Sunday, August 30, 2015

Straight Outta Compton

Who would have thought that the new movie, Straight Outta Compton, in addition to its great story and great music, would also contain some great lessons about negotiation? The main lesson being about the dangers of creating a partnership deal that is not fair to all of the participants. According to the movie's version of events, the leader of the group NWA, Eazy-E, and the manager Jerry Heller, presented the other members with a deal giving them a much smaller share of the profits than Eazy-E was taking. Followers of the school of aggressive negotiation can justify this hard bargain because it was originally Eazy-E's company and he put up the money to get the band's first record made, and also because the ethics of that school of negotiation support taking whatever you can get, and letting those on the other side of the table look out for themselves.

The results of driving such a hard bargain in this case were disastrous. The group's talented lyricist, Ice Cube, refused to sign and left the group. Eventually, the brilliant composer Dr. Dre also left the group. Both these talented musicians went on to have spectacular solo careers, while Eazy-E is shown losing almost everything. Experts on negotiation stress the importance of leaving something on the table, and making the deal fair to other parties, particularly when one has to work with those partners in the future. And particularly when those partners create so much of the value for the group. (For example in Michael Wheeler's book The Art of Negotiation, discussed in a previous post, the author provides many examples of aggressive negotiators blowing deals by demanding too much, or gaining deals that cost them in the long run.) Because Jerry Heller and Eazy-E failed to observe those rules, they ended up much worse off than if they had treated their partners fairly.

trailer
But just in case anyone thinks that this film about a bunch of tough guys only illustrates the value of "nice guy" negotiating, the movie also contains some examples showing that taking a "tough guy" approach can also be effective. At one point, Ice Cube is shown smashing up his record producer's office with a baseball bat to convey his displeasure at the size of his royalty payments. It's not a tactic I can recommend, but it sure seemed to make the guy a lot more pliable the next time they met. Dre's partner Suge Knight is also shown employing violent tactics to make a deal, methods that lead to some short term success but long term failure. So there is also a place in negotiation for standing up and demanding what you are entitled to. To a large extent, that is what NWA stood for.

Highly recommended.

Thursday, August 27, 2015

Openings, part 2

When we meet someone for the first time, we immediately start forming impressions of them. It takes a lot to change that perception, even if they turn out to be quite different from the way we initially perceived them. Similarly with conflict. The way in which a controversy is framed does much to affect the way parties subsequently see the dispute.

Bombet
When a prospective client brings their problem to a lawyer, the lawyer is trained to sift through the client's story and pick out all of the potential legal claims. Much of the client's story is irrelevant to the lawyer, even though it may be important to the client. The lawyer then frames the story as an accusation that the other party has committed certain wrongs. What the case is "about" is then determining whether the opponent's conduct met the standards for assessing liability. 

There are a number of problems with this approach. First, the way in which the legal system defines the problem may not much resemble the problem that was originally bothering the parties. Instead, the legal system has created a new problem for the parties, by assigning them the task of obtaining a legal determination of the issues set forth in their lawsuit, rather that a full discussion of the conflict.

Second, since most cases even in the traditional adversarial system end without a full resolution of those legal issues, we are wasting a lot of resources preparing for an event (trial) that in most cases will not take place. And even in the cases that are disposed of by motion or trial, and thus obtain an adjudication of what the re-framed conflict is now about, the parties are often left unsatisfied with that resolution. And not just because the result may have gone against their side, but also because the case may have been decided based on an issue that is different from what was really troubling them.

The third problem is that the adversarial system encourages the parties to act in an antagonistic manner. The initial framing of the dispute creates new issues for the parties to contend over, and their conduct of the lawsuit or arbitration allows the parties to perpetrate fresh outrages on each other. It does not lead the parties to a different path of problem-solving and accommodation. Not right away, anyway. Before they get to that point, they are likely to inflame the dispute, and create new disputes. 

If we could get parties to frame a dispute in a more constructive way from the outset, that might lead them more quickly to more constructive methods of resolving the problem. In my prior post, I suggested that more creative use of demand letters might help create that constructive atmosphere. I think there is also a need for a more formal mechanism of initiating conflict resolution that does not require the parties to head down a destructive and wasteful path. Instead of assuming that the dispute is going to be resolved by an adjudications of the legal issues raised in the pleadings (which even in the traditional system, does not happen in most cases anyway), why not start off assuming that the dispute will be resolved by negotiated agreement, and assist the parties in that process?

It would be helpful to establish a more formal protocol for out-of-court dispute resolution, starting with a notice of dispute rather than a complaint. A complaint invites the defendant to deny the allegations, to file motions, and to raise defenses. A notice of dispute invites the other side to agree that the parties have a problem that needs to be solved. A complaint invites the other side to look for ways to thwart the progress of the action. A notice of dispute could suggest various methods of resolving the dispute, and invite the other side to suggest others.

The pleading stage of a lawsuit is usually followed by the discovery stage, a fresh opportunity for parties to battle over what should and should not be produced. Instead of launching into that battle, a notice of dispute could request an exchange of information and documents that would be helpful to resolving the dispute. It would encourage the parties to agree early in the process on what each side needs from the other.

I've been toying with this idea in my mind for years, thinking that it would be necessary to persuade the court system to change the rules and forms sufficiently to provide a mechanism for alternative forms of dispute resolution. Now that I think that's not likely to happen anytime soon, it's time for parties and lawyers to develop these protocols on their own.

Unless we believe that parties in every case need to engage in adversarial combat before they sit down and resolve the case consensually, just to get it out of their system, parties should understand the value of attempting diplomacy to resolve conflict before resorting to war. It's not that all cases must be resolved by negotiation. There is still a place for hard-fought contests over matters of principle. It's just that we don't need to start off assuming that ALL cases must be resolved by such adversarial means. 

Monday, July 27, 2015

Openings

In a prior post, I suggested that in the absence of a thorough re-vamping of the rules of civil procedure, parties and practitioners should try to invent new ways to resolve disputes outside the court system, How exactly would that work?

Let's start by considering how to open a case, both within and outside the court system. If you're having a problem with your neighbor/boss/business partner/stranger, etc., you can't simply ask the court to help you resolve that conflict. Instead you must file a complaint setting forth a cognizable legal claim. You must include all the elements of the claim. You must have damages or an entitlement to equitable relief. You must identify yourself as the victim and the other side as the transgressor. To get inside the door of the courthouse, you are required to act in an adversarial manner, and you must allege wrongdoing on the other party's part.

This is not always a bad way to initiate dispute resolution. A formal complaint does have the advantage of getting the other side's attention, and letting them know that you feel sufficiently aggrieved by their conduct to initiate formal legal action. But it also throws down the gauntlet. In that context, it's hard to resist the temptation to go further than is necessary. So to achieve maximum impact, the plaintiff often includes some causes of action that might be a stretch, and some allegations that verge on hyperbole. That is usually done to let the other side know just how severe the consequences  of their actions might be, but it also frequently provokes outrage, denials and counterclaims. In contested litigation, the pleading process, which in an ideal world would serve the useful purpose of finding out what matters are actually in dispute and what matters are agreed, is more likely to inflame passions on both sides, and drive the parties further from resolution.

For a lot of reasons, some historical, some budgetary, and some moral or philosophical, the courts are not likely to open their doors to disputes that do not meet traditional legal standards. Courts are not likely to turn themselves into dispute resolution centers available to manage any sort of conflict, regardless of whether or not it meets those traditional tests of legal sufficiency. But a lot of conflicts that probably don't meet those requirements seem to find their way into court anyway, simply because there is nowhere else to take them that can provide the same level of gravitas. Which means that the courts spend a lot of time "weeding out" cases that "don't belong" in court, even though they may involve real conflicts that are important to the parties involved. And even for the conflicts that do happen to meet the legal tests of at least successfully alleging a breach of contract, tort, or violation of some other legal interest, people might be surprised to learn that it's still not the courts' primary function to resolve those conflicts. Instead it's the courts' job to determine whether one or both sides is able to prove the alleged violations. In many cases, doing that job might have the effect of resolving the conflict, but it's still not the same thing.

So let's say you want to try to resolve a conflict--whether or not it meets traditional tests of legal sufficiency--outside of court. What you would probably do, outside the court system, to initiate a dispute resolution process is serve a demand letter. The problem with most demand letters--maybe because they're usually drafted by lawyers--is that they often find themselves infected with the same values and methods associated with the adversary system, even though they purport to present a means of resolving disputes out of court.

What that means is that most demand letters are going to contain the same language of legal claims, violations and damages that is contained in complaints. Most are going to threaten the party served with severe legal consequences in the event they do not give in to the party's demands. Even though most demand letters actually invite a negotiated resolution of a dispute, they usually read more as an ultimatum, and many of them seem to leave little room for negotiation. As a result, many demand letters provoke the same kind of angry denials and counter-charges that complaints provoke. Many become the opening salvos in a war of words that will probably end up in court, and only much later return to the negotiating table after a lot of costs and pain have been inflicted by both sides.

Recently I had to respond to a demand letter charging a client with various trademark and false advertising violations. I responded by suggesting that the client was within its rights in some areas but was willing to make certain other changes to its advertising materials in order to resolve the dispute. What I got in reply was a new letter, speaking in the same terms of threats and ultimatums, but demanding only that we do exactly what we had offered to do in response to the original letter! We made the changes, I wrote back thanking the trademark holder's attorney for his cooperation in successfully resolving the dispute for the benefit of both sides, and that was the end of the matter. The point being that lawyers have a hard time getting ourselves out of the mindset of claims and threats and sanctions, and into a different mindset of cooperative dispute resolution. Another point being that demand letters, even though they purport to seek an out of court resolution of a dispute, still operate in the shadow of the court system.

What I'm suggesting is that we might be squandering an opportunity. We ought to try being more creative in framing demand letters in a way that suggests a positive solution to a problem. That usually requires some acknowledgement of the other side's interests, and that can be done without appearing weak.

We should recognize that to frame a dispute only as a legal claim might be an unduly narrow way of looking at the problem. Discussion of the parties' other concerns and interests opens up other ways of potentially resolving the dispute.

We might also consider asking the opposing party to agree that the parties have a conflict, instead of inviting the opposing party to disagree with our characterization of the alleged violation. That would start the parties down a path of agreement, even if the only common ground that can be found at the outset is to the proposition that the parties have a dispute that needs resolving.

Another positive way of framing a demand letter is to invite the other side to suggest a means of resolving the conflict, instead of just demanding that they agree to our terms. That way they are invested from the outset with part of the responsibility for solving the problem.

Granted there are some situations where the stakes are such that you must demand that the other side agree to your terms or face the consequences, but you have to recognize when you take that approach, that if they don't back down immediately, you're just headed for litigation. For a large number of contested disputes it might be more productive to suggest right up front that you are interested in sitting down and resolving the dispute in a way that may satisfy both side's concerns and interests. The vast majority of contested disputes are going to end up in a negotiated resolution eventually anyway. It only makes sense that they start down that path from the outset.

Tuesday, July 14, 2015

Iran

The ink is barely dry on the breakthrough agreement reached this week with Iran, requiring that country to eliminate most of its nuclear weapons capacity in exchange for the lifting of economic sanctions, and many critics are already out in full force decrying the agreement. It seems remarkable that they could be so sure of their opposition without having had much time to read or study the text, or consider carefully whether this deal is better than the alternative of continued conflict. (In previous posts--here and here--on this topic, I outlined the way in which I think any negotiated agreement should be evaluated, not by comparing it to the outcome each side would have preferred, but instead by comparing it to the alternative of no agreement.)

But maybe it's not so remarkable that the critics have not even bothered to make what I think is the only relevant comparison. Maybe it would be a futile effort to try to walk them through the text, because their opposition is not fundamentally based on the terms that have been negotiated. They would probably object to any deal that Iran would agree to, because any deal that lifts sanctions will make Iran a more powerful, and therefore dangerous influence in the region. Any deal that allows Iran any weapons development capability at all can be viewed as an attempt to appease a dictatorial regime. Any deal that puts the world on better terms with Iran leads the world into a false sense of security.

