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Ascertaining All of the Terms and Conditions of Your Cell Phone Service

(I'm using Sprint as an example only because the question posed to me related to Sprint -- I'm assuming most cell phone service agreements are the same, or at least substantially similar)

Because a reader asked, I learned today that the Sprint Cell Phone Service Agreement contains an arbitration provision. 

How did I gain this valuable knowledge?  Read on.  

A Trip to the Grocery Store   

On my way to the grocery store this morning , I drove by a Sprint outlet.  So I stopped, ran in, and had the following conversation with the Sprint representative.

"Can I get a copy of Sprint's service contract?"

"Huhhhhhhhhhh?????????"

"You know, the terms and conditions of the Sprint cell phone service plan."

"Uhhhhhhhhhhhhhh -- you mean the, uh, Plan Brochure?"

"Does it have all of the plans' terms in it?"

"Terms?"

"You know, the FINE PRINT?  the contract?  the parties' agreement if I sign up for service."

Smiling, "sure," she replies, handing me the brochure and graciously validating my parking ticket (the one with the waiver of the car park's legal responsibilities to me or my car printed on the back in 3-point type).    

Now that I've Read ALL the fine print in the Sprint brochure, I can tell ou that there is nary a mention, hint, suggestion or covert reference to "dispute resolution" or court or jury trials or arbitration. 

Nothing, Nada, Nichts.

I Should Have Gone On-line in the First Place to Find the Sprint "Terms and Conditions" of Service

At the very bottom (left hand corner) of Sprint's Plan Page you will find a link titled "Terms and Conditions." 

That's where you'll find your Sprint Cell Phone Service Agreement -- that adhesion contract I was talking about in my last post.  It is here where you will find that by signing up with Sprint (and likely all other cell phone providers) you agree to waive your Constitutional right to a jury trial [except in  California where the Supreme Court has refused to enforce pre-dispute jury trial waivers such as that required by Sprint here] and your Constitutional right of access to the courts. 

You also consent to submit any dispute you have with Sprint to binding arbitration under the authority of the Federal Arbitration Act and the rules of the National Arbitration Forum.  

The Arbitration Agreement Verbatim 

Your Agreement with Sprint Solutions, Inc. . . . includes terms of your service plan . . . and the most recent Sprint Nextel Terms and Conditions of Service . . . carefully read these all terms which include, among other things, a MANDATORY ARBITRATION of disputes provision.

The dispute resolution clauses are at the end of the Terms and Conditions (T&C's).  They provide as follows:

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(photo:  Amor de Cosmos)

A reader's inquiry (does the Sprint cellphone contract contain an arbitration clause?) alerted me to cell phone company "escape" clauses courtesy of the Consumerist Blog's post Materially Adverse Clauses for All Major Cellphones-So You Can Escape a Contract without a Termination Fee.

THE ANSWER TO THE QUESTION IS:  YES.  SEE NEXT POST FOR DETAILS

This is consumer reporting at its finest.  The "little guy" has been fighting (and sometimes winning) the battle of the adhesion consumer contract for years (see the Wage Law Blog's coverage of the California Supreme Court's decision in Discover Bank).

(For non-lawyers, an "adhesion" contract is one you didn't really agree to because, for instance, it came as an insert with your monthly cell-phone or credit card bill or appears on the back of the ticket you pull when you enter your local mall's parking lot.  It's an asymmetrical contract.  The party imposing the agreement on you has all of the power and you have none.  Take it or leave it.  That's an adhesion contract and it's not necessarily -- in fact is often not -- invalid).

That said, it appears that most cell phone contracts contain a clause permitting you to terminate your service before the expiration date without a cancellation fee (a real boon if you want to change plans!)

You may generally do so "in response to a materially adverse change [the cell phone company] makes to the Agreement . . . (Sprint Contract language).  The imposition of an arbitration provision that wasn't part of the contract when you sign it would be a material adverse change (I'm actually willing to go out on a limb here and say that's my actual legal opinion).

The Consumerist has collected all of the cell phone service providers "materially adverse change" contractual provisions here.

Sprint requires you to provide it with notice of cancellation within thirty days of their notice to you of the change (as I suspect all the other cell phone services do).  So if you want to take advantage of this, you'd have to begin reading those inserts that come with your cell phone and credit card bills. 

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The following excerpt from the PBS Benjamin Franklin webpage, Citizen Ben, demonstrates the wisdom of Lax' and Sebenius' advice that every successful negotiation requires moves away from the table to set  up the most promising situation once your'e at the table. 3-D Negotiation.

Here, those "away from the table" negotiation moves led to the founding of our nation.   

In 1781, Benjamin Franklin was in France. .  .  Franklin understood the French and knew that real diplomacy wasn't accomplished at the negotiating table, but at the dinner table. He spent a great deal of time in the salons and at dinner parties where things could be discussed in an informal manner. In this way, he won the trust and respect of the French court.

Although the Continental Congress wanted to negotiate a treaty directly with Great Britain, the French wanted to arrange for a three-way treaty that would end the war between France and England, as well as between England and the colonies. There was some concern on the part of the Congress, as well as other commission members, that Franklin might be unduly influenced by France in the negotiations. Months passed and various offers and counteroffers were made by the former colonies and Great Britain. In addition, France was negotiating settlements with Great Britain that involved portions of the North American continent.

Adams and Jay made an end run around France to negotiate a treaty directly with Great Britain. The British made an incredible offer, one that gave the Americans almost more than they were demanding. Franklin recognized that the British offer was the best that could be had. The French were offended that the Americans had gone behind their back.

Franklin used his connections and his diplomatic skills to convince the French that Adams and Jay had acted out of lack of propriety, not hostility.

In late November 1782, the Paris pact was signed and sent back to Great Britain and the American Congress for ratification.

Thanks to Franklin's diplomacy, along with Adams' and Jay's work, the United States was recognized as a separate and equal nation by the world's great superpowers, France and Great Britain.

Happy 4th of July!

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We continue to sort through the end of the Supreme Court's term, as well as the business community's reaction to it. 

Why do we care?  Because you settle litigation when the risk of loss and the cost of proceeding is greater than the deal being offered to call the whole thing off. 

As I've said a bazillion times before, I prefer  negotiating a business deal to resolve a legal problem to predicting litigation outcomes -- the latter a dicey proposition at best.  In ADR terms, I have a strong preference for "facilitative" over "evaluative" mediation practice.  

Still, I'll never stop being lawyer, litigator and trial attorney.  I will never be completely immune to legal developments suggesting that the tide is turning for one "side" or the other.

