The study was co-sponsored by Cornell’s Scheinman Institute on Conflict Resolution, the Straus Institute for Dispute Resolution at Pepperdine University, and CPR.  The objective of the study was to obtain information regarding the current use of mediation, arbitration, and other ADR techniques used by major U.S. corporations, focusing on commercial, consumer and employment disputes. 

The results of the influential 1997 survey were published at the time and may be found in Emerging Systems for Managing Workplace Conflict (Josey-Bass, 2003).  That study garnered responses from 606 of the Fortune 1000; the current study has 368 responses.  About half the respondents were General Counsel and half were other attorneys in the General Counsel’s office. 

With respect to conflict resolution “policies” of the corporation, by far the most common (38%) was to “litigate only when appropriate; use ADR for all other disputes.”  The response was about 50% higher in 2011 than it had been in 1997.  Decreases were found for policies of “litigate first, then move to ADR when appropriate” (24% - 19%) and “always litigate” (6% - 1%).

Of the corporations responding, 97% had used mediation at least once in the previous three years; 83% had used arbitration.  Interestingly, 63% reported using Early Case Assessment, a technique that was not in the 1997 survey at all.  Most corporations said they use ADR to save time and money; more than half said it is because it is court-ordered and about the same number use it because it allows them to resolve disputes themselves.

Types of disputes in which mediation was used were almost even with those cited in 1997.  The most frequent were employment, commercial/contract and personal injury.  A boost of almost 35% was reported in the use of mediation in Intellectual Property disputes, however.  By contrast, the use of arbitration fell by about half in employment disputes; by about 40% in commercial/contract disputes; and by a surprising 60% in construction disputes.

Many respondants cited the absence of appeal as a discouraging feature of arbitration.  Many also perceived that the process results in compromise outcomes, though many reputable studies have demonstrated that it is simply not so.  Some cite “external law” making arbitration more complex, costly and time-consuming.  Integrated conflict management systems for employment disputes are now adopted by about one-third of respondents.

Lipsky concludes that about 50% of American companies have adopted ADR as their principal approach to resolving consumer, commercial and employment disputes, and that they employ a wide array of ADR techniques such as ENE, ECA and other approaches that have recently come to the fore.  Moreover, ADR seems to have advanced from a method of companies’ avoiding litigation to a process for managing and resolving disputes at the earliest possible stage, prompted by their own interest.

I feel like an old man.  When I joined CPR in 1998, founder Jim Henry stated that the Institute’s mission was to “put ADR into the mainstream of the American legal practice.”  He seems to have succeeded and then some: ADR is not just in the legal mainstream; it is in the pantheon of corporate best practices.

Jim, take a bow.

To start with, Golann notes that “insulting” is more a term of art than the description of an event.  Lawyers and clients may be dismayed by a low-ball offer or a stratospheric demand, but they are seldom literally “insulted.”  Nor does anyone at a bargaining table get paid more to humiliate the counterparty.  Why, then, are “insulting” openers ever made?

TACTICS.  Golann suggests that an extreme opener may be signaling that the party believes that there is either (a) an attractive alternative to agreement or (b) a high likelihood of an exceptionally favorable outcome to the negotiation.  Moreover, the effect of “anchoring” the discussion by offering an absurd first number may be advantageous in unsophisticated bargainers; ”the less certain a bargainer is about case value… the more impact a high or low offer will have.”

EMOTIONAL VALUE:  Parties whose attorneys have been unsuccessful in instilling clear-headed calmness during negotiation may need to make an emotion-laden opener.  “I spit upon your offer, ptui!”  That out of the way, the party can settle down to real work.

MISEVALUATION:  The party may mistakenly believe that the “insulting” offer is the apporpriate one.  Thus, an insulting opener may contain a great deal of helpful information for the counterparty seeking to learn the opponent’s actual economic assessment.

CLUNKY BARGAINING DECISIONS:  A lawyer may agree that the value of the case is around $20,000, but insist on opening with $1,100,000 “to show I’m serious” or “to give us room to maneuver.” 

INTERNAL DISAGREEMENT:  When lawyers, accountants, spouses and spiritual advisors all give the client conflicting advice, the result might often be an extreme opener, “so as not to look weak.”

The participation of a sophisticated mediator can reduce the possible damage that extreme openers can wreak on the negotiation process.  Most experienced mediators are familiar with the “reality testing” or “probing” skills brought to bear when trying to save a party from its own missteps.  Golann lists five:

ASK THE REASONING:  What’s your thinking?  How did you pick that number?  Can I share your reasoning with them?

DISCUSS THE LIKELY RESPONSE:  How do you think they will hear that.  How would you hear it if you were they?  How do you think they will respond?  Is that the response you want?  What do you plan to do if they respond that way?  What if they respond differently, what will you do then?

