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How we resolve our disputes

Entries in mediation (46)


An ounce of prevention . . . 

Maybe it’s the economy. Or maybe it’s the latest negotiation tactic. Lately, I have conducted several mediations in which one party claims that it will file for bankruptcy if it does not prevail in the pending litigation. Collectibility is frequently an issue in mediation, but the spectre of bankruptcy raises it to a higher level. If a settlement is reached and the party who pays money then files for bankruptcy protection, will the recipient have to pay it back to the trustee to be distributed equitably to all creditors? In one case, the plaintiff alleged its business losses were due to conversion by a business partner — an intentional tort that could not be discharged in bankruptcy.

Of course, many business disputes, especially between partners, can be avoided with carefully worded contracts, partnership agreements or corporate documents. Unfortunately, in the recent cases I have mediated, the contracts and other documents were not carefully worded. In some instances, they were non-existent or, at best, inartfully drafted. Maybe the parties did not feel the need for written agreements, or maybe they were too cheap to pay attorneys to draft them. But I suspect that well-drafted legal documents would have come in handy when it came time to end the relationships or resolve disputes. In the absence of such documentation, the litigation became a he said/she said affair. And the mediation boiled down to “give me what I want” or “accept what I am offering” or else I’ll file for bankruptcy.

A transactional or business attorney’s best marketing tool is to tell a client to “pay me now or pay the litigators later.” In the cases I have seen, parties who scrimped on business planning and documentation have gotten what they paid for. Trouble.


Popping the "information cocoon"

Sometimes, reading a New York Times book review can be better than reading the book. This past weekend, a review of the book The Filter Bubble: What the Internet is Hiding From You prompted me to think about how people can be trapped inside their own “information cocoons.” Google and other internet search engines, as well as Facebook, LinkedIn and other social media, apparently spoon feed us information they think we would like to see, based upon our past searches and selections. Their algorithms personalize search results and rankings according to the searcher’s previous internet history. The book details how and why this is done, as well as exploring the political and social implications of search engine personalization. The book review raises the question of whether governmental regulation to achieve more “serendipitous discovery” is desirable.

This topic is important in understanding how people make decisions and why disputes and conflict arise. Perhaps this is one of the reasons many people perceive an increase polarization and hostility in recent public discourse. When the information you receive on the internet is tailored to complement your previous disposition, you are less able and likely to see the other side’s point of view.

In dispute and conflict resolution, it is sometimes necessary to pop a person’s “information cocoon” to help him or her understand the other side’s position and the risks of continuing the conflict. Mediators often must test a participant’s underlying presumptions by engaging in “reality checks.” Another way to think about this process is to pop the information cocoon. Where are the parties to the dispute getting their information? Are they familiar with the other side’s sources? If not, it may be worth their time to take a look. 

Good litigators must know the other side’s case as well as their own. Good negotiators must be similarly prepared. If internet search engines and social media are making that more difficult, we must be aware of it and be prepared to deal with it. Removing the filters from our search engines would be a good start toward diversifying our information sources. Mediators should be prepared to point out this problem to parties in dispute in order to help pop their information cocoons.


Dare to cross the line

Inspiration comes to me from many sources.  Last weekend, it came to me from a comic strip.  In Baldo (the first comic strip featuring Latino characters and themes), a little girl on a playground dares a bigger girl to cross a line she has drawn in the sand.  The two girls stare at each other as other children gather round.  Finally, the bigger girl crosses the line and the little girl says “Good. Now you’re on my side.”  In the final panel, the two girls hug and smile.  

This inspired me to think of how many times I have seen people in dispute draw lines in the sand that they dare not cross.  Once their positions are fixed, it is difficult to get disputing parties to move.  The cartoonist was able to illustrate how the line might not be a barrier.  Rather, it might be an invitation to explore opportunity. 

