to be bridged; they become the core of the agreement. . . . [Parties] can bet on the future rather than argue about it.

Here, the agreement calling for a Stipulated Judgment of sufficient size to deter default, allowed the parties to:

1. bet on rather than argue about their different forecasts for the future;
2. manage their decision-making biases (overconfidence and egocentrism) by building them into the settlement agreement itself;
3. solve the trust problem by creating a contingency (judgment) against the unknown ability of the defendants to perform
4. diagnose the other side's honesty by "daring" him to bet on his own predictions
5. reduce risk through sharing the upside gain (defendant will pay) and the potential loss (defendant will default)
6. increase defendants' incentive to perform at or above contractually specified levels.

See The Mind and Heart of the Negotiator, The Six Benefits of Contingency Contracts, Box 8-2.

There's more, however.  The parties agree to the Stipulated Judgment in principle and sum during hour eleven and we've got three more hours to go.

Stay tuned!

It's 8 p.m. and you've just spent nine straight hours negotiating the settlement of complex commercial litigation with multiple parties that was filed before George Bush first took office.  The case has been up on appeal twice and is now scheudled for trial in February.  All defendants but the final three standing have settled.   Three of the principals have flown in from out of state and two of the attorneys have driven a few hundred miles to Los Angeles from their home towns. 

"Let's just write up the deal points," says Lawyer No. 1, yawning.  "We can write up the full agreement over the long weekend."

Lawyer No. 2 turns to me and says "Judicate West has a form, right?  Let's use that."

Before we go further, let me give you the complete, verbatim language of the online skeletal Judicate West form.

Date:_________________

Stipulation for Settlement


    VS.                           

IT IS HEREBY STIPULATED by and between the parties through the respective counsel or representative of each that the above-referenced case has been settled according to the terms memorialized herein below.  This document is binding on the parties and is admissible in court pursuant to Evidence code section 1123 and enforceable by motion of any party hereto pursuant to CCP section 664.6.                                                                                   

In order to facilitate the above specified terms of settlement, the parties further agree that on or before the          day of          they will execute or change the following:

• Settlement / Release Agreement   Prepared by _____plaintiff_____defendant

• Request for Dismissal     Prepared by _____plaintiff_____defendant

Other____________________________________________________________

All relevant parties must sign below.  Copies are acceptable in lieu of originals.

I know.  You didn't expect the case to settle.  At least that's what I've been hearing you all tell me since hour one of the mediation.  But now we're in hour nine and the basic deal points have been reached.  It's January 15.  Trial is in 30 days.  You have all the parties present and the mediator who has by now sussed out the BS; developed a good working relationship with all sides of the dispute; knows how hard the parties worked to get here; and, is unlikely to let the "devil" in the details sink the settlement ship.

What do you do?

My own answers in next post.

I've always recommended barter when cash is tight.  In an early post entitled The Benefits of Barter, I explained how interest-based barter is not simply for small-fry.

 AT&T used interest-based negotiation tactics and bartering in its 1999 fight with Comcast Corporation for the acquisition of MediaOne Group. All parties were at impasse until AT&T offered to provide Comcast with surplus AT&T cable systems that would fill Comcast's critical need for additional subscribers -- 2 million to be exact. In exchange, Comcast withdrew its $48 billion bid for MediaOne, leaving AT&T as the only potential purchaser in the field.

Interest-based negotitions such as the AT&T-Comcast deal go beyond evaluating the strength of the parties' "positions" (or muscle) by engaging them in a mutual exploration and assessment of everyone's needs and resources -- a process that can create new buisness opportunities or relationships that increase the value of Business A without concomitantly decreasing the value of Business B.

"This type of negotiation begins with all community resources and know-how with the goal of increasing the well-being of all stakeholders rather than assuring victory to one of them," I wrote.

For those of us in the wisdom business, much of what we have to barter is our ability to mentor and be mentored.  The Professional Women's Network of Southern California is, essentially, a "mentoring circle," in which each member teaches, each member learns, and each member connects every other member to her network. 

Now, the Women Lawyer's of Los Angeles is putting its wheels on recovery road by kicking off its existing Mentoring Circle Program to meet the challenges of the coming year. 

For a number of years, the WLALA Career Mentoring Committee has organized a West LA Mentoring Circle for WLALA members to meet and support each other's career development over lively dinner conversation.  These meetings have served as a forum for participants to share stories, goals and advice.  Over the years the women involved in the Mentoring Circle have become a close-knit group of champions for one another's success.

The WLALA Career Mentoring Committee is excited to expand mentoring opportunities for WLALA members by starting a Downtown Mentoring Circle.  If you are interested in mentoring others or benefitting from the experience of other WLALA members, please join us for the first meeting of our new Downtown Mentoring Circle at Bonaventure Brewing Company at 6:30 on January 29. 

Our discussion topic will be career goals and objectives for 2009.  Please RSVP to Jessica Pink (jlpink@allenmatkins.com) if you plan to attend.

Bonaventure Brewing Co.

404 South Figueroa St. Suite 418A
Los Angeles CA 90071
(213) 236-0802

We look forward to seeing you!

Your Career Mentoring Chairs,
Gigi and Jessica

Check it out!  And for women AND men professionals in all parts of the country, you couldn't do better by yourself and your business than to start your own mentoring circle.

Laissez les bon temps rouler! 

Before you start bargaining your way through the current recession, you need to decide which of your expenses might be negotiable.