BARGAIN OR ADVISE:  The parties aren’t the only ones who bargain during a mediation.  That number may drive them away; what if we halved it to make sure we stay in business?  What if I tell them what you wanted to start with and why, but say you’ve changed your mind to keep us at the table? What could the other side show you to bring your demand down?

PRIVATE INFORMATION: Just for my understanding, I know you won’t go below a million now, but might you later?  Where do you think they ought to be at this point?

OTHER TOPICS: Let’s set the money aside — what do you think of their assessment of their legal defenses?  Where do you think they’re wrong?  How do you suggest we plant the seed that they may be misevaluating the claim?

Golann also offers some thoughts on how the mediator conveys an extreme opener.

CONTEXT: Lay the groundwork of the offeror’s thinking before conveying the offer itself.

GENERAL NOT SPECIFIC:  They made a very low offer, and are still emotional. Let’s wait a while.

CALL IT WHAT IT IS: They offer $5,000, which is so low it hardly helps.  Do you want to play their game and respond in kind, or play your game and open with something that teaches them something about your estimate of the value of the case and gets us back on track?

PROCESS: Put the accountants together, or the lawyers together, or the consultants together.  “Let’s see what’s driving the disagreement about revenue projections.”  Golann points out that this is also code for, cut the b__ s__.

Once we remember that an “insulting opener” is, at its core, either a tactic or an error, then we can defuse its potential for harm and shift the process away from personal vindictiveness and back to solving the problem.

There has been a recent mini-tsunami of empirical studies casting skepticism on attorneys’ ability to make objectively accurate determinations of outcomes of litigated claims.  Kaster cites Randall Kiser’s much-touted article, Let’s Not Make a Deal, for one of its many startling findings: that 61% of plaintiffs made errors in rejecting settlement offers, with a mean loss of $42,000; and 24% of defendants made decision errors in rejecting offers, with a mean loss of more than $1,000,000.   

So we must assume that there’s a high likelihood that the parties to a mediation are misinformed about the objective value of the claim/defense.  What is the mediator to do about it?  The client sitting in front of us doesn’t want to make an error in value assessment.  Accuracy is hampered by many barriers beyond the client’s control. 

Kaster notes the phenomenon of “groupthink,” as well as heuristics such as hindsight bias and cognitive dissonance.  She also notes the “sunk-cost bias” that prompts litigants (and their advisors) to throw more money and effort into an endeavor on which they have already invested.  All of these conclusions are made in good faith.  None of these distortions is a choice — they come with the territory.

Techniques to wrestle with this challenge?  First, ask the client to work out a risk-assessment protocol.  That is, encourage the client to be explicit with respect to the assumptions and calculations that underlie the value decision. 

Second, probe conclusory statements like “We have a very strong case.”  A former Chief Litigation Counsel for AT&T, Kaster is accustomed to encouraging the most straightforward calculations of risk for the benefit of business clients:

What is the likelihood of success at trial?

 Slam Dunk.

But what is the percentage likelihood?

80%.

And will the other side appeal?

Certainly.

What is the likelihood of success on appeal?

Slam dunk.  80%.

So you have a 64% chance of winning, subject to further reduction by costs of experts, court reports, trial exhibits, attorney fees, etc.

Being prepared to do the math, and being aware of the cognitive, unintended and unconscious influences on decision-making, enables a mediator to help a party to come to a closer estimate of the value of a case, and may help to lower the instances of decisional error by the parties and their lawyer.

Two years have passed and my cyber-friendships have broadened and deepened.  Yet nothing tops perfection, and so I invite you to treat yourself to five minutes of utter beauty by clicking here.  Very best wishes to you!

F. Peter Phillips

Rutgers Professor Jonathan M. Hyman writes about “The Roots of Impasse in the Mind of the Mediator.”  It is a perspective I had not even considered before — that the mediator may be the one who is dead-ending the negotiation process by his own closed-off observational skills.  Indeed, Prof. Hyman says as much: “I will argue that mediators may well bear a larger share of the responsibility for impasse than they would like to believe….. The way mediators think about the process of mediation — their modus operandi — may itself intensify, or even cause, impasse.”

