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How we resolve our disputes

Entries in buyer's remorse (2)

Wednesday
Aug142013

Fly on the wall

How many times have you finished a negotiation and wondered how much more you could have gotten the other participant to agree to? Have you ever wished you could have been a fly on the wall in the other side’s conference room?

My website claims that a mediator can help people negotiate better than they can negotiate on their own. I’ll go one step further. A mediator can help people negotiate better than they can with other advisers, like attorneys, business coaches, accountants and public adjusters. This is not to say that those professionals are not helpful or worth consulting. They are often essential. You can tell your attorney both the strengths and weaknesses of your position in confidence because you have a legal privilege not to have that information disclosed to anyone else without your consent. That is not true of any other business adviser or coach. Only doctors, clergy and spouses have a similar legal privilege. But even your attorney gets the story of your dispute or conflict only from you. Your attorney or business adviser or consultant can serve only one master. Your opposition will not tell your advisers their real bottom lines.

In contrast to this adversarial model of negotiation, mediation has a great advantage. A mediator can talk confidentially to both (or all) sides in a dispute or conflict, and no one—not even a court—can compel the mediator to disclose what is said in confidence. Thus, the mediator can be the proverbial fly on the wall who listens to each participant’s strengths and weaknesses, hopes and fears. By hearing and seeing the bottom lines of all participants, the mediator can determine whether there is an overlap, where everyone’s interests coincide, or whether there is a gap and, if so, how large and important it is. In this way, the mediator can encourage the participants to move toward those positions or solutions where agreement is possible. The mediator can also suggest when a settlement proposal or offer may be worth exploring, and when it may not be worthwhile. As a result, the mediator can prevent the parties from leaving money on the table or from giving away the store.

I am not so naive as to believe that everyone is entirely truthful, even when speaking with a mediator in confidence. I have been lied to. I have played poker, where bluffing is part of the game. But getting people to talk in confidence often discloses real interests and hidden agendas, even when they are prepared or guarded by their own attorneys, consultants and advisers. Sometimes, as a mediator, I am most useful when people ignore me, like the fly on the wall. By simply listening to and observing both participants, together or separately (in confidence), I can spot opportunities for settlement and prevent people from giving up too soon. So let a mediator be your fly on the wall. The mediator cannot tell you all that he or she sees and hears. But the mediator can make your negotiations more productive, with less second-guessing and buyer’s remorse when it is over.

 

Thursday
Oct282010

Buyer's remorse

In more than 30 years of practicing law, I have heard many attorneys say they do not need help negotiating contracts, agreements, or settlements of lawsuits.  I have also seen many contracts and agreements that are full of ambiguities or missing terms, which frequently lead to lawsuits.  Even when an agreement is not ambiguous or incomplete, a party who has “buyer’s remorse” often turns to the courts for help.

For example, in BV/B1, LLC v. Investors Bank, a real estate developer negotiated favorable terms on a loan from a bank.  In return, the bank inserted a fairly hefty prepayment penalty clause.  Sure enough, the developer got an offer to sell its building and property before the due date on the loan, triggering the prepayment penalty.  So the developer went to the bank and negotiated a reduction in the penalty in order to complete the sale, avoid litigation, and maintain a continuing relationship with the bank.  The developer paid off the loan and penalty out of the proceeds of the closing, but also sent a letter reserving its right to seek a refund of the penalty.  The developer quickly demanded its refund and the bank refused.  The developer sued.  (What happened to avoiding litigation and maintaining a good relationship with the bank?)

The trial court granted summary judgment to the bank, declaring not only that the bank did not have to refund the penalty, but that it was entitled to the balance of the original penalty.  The developer appealed, but the appellate court affirmed.  End result—the developer has to pay more than twice what it had negotiated for before filing its lawsuit.

Maybe the developer, or its attorneys, were good negotiators.  They just didn’t know when to leave well enough alone.  The bank and its attorneys were obviously also good negotiators.  And the courts appreciated that fact, refusing to relieve the parties of the benefits of their bargain.  The appellate court’s opinion refers to the parties’ “negotiations” and “agreement” (or variations thereof) more than a dozen times and finds no ambiguity. 

I don’t know whether the parties in this case considered mediation at any point, but a good mediator should help the parties appreciate the effect and importance of their negotiations and agreements, and avoid buyer’s remorse.  No matter how good the negotiators are, a settlement agreement that leads to litigation fails to achieve its purpose.  Dispute resolution means putting the dispute behind you, not kicking it down the road into court.