Today we hear Roy Englert Jr. of Robbins, Russell, Englert, Orseck & Untereiner quoted in Law.com's end-of-term article High Court Reveals a Mind for Business.  Excerpt below.

The first big sign that Alito and Roberts were solid votes for business came on Feb. 20, when they voted with the majority -- and against Scalia and Thomas -- on the issue of punitive damages. In Philip Morris USA v. Williams, brought by the widow of a cigarette smoker, the Court ruled that jurors could not base an award in an individual case on the harm that tobacco companies did to others. Scalia and Thomas joined Ginsburg and Justice John Paul Stevens in dissent.

For Alito, as well as many of the other justices who have joined him or led him in business cases this term, suspicion of the plaintiffs bar might be one factor driving the pro-business trend.

"The entire Supreme Court has a mistrust of lawyer-driven litigation," Englert told a Washington Legal Foundation forum June 27. "The Court has inflicted a world of hurt on the plaintiffs bar. ... The justices don't see real, injured people. They see lawyers trying to extort settlements."

In Bell Atlantic v. Twombly, for example, Justice David Souter spoke repeatedly of the problem of "discovery abuse" by plaintiffs that "will push cost-conscious defendants to settle even anemic cases before reaching those proceedings." The decision, which got few headlines but may have broad practical effect, spells out higher requirements for what must be included in initial pleadings that businesses hope will weed out baseless class actions and other litigation.

In another case this term, the Court also showed a mistrust of juries in deciding complex business cases. In Credit Suisse v. Billing, the Court said securities law should trump antitrust law, in part because the Securities and Exchange Commission had more competence than jurors in assessing possible antitrust violation in initial public offerings. But consumer groups worry that agencies such as the SEC are often too protective of the businesses they regulate.

In the Credit Suisse ruling, Justice Stephen Breyer wrote with concern: "Antitrust plaintiffs may bring lawsuits throughout the nation in dozens of different courts with different nonexpert judges and different nonexpert juries."

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(photo from Millzero Photography)

I've got several streams of thought going about diversity this weekend. 

First of course is Parents Involved in Community Schools v. Seattle School District in which the new five-justice majority 

held that the consideration of race by school districts in assigning students to public schools in order to promote racial diversity violates the Equal Protection Clause, even though the Court had unanimously declared more than thirty-five years ago that such a policy "is within the broad discretionary authority of school authorities." 

Roberts, Alito and the Rule of Law by Geoffrey R. Stone, University of Chicago Law School professor and most recently the author of War and Liberty: An American Dilemma.

The New York Times tried to put a good face on the case this morning by quoting law professor Michael J. Klarman who argues that Brown v. Board of Education didn't really end desegregation -- the Johnson administration did when it committed itself to enforcing the Civil Rights Act of 1964 and H.E.W. threatened to cut off financing to segregated schools.  See Jeffrey Rosen's Can a Law Change a Society?   

Professor Klarman concluded by opining that "we're headed toward an ambiguous place where we're committed both to color-blindness and to diversity in public life" and that Seattle School District wouldn't "make much difference either way."

I guess that's as rosy as a liberal can get about the demise of the most important Supreme Court opinion in race relations in the country's history -- whether it delivered de-segregation "with all deliberate speed or not."  Brown v. Board has its own U.S. government National Historic Site for goodness sakes!  Are they going to dismantle it?

Being an optimist, I was recounting Professor Klarman's view to my husband on our way to today's Dodger game (how All American is that?). I suggested that American business itself had learned the value of diversity (see Professor Leigh Thompson's Making the Team) so maybe Klarman was right and Seattle School District wasn't as bleak a moment in U.S. Constitutional history as we'd been assuming.  None of which convinced him of anything other than to confirm his view of my unfortunate tendency to tear a silver lining from every dark cloud.

Bio-DIVERSITY, Get It?

Then I remembered our neighbor, Tony  -- the astral-orbital engineer -- you know, a guy who throws satellites up into space.  The one who wears a t-shirt that says "Yes, I AM a Rocket Scientist." 

Tony and I were talking about diversity in business one afternoon while he was fixing something or other -- the plumbing or the electricity (oh, the luxury of having a rocket scientist next door).  Finally, he turned to me, wrench in hand and said "BIO-DIVERSITY, get it?" /*

All of which takes me to the ADR Diversity Blog, which seems so full of any number of great things that I can hardly get my brain around it.  I'm certain to spend some considerable amount of time poking around its corners when I'm not about to sit down for my Sunday evening's guilty pleasure -- Entourage.

_____________________

*  Tony's point?  In the absence of biological diversity, life on earth would be quite impossible and we (humans) have repeatedly shown ourselves incapable of mimicking it ourselves.  See Wikipedia's entry, Biodiversity.

Biodiversity provides many ecosystem services that are often not readily visible. It plays a part in regulating the chemistry of our atmosphere and water supply. Biodiversity is directly involved in recycling nutrients and providing fertile soils. Experiments with controlled environments have shown that humans cannot easily build ecosystems to support human needs; for example insect pollination cannot be mimicked by man-made construction, and that activity alone represents tens of billions of dollars in ecosystem services per annum to mankind.

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We don't often get to hear what jurors actually do and say during deliberations.  Even when you poll them after the verdict comes in, you often can't trust that you're getting the straight skinny.

I was talking to an old friend recently about the way jury verdicts can act as reparations of one sort or another if the issues raised by trial are racial or gender or nationality-based.  I've alsowritten elsewhere about the effect of past racial injustices on the settlement of a wrongful cemetery practices case.

My friend was good enough to reduce his jury experience to writing.  I provide it here for you without commentary. 

I was chosen for jury duty while working for a Bank in corporate communications in San Francisco's financial district.  So I arrived at the courthouse in a suit and tie and probably looked and sounded pretty conservative.

I was chosen as one of the twelve jurors to decide a personal injury lawsuit.  The plaintiff was a wiry little black guy suing a big shipping corporation.  A restraining rope had snapped while he was loading cargo onto a ship at the docks somewhere along the Bay early one morning.  It caused him to slip and fall and badly hurt his hip.

On the witness stand, the Plaintiff revealed that he and his fellow workers were in the habit of taking a few healthy nips from a bottle of liquor as they drove to their 6 A.M. shifts.  It seemed that he and his fellows were generally somewhat drunk nearly every morning as work began.

The defense attorney made it pretty clear that though the snapping of this important rope hadn't been the Plaintiff's fault, that he wouldn't have injured himself, wouldn't have fallen at all, if he'd been sober.    

