WHAT EVERY BUSINESS EXECUTIVE NEEDS TO KNOW ABOUT DISPUTE RESOLUTION

Part II: Litigation and Negotiation

© 2009 by Ronald W. Brown

In the Past, Dispute Resolution Took Many Forms And the Outcome Could Be Uncertain

Some Overlooked “Collateral Damage” Aspects of Disputes

• Uncertainty is damaging to a company in many, many ways. Depending on the size of the conflict, it could make lenders less interested in lending, customers concerned about the future, etc.

• It is challenging for the owner-of-a-dispute to compartmentalize a conflict to the point that it does not spill over into the business executive’s personal life and their effectiveness as a leader of the business.

• Any method of dispute resolution can be misused, for example as a delaying tactic or method of preventing forward progress, using up resources such as time and money. Recouping this lost opportunity cost is nearly impossible.

ALTERNATIVE DISPUTE RESOLUTION

LITIGATION

© 2009 by Ronald W. Brown

Two Essential Things Every Business Executive Should Know About Litigation: #1

• ”Every legal dispute is a business problem requiring a business solution.”

• “Instead of handing over disputes to the lawyers with a ‘you take care of it’ attitude, managers need to take responsibility for their disputes. They need the same negotiating skills they use to close an acquisition or negotiate a contract to try to settle. If a case goes to litigation, you have already lost. As Priceline founder Jay Walker put it, it's not a matter of who wins, it's a matter of who loses less.”

• “If the initial settlement efforts fail, the manager in charge needs to continually reassess whether it makes sense to continue litigation or put another offer on the table.”

Constance E. Bagley, “Using The Law To Strategic Advantage”, Harvard Business School, Working Knowledge, December 12, 2005

Two Essential Things Every Business Executive Should Know About Litigation: #2

• “Most civil litigation in federal court settles either during pretrial discovery or right before trial ‘on the courthouse steps.’ Settlements at the pleading stage are relatively infrequent. Notoriously few civil cases in federal court are tried.”

• “Particularly because most cases settle, pretrial discovery is of critical importance. Pretrial discovery is often used to determine the boundaries of settlement discussions. Frequently, the amount of the settlement reflects the parties’ success or lack of it during the discovery process. “

• “If the case is one of the few cases which is tried, it is likely that the parties’ presentations will rely heavily on evidence they developed during discovery.”

Robert L. Haig and John P. Marshall, “Corporate Discovery Strategy In Complex Litigation”, Law Department Management Adviser, Issue No. 217, April 1, 2001

Reject A Settlement Offer and Do Better Going to Trial?

A recent ABA Journal article, “Most plaintiffs Who Reject Settlement Offers Do Worse At Trial” found four things:

1. “The gamble of going to trial doesn’t pay off for most plaintiffs, according to a study of more than 2,000 civil suits from 2002 to 2005.”

2. “Sixty-one percent of plaintiffs who turned down settlement offers ended up faring worse at trial, according to a New York Times story on the study. The average settlement offer was $48,700 and the average award at trial was $43,000, a difference of $5,700.”

ABA Journal Law News Now, Posted Aug 11, 2008, 06:49 am CDT, By Debra Cassens Weiss

Reject A Settlement Offer andDo Better Going to Trial?

3. “Defendants were wrong in just 24 percent of the cases, but for them the cost of a bad gamble was much larger. The average plaintiff’s settlement demand in those cases was $770,900 and the average verdict was $1.9 million, a difference of more than $1.1 million.”

4. “Plaintiffs were more likely to make poor choices about going to trial in contingency fee cases. On the defense side, defendants were more likely to make poor choices when there was no insurance coverage.”

ABA Journal Law News Now, Posted Aug 11, 2008, 06:49 am CDT, By Debra Cassens Weiss

Simplified Overview: The Civil Litigation Process In Nine Steps (with a flow diagram)

1. Plaintiff’s Summons and Complaint

2. Defendant’s Answer to the Complaint, Affirmative Defenses, Counterclaims

3. Motions

4. Discovery (Depositions, Interrogatories, Production of documents)

Simplified Overview: The Civil Litigation Process In

Nine Steps (with a flow diagram)

1. Pre-Trial Conference and Motions

2. Jury Trial or Bench Trial

3. Judgment

4. Motions After Trial and Appeals

5. Enforcement of Judgment

http://www.tfc­associates.com/suit.html

A FLOW DIAGRAM FOR A CIVIL

LAWSUITPrepared by TFC-Associates.com

What Do Litigators Charge?

• A straight hourly rate can range from three to four figures.

• There are many variations to the straight billable hour.

• Joel A. Rose & Associates, Inc., Management Consultants to Law Offices, lists 21 different creative billing arrangements that law offices are using as alternatives to the straight billable hour.

(http://www.joelrose.com/articles/creative_billing_arrangements.html.)

“Traditional litigation is a mistake that must be corrected…For some disputes trials will be the only means but for many claims trial be adversarial contest must go the way of ancient trial by combat…Our system is too costly, too painful, too destructive, too inefficient for really civilized people.”

Quoted in “The Reasons for Mediation’s Bright Future” by Edna Sussman, NYSBA New York Dispute Resolution Lawyer, Fall 2008, vol. 1, no 1. p 57

Warren E. Burger,

former Chief Justice United States Supreme Court

“The notion that most people want black-robed judges, well-dressed lawyers, and fine paneled courtrooms as the setting to resolve their dispute is not correct. People with problems, like people with pains, want relief, and they want it as quickly and inexpensively as possible."

Warren E. Burger, former Chief Justice United States

Supreme Court

http://adr.navy.mil/adr/slideshows.asp

Alternative Dispute Resolution

Negotiation

Five Memorable Thoughts About Negotiation

1. “Let us being anew, remembering on both sides that civility is not a sign of weakness, that sincerity is always subject to proof. Let us never negotiate out of fear, but let us never fear to negotiate. “

President John F. Kennedy, in an address to the United Nations General Assembly

Five Memorable Thoughts About Negotiation

2. “ We cannot negotiate with those who say: ‘What’s mine is mine, and what’s yours is negotiable.”

Five Memorable Thoughts About Negotiation

• 3. “Negotiation is a process in which people learn to accept an available compromise as a satisfactory substitute for that which they thought they really wanted.”

• 4. “Negotiation is the sum of all the ways in which we convey information about what we want, what we desire, and what we expect from other people---as well as how we receive information about other people’s wants, desires, and expectations.”

---George H. Ross, Esq., Executive Vice President and Senior Counsel for the Trump Organization

Five Memorable Thoughts About Negotiation

• 5. “If you can’t go around it, over it, or through it, you had better negotiate with it.”

---Ashleigh Brilliant

A Three Point Perspective: Negotiation As A Foundation For A Successful Relationship

• 1. “To begin with, almost all negotiations have conflicts and how the parties deal with those conflicts can set an important precedent as to how different types of conflicts will be dealt with in the future. To the extent that disagreements arise, lawyers should consider — rather than engaging in costly e-mail wars demanding concessions based on the insistence that "their way is the right way" — working to foster a method of handling the conflict that is most likely to quickly resolve it. An example? Identify real business issues quickly and have the business parties discuss them in as amicable a manner as is possible.”

ABA Section of Business Law Volume 12, Number 5 - May/June 2003 , Win the Battle or Build a Relationship? How Japanese Style Could Help American Negotiators. By Darin Bifani

A Three Point Perspective: Negotiation As A Foundation For A Successful Relationship

• 2. “Negotiating lawyers can also help strengthen the business relationship of the parties by avoiding words and actions that are likely to embarrass or surprise the other party and use words and actions, which, as much as possible, put the counterparty and the business relationship in a positive and long-term light. Skilled negotiators typically have an arsenal of adversarial tactics at their disposal, such as mastery of technical minutiae, which others do not completely understand. This can surprise the other side with uncomfortable or unflattering data or corner less skilled negotiators with references to sources or facts that they may not know. “

ABA Section of Business Law Volume 12, Number 5 - May/June 2003 , Win the Battle or Build a Relationship? How Japanese Style Could Help American Negotiators. By Darin Bifani

A Three Point Perspective: Negotiation As A Foundation For A Successful Relationship

• 3. “While these tactics may win concessions on contractual language in a crowded negotiating room, they also can leave a lasting negative impression in the mind of the other party. As one lawyer once mentioned, it is often a good idea to share potentially damaging or explosive information with the other side before discussing it in public because, among other reasons, the counterparty in negotiations "may often be your client's client."

ABA Section of Business Law Volume 12, Number 5 - May/June 2003 , Win the Battle or Build a Relationship? How Japanese Style Could Help American Negotiators. By Darin Bifani

Principles of Negotiation: Getting To Yes—Negotiating Agreements Without Giving In

• Separate people issues/relationship issues from substantive problem issues,

• By Focusing on interests not positions.• Search for mutual options for mutual gains that satisfy the

parties interests (Avoid: making premature judgments; searching for the single answer; assuming the pie is fixed in size; thinking that solving their problem is their problem)

• Insist of using objective criteria or standards of what is realistically fair and reasonable.

• Have a Best Alternative to a Negotiated Agreement (“BATNA”)

Eleven Additional Important Points About Negotiation

1. “It's easy to come up with a recipe for disaster when the subject is negotiation. As in chess, once you sit down at the table every move counts. So many factors compete to undermine an optimal settlement: the emotions of both participants; the potential for misunderstanding what could be gained (or lost); differing interpretations of what constitutes fair play.”

---Martha Lagace, “The Art of Negotiation”, Harvard Business School Working Knowledge, May 23, 2000

Eleven Additional Important Points About Negotiation

2. “The cooperative approach to negotiation postulates that all parties must come away having gained something.”

3. “There are three things you need to know in understanding negotiation. First, it is not a science. Second, it is not a situation in which winning is everything. Third, it is not an event with continuity—the parties involved, their motives, and their goals are all different and are all subject o change at any moment during the course of the negotiation.”

---George H. Ross, Esq., Executive Vice President and Senior Counsel for the Trump Organization

Eleven Additional Important Points About Negotiation

4. “Find common ground with the other side.” 5. “Establish a good rapport.” 6. “Be a nice person to deal with.” 7. “Find the appropriate level of communication.” 8. “Understand the other side and its needs.” 9. “Cement feelings of trust.”10. “Learn flexibility.”11. “Become known as a deal maker and not as a deal

breaker.”

---George H. Ross, Esq., Executive Vice President and Senior Counsel for the Trump Organization