Perhaps the single least recognized, most effective strategy for managing streams of commercial disputes is early intervention. The bundle of skills implicated by this strategy include Planned Early Negotiation, Early Case Assessment, Risk Analysis, and Decision Tree Analysis. But the objective of all of these tools is the same: To place the decision-maker within the client in a position to make an informed choice on how the matter will proceed, driven by business — not legal — objectives.
The ABA Dispute Resolution Section recently hosted a Task Force on Planned Early Negotiation, chaired by Prof. John Lande. More recently, the Dispute Resolution Committee of the ABA Business Law Section offered a trenchant panel of experts on the topic, headed by Duff & Phelps’ John Levitske. Much wisdom was offered.
Kathy Bryan, President of CPR Institute and former head of litigation for Motorola, conceded at the outset that it was easier for in-house counsel to perform an Early Case Assessment than for outside counsel to do so. At the very opening of her remarks she reminded us that business, not legal, interests fuel the management and inform the outcome of business disputes — a theme to which many spoeakers reverted over the course of the discussion. Because the dispute itself is not profitable to the company, but rather the outcome of the dispute, then reducing transaction costs, defining the risk of unknowns, and reaching an early and valuable outcome are of premium importance to business dispute managers. She cited abundant evidence that early outcomes not only are cheaper than later ones, but produce better commercial outcomes.
Bryan offered a ten-step process by way of a template of managers:
1. Gather information
2. Review the facts giving rise to the dispute
3. Raise the business interests immediately and define a successful outcome in business terms
4. Perform the same analysis from the counterparty’s perspective
5. Perform risk management and decision tree analysis
6. Perform a legal analysis
7. Determine the cost/benefit of best, worst and likely outcomes
8. Set a settlement value
9. Create a preliminary litigation plan
10. Devise a mechanism for feedback and modification of the analysis over time
Ben Picker reluctantly offered that, based on his years of experience helping parties settle lawsuits, litigators prefer a later closure and clients prefer an earlier one. Business relationships are continually negotiated, so clients are not unfamiliar with the process of negotiating problems or conflicts. The dispute is “owned” by the business person at first, and slowly gets taken over by the lawyer; the result is that business objectives often get more and more remote. As time passes positions become fixed, resources get invested, and the effects of cognitive dissonace become more pronounced, with parties and counsel increasingly unwilling — even unable — to entertain data that is inconsistent with their (by this time well-formed) opinions and conclusions.
Jim McGuire gave a stirring talk on his decision to develop a practice as settlement counsel. He said he just stopped litigating and spent two years or so studying why, how and when disputes settled, in the hope of being the best at settling them. And, by cracky, he is. His materials distributed at the session are available on the ABA Business Law website and are superb.
David Burt, in-house counsel at E.I. DuPont, reflected many of the themes of the other speakers. He spoke of what he has experienced as the “Golden Hour,” when the client comes to his office and explains a prpoblem that he thinks may be headed for formal litigation. During this conversation, said Burt, the client will describe a business deal, or an engineering joint venture, or a rocky business relationship, with a narrative cogency that will never again be duplicated. One verifies the details with others promptly, but it needs to be done early. Later, the story is tinged with self-protection, or becomes stale, or is couched in a particular way. At the early “Golden Hour,” the lawyer gets the best chance to understand what the business problem really is, and to serve the client.
The materials (Item #67) and the audio of the panel (Item #68) can be found here.
Excellent, Peter. Lots of insight you’ve gathered and put in this post. The “golden hour” reminds me of small claims court work I do, as a mediator. The parties in dispute are meeting the mediator for the first time. The mediations are only 2-3 hours in length. The first hour inevitably has a story telling component… the golden hour! The abbreviated small claims format also speaks to time-boxing dispute resolution… and bows down (ie generous time) to the place and importance of the golden hour.