Thursday, January 30, 2014

How do you Use a Written Evaluation of Likely Damages Effectively in Mediation of Business Disputes? ?

    Numbers have their own mystical language and I find that sometimes writing out the most likely, least likely and somewhere in between outcome in a business case can be a useful vehicle for further discussion. 
     After I elicit the parties best estimates of those figures, I can project a range of most likely outcomes.  For example, in the lawsuit arising out of an allegation of damage to manufacturing equipment due to a leak at a warehouse, I was able to project that if the property proved to be a total loss, after the salvage value of about $50,000,  the owner would be left with a hypothetical loss of $250,000 (since he claimed the depreciated value of the equipment was $300,000.). 
     On the other hand, if the equipment could be restored, at a cost of $25,000 and resold at a discounted price of $200,000., the loss would be only $75,000.  ($300,000 less $225,000 for costs of repair less purchase price).  The third possibility was that he could use the machinery himself once it was restored, making the loss only $25,000.00 (the cost to restore to it's full value of $300,000.).         
     After assessing these values, the analysis goes further to assess the likelihood that each occurs.  In my example, the lawyer and I believed that there was only about a 10% chance the machinery would be a total loss. The settlement value of 10% of $250,000 turned out to be $25,000.  On the other hand, we agreed that there was a 50/50 chance that he could re-sell the property, making the settlement value approximately 50% of $75,000.  The chance that the only loss would be the cost of repair, or $25,000 was again only 10%, making the settlement value $2,500.00.  By assessing these potentials, and writing them out, the numbers demonstrated that if the case could be settled at something between $25,000 and $75,000, the Plaintiff would have achieved his goal of being compensated for the most likely amount of loss occasioned by the leak at the warehouse.   Whereas he arrived at the mediation assuming his case was worth no less than $250,000., he left feeling fine about a settlement of $60,000. based upon this careful analysis.
     This technique is particularly useful where, as here, there is a language barrier and the concepts are translated but the numbers are too quickly glossed over.  Somehow seeing these numbers throughout a long day's mediation can achieve a magical consensus on the value of settlement in a business dispute.
     Do you find a written number analysis useful in your mediation hearings?

Thursday, January 23, 2014

Do you ever hold a Late Day Joint Session to Save a Dying Deal from Impasse?

Sometimes after a long day of bonding and commiserating, I get a sense that the lawyers are so busy posturing for their own clients that they get stuck in an argument they no longer believe in against "the enemy" in the other room.  Joint sessions at these junctures are risky business.  Still, I find it is worth taking that risk when real signs of an impending impasse seem to be looming. 

Last week, after 9 hours of negotiation on a case that had an initial demand of $500,000 and an initial offer of $15,000, the Defense offered a "last, best and final" offer that was well below the last mid-point of the proposed bracket that was on the negotiating table.  Hypothetically, Plaintiff was hinting that she'd take $200,000 by offering to bracket the negotiation at $100,000 and $300,000. and Defendant instead offered a randomly chosen $127,500.  At that point the lowest actual demand by Plaintiff had been $350,000, though it was apparent that the mid-point of their range would be $200,000.  Rather than present that offer myself, I invited the two defense lawyers to meet with the two Plaintiff lawyers (without their respective clients) and present the offer themselves.

I was not so very surprised, but pleased when the Plaintiff lawyer kindly stated that his team wanted to settle the case, couldn't accept that offer and was willing to stay to see if there was a number which all could live with that evening, rather than risk losing the deal after so much progress in narrowing the chasm between them had been made.  This was a gentlemanly hint that the gap between $200,000 and $127,500 could be bridged if they worked at it.  The defense counsel, to their traveling client's chagrin, agreed to stay for another hour to continue to negotiate, beginning with the terms of a long-form agreement which had heretofore seemed unattainable.

It only took another hour to move the Defendant up ever so slightly to $135,000. but at that point Plaintiff was satisfied that she had really gotten the best deal possible at the mediation.  And most of the non-monetary terms had already been agreed upon by then, too.

It's risky business, but I find that late day joint session between opposing counsel without clients can be worthwhile where the attorneys are urging settlement to their clients and feeling somewhat discouraged that the parties can reach an agreement based upon the negotiation at hand.

Friday, January 17, 2014

How does a Busy Mediator Stay Fully Engaged in each Case?

One of the struggles I have when I am as busy as January has become is to fully attend to each case and essentially be "an empty vessel" so that I can listen deeply to the parties in conflict, without pre-judgment or bias.  Like a good psychotherapist, a mediator's job is largely to listen, empathize and reframe in such a way that the disputants to any given conflict feel genuinely heard and understood.  It is only after that exercise and effort that the mediator can help each side to see the other's perspective and be truly creative in addressing each side's claims and underlying interests.