The jurors were almost all white and most were staunchly middle class.  During deliberations, two of the jurors harangued the rest of us about the contempt they held for anyone who got drunk in the morning.  A couple of other jurors were really down on the guy and talked about him as if he were just dirt.

(below:  Berkeley in the Sixties)

Now, I know it isn't cool to drink the way he did, and I wasn't a long-haired kid anymore, learning to play the blues and romanticizing the Black experience as I had during my days at Berkeley in the sixties.  But I couldn't help empathizing with the guy.

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(The Sound of Time (2003) by Dorit Cypis)

Conflict is . . . is simply the sound made by the cracks in a system, a boundary condition that can best be resolved by communicating across the many internal and external borders we have erected to keep ourselves safe, or exclude others.  --- Ken Cloke, President, Mediators without Borders, Committing Personally, Acting Globally.

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(right:  photo by hester2006)

We recently posted a piece about mediators going "green."  Now that I've cruised my husband's law firm web site in connection with our last post on D&O coverage, I find that insurance coverage might go "green."

At least that's what policy holder counsel are saying about coverage for losses arising from global warming under CGL and other standard commercial policies.  As Heller's January, 2007 article Insurance Coverage for Global Warming notes:

Insurance may be available to cover losses faced by companies as a result of global warming issues. For example:

• A company’s existing portfolio of comprehensive general liability (CGL) policies may provide coverage for defending against and paying settlements or judgments in lawsuits brought against a company for causing property damage as a result of alleged contributions to global warming.
• Errors and Omissions (E&O) insurance may provide coverage for claims by governmental entities or individuals that a company or its management engaged in wrongful acts by allowing global warming emissions.
• Business interruption insurance may provide coverage for a company’s loss of profits stemming from an event linked to global warming. 

This is the first I've seen about potential coverage for global warming losses.    

Already, however, I can see the coverage complaint and envision the answer to it, followed by discovery, motion practice and decades of litigation.

Maybe this time we'll find a way for the lawyers to commence a collaborative process to resolve these claims early enough to avoid the hundreds of millions of dollars that get eaten up by attorneys, arbitrators, mediators, experts, accountants, engineers and the like. 

We're all ready and eager to serve if needed.  But if there is a colorable argument for coverage, wouldn't it be better for all of us who understand coverage to sit down and try to knock out agreements that will satisfy party interests better than the adversarial system is capable of providing.

If you want a referral to a member of the "global warming insurance recovery" team here in Los Angeles, you couldn't do any better than to contact the dynamic and brilliant Nancy Sher Cohen.

The Cost of Prevention and Cure

Since posting this brief note on global warming insurance, a reader called my attention to the following post on recent carrier research concerning potential losses from global warming.  See Josh Rosenau's Thoughts from Kansas post Global Warming Insurance from May of this year and the following excerpt below. (Mr. Rosenau is graduate student at the University of Kansas, in the department of Ecology and Evolutionary Biology).

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(Mermaid and Merman by James M. Thorne)

Dinah Lynch at Mediation Mensch has launched a meme tag Can Mediation Go Green? 

I could talk about the energy-efficient, compact fluorescent light bulb -- the CFL  -- that illuminates the desk on which I write this post or explore the (controversial) issue of carbon credits and taxes.

But I'm more interested in the paradigm shift necessary to survive the climate crisis. 

I earlier wrote about the book my friend and mentor Ken Cloke is writing called "Mediators Can Save the Planet" in Empathy, Evolution, Mediation and Global Warming.  

Why mediators? Because WORLD 3.0 will require that we supercharge our natural cooperative and altruistic natures while dampening our competitive drive without thereby discarding our ambition.

What will it take? A shift from competition to collaboration.

Can we do it?  "Yes we can," says Al Gore in An Inconvenient Truth at the moment when his audience begins to move from denial to despair.

How?

At least one way to get the global cooperation ball rolling will be to school ourselves in empathy, a necessary prerequisite to tackling the problem of collaborative solutions to worldwide problems.

We Don't Have the Luxury to Cling to "Hot Button" Issues

I was talking to a young attorney in my husband's law firm last night at a fund-raiser for Public Counsel.  When I suggested Obama '08, he demurred on the ground that Barack's church-state separation position wasn't sufficiently clear and it was one of his "hot button" issues.

I said, "we can't afford any hot button issues in the coming election.  There's too much at stake."  I didn't need to say more. 

Denial and Despair:  The Parade of Horribles

Catastrophic species extinction, mass relocation of populations dispossessed by rising oceans, vast increases in wars fought over diminishing natural resources, and continued destruciton and  dispossession caused by increasingly severe weather conditions.  

There's more, but that should be enough for denial and despair to set in.

Hope:  What Mediators Can Do

Last week, I had the great pleasure of shaking Barack Obama's hand and asking him what an ordinary citizen like myself could do to help his campaign.  

"Talk," he said.  "Talk to your freinds and your family.  Talk to those who support me and those who don't.  Talk to Democrats and talk to Republicans.  Talk to those who agree with you and those who don't.  But first listen." 

The challenge of winning a presidential election in the most technologically advanced, economically strong, militarily mighty nation in the world pales in comparison with the work we must do to survive the twenty-first century with our freedoms intact. 

We cannot do it alone.  We cannot continue to avoid difficult conversations with our friends, families, and those who we perceive to be the enemies to good governance and thoughtful environmental stewardship.

I am voting for Barack because he is a conciliator.  I believe he has the heart to do the right thing and the intelligence to surround himself with the people necessary to accomplish it.  He is not a utopian nor an ideologue.  He is practical and progressive.  

But my hopes are not really pinned on Barack.  My hopes are pinned on the American people to awake from our long post-9/11 slumber.

My hope is that no matter who we put in charge of the White House in '08, we will begin working together, talking together, reaching consensus on those issues on which we can agree, forgiving one another for our inability to solve those we cannot; and, building coalitions of those willing to put aside their personal grievances so that we can rise to the unprecedented global challenges that face us.

Why Mediators?

What is the first step in a mediation?  The creation of hope and safety.  And after that?  Communication, reality-testing, and problem solving conducted by locating our mutual interests and finding ways to satisfy them.  Reconciliation, forgiveness.  Dare I say justice.

This is not work for the weak-willed.  It is not work for those with stars in their eyes.  It is not work for ideologues or utopians.  It is work for those, as Ken Cloke says, who are hopeful at heart and pessimistic of mind.  For those who combine a fine skepticism with the courage (and humility) to reach across the aisle, cross the political divide, listen to those with whom we most violently disagree and seek solutions.

In all of this, we must realize that we are not creating a world without borders.  We are simply recognizing it.  We are one, united, inseparable, inter-dependent, fragile and worthwhile.  Every one of us.

