Finding from an empirical study: litigants “have great enthusiasm” for participating directly in settlement negotiations and have little enthusiasm for negotiations involving “only the attorneys.”
—Prof. Donna Shestowsky in, “Research Report: How Litigants Evaluate Legal Procