Wednesday, April 28, 2010

When to ignore deadlines

The United States Senate is a good example of a place of endless negotiations, sometimes resulting in agreement and sometimes not.  Updating my post below on the ongoing Senate negotiations over the financial regulation bill, we are still in the process of  finding out what happens when a deadline passes but no agreement is reached.  Majority Leader Harry Reid announced last week a firm date and time (Monday at 5:00 p.m.) for a vote regardless of whether or not the parties had a deal on the text of the proposed bill.  True to his word, he called for a vote, and true to their word, all of the Republican Senators (and one Democrat) voted to deny allowing the bill to be debated.  Another vote was held Tuesday, with the same result.  What we are finding out this week, however, is that there is still just as much reason to reach agreement on this bill as there was last week, and the possibility of making a deal still exists.  The Republicans may feel even a bit more pressure this week to reach agreement, as they recognize that only a couple of their members need to defect to allow the bill drafted by Chris Dodd to reach the floor.   Some Senators on both sides in this negotiation may also feel, on the other hand, that a negotiated agreement is not the best way to achieve their goals.  Some Republicans may prefer to force the Democrats to take responsibility for passing this legislation, as they were forced to do with health insurance reform legislation, rather than cooperate and assume shared responsibility.  Some Democrats still hope that a couple of Republicans will defect, and allow them to pass a bill with fewer compromises, and they are willing to take the risk that no bill passes, which would allow them to blame the Republicans for this failure.  So if Democrats don't feel any undue pressure to make a deal, they can let the deadline pass, knowing that the pressure on the Republicans--either to compromise or defect--has not changed.    

Sometimes the passing of a deadline removes the possibility of agreement, but only if at least one of the parties decides to walk away from the table when the time limit expires, or if it is a real deadline, such as a trial date (although settlement negotiations often continue even during trial, while the jury is deliberating, and while the case is on appeal).   Most of the time, however, the parties have the same reasons to reach agreement or not both before and after the deadline, as I discussed in a previous post.  So the passing of a deadline merely means that whatever was threatened to occur at the expiration of the deadline may actually occur--the union will refuse to work without a contract, the Senate will vote on the Democrats' bill, the motion for summary judgment will be filed--but the possibility of obtaining an agreement frequently still remains.  Both sides' calculation of the pros and cons of reaching an agreement do not fundamentally change just because the clock has struck an arbitrary hour.

Mediators sometimes try to create pressure on the parties to settle the case on the day of the mediation, and parties in a mediation sometimes threaten that if agreement is not reached that day, settlement is off the table.  And it sometimes does happen that parties who fail to seize an opportunity to settle a dispute may lose the possibility of settlement for some time or even forever.  I agree that it is often helpful to create an atmosphere of opportunity and a certain amount of pressure on the day of the mediation to maximize the chances for a successful resolution.  I prefer, however, not to judge a mediation a failure merely because it does not result in a negotiated agreement on the day of the mediation.  As long as progress is made toward illuminating the parties' choices, the mediation serves a purpose.  As long as parties do not abandon the settlement discussion after an inconclusive mediation, settlement remains a possibility in the days or weeks or months following a mediation session.  The mediation itself should not serve as an artificial deadline telling the parties that they must abandon all hope of settlement if they cannot achieve it at the mediation.  Otherwise, mediation would perversely serve to discourage some settlements, contrary to its goal of promoting settlements.

(Harry Reid photo from Huffington Post; jumping off cliff photo from strumpette)


4/29/10 update:  Yesterday the Democrats succeeded in breaking the Republican filibuster, as a result of good tactics on their part--threatening an all-night session and repeated votes--and weakness among the Republican ranks--no surprise quite a few of their members are not fundamentally opposed to the bill.   Maybe the whole exercise was not really about deadlines, and not really about reaching an agreement, at all.  Maybe it was just about political power.  Maybe I need to do some thinking and some posts on the exercise of power in negotiations.  (As my labor law professor used to say, it's all about who's got the muscle!)

Friday, April 23, 2010

When to Set Deadlines

While most of us will be free to pursue family and other activities this weekend, it looks like Senators Chris Dodd and Richard Shelby will be spending the weekend trying to hammer out an agreement between Republicans and Democrats on new financial regulation legislation.  That is because Majority Leader Harry Reid set a vote for 5:00 p.m. on Monday on the Dodd bill.  Republicans have threatened to prevent debate on the bill by unanimously voting against cloture.  So by setting the time for a vote, Reid is forcing one of three possible outcomes.  Either a deal is struck and a number of Republican Senators will then allow the bill to come up for a vote.  Or no deal is made and at least one Republican Senator allows the bill to come to the floor anyway.  Or the Republicans stick together and prevent the bill from coming up for debate.

I discussed the politics of this bill a bit on my political blog.  Here I'm only interested in talking about negotiating tactics. I also did a post about deadlines a few months ago, in which I noted that parties often do not take them seriously.  But sometimes the parties all know that the deadline is probably real.  In a lawsuit, if the judge shows he is serious about a trial date, the parties know that if they don't settle the case before the trial starts, they are most likely going to trial.  In the case of financial reform regulation, Senator Reid could still decide to postpone Monday's vote.  But he will more likely decide he has to stick to it, so as not to look weak, so the parties have to take the deadline seriously.  Harry Reid's maneuver demonstrates that if you are going to set a real deadline, you should have a Plan B and also perhaps a Plan C.   Reid, who is a master negotiator, would not be forcing a vote unless he can live with any of the three possible outcomes.  The Majority Leader can presumably live with any compromise Senator Dodd works out with Senator Shelby.  He can certainly live with passage of the original Dodd bill.  And he must be able to accept the risk that the bill will be defeated due to a Republican filibuster, which would then allow the Democrats to blame Republicans for being in the pockets of Wall Street come the fall elections. 

When you set a deadline, you also have to calculate the effects of that deadline on the other side.  Senator Reid knows that a number of Republicans support many of the provisions of the reform bill, and he also knows that there are serious political risks for the Republicans in being seen as against Wall Street reform.  So he evidently feels that the pressure of a deadline will be sufficient to gain enough support to allow the bill to pass.  Senator Schumer is quoted in Politico as saying that as a result of this pressure, the Democrats "have the upper hand."   Reid's time limit thus prevents negotiations from dragging on for weeks, seems likely to achieve passage of some form of bill, and allows the Democrats an acceptable political alternative if the deadline does not achieve its intended results.  To make the best possible deal, you sometimes have to be willing to walk away from the table and accept the consequences of failure.

(photo from I Hate Room Mates)

Monday, April 12, 2010

"Premature" Mediation

Mediation is often thought of as a one-time event in the history of a litigated case; best designed to take place after the parties have done an adequate amount of discovery, have a pretty good idea of how the case might play out at trial, and are sufficiently tired of paying their lawyers' bills that they are receptive to putting an end to the dispute.  The mediator is then expected in a few hours to unravel a mess that may have taken years to construct, and that oftentimes seems to move further from resolution after months of litigation.

What would happen if a mediator were to get involved before the case is generally considered "ready" for mediation?  I had a chance recently to test some of my theories about the potential for a mediator's constructive involvement at an earlier-than-usual stage of the case, in a case where the parties had not had a chance to complete some basic discovery before the impending mediation completion date.  Instead of asking the court for more time, they decided to go ahead with the mediation even though the case was not "ready."  It quickly became apparent in this dispute about the development of some property, that the parties were in no position to reach the negotiating phase of a mediation session, because they needed to exchange more information about how monies were expended, what work was done, and  other matters.  Without that information, they could not even assess the amounts to demand or offer each other.  Instead we turned our attention to two important purposes.  First, knowing that we were probably not going to be able to negotiate a settlement, the parties found themselves surprisingly freed up to have an open conversation with each other about the facts in dispute, as well as to talk about some options for resolving the dispute (e.g., selling the property, making a renewed effort to develop the property, etc.) , without ever getting into the contentious subject of the amounts of money that might need to change hands to complete the deal.  Second, meeting with the parties before they had launched into extensive discovery also gave us the chance to explore various ideas for exchanging information in a cooperative manner that would minimize the need for expensive depositions, motions, requests, written responses, and all the other associated costs of traditional adversarial discovery.  I extracted a promise from both sides that over the next 60 days they would endeavor to exchange the necessary information without unnecessary fighting about their respective requests.  I told them that after they did that, they were free to meet with me again and try to settle the case, or if they preferred, they could just go ahead and get the case ready for trial.

It remains to be seen whether a mediator's intervention at this "premature" phase of the case will set the case on a better track than otherwise.  I doubt anyone's ability to prepare for trial, or to litigate the case aggressively down the road, will be prejudiced by a period of cooperative exchange of information.   The rules already encourage that kind of cooperation, but many times parties instead slip into an adversarial mode from the outset, that only increases expense and delay for both sides.  My hope is that an earlier-than-usual meeting gives the parties and their attorneys enough of a taste for constructive discussion and problem-solving, that they will apply those skills to the eventual settlement of the case, rather than drive themselves further apart by approaching every problem they still face in this case in an adversarial manner.

(photo from Niagara Falls Boxing)

Sunday, April 11, 2010

Mediation Confidentiality Does Not Shield Attorney Malpractice.

On Thursday, the California Second District Court of Appeal decided Porter v. Wyner, reversing a ruling that a new trial was required in a dispute between lawyer and client, because the original trial had included testimony about attorney-client communications in the context of a mediation.  This opinion seems to go further than the Cassel case,  in which attorney-client communications outside the presence of the mediator or the opposing party were held unprotected by mediation confidentiality.  The Porter court held that even though attorney-client communications might occur during or as part of the mediation process, they are not considered to have taken place “for the purpose of, in the course of, or pursuant to" the mediation. Evidence Code § 1119.