As James Agee wrote of our responsibilities in depression era America:

In every child who is born under no matter what circumstances and of no matter what parents, the potentiality of the human race is born again, and in him, too, once more, and each of us, our terrific responsibility toward human life: toward the utmost idea of goodness, of the horror of terrorism, and of God.

James Agee, Let Us Now Praise Famous Men

That's green.

I tag Justin Patten, Paula Lawhon, and Jan Schau.

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(right:  Andy Warhol’s Green Car Crash (Green Burning Car I) sold for $71,720,000 at Christies in May of this year, bringing the total price for ten Warhols sold in the same evening to $136.7 million)

When I read articles like Clyde Haberman's The City’s New Motto: ‘See You in Court’ I want to understand and not simply condemn any one of the following (no matter how easy it may be):

1. the lawyer who worked 30 to 40 hours — nearly $10,000 in billable time — to fight a $65 parking ticket. 
2. former Supreme Court nominee Robert H. Bork who wants $1 million from the Yale Club in Manhattan as compensation for the pain he suffered after falling at the dais before a scheduled speech.
3. an immigrant from Mali who is seeking $100 million against the City of New York for the death of his wife and 4 children "in a terrible fire in the Bronx three months ago."

I am not even going to posit the possibility that Bork suffered genuine injuries; the lawyer  "took on City Hall" for the principle of the thing; and, the loss of five lives might just be worth the price paid for ten Warhols at Christies in May of this year.   

What interests me, as always, is why.  

Why Do People Bring Lawsuits? 

Fortunately, we do not need to speculate or call in the usual suspects of greedy lawyers, the over-reaching victims of minor injuries or the evil-doing citizens we (too often?) assume lurk among us.

Nera Economic Consulting, along with the Rand Institute, neither known for their love of the plaintiffs' trial bar, recently published an article sufficiently scholarly to carry the dry-as-bones title, The Propensity to Sue: Why Do People Seek Legal Actions?   The answers to the question -- why do we sue - in order of importance - are:

•  When we believe someone else is to blame for our injuries, we are nearly five times as likely to make a claim against another.  The good news is that we do not sue, even for catastrophic injuries, if we do not believe someone else was at fault.  As Rand and Nera report:

For a person who sustained a severe injury in an accident, such as life threatening impairment, there is a 10% probability of claiming if he blames no one else for his or her injury. The probability increases to 61% if the person perceives that some other individual, company or organization caused this severe injury. 

• Nevertheless, the severity of the injury (measured by bruises and fractures) does positively relate to the rate at which claims are made.  Rand and Nera again:

The predicted claiming rate is 12% for a minor injury, 16% for a moderate injury (including crushes and fractures), and 35% for a serious injury (including life threatening and long-term impairment). Measuring severity in terms of days from work [also] has a persistent, statistically significant impact on claiming rate.

• People tend to make claims for injuries more often in automobile accidents than for any other type of injury-causing event.  "The odds ratio of claiming in a case of car accidents," we are told, "is almost 11 times more likely than any other type of accident." 

Whether these suit-filing rates and reasons suggest a nation-gone-mad with litigation is for the more scholarly researchers to determine.  I report this data here only because I'm a trained skeptic of the anecdotal to explain personal or societal pathology.

(and for the reference of readers who don't know who in the world I am, I spent my litigation and trial career primarily representing corporate commercial interests -- not injured plaintiffs)

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It's common to blame your lawyer when dispute management goes awry in the executive suite, even when the client is former Time, Inc. EOC, Norman Pearlstine (book here and Senate testimony here) and the attorney is "[o]ne of America's most ferocious defenders of the First Amendment, Floyd Abrams."

In today's NYTimes, Adam Liptak reviews Pearlstine's public charge that Abrams "gave [Time] less good advice than [it] deserved" in responding to subpoenas issued by the Special Prosecutor during his investigation into the disclosure of CIA operative Valerie Plame Wilson's identity.  (For the full article, see Editor’s Charge: His Lawyer Fell Short).

Though not agreeing with Pearlstine's evaluation of Abrams' motives -- that he was "more focused on overturning Branzburg  v. Hayes . . . reject[ing] First Amendment protection for confidential sources, 'than on pragmatic ways in which [Time] might fashion a compromise'  - Liptak concurs with Pearlstine's "broader point" that  

Time, like The Times, seems to have misplayed its hand. While it is impossible to know if the two news organizations and their reporters could have found a way to respond to [congressional subpoenas] short of a constitutional battle royale, it seems pretty clear that they could have tried harder to look for a compromise. . . . Time’s fundamental misstep was its astonishing failure to approach Mr. Rove for permission to cooperate in the investigation."

Zealous Advocates and Negotiation Pros

No matter how complicated a game of football subject to Monday morning quarter-backing might be, it pales in comparison to the immensely complex and sophisticated commercial and legal strategies that must be planned, launched and managed in response to a Congressional subpoena (and yes we have grappled with the monster for our pro bono clients).  

But the purpose of this comment is not to call into question either Mr. Abrams' legal advice or Mr. Liptak's belief that the decision not to approach Mr. Rove for permission to cooperate in the investigation constituted an "astonishing failure."

Rather, we ask ourselves and our readers again whether there ought not be a representational "balance of powers" when the legal, professional, societal, political and commercial stakes are so high.

We lawyers do like to represent ourselves as Jacks of all trades -- negotiating a settlement here; drafting a compelling appellate brief there; cross-examining a witness within an inch of his life today and strategizing a long-term legal and commercial strategy in response to a thermo-nuclear patent infringement action the following week.

But, really.  We're just not all 100% top-of-the-class, flat-out brilliant at everything. 

When a client wants a zealous advocate, willing to burn the enemy's crops for a litigation advantage, he's not likely to also get Mr. International Diplomacy in the bargain.  One General Counsel once told me that her (Fortune 50) Company didn't let the litigators and trial attorneys "in" on the overall plan, particularly settlement strategy, because they wanted them to be combat-ready at all times.

The Interdisciplinary Approach to Bet-the-Company Litigation

Once again we're recommending an interdisciplinary response to litigation, particularly when the enterprise's survival or the survival of its fundamental principles are at stake.

Whether or not you'll want to hire an outside settlement team, you'll definitely need a strategic planning in-house negotiation guru to do that which "one of America's most ferocious defenders of the First Amendment" shouldn't be expected to do.

We will say it again and again.  Litigation is a business negotiation being conducted in the courts.  The litigators need to be focused on the law; the parties' positions; legal strategy; and, most importantly, that which they do supremely well for a living -- WINNING.