Last week, I attended a Networking meeting lead by a colleague and friend, Mark Fingerman, who also teaches Yoga and meditation.  He challenged the lawyers present to give meditation a try.  Together, we sat erect in our conference room chairs, eyes closed, attentive only to our own breathing.  After three minutes, chimes sounded and we opened our eyes.  It sounds too easy to have been true:  but somehow I felt a little more genuine in my listening to the life story of the Plaintiff in a wrongful termination case that came before me that day.  I heard (through a translator) about the plight of a man who had experienced an extraordinarily challenging life.  He came to the U.S. on a boat from Viet Nam during the war in the 1970's.  He suffered horrible losses during that trip:  family members drowned and others were too weak to survive the journey.  He struggled to gain U.S. citizenship and employment here--with no English skills when he arrived here.  He was now the sole care taker for a disabled (adult) child and had been out of work for over a year. 

My morning meditation (only 3 minutes!) gave me the calm and legitimate "presence" to listen deeply to a point of view which I cannot personally know, given my own experience as an American born, college educated, empty nester.  Having calmed myself early in the morning, I found I could attend to the difficult facts and truly empathize and engage with this Plaintiff.

I am certain it is not the only way, but for me, so far, meditation has been a simple, but effective tool to empty my mind of my own personal clutter and fully attend to those in conflict before me.  And today I worked my way up to 4 minutes!

Friday, January 10, 2014

How do You Manage Multiple Defendants?

I was up late last night mediating a challenging case where an employee sued her former company after it had been sold to another Company.  Though the first company had sold all of it's assets, there was a contract that specifically stated that the successor company did not purchase or assume any of it's liabilities.  Luckily, there was some insurance coverage for the old company, since it no longer had any assets and was defunct. 

After a full day of negotiation, the Plaintiff and defendants collectively agreed to my mediators proposal.  Then the real drama began.  Although the defendants had spent a full 8 hours together in a single conference room, the dynamic suddenly shifted when the standard terms appeared on the short-form agreement:  "each party to bear its own costs and fees".  Though all of the defendants were delighted to settle the case against Plaintiff, there was an express indemnity agreement which legally gave rights to the new company to look to the selling company, Plaintiff's former employer, for indemnity.  And their costs were huge!

At 9:30 P.M., after Plaintiff had signed the agreement and left the office, I found myself looking at faces like those above.  While I was circling between rooms and mobile phones, discussing the ramifications of holding up the settlement to pursue recovery of costs with out of state clients and senior partners, the mood was getting darker and the other participants angrier.

After a relatively sleepless night, I did get confirmation that it had worked out and there was a full release made.  Still, I clearly could have and should have raised this dark issue as a potentiality long before the final agreement was being signed.  I guess the lesson is not to make any assumptions that standard terms will be agreeable in any settlement agreement.  Everything is subject to negotiation.  I just wish those negotiations could be conducted before sundown.

Friday, January 3, 2014

Lessons Learned from Negotiating to buy a new car

     This week I negotiated to buy a new car.  After over thirty years of marriage, this was the first time I did all of the negotiation and took title on my own.  I was struck by how many techniques the salesmen used to close which are also employed by the astute mediator.  Here's how it went down. 
     First, the salesman offered to let me take the car out for a drive.  He had some confidence that this car would "sell itself".  This was a little rapport building.  Then, he searched his computer for a car that met our wishes in terms of color and features.  This was the information gathering stage.  While he did that, he offered us expressos, pastries and even sandwiches.  He kept us there and kept us happy. (We were at the dealership for over two hours on Monday and about three hours on Tuesday.)
     Next, he offered to take my old car in trade at a certain (low) rate, even though it was in the shop for repair with an unknown problem.  We developed a mutual, collaborative process at this point to figure out how I could get rid of my old car and swap for a new car effortlessly and at the least expense.  There was a nice rapport going and even a bit of distributive bargaining on the terms of the purchase and sale.  This was about 4:00 PM, and as is typical in the negotiations of lawsuits as well, things got a little challenging and I needed a break to discuss the pros and cons with my husband.  We left and promised to be back in touch later in the day.
   Then we hit a snag.  The next morning, my husband took my car over to CarMax and sold it at a 20% higher rate than the salesman was offering. 
     Sometimes a particular new development arises in a negotiation which changes the terms entirely.  In those instances, though the negotiating parties may want to follow their instincts and forge ahead, it is better in fact to take a step backward and re-assess.  I had superior bargaining power at that point because I wasn't asking the dealer to take my old car (with 71,000 miles and out of warranty) in trade.  I was able to negotiate a better rate and higher mileage on the lease.
     Now it was New Year's eve and insurance offices and finance offices were closing every hour all over the Country.  My car had been sold and I wasn't sure we could get the deal done on the new one before the New Year's holiday.  I knew, however, that the salesmen wanted to make it happen to boost their 2013 sales.  Another advantage! 
     We got several levels of Managers involved in order to close the deal by 4:00 PM on New Year's eve, overriding their initial offer on higher financing costs.  Clearly, the collaborative process and information exchange which began the transaction served us well as the final details were completed.  And my negotiating skills were completely transferable.  Triumph in four wheels!