It should be acknowledged that the critics have legitimate concerns, and that their arguments cannot be refuted by logic or reason. That is not to say that any of these arguments are right. I happen to think they are all wrong, or at least they are outweighed by the tangible benefits of making peace, and that the alternative of failing to reach agreement is far more dangerous. Still I don't think it's possible to persuade the implacable foes of Iran--or President Obama--of that. They can still respond with cries of appeasement, or with fears of the dangers posed by the Islamic Republic. They can't be proven wrong except by time. I have dealt with parties in conflict enough to know that they usually can't be persuaded by a mathematical demonstration of the benefits of the deal on the table vs. the costs and uncertainties of continued conflict. Instead they must in some other way reach a point where they feel that they can let go of the conflict and accept the deal.

Signing on to a deal with a partner that has attacked or betrayed you in the past always requires a leap of faith, no matter how airtight are the verification procedures for the deal's strictures. Peace always represents a leap of faith. And the arguments in favor of maintaining conflict, and distrusting one's adversaries are usually powerful. That must be why humanity so often resorts to war at the drop of a hat, while establishing peace is a fraught and difficult process.


Thursday, July 9, 2015

Time

Here is Secretary of State John Kerry reporting on the progress of negotiations with Iran. His statement should sound familiar to a lot of mediators: on continuing negotiations so long as progress is being made, on the importance of building an agreement that will last, on the need to avoid being rushed or constrained by arbitrary deadlines, and at the same time on recognizing that difficult decisions need to be made soon if agreement is to be reached.

Tuesday, June 30, 2015

Rule 1

The reformers who drafted the Federal Rules of Civil Procedure in the 1930's thought that if we could only get rid of the complexities of ancient pleading practices, and liberalize discovery, cases could be fairly adjudicated on their merits instead of being won or lost on technicalities. Their intent can be gleaned from Rule 1, which provides that the rules "should be construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding."

To a large extent, the simplified rules we have been living with for so many years must be judged a success, simply because they have stood the test of time. On the other hand, hardly anyone would say that Rule 1 accurately describes the way civil cases are currently processed. We have encrusted the original simple pamphlet enacted in 1938 with so much commentary and interpretation that the rules are on their way to becoming as arcane as the system they were designed to replace. We no longer administer the rules to remove roadblocks to just, speedy and inexpensive determinations of every action and proceeding. Instead we have created so many new roadblocks--mainly the burden of expensive discovery, but also new opportunities for motions--that the whole premise of the federal rules project must be called in question.

The rules ought to be re-written and streamlined again from top to bottom, which would be an endeavor comparable in scope to the original project. Such a revamping should recognize that the vast majority of cases are never going to be adjudicated on the merits. Since most cases are settled, the rules should better incorporate alternative forms of dispute resolution. A simplified set of rules could also eliminate steps that are unnecessary for the vast majority of cases that not going to trial, and could also encourage parties to move toward resolution rather than engaging in wasteful adversarial behavior. At the same time, simplifying the rules could make it possible for more cases to go to trial, because the cost of litigation would present less of an obstacle. (My own radical proposal for an overhaul of the federal rules can be found here.)

One commendable effort to reform the rules has been undertaken by the American College of Trial Lawyers and the Institute for the Advancement of the American Legal System. The task force has compiled a set of principles that still exalt the ideals of Rule 1, and that seek to create more flexibility and proportionality in the civil justice system to allow cases to be resolved in more appropriate ways. Some of these ideas are being incrementally adopted in amendments to the Federal Rules.

I'm not sure I will live long enough, however, to see the kind of wholesale reform that I think is needed. There is too much resistance to change in the fearful legal profession. And there is too much partisanship and paralysis in the political system to allow that kind of change. That means that the only practical way now to create the kind of streamlined dispute resolution process that would live up to the ideals of Rule 1 is to do it at least partially outside the purview of the court system. More on how to do that in subsequent posts.

Monday, June 22, 2015

What works

A mediator I know was explaining his system of taking and cataloging notes from his mediation sessions, to help him learn what was working and not working. He writes down phrases he has used that seem particularly effective, and keeps them on note cards. And he sometimes thumbs through his stack of cards during subsequent mediations to see if he can find something useful.