Business, however, is not a legal negotiation being conducted in commerce.  It is a multi-faceted enterprise with commercial (as well as societal and political) interests that can be advanced or deterred by the quality of its management.

When you need a negotiator to approach the likes of Carl Rove, you do not ask Floyd Abrams to do it.  You find a lawyer or a political ally who is skilled at working Washington relationships.  No matter how masterful the litigator, s/he is not in charge of the war, only one of its many battles.

CEO's who blame the lawyers on their watch for strategic missteps are missing the point.  Lawyers are commercial foot soldiers -- some skilled at flying B-52's; others at triaging the wounded; and a few, very few, at planning the grand strategy to take a City or withdraw from it with honor.

The lawyer, no matter his credentials, is a member of the team and should be deployed by the CEO as best suits his or her skill, education, experience, talent and drive.

As Sun Tzu instructs in The Art of War,

A sovereign of high character and intelligence must be able to know the right man, should place the responsibility on him, and expect results.

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Check out Bob Steinberg's article in the San Francisco Daily Journal, Influencing the Mediator. 

Bob's article -- the tip of a trend -- stresses "winning" the mediation by canny, savvy, sophisticated and sometimes just flat-out tricky negotiating tactics. 

Like what?   Like squeezing the mediator into a small room at a round table with your team to undermine his authority on your side while at the same time proffering a large rectangular table to the opposition in the hope that the mediator will sit at its head, thereby increasing his influence upon your opponent (assuming, that is, you decide you want the mediator influencing your opponent and aren't concerned that the buddy-buddy atmosphere you're creating won't lead to disclosures you'll later wish you hadn't made).

I know Bob and like him.  He's shrewd and frighteningly intelligent.  I wouldn't play poker with him or black jack because I know he's capable of actually counting the cards.  He probably knows more about negotiation than most litigators of similarly seasoned years because, as a transactional attorney, he surely negotiated and closed more deals in a single year than his adversarial counterparts did in a decade.  

And just as some clients choose their litigators to fit the fight (an unreasonable obstreperous fight-ready trial lawyer for case A and a cordial, collegial sort for case B) lawyers will want to choose their mediators to fit the type of work they believe that mediator will do best.     

Still, I have reservations about Bob's proposals (which are increasingly being made by many attorneys and mediators) including:

• the benefit that might be lost by continuing to treat your adversary like . . . . well . . . an adversary, rather than as someone with whom a creative business deal might be struck if the attorneys and the mediator would loosen up their control long enough to let the business people do what they do best -- plan for a successful future by drilling down into both parties' commercial interests in an innovative way (cf. Sun Microsystems' Jonathan Schwartz's motto -- Innovate, Don't Litigate); and, 
• the likely dreadful set of unanticipated consequences that too often flow from attempting to control an inherently unpredictable and multi-determined process -- one with so much greater depth, texture, nuance and possiblity than any poker game could ever possess.

There is certainly a time for measured responses, poker faces, cozying up to the mediator or letting him (or her!) know who's really the boss.  I don't believe, however, that flat-out game-playing and "psyching out" the other side will result in the type of agreements you and your clients are looking for -- not only creative ones, but also durable ones. 

Go ahead, let the client take the lead once in awhile.  Jim Smith didn't become the head of a division of Lockheed or Joe Richmond the President of Software, Inc. by changing the size of the conference table.  

And before abandoning this topic, let me leave you with a recent observation by Schwartz about leadership at Sun Microsystems from an interview entitled The Education of Jonathan Schwartz by Stephen Shankland of CNET News.com. 

[a] leader has courage, and courage is the courage to innovate, the courage to collaborate, the courage to act with integrity--because that actually does take some courage--and the courage to do so with pace. You've got to be willing to brook the criticism and the critique from those who don't see the world the way you do. When people look back at who is Sun, they are not looking me; they are looking at 35,000 people.

[As the leader of Sun Microsystems] I want to do a good job of building a leadership culture . . .  I don't want there to be one voice [from Sun] to the marketplace, but I want that somewhere in that cacophony [of other Sun voices] to be a very clear and consistent message: here is what we're all about, here is what we can do and here is how we are going to march forward.

Rock on.

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(right:  Lawyer as Satan:  Al Pacino in The Devil's Advocate) 

Gini Nelson at Engaging Concepts recently alerted me to John Lande's recent and excellent article, Principles for Policymaking About Collaborative Law and Other ADR Processes.  There is much in this article to recommend it, including observations and recommendations about regulating ADR policy and practice.   What caught my attention were Lande's comments about "bad faith" mediation, a topic we've been following in the Couts.  

Good faith in mediation, notes Lande, "is like mom and apple pie—it’s hard to be against them.  .  . Many people  

think that they know bad faith when they see it. They “know” that bad faith in mediation is when one side—the other side—refuses to make a new offer or what they view as a “reasonable” offer.  This conduct clearly grieves some litigants, lawyers, and judges who would like the courts to sanction the alleged offenders.

In virtually all the final reported opinions on this issue, however, the courts have decided that this conduct is not sanctionable bad faith.  The courts have decided that it would be inappropriate to sanction this behavior, which is impossible to adjudicate without evidence about communications in mediation and the participants’ state of mind.

Even proponents of good faith rules recognize that judicial second-guessing of participants’ states of mind would be an inappropriate judicial encroachment into the mediation process.  As a result, the judicial interpretation of “good faith” has come to mean attendance at mediation (possibly with a representative having “sufficient” negotiation authority) and submission of any required premediation materials.

The result is that the good faith rules do not prohibit what people think of as bad faith.

"Bad Faith" Negotiation Strategies and Tactics

In our recent survey (with 78 responses) participants were asked to identify which of several acts  constituted bad faith negotiation practices or strategies:

Those that garnered the most votes were parties lying about facts important to resolution (65.83%) -- which would likely constitute grounds for rescinding any deal reached by the parties due to fraud -- and a refusal to compromise "without good reason" (59.76%).  Withholding information important to obtaining a "fair" deal garnered less than half but nevertheless a substantial number -- 40.51% -- of the "votes."  Again, this type of behavior could well constitute fraudulent concealment and is subject to its own set of sanctions -- rescission and damages. **

Refusing to compromise with good reason (4.5%) however, and not compromising "enough" (3.4%)received so few votes that we must conclude our survey respondents accept these activities as perfectly appropriate when parties are attempting to negotiate  settlement, whether in a mediation or outside of it.

The Importance of Reason Giving

My friend the settlement Judge Alex Williams likes to tell his disputants that he needs "a number and a reason" when shuttling offers between the parties.

As we've discussed before, any reason whatsoever, "reasonable" or not has a salutary effect upon people's willingness to accomodate their fellows See "Why -- an Anatomy of Explanations").    More on the dynamics of reason-giving in negotiating the settlement of your disputes tomorrow.

___________

*  For individual responses to the question, "what constitutes bad faith negotiations?" click here.

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Attorneys routinely claim that their negotiating partners are acting in "bad faith."  But what does that mean?

In our recent Negotiation and Justice Survey, we asked our attorney, negotiator and mediator respondents (78 of them) to define bad faith in negotiations.  Having no authority to settle, refusing to listen to the other side, and failing to bring the decision makers to the negotiation are the most commonly cited instances of "bad faith" tactics in negotiation or mediation.

In response to our own formulations of potential bad faith negotiation tactics, the results were as follows:

A party lies about facts important to resolution                                      83%
A party lies about its "bottom line."                                                           23%
A party withholds information important to a "fair" deal.                      51%
A party refuses to compromise (with good reason)                              4.5%
A party refuses to compromise (without good reason)                       59.76%
A party doesn't compromise enough                                                        3.4% 

Here are all of the "unique" responses: 

1. stonewalling or frustrating the process unnecessarily 
2. acting out of a desire to punish the other or vindicate one's self
3. using the process for discovery
4. proceeding with no intention of exploring opportunities for settlement
5. taking advantage of a power imbalance which the mediator does not address and ameliorate
6. consciously taking advantage of the mediator's bias
7. negotiating unreasonably or intractably
8. prolonging the process by engaging in irrelevant conversation so that all parties are not given equal time
9. using hardball tactics meant to corner or trick the other party into submission
10. arriving unprepared and refusing to acknowledge it (2 separate comments)
11. threatening to engage in future unfair practices 
12. being unwilling to go through the entire process
13. asserting and maintaining an unreasonable position
14. failing to show up 
15. refusing to listen (5 separate comments)
16. refusing to provide necessary documents 
17. arriving with no settlement authority or without decision makers (6 separate responses) 
18. misrepresenting or mischaracterizing the client's case to one's own client
19. refusing to discuss interests
20. persisting in discussing positions
21. trying to bully the mediator or the other party

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From Law.com's In House Counsel page comes Beth Bar's New York Law Journal article Some Attorneys Questinong the Advantages of Arbitration.

The chart above represents results from a survey conducted by the  International Instititue for Conflict Prevention and Resolution ("CPR")  earlier this year.   

Aside from arbitral inefficiencies caused by lawyers doing what lawyers do (discovery and pre-trial motion practice) we suspect that a lot of the dissatisfaction comes not from arbitration as a method to resolve disputes, but from ill-advised pre-dispute boiler-plate arbitration provisions that prevent those who are handling the dispute from altering the way in which it is resolved.

We favor post-dispute arbitration agreements in which the parties can resolve the problems created by the skeletel provisions found in most contracts.  Post-dispute arbitration contracts can:

• provide for the type and extent of discovery and pre-trial practice necessary for the type of dispute that has arisen under the parties' agreement -- a dispute the contract's drafters may well have been unable to predict;
• provide for the composition of the arbitration panel best suited for the dispute, a single arbitrator with specialty industry knowledge, for example, or a three-arbitrator panel with two party and one neutral arbitrator, or any other combination or permutation that the parties' needs and creativity can give rise to;
• provide for an appellate process if the parties are afraid of a "runaway" arbitrator who provides neither rationale decision-making authority nor decisions tempered by the realities with which the parties must deal;
• place limitations on -- or expand -- available remedies, including all equitable relief otherwise available in a court of law; and,
• just about any other provision the parties' needs makes sensible and efficient.

Here's the good thing about both mediation and arbitration.  If the parties can sit down together and craft the best way to resolve their dispute (and a mediator might help with this process) they can make the law fit their needs rather than trying to put the square peg of their conflict into the round hole of local, state, national or international procedures.

And if you could use a contract drafting tune-up, do check out AdamsDrafting.  I'd say it's the best, but I believe it's the only web site devoted to clarity in the drafting of contracts.  Had Ken Adams existed a generation before I went to law school, I could likely have done something better with at least 5 years of my life when I was litigating this burning insurance coverage question -- does sudden mean quick or only unexpected -- upon which hundreds of millions if not billions of dollars of coverage for environmental clean-up rested.    

Finally, we've seen a great draft of Eric Van Ginkel's article on this topic for intellectual property disputes that will appear soon in the IP ADR Blog.  Keep a lookout for it.  

Pick the forum to fit the fuss.

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Fear Factor:  Letting a Jury Decide Your Case

What drives the settlement of all cases involving personal injuries and even those opponent-neutral disputes between commercial competitors? 

Fear of juries, of course. 

Juries are the "better" (or "worse") alternatives to negotiated agreements that mediators talk about when they throw around the acronyms BATNA or WATNA (see mediator Jessica Notini's excellent primer Effective Alternatives Analysis In Mediation: “BATNA/WATNA” Analysis Demystified).  

The Elephant in the Settlement Room

Even though Adam Liptak's New York Times Select article, Oddity in Picking Jurors Opens Door to Racial Bias, concerns death penalty cases, the means of choosing the members of the final 12 (or six in federal court) also drives civil justice in America.    

The referenced "oddity" in American trial law?  The peremptory challenge that permits lawyers to exercise more or less control over the final composition of the jury than some believe is warranted in an aspirationally color-blind justice system.  As Adam Liptak reports,

Justice Thurgood Marshall wrote that . . . . “peremptories inject [racial discrimination] into the jury selection process[, the elimination of which] . . . “can be accomplished only by eliminating peremptory challenges entirely.”

Two years ago, in the Miller-El case, writes Liptak, "Justice Stephen G. Breyer appeared to endorse that view, saying that “peremptory challenges seem increasingly anomalous in our judicial system[,]”  writing that 

 England has eliminated peremptory challenges but “continues to administer fair trials based largely on random jury selection.

Liptak concludes by suggesting that

Peremptory strikes are an odd and arbitrary historical artifact. Unlike equal protection, they are not guaranteed by the Constitution, and in capital cases — where race matters most — they would not be missed.

The settlement angle on this?  You can see it coming. 

In American urban courtrooms throughout the country, settlement decisions are commonly based upon the probable racial, ethnic, gender, and socio-economic composition of a jury that will eventually give their thumbs up or down on the Plaintiff's case.  If settlement decisions are governed by audacity on the Plaintiffs' side and fear on the defense side, both are often pinned upon the presumed "passion and prejudice" the "have nots" will bring to decisions affecting the "haves."  