Your office or residential rent?  I have friends who have successfully negotiated reductions mid-lease on the strength of their desirability as tenants and good relationships with their landlord. 

Over dinner with friends last night, I learned that a local shopping mall recently agreed to renovate the commercial space of one of its major department store tenants in exchange for the store's promise to renew its lease at the end of this year on existing terms. 

When I asked my twitter network what recurring expenses they'd like to reduce this year, I got answers on everything from diapers (@mglickman) to flat Westlaw fees (@dtoddsmith).  And though she rejected their offer, attorney Jeena R. Belil provided an excellent example of an integrative negotiation tactic - offer more value for the same price -- here, the Yellow pages offering to provide her with a half-page ad at the quarter-page price (@jeenaesq).

So, make a list of expenses that make your monthly "nut" difficult to crack during a down economy.  Even if you believe these expenses to be non-negotiable, give it a try.  You've got nothing whatsoever to lose by asking.  

And once you enter negotiations, here are five rules from the Harvard Negotiation Project to speed you on your way to a more economical year.

1. Don’t Bargain Over Positions
Most of us begin negotiation by identifying a position and arguing for it, such as: “I want to retain the CEO title.” But such positional bargaining can limit your ability to arrive at a “wise agreement” that benefits both parties — the proverbial middle ground and the whole purpose of negotiation. Instead of thinking of a “position,” identify the goal. You want remuneration for the sweat you put into your company. You want, for example, status (to remain CEO). But a specific position is binary — you either get it or you don’t. A goal can be attained in many ways, giving you many more options for arriving at a solution.

2. Separate the People From the Problem
Most negotiation is emotional. You want something, after all. And emotion clouds our objectivity. But you can limit the emotional content of your negotiation by thinking of the person you’re talking to as your partner and the problem you’re trying to solve as an object. Take, for example, the question of how much a company’s equity is worth. In this case, you’re not negotiating against the investor over a position, you’re engaged with that person to arrive at the right answer to the question. Some will urge you to make your negotiation opponent a partner, but this can lead to Stockholm Syndrome. Instead just think of engaging the other person, using their input to arrive at the right answer. Maintain your independence.

3. Focus on Interests
We all have interests. The pursuit to fulfill our interests leads up to adopt positions. But bargaining for stated positions, such as titles, will not necessarily produce a wise agreement that takes care of the interests that led you to adopt the positions in the first place. Think instead: I want to remain engaged in the business. There are many ways to achieve goals without having specific positions.

4. Invent Options for Mutual Gain
This is the creative part. You must examine each other’s interests to come up with options in which both parties gain. Your investors have an interest in a pro-CEO who can sell into large corporations (you’ve never done that). You need funding, but also want to remain engaged. Both parties can draft a list of options for your new role that satisfy everyone’s needs: COO, president, chief innovation officer, etc. Negotiate from this list.

5. Insist on Using Objective Criteria
We all have personal standards. CEO conveys more status than chairman, etc. The key is to let go of personal standards in favor of objective ones upon which both parties can agree. (Think of the Kelley Blue Book, a set of agreed-upon standards for those looking to buy or sell a car). But here you have to do some real homework and investigate the objective standards that apply to your negotiation ahead of time. Some to consider: market value; legal or business precedent; scientific judgments (patents); efficiency; and reciprocity.

There's a great new LinkedIn Group Mediators and Peacemakers that anyone interested in the dynamics of conflict and its resolution should think about joining.  Recently, a group member posed this question:

How do you as a mediator recognize the signs of cross cultural differences and how do you resolve that type of dispute? How often do you come across this type of dispute?

I was thinking about how I might answer it when I noticed that my colleague and friend, mediation guru Lee Jay Berman, had taken the time to jot down his thoughts, which were better than any I was having, yet precisely expressed my own experience mediating conflict.

Here's what Lee Jay had to say:

I think that some is easy to recognize, like two Korean businessmen walking in with their counsel, knowing that they will have a value system that is based around how Korean businesses conduct themselves, and knowing that trying to overlay that onto an American legal system is going to be awkward for them.

But my belief is that NEARLY ALL conflicts are cross-cultural. The vast majority of what I see as cross-cultural conflicts don't present themselves as such at first glance because they may occur between two people of the same color skin, same nationality, same faith and even same family. I think we risk falling into the belief that cross cultural disputes only exist when we have people of different racial cultures at the table. We sometimes think we can turn our cross-cultural radar off when both people sitting there look the same to us. But to me, most conflict comes from different cutltural perspectives, different expectations based on how we were raised and what they see as "normal" or how people "should" conduct themselves.

The example I live with is that my wife and I were both raised Jewish, both families grew up with Christmas trees in our homes, too. We both went to UCLA, we both love sports, and the list goes on and on. When we married, we had the expectation that we would be relatively the same when it came to living our lives together. But when it came to communication styles, especially around disputes or disagreements, what we each learned from our families (the tribes in which we were raised and where we learned our norms) could not have been more different. Early in our marriage, this created constant cross-cultural disputes, which turned into conflict because of the assumptions we each made about what was the "normal" way to deal with disagreements. On paper, most people would never say that my wife and I were cross-cultural, but in real life, we had a huge cross-cultural rift that was invisible to most, and even to us at first.

The moral of this story is that we must ALWAYS be looking for evidence of cross-cultural issues, even when they don't present with different skin color.