Play Ball!

This is not about Major League Baseball, even though today is opening day of the 2011 season. However, baseball has been used as a metaphor for, or backdrop to, life in general for most of the last century, at least in U.S. literature and theater. From For Love of the Game to Field of Dreams, from The Chosen to the The Natural, baseball in novels and the movies is part of our national and cultural folklore. Baseball’s lessons and language also permeate mediation and dispute resolution.

The other day, I was engaged in some business negotiations. After presenting our initial proposal, the other party’s attorney said it was not even “in the ballpark” and advised his client to forget about making any deal with us. In effect, he wanted to pick up his ball and look for another game after the first pitch. Recognizing this as a time-worn negotiating tactic, I reminded them that we were only in the first inning and there was plenty of time for both sides to take their turn at the plate. In other words, we wanted to play ball with them. If they would have accepted our initial proposal, we would have been very happy but that was not our entire game plan. After the exchange of a few more proposals, it became apparent what was important to each side and an agreement was reached. All it required was for each side to demonstrate a love of the game and be prepared to “go the distance.”

Very often in mediation and negotiation, we see parties take positions that are seemingly irreconcilable at the outset. If the parties come in with positions that are truly their bottom lines, no agreement or settlement will be possible. Therefore, I recommend that the parties do their research ahead of time, come in with their best alternative to a negotiated agreement (BATNA) but be aware of the worst that could happen. And then play ball. After all, it is our national pasttime.

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.

A New Year Wish

In his annual report on the judiciary, Chief Justice John Roberts expressed concern about the “economic downturn that has imposed budgetary constraints throughout the government, and the persistent problem of judicial vacancies in critically overworked districts.”  In most federal districts that I am familiar with, U.S. Magistrate Judges conduct settlement conferences in civil cases.  In state courts, if you want a neutral third-party to facilitate settlement discussions, you hire a mediator.  Why should the federal courts be different?  My wish for the new year is that the federal courts outsource or privatize the settlement function.  Want to save judges’ time and taxpayers’ money?  Let the judges (and magistrates) be judges.  Let mediators mediate.

The easiest mediation

Everyone writes about their most difficult mediation case and what they learned from it.  No one seems to write about the easy ones.  But I think there is something to learn even from those easy cases.  Yesterday, a friend told me about a case involving a mistake during construction of a government building that caused about $300,000 damage to the building.  The state sued to recover the cost of repairing the damage, but it really liked the contractor and wanted to continue doing business with them.  The contractor, of course, wanted to keep the state’s business.  Neither one wanted to give away the store, but neither did they want to go to trial.  An easy one, right?  Find out how far apart the parties previous offers are, caucus and try to find their bottom lines.  The difference couldn’t be worth more than the value of future business and services between the parties.  Naturally, the case settled fairly quickly in mediation. 

So what can we learn from this?  In most cases, the parties are not quite so obviously motivated to settle.  But that is precisely the point.  Their motivation to settle might not be obvious, but their motivation not to settle is often painfully obvious.  One side might be so sure of its position that it wants to punish and make an example of the other party.  The other side might be equally sure of its position and figures it has nothing to lose by going to trial.  Regardless of what their motivation is, the first step to settling is finding out what is motivating them.  This requires getting them to talk.  If they won’t talk to each other, maybe they will talk separately and privately to the mediator.  What makes them so sure of their positions?  Have they considered all costs and risks?  Are their assumptions realistic?  What are their alternatives? 

In criminal cases, defense attorneys often argue that their client cannot be found guilty because there is no proof of motive.  Why would the defendant do what he is accused of doing?  The prosecution usually answers that motive is not an element of the crime and they do not have to prove one.  Nonetheless, if they know the motive, they certainly will try to prove it because it makes it easier to get a conviction.  Likewise, in a civil case, motive is not usually an element of the cause of action, but knowing a party’s motive can make it much easier to prove your case.  Or to negotiate a settlement.  It matters not whether the motives favor settlement.  What matters is knowing each other’s motivation.  Only then can you begin to craft a settlement that satisfies those motives.  In my friend’s “easy” mediation, the most important motive for each party was preserving the relationship.  If the mediator had focused only on money, the mediation would have been much more difficult. 

Arbitration v. Mediation: Statistics

FINRA (the Financial Industry Regulatory Authority) administers both mediation and arbitration programs for securities brokers, agents, and customers.  Their recently reported statistics for the first part or 2010 show an increase of 106% in new filings for mediation and a decrease of 25% for arbitration.  New arbitration case filings still outnumber mediation requests by about 7 to 1.  FINRA also reports that 85% of mediation cases closed with a successful settlement, an increase of about 5% from historical FINRA mediation settlement rates due in part to a multi-case mediation coordinated by FINRA, which settled a large group of cases.  The average case turnaround time was 88 days.

Statistics like this are difficult to come by.  If anyone knows a good source for similar statistics in other arbitration and mediation programs, let me know.  Without such information, generalizations about filing trends and settlement rates are impossible to make.