And as the gulf between these two groups widens, the fear on the defense side has become more palpable.  *

Is this any way to run a justice system in a racially polarized society?

The White Reaction to the Black Reaction to the O.J. Verdict

We talk about "race cards" in this country because of the O.J. Verdict.  It wasn't so much the result of the O.J. trial that shocked America, as it was was the white reaction to the black reaction to the verdict. 

As Harvard Professor Henry Louis Gates, Jr. wrote in the aftermath of that trial (Thirteen ways of looking at a black man’ (23 October 1995), the phrase 

’ “race card” … itself infuriates many blacks. [Federal Appellate Court] Judge Leon Higginbotham Jr. . . .[said of] charges that Johnnie Cochran played the race card. “This whole point is one hundred per cent inaccurate. . . . If you knew that the most important witness had a history of racism and hostility against black people, that should have been a relevant factor of inquiry even if the jury had been all white .. .

[Academic and activist] Angela Davis [says] ... “Race is not a card,” she says firmly. “The whole case was pervaded with issues of race.” ’

Is Race a Card?

This is too big a question for this post.  I grapple with this issue an upcoming article in the LaTrobe University Dispute Resolution Journal (Vol. No. 1, so you won't yet find it online) and will link to it when it is published.

Let's just say this.  The jury is, as it was meant to be, a microcosm of the society.  Though originally meant to be comprised of people who were witnesses or who could track down witnesses to directly learn about the events giving rise to the dispute, over time the jury became a presumably neutral body that would determine credibility, "find facts" and, with the Judge's instructions, apply the law to the facts the jury deems the more credible.  

In analyzing the potential pre-trial settlement of an action, the attorneys consider everthing to be a potential "card."  If the stakes are high enough, they hire jury consultants to advise them how to select a jury that favors their side because trial lawyers are advocates looking for a jury that will be prejudiced in their favor.

This is not news.  It is the judge and the jury that are supposed to be neutral, not the trial attorneys.  And if they can increase their chances of winning by leaving African Americans or Koreans or the marginally employed on a jury, they will do so.  If it helps their case to use their peremptories to empty the jury box of women or Gen-X'ers or engineers or African-Americans, they will do that too.

And This Has What To Do with Settlement?

For a negotiated agreement to do the job of resolving the dispute in a better way than its alternative -- trial -- the parties and the mediator will have to grapple with the racial and ethnic and gender elephants in the room.  

And it may just be that a mediator who is capable of setting aside his or her prejudices long enough to look past issues of race, ethnicity, nationality, obvious religious affiliation, and gender, might be the one who is most capable of helping the parties achieve something that resembles justice.  

_____________________________

*     By the 1980s the United States had become the most unequal industrialised country in terms of wealth. The top 1% of wealth holders (the ‘Super Rich’) controlled 39% of total household wealth in the United States in 1989, compared to 26% in France in 1986, about 25% in Canada in 1984, 18% in Great Britain, and 16% in Sweden in 1986. More than 46% of all outstanding stock, over half of financial securities, trusts, and unincorporated businesses, and 40% of investment real estate belong to the super rich. The bottom 90% are responsible for 70% of the indebtedness of American households. Wolff, How the pie is sliced: America's growing concentration of wealth’ (1995) 22 The American Prospect 58.

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In his article, Feeding Lawyers' Souls but Not Their Wallets, New York Times writer Adam Liptak reports on a recent federal appeals court opinion confirming the old legal saw that bad facts make bad law.

Should Pro Bono Attorneys Be Required to Accept "Psychic Reward" When Their Clients are Entitled  Attorneys Fees?

It seems that Gibson Dunn prevailed in a federal Voting Rights Act case after eight of its attorneys devoted 300 hours to the legal effort, resulting in a $107,000 bill, to be paid by the taxpayers of Albany County.

Most law firms the size, sophistication and power of Gibson do a lot of high profile pro bono work, with no expectation of reward.  When the law permits the recovery of legal fees, however, they are as entitled to be reimbursed as any other lawyer -- be s/he a solo practitioner, a public advocacy group, or a mid-sized law firm.

Sometimes only a firm like Gibson is capable of handling "small" cases on behalf of public-sprited NGO's.  I know.  I represented the Rain Forest Action Network when Occidental Petroleum brought suit against it for picketing the CEO's house in Brentwood.  Right or wrong, this is the type of case most attorneys could handle with a bit of a brush-up on the recent constitutional law on picketing.

Later, however, RAN needed an attorney to respond to a congressional subpoena implicitly threatening its tax-exempt status.  There aren't a lot of attorneys who can do this work, so I lateraled it to an AmLaw20 firm, with a D.C. office and lawyers capable of responding to power with power.

Let's Give the Federal Judges a Raise!

Federal judges -- all of whom are long past due for a pay raise -- sometimes cast a skeptical eye on fee requests by major international law firms.  When first year attorneys at these firms are making more than federal judges, we understand how it rankles.

But the "psychic reward" calculus seems not to have precedent -- nor credible legal basis -- as a response to any attorney's request for fees, be s/he a Gibson lawyer or a solo practitioner.     

Let's Get Back to Judging Fee Requests by their Merit

First, Voting Rights fee provisions are not simply meant to reimburse counsel.  Rather, we suspect, the exception from the "American Rule"  that governs most litigation, is to encourage attorneys -- not all of them Gibson, Dunns -- to take on cases for indigents harmed by civil rights abuses. 

We also suspect that fee awards in Voting Rights Act cases have some punitive purpose -- to encourage the government, for instance, to abide by the Act without lengthy and expensive legal resistance.

And hey!  Some attorneys get a lot of psychic reward from representing their corporate clients, not all -- or even most -- of whom are Simon Legrees of capitalism.  Rather, they're the types of enterprises that keep the American economy humming along for the benefit of most of our citizens. 

Would a court suggest that Yahoo's attorneys, or Google's, should be satisfied by the good they do for the economy of the country rather than seeking actual cash payment for the work they do?  What if their representation of Apple gives attorneys not only the "psychic" reward of playing golf once a week with the CEO, but also social capital -- access to people who can connect you to others who can make you even richer and more powerful than you already are. 

Should we consider that when granting or denying fee awards to the attorneys for Microsoft?

No Good Deed Goes Unpunished

We  shouldn't read this case as a happy occasion to bash attorneys who are signficantly more financially successful than the rest of us.  Rather, we should read it for the decision it is -- yet another occasion to confirm a second class status for the least of us, who this federal court presumes should be content to accept charity from attorneys who cannot hope to recover the fees that might be awarded if they represented clients with sufficient funds to to pay their attorneys in the first instance.   