Another mediator blogger recently pointed out that 4 year olds can be taught to “do conflict resolution.”  Perhaps we have found a way to make childishness a good thing.  When adults draw lines in the sand, it might be better if they think like 4 year olds or the children in the comic strip. I am going to keep copies of this comic and blog in my mediation binder.  I’ll report to you as soon as I have an opportunity to use them.


Caveat negotiator

An excellent article in the current issue of the Wisconsin Lawyer, titled “Negotiating in the Red Zone,” discusses the risk of legal malpractice liability for lawyers conducting settlement negotiations for clients.  The “red zone” occurs when an opposing party makes an offer within the client’s stated acceptable range but the attorney believes that they can obtain a better offer by rejecting it and negotiating further.  The risk is that the opposing party will terminate the settlement discussions and a trial will result in a worse outcome.  The author argues that lawyers are more vulnerable to professional liability when a settlement opportunity is lost in red-zone situations than in non-red-zone cases.

The article suggests that attorneys fully advise clients of the risks and benefits of continuing negotiations in such situations, and that they document and not deviate from the client’s agreed-on strategy.  It also mentions that this advice should be followed even in mediation.  It does not discuss how the mediator should address or participate in the decision to accept or reject a red zone offer.  At a minimum, the mediator should be aware of the ethical considerations and risks of liability that the attorney is facing.  While the mediator probably has no obligation to advise the lawyer of the heightened risk, doing so could enhance the prospect of a final settlement.  Without a participant’s consent, a mediator cannot disclose whether an offer is a final bottom line.  But the mediator can help attorneys and their clients to intelligently consider and evaluate the risks and benefits of continuing to negotiate versus accepting an offer.  The mediator might also help to document the attorney’s advice and the client’s decision regarding red zone negotiation strategy.  Thus, a mediator may help to reduce the attorney’s risk of ethical problems or professional liability. 

In other words, the article demonstrates another reason to seek out a mediator to assist in delicate or complex negotiations to resolve litigation or civil disputes.


Failure to communicate

As if people facing foreclosure of the mortgages on their homes did not already have enough problems, a new wave of scam artists is targeting them.  According to the FTC, so-called forensic loan auditors are offering to review mortgage loan documents to determine whether the lenders complied with state and federal mortgage lending laws.  The other day, a client came to me with an ad from one such company.  The “auditors” say the borrower can use an audit report to avoid foreclosure, accelerate the loan modification process, reduce loan principal, or even cancel a loan.  Of course, they expect the borrower to pay large up front fees in advance.  This is illegal in many states.  Even if it is not illegal, it is foolish.  The FTC recommends that borrowers talk directly to their lenders to negotiate a new repayment schedule. 

Why would someone already deeply in debt, unable to pay their mortgage, fork over hundreds or thousands of dollars to someone to do what they could do themselves?  Two reasons.  First, many lenders or mortgage servicers are so swamped with delinquent mortgages that they do not have sufficient personnel to talk to every borrower who needs help.  Borrowers cannot get in touch with anyone who has authority to work out a new payment plan, so they think that someone with a fancy sounding title, like forensic mortgage loan auditor, might have better luck.  Second, borrowers may lack confidence in their own negotiation skills.  In either case, the person to see for help is a lawyer.  Most lawyers will charge less than the scam artists and will not waste time searching for unnecessary negotiating leverage.  Borrowers already have all the leverage they need.  Banks do not really want to own all of the homes securing their mortgage loans.  If the borrower’s lawyer cannot get a response from the lender, he will certainly be able to get a response from the lender’s attorney when a foreclosure action is filed. 

As they said in the movie Cool Hand Luke, “what we’ve got here is failure to communicate.”  The solution to a lack of communication, or inability to communicate, is to start talking.  If mediation is available or required, the borrower should definitely take advantage of it, using the mediator to help negotiate with the lender.  Ignoring the problem or hoping someone will find a silver bullet to make it go away is rarely the answer.  In the current economy, mortgage default and foreclosure are legal problems that no one should be embarrased to talk about.