According to this mediator, impasse does not exist. Instead, when parties get stuck, he prefers to tell them only that the dispute probably will not settle that day, preserving the hope that it will settle at a later time when the parties are ready.

I have also found that the concept of impasse is not particularly helpful. It's too simplistic, for one thing, as there are a wide variety of situations in which negotiations can get bogged down. For example, the parties may need more information before they will move off their positions. Or one or both sides may be refusing to budge for tactical reasons. Or the appropriate decision-maker needs to be consulted before additional concessions can be made. If we use the term "impasse" to describe all these different scenarios, the term doesn't have much meaning. Moreover, the term "impasse" doesn't provide any guidance for moving the negotiations forward. It suggests instead that the process has reached a dead end.

If you have a stack of note cards or some other tools available to show the parties some ways to keep the process moving, you have no reason to suggest to them that they have reached an impasse. Instead, just pull out another card.


Sunday, June 14, 2015

Trade Negotiations

Some thoughts based on my experience with negotiation and mediation in general that may be relevant to the ongoing Congressional fight over passage of fast track authority for the Trans-Pacific Partnership (TPP) trade agreement (which suffered a major setback on Friday): First, there are great virtues in preserving the secrecy of negotiations until the deal is complete. Critics of the TPP have thrown suspicion onto the deal because many of its terms remain shrouded in secrecy. But confidentiality is something we fight to preserve in mediation and other forms of negotiated conflict resolution. One reason is to allow negotiators freedom to make aggressive offers and demands without fear of being second-guessed by their principals until the deal is completed. Another is to try avoid unnecessarily angering those who have to approve the deal before they fully understand the trade-offs involved in the final agreement.

In addition to maintaining confidentiality, it is helpful to the negotiating process for negotiators to remain open-minded. Even if the other side makes what is considered an unacceptable proposal, that should not be a reason to scuttle the negotiation. Instead, it is more constructive to present a counter-proposal, or to present something the other side may view as equally unacceptable as a condition of acceptance of their outrageous proposal.  I always caution parties to settlement negotiations to try not to react too negatively to the other side's insulting offers or demands. Instead they should be treated as invitations to make counter-proposals. I also caution parties not to rush into an evaluation of the merits of the deal. Wait until the negotiators have made the best deal they think they can get before comparing that potential agreement to the alternative of no agreement.

Particularly with something as complicated as a multi-nation trade negotiation covering a wide range of issues, it is important to step back and look at the bigger picture rather than to pick apart provisions that appear harmful to one side. In general, when barriers to trade are reduced, industries that have trouble competing against foreign suppliers are going to face even greater challenges, while industries that are having success in selling abroad are going to have even greater success. The economy may benefit from lower prices for goods made abroad, as well as from greater revenues for increasing exports. The net positive and negative effects  have to be weighed against each other before the deal as a whole can be deemed harmful. This is why every modern president seeks and usually obtains fast-track authority for trade agreements: so Congress can evaluate the package as a whole, rather than pick apart the pieces and risk its destruction.

One final consideration in evaluating almost any kind of negotiated agreement: Let's not overlook the value of peace itself. Parties often focus on the merits of the issue being negotiated, and fail to give sufficient consideration to the cost of failing to resolve the issue. They fail to put a high enough price on the cost of continued conflict. These costs and values are particularly dramatic in the context of international trade agreements. Trade can create greater understanding among the peoples of nations engaged in trade, as well as economic benefits. The alternative to free trade is suspicion, distrust, and even war. The first thing that countries suspend when they resort to war is trade. Thus, trade can be seen as one of the most effective deterrents to war, because when the economies of various countries benefit from trade, they are less likely to resort to war.

In the current round of negotiations over this trade deal, we see critics of the deal failing to consider all of the foregoing. They are suspicious rather than protective of the secrecy of the negotiations. They are unduly focused on the merits of particular parts of the deal, and unable to evaluate it in its entirety. And they fail to put a sufficient value on the virtues of making an agreement per se. I'm not arguing for or against the TPP. What I am saying is that there are good reasons for keeping negotiations secret; there are good reasons for the president to seek fast track authority to allow a vote up or down of the agreement as a whole; and there are a great many issues that must be considered in evaluating the benefits and costs of such a deal, including the value of resolving disputes by agreement instead of by more destructive means.