If Gibson's fee was excessive, it should have been measured as all fee awards are -- based upon the sophistication and difficulty of the legal work required, the amount of time expended and the result achieved.

The fee should not, however, rest upon some unmeasurable "psychic award" that public spirited lawyers presumably receive when working pro bono or for a "good" cause.  

And the Settlement Angle? 

The news here is far from good as well.  If the indigent plaintiff is treated as a second class citizen by the courts, the wrongdoing defendant benefits at the expense of a good samaritan.  With more bargaining chips in hand, the defendant can cut a more advantageous bargain for itself.  The plaintiff -- bent primarily upon the public good -- must be satisfied with a lesser monetary reward and fewer bargaining chips to achieve the social justice s/he seeks.

Gibson did a good deed and is repaid for its public service by derision from the bench for its financial success and a diminished fee award.

No good deed goes unpunished.   

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We've taken to heart Justice Ruvolo's admonition that the Courts should put their resources into their central mission -- providing a litigation and trial forum to resolve disputes that the parties cannot or should not be required to resolve in "alternate" private forums.  

Though I'm an ADR fan, I don't think either arbitration or mediation should be utilized simply because the courts can't get your dispute resolved effectively, efficiently or in a cost-effective manner.

As we've noted before, no one wants to settle a case looking down the barrel of a gun.  Too often the "justice" system looks more like a .357 Magnum than the constitutionally mandated "fair trial" we've been brought up to believe in. 

Free the Defendants -- Dismiss Dubious Pleadings

Courts are at their most frustrating when they permit dubious or skeletal Complaints to stand, thereby requiring defendants to expend hundreds of thousands of dollars in legal fees to engage in the discovery and further pre-trial practice that they hope will extricate them from the litigation at the end of a (very long) day.  

Every time a Court requires the Plaintiff's Complaint to rise above the level of speculation, a justice angel earns her wings.

So it is with the Supreme Court's recent decision in Bell Atlantic v. Twombly, summarized by a recent Mayer Brown Antitrust Client Alert  Supreme Court Decision Signals a Major Victory for Antitrust Defendants in a Variety of Industries. (You know, you really should be blogging these great intellectual treasures -- talk to my friend Kevin O'Keefe at LexBlog about exhuming your best articles from the firm's web site and coming out into the blogosphere to play!)

Here's the good news on the new standard of pleading antitrust counts as reported by Mayer Brown:   

 The Court’s ruling brings Section 1 pleading rules into line with previous decisions that, at later stages of the litigation, a plaintiff’s proof must tend to exclude the possibility that defendants were acting independently. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984).

And it finally inters the oft-cited statement in Conley v. Gibson, 355 U.S. 41, 47 (1957), that a complaint should not be dismissed unless “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief”—a statement that some courts have held to permit highly speculative pleading revealing only “the theory of a claim.” Stating that this “famous observation has earned its retirement,” the Court concluded that it is “best forgotten as an incomplete, negative gloss” on standards that apply only once a claim has been stated adequately.

The Court’s decision has wide-reaching implications for federal antitrust litigation and signals a victory for antitrust defendants in a variety of industries. Paired with Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), this case reflects the Court’s sensitivity to the pressures of settlement prior to discovery and its concomitant willingness to interpret strictly the Rule 8 entitlement requirement.  (emphasis mine).

For more information about your antitrust ligitiation, Mayer's Client Alert suggests you contact Richard J. Favretto or Gary A. Winters, both in Mayer's D.C. office.  

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From time to time we take a look at social psychology and evolutionary biology because ADR practitioners must be good students and careful readers of predictable human behavior and ways to encourage change.

What better place to begin than with ourselves.  In this week's Blawg Review, Enrico Shaefer's Greatest American Lawyer gathers together the week's 411 on self-reported billing irregularities. 

I know this topic is compelling to lawyers because I've had more "hits" to the Bar & Grill Singers' "I'm Billing Time"  video (their song/my video) than for any other post.

Here it is again.  

On to disreputable billable hour violations . . . .

We're Hard Wired to Detect Cheating

In their article Evolutionary Psychology: A Primer, Leda Cosmides & John Tooby report on research finding that our reasoning abilities are more finely attuned to detect cheating than any other type of misbehavior.  Before discussing violations of social norms, Cosmide and Tooby explain the most fundamental norm in human behavior -- reciprocal altruism in social exchanges. 

The evolutionary analysis of social exchange parallels the economist's concept of trade. Sometimes known as "reciprocal altruism", social exchange is an "I'll scratch your back if you scratch mine" principle. . . [S]ocial exchange cannot evolve in a species or be stably sustained in a social group unless the [participant's] cognitive [abilities permit] a potential cooperator to detect individuals who cheat, so that they can be excluded from future interactions in which they would exploit cooperators.

Who are the cheaters?  Individuals who "accept[] a benefit without satisfying the requirements that  . . . [the] benefit  was made contingent upon."  You know, the people who earn a little extra by padding their billable time by two or three hours a week.  Benefit without satisfying its conditions.  Work for hire.

How Good Are We at Detecting Cheating?  Very, Very Good

The researchers designed an experiment to test whether we have a specialized "cognitive architecture" that permits us to detect "logical violations of conditional rules."  The result?  In response to a relatively simple logical problem-solving exercise designed to test this type of reasoning, Cosmides and Tooby found that fewer than 25% of subjects spontaneously detected the violation. 

What about our logical reasoning skills when it comes to detecting cheating or bluffing?  In these circumstances, we become very smart very fast.  The authors explain:

People who ordinarily cannot detect violations of if-then rules can do so easily and accurately when that violation represents cheating in a situation of social exchange . . . This is a situation in which one is entitled to a benefit only if one has fulfilled a requirement (e.g., "If you are to eat those cookies, then you must first fix your bed"; "If a man eats cassava root, then he must have a tattoo on his chest"; or, more generally, "If you take benefit B, then you must satisfy requirement R").

Cheating is accepting the benefit specified without satisfying the condition that provision of that benefit was made contingent upon (e.g., eating the cookies without having first fixed your bed).

When asked to look for violations of social contracts of this kind, the adaptively correct answer is immediately obvious to almost all subjects, who commonly experience a "pop out" effect.

Whenever the content of a problem asks subjects to look for cheaters in a social exchange -- even when the situation described is culturally unfamiliar and even bizarre -- subjects experience the problem as simple to solve, and their performance jumps dramatically.