Hyman suggests that there are four “approaches” or “mental models” into which mediators often confine themselves while they work.  He lays them out as follows:

Postitional/Distributive:  The mediator seeks to learn the parties’ bottom-line position, and structures the process to overcome resistence to making concessions. (”I want more, even at your expense.”)…Think Lawyers

Value-Creating: The mediator seeks to learn as much as possible about the parties’ underlying interests and needs as a necessary step to move the process ahead. (”Help me out, and maybe we can get you some of what you want, too.”)…Think Fisher/Ury

Relationship: The mediator seeks information about how the parties have related to each other in coming to the dispute. (”How can you be treating me in this awful way?”)… Think Matrimonial Disputes

Understanding: The mediator seeks to comprehend how accurately and fully each party understands the circumstances, perceived facts, feelings and motivations of their opponents and themselves. (”Don’t you hear what I’m saying?”)…Think Friedman/Himmelstein/Transformative Mediation

 The problem comes when there is a mismatch between the parties’ own condition(s) and the mediator’s inclination.  If a party is in the relationship mode but the mediator is seeking to add value, the mediator may be unable to assist with forward movement unless she perceives the incongruity and is willing (and able) to abandon her methodological predispositions.  The key is the variability of the mediator’s own modes, and the skill of really deep listening in order to perceive what mode is needed — what rules this particular game is being played by.

Hyman calls this intense state “listening beyond the music that’s playing.”  The mediator’s task is to listen both to the subject matter being shared, and also the substance of the communication.  “If one accepts the idea that a substantial part of a mediator’s responses and actions in a mediation are the product of an automatic kind of thinking, and if one further accepts the idea that these responses and actions are not random or idiosyncratic but result from mental systems that have some kind of unconcious order to them, then it is important for mediators to keep their ears open for the music beyond the music that they are consciously playing.”

This reminded me of a truly brilliant observation by a mentor at the Royal Academy of Dramatic Art, the late Hugh Crutwell.  He described the state of the actor at the moment of performance not as rehearsed or memorized or prepared or practiced, but rather as relaxed, released, confident, open, unpredicting, unpredictable, ready to pounce when provoked.  His term was that the performing actor existed in ”a state of alert passivity.” 

Oh, how few actors — or mediators – truly accomplish that rare state of being.

Alessandro has recently posted a two-part article on the current state of mediation in Italy – post-lawyers’ strike, post-European Directive — that is informative and illuminating.  It can be found here and here, and it is hoped that all those interested in this vital part of the legal and economic European scene will devote attention to it.

For me, that ended in an early-career EEOC mediation where the ADA claimant, having been offered every accommodation to her disability, refused to withdraw the claim unless she was paid $600,000 — more than twenty times her salary. 

In mediation, as in life, money talks.  And Dwight Golann has recently reported empirical research backing up that conclusion.

In an article appearing in the Fall 2011 issue of Dispute Resolution Magazine, Golann surveyed some leading mediators and asked whether, in their most recent two commercial cases arising from a significant business relationship, those mediators concluded that the parties had repaired their relationship.  In 17% of the 60 cases reported, the mediator considered the relationship had been repaired, while in 83% it had not been.  And even when the relationship continued it was often a case of “too expensive to get divorced” (such as a dispute over a rent arrearage owed by a business tenant).

Why so low?  Golann  lists a variety of factors that encourage business disputants to stick with their positions and look for the money, not the love.

For one thing, by the time they litigate, it’s too late.  Litigation is itself a signal that the commercial relationship is bankrupt and only damages are left to be determined.  Another factor is the deep well of mistrust that has grown between the parties over years of disputatious behavior, ant that a mere mediation is unlikely to overcome.  Most business disputants have options to continuing the relationship – they can always hire a replacement employee or deal with a different supplier. 

Not only are incentives and rewards for an integrative outcome missing — authority is missing too.  In my experience the “guy with authority” is the guy who can write a check, not the guy who can write up a new contract.   

Golann offers suggestions to mediators who are confronted with money-only negotiations.  But his conclusion?  “Most training does not prepare students well for what they encounter in practice.” 

Well, Dwight, for that matter, does law school?

The provider program at issue, IDRS Ltd., administers a range of dispute resolution programs in the area of consumer complaints and complaints between businesses and public sector organizations.  As a result of the sale, IDRS will continue as a going concern under CeDR’s umbrella, and CIArb will concentrate on its core business as a professional and membership body.

Both organizations look forward to cooperating with respect to research that will further both CIArb’s responsibilities as a chartered learned society and CeDR’s estimable reputation as an innovator of dispute management approaches.  They are planning to co-host a joint mediation event in early 2012 on the theme of future research in ADR.

Break-outs will be offered on school peer mediation programs, employment mediation, and the recent revisions to New Jersey’s presumptive court-referred mediation program.  John Harper and Robert Lenrow will deliver a presentation on ethical challenges to mediators.  I will be offering a program on the use of mediation in corporate/community conflicts, and showing the recently released film on the Peruvean community that was displaced by the open pit copper mine in Tintaya.

Substantial savings are available for those who preregister; to visit the registration page click here.