As a matter of statutory interpretation, the dissent seems to have the better of the argument, since the mediation confidentiality statute is written in broad enough terms to exclude evidence of  anything done or said in the course of mediation for any purpose at all.  However, as a matter of policy, this decision can be defended on the grounds that participation in a mediation ought not to serve as a shield for attorney malpractice.  The jury in the Porter trial concluded that the attorneys gave their clients some incorrect tax advice, and were obligated to reimburse them some fees and expenses.  The Court of Appeal seemed understandably reluctant to disturb that finding and order a new trial in which at least some of the evidence supporting those findings would have to be excluded.  In other words, if you can sue your attorney for the bad advice you received the day before the mediation, as well as bad advice you received the day after the mediation, why should the attorney be able to exclude evidence of the bad advice he gave you on the day of the mediation?  Mediation confidentiality was not designed to prevent parties from obtaining redress for wrongful acts by their attorneys; it was designed to encourage parties to speak freely at a mediation, secure in the knowledge that anything admitted during the mediation could never be brought up in court.

Some mediators will undoubtedly be concerned that decisions like this one erode the broad protection the Legislature has extended to mediation proceedings, because they open the door to allowing testimony about confidential settlement discussions to be used to create additional disputes.  Some of this concern may be justified, but on the whole, the principle of mediation confidentiality should not be threatened by allowing clients to preserve claims for attorney malpractice or fraud or breach of fiduciary duty regardless of when in  the course of the representation such alleged acts occurred.  Indeed, clients might even be more amenable to participating in mediation knowing that such proceedings cannot be used as a refuge for potential attorney malpractice.  In any event, the issue may soon be clarified by the California Supreme Court, which has granted review in the Cassel case.  And regardless of which way the Court rules, the issue should probably ultimately be decided by the state legislature.

UPDATE (1/11): See my post on the California Supreme Court decision in Cassel, which  upheld a more expansive view of confidentiality.

Monday, April 5, 2010

The Power of Agreement

One of the more interesting courses I took in law school was International Law, which is not a course that everyone takes, because it does not appear to offer much practical value for most lawyers' careers.  I didn't see much practical value in it either when I signed up, but found that it got me thinking about the law in a much different way from other law school courses.   What you learn when you study international law is that the system of international law is for the most part not structured as a body of statutes enacted by legislatures, or precedents handed down by judges.  International law is mostly not enforced by police, or by fines, or by prison.  Because it doesn't primarily rely on these attributes, many people--including many lawyers--do not take international law seriously.  That is because people do not generally recognize the power of agreement as a means of creating enforceable law.  Agreements between nations rely on principles of trust and reciprocity, more than they rely on sanctions or the threat of warfare.  Their enforceability mostly derives from the mutual benefits of living up to treaty obligations, as well as each party's fear of the loss of those benefits if that party were to fail to live up to those obligations.  For example, nations generally pay their debts because they want credit in the future, not necessarily because they are afraid of being invaded if they do not. 

In some ways, mediation is to litigation as international law is to traditional sanctions-based law.  It is not just that mediation is a process that aims to result in an agreement.  It is a process that operates at all stages by agreement, from the choice of an ADR process, to the conduct of the mediation itself, to the negotiation of a settlement.  If parties approach mediation in the same way they approach litigation, as a conflict in which one side will prevail over the other, they are less likely to be successful than if they try to establish some degree of trust and reciprocity with one another.  (That is not to say that parties should not try to get the best deal they can, or be prepared to walk away from the table if they cannot achieve a fair deal.  They should of course try to "win" in that sense.  But they can't win by persuading the neutral to rule in their favor, the way you would try to win in court.  They need to persuade the other side.)   It takes a significant adjustment in approach to move from a litigation mind-set to a mediation mind-set.  When I see parties directing arguments to me as if I were going to adjudicate the dispute for them,  I have to subtly shift their focus toward persuading the other side.  I even heard a judge at an ADR lunch recently, where some of us were suggesting that mediators might play a greater role in resolving discovery disputes, ask whether we were suggesting that mediators "decide" discovery disputes.  Even a judge well-versed in the ADR process does not always appreciate that the mediation process is fundamentally different from court. 

I try to create areas of agreement from the convening stage forward.  If parties choose me as a mediator, I expect them to communicate with each other to agree on available dates for the mediation.  If they can't even agree on that, and I have to intervene, I know we have our work cut out for us.  When we meet, I ask the participants to agree first of all, not to interrupt, and more importantly, to really listen to each other.  To me, that is the most important ground rule, and a much bigger commitment than most people realize.  When we talk about the substance of the dispute, I usually start by trying to find some areas of agreement, or common interest.  The more we work on those, the more we narrow the areas of conflict.  Finally, when it comes time to try to negotiate an agreement, the parties should be practiced enough in the diplomatic arts, that the process can proceed more smoothly.