Friday, May 29, 2015

John Nash

Last week we heard the news of the strangely untimely death of mathematician John Nash, whose life story was made famous in the book and film "A Beautiful Mind." The Nash equilibrium is a concept sometimes touched upon in teaching negotiation theory, and it's not difficult to understand why we should try to understand it, even if we might have trouble doing the math. What Nash and others taught us that is especially relevant to conflict resolution is that parties involved in conflict will often rationally both choose a sub-optimal outcome for themselves. Therefore they will benefit from learning how to be more cooperative with their adversary. That means Nash's mathematical theory helps prove the usefulness of mediators or some other mechanism to encourage greater cooperation.

But Nash's own life story, and even his tragic death, prove something else also, which is that people are not governed solely by rational calculations, whether selfish or cooperative. Nash's own mind was taken over by irrational impulses for many years, due to his struggles with mental illness, and he only regained its rational functions late in life. His death in a freakish taxi accident, also could not be predicted by any mathematical equation or other rational process. Those hoping that a rational formula can be devised to resolve conflict are going to be disappointed. We also have to take account of irrational impulses, feelings and emotions, and just plain bad luck.

Tuesday, May 12, 2015

The Art of Negotiation

A long time ago, when I was fairly new at law practice, I represented a plaintiff in a contentious sexual harassment case against a large company. After a series of pre-trial battles, the defendant's counsel opened the door to the possibility of settlement, throwing out an insultingly low-ball number. I wasn't sure how to respond.

At that point in my career, I thought I knew how to litigate, but nobody had ever taught me how to negotiate. I had never received any training in negotiation strategy in law school, and very little at my law firm. The subject simply wasn't taught at the time. So I honestly didn't know the best number to come back with in order to lead the process to a good result for my client. For some reason I confessed my weakness to the other side, saying something that indicated I wasn't sure what to do next. My adversary's response was to ask me whether there was anyone else at my firm who was more skilled at negotiation who could get back to him with a response to his offer.

Suddenly I understood two things. First, there was nobody else at my firm who could do this better than I could. This was my case, and I knew it better than anyone. Second, I realized from defense counsel's somewhat desperate request for somebody to negotiate with, that the other side was extremely anxious to make a deal. Their aggressive litigation strategy had failed to make us go away, and now they were looking at the high costs and high risks of proceeding to trial. I knew they would pay more than they were offering, even though I wasn't sure how much I could talk them up.

Once I figured out how to process what the other side was telling me, I had the confidence to handle the negotiations, And I was able to engage in the kind of give-and-take necessary to get the deal done. After that, I never again thought of myself as someone who didn't know how to negotiate.

This story came back to me as I was reading a book called The Art of Negotiation, by Michael Wheeler, a professor at Harvard Business School, who is also part of Harvard's well-known Program on Negotiation. I picked up the book after I had a chance to hear Wheeler talk at UCLA about his theories of negotiation. The book is filled with entertaining stories about buying houses and cars, and closing business deals. Wheeler teaches classes on negotiation, so he obviously believes students can learn about negotiation in a classroom. But he also understands that negotiation is more of an art than a science. His theme is about the importance of improvisation in negotiation: responding to the cues and information given by the other side It's about the attention, presence of mind, and creativity needed to succeed in negotiation.

In other words, the secrets of negotiation lie not so much in knowing how to parry and thrust against the other side's maneuvers to score the most points. In fact, Wheeler repeatedly emphasizes that pushing for the best possible deal is not necessarily to a negotiator's advantage. Sometimes an overly aggressive approach will cause the other side to walk away, and sometimes getting more than your fair share will end up costing you in the end.

Instead, being a good negotiator is more about being in tune with the needs and desires of the other side, the way that good jazz musicians or theatrical improvisers respond to what they hear from their counterparts. It's about having a plan and then throwing that plan out the window as soon as you encounter the unpredictable response of the other side. And it's about learning how to treat our adversary as a partner in a project that requires more collaboration than competition.