Getting the Parties to the Bargaining Table, Part II: Using Outside Settlement Counsel
In this part of the new series on getting the parties to the bargaining table, I interview former in-house Chrysler counsel and former Hogan & Hartson partner, Lew Goldfarb, who now has his own full-time outside settlement counsel firm.
For Lew's full bio and contact information, click here.
- what's the difference between outside settlement counsel and a mediator?
Settlement counsel is an advocate for one side, in my case, that's usually the defense. While the mediator is a neutral who tries to facilitate a compromise, settlement counsel attempts to achieve better outcomes for his clients for two reasons: (a) I have a complete understanding of the full range of my clients' interests, many of which are often not communicated to litigation counsel; and, (b) it is easier for me to learn the true motivations (if not the bottom line) of plaintiffs' counsel than it is for litigation counsel to do so.
In class actions, which are my specialty, I strive to craft a solution that responds to plaintiffs' counsel's needs while imposing minimal costs on my client. There are numerous, creative ways to settle class actions that accomplish both objectives effectively.
- I sometimes find that the parties for whom I mediate have not confided in the litigation team all of the corporate interests that are propelling the client toward settlement. I found this to be true in litigation practice and as a mediator. Do you encounter this as outside settlement counsel and, if so, how do you serve the client's interests without stepping on the toes of litigation counsel and vice verse.
There's always a bit of a communication gap between litigation counsel and the client. When clients hire me as settlement counsel it's in their interest to provide me with complete information in order to get them the best possible outcome, so they rarely withhold any important information fro me. In a recent case, I was not only invited to speak at several client board meetings, I was also asked to spend several days in the field on sales trucks to observe the client's franchisees that were the subject of the lawsuit. As a mediator, I usually only see the information that the litigation counsel provides as part of his client's submission, which is probably much more selective.
- Now that I've been mediating full time for four years, I find I'm much more prone to ask the parties interest-based questions than I was as a litigator. When I say "interest based," I mean corporate realities such as chain of command; upcoming mergers or acquisitions; a new management team; quarter- or year-end financial planning; divisional loss history; and, the like. If you find that to be true as outside settlement counsel, what do you think accounts for corporate counsel keeping their litigation team largely in the dark about issues that might have a substantial impact on the ultimate resolution of the matter?
Since I have always approached litigation with a view toward early resolution, either as in house counsel, outside litigator or mediator, I would usually make the same inquiries regarding the client interests that you do as a mediator. My only explanation as to why corporate counsel may withhold such information from their litigators may be that they are not seeking a negotiated outcome. In that case, they may believe that their litigators will be more effective and focused without being encumbered with "interest-based" information.
- My peers in the mediation world are fond of saying that litigators have to "churn" cases before settling them. I find that a shockingly cynical attitude. I often found that clients were more settlement averse than their litigation counsel. What is your experience in that regard?
I have to admit that I am more on the side of the cynics. I've had this longstanding belief that the legal profession imposes enormous economic costs on society without a commensurate benefit to the public, all in the name of providing access to the legal process. (See Goldfarb v. Virginia State Bar, 423 U.S.886 ) I believe that litigators tell themselves that they were hired to litigate not settle the case. I think it's less a matter of "churning" than it is the litigators' belief believe that "early" resolution means winning a dispositive motion, even if it takes a year or more to get an outcome. (See my article "Litigate it or End it" which discusses this issue.)
While there are always legitimate corporate reasons for not settling a case, litigators are reluctant to discuss early settlement with their clients for two reasons: (1) loss of fees; and, (2) fear of showing any lack of resolve to win the case. My experience is not that clients are settlement averse, rather that litigation counsel convince their clients to hold off on settlement for one more dispositive motion.
- How did you come to champion the use of settlement counsel?
I honed my skills as settlement counsel while serving for 16 years in house at Chrysler. When I arrived at Chrysler in 1985, the company was engaged in costly litigation with GM over a GM/Toyota joint manufacturing venture in Calif. The General Counsel asked me to look for alternatives to the litigation, which is when I found an article by Roger Fisher of Harvard promoting the use of separate settlement counsel. Chrysler did so and settled the case within a few months. I was then placed in the role of overseeing all class action litigation and serving as settlement counsel as well. Most in house counsel are not sufficiently immersed in the litigation, however, to serve as settlement counsel or simply do not have the time.
- As a former litigation partner in an AmLaw 100 law firm, do you wish you'd had inside settlement attorneys working side by side the litigation team?
Because of my experience as in house counsel settling cases, I was always the partner urging my fellow litigators to evaluate settlement possibilities. For all the reasons set forth in my answers above, most large law firms do not embrace the idea of institutionalizing an in-firm settlement section. One exception was Wilmer Cutler in DC which did set up an ADR group within the firm with the idea that clients would make use of it. I don't know whether it still exists. I still think it is a great idea, although not as effective as the hiring of a completely separate firm or individual to explore settlement.
- Doesn't it take outside settlement counsel an unnecessarily long time to "get up to speed" on a major piece of litigation -- thereby making it less cost effective than simply hiring a mediator to help the litigators settle their own cases?
Not at all. When I take on an assignment as settlement counsel I provide the client with a budget that includes a separate breakdown for "up to speed" time. While I need to understand the merits of the client's defense I do not need to read all the briefs since I generally am not called on to argue the merits of the case. Most importantly, I must fully understand what the client's interests are and what it is willing to offer up in settlement. For better or worse, what I offer is a very low cost, low risk means of exploring and settling complex litigation.
Thanks Lew! I can think of a couple of complex anti-trust, securities and IP cases I could have used your services for. I hope this interview gets the word out to attorneys feeling pressured to settle a difficult case but unable to get the other side to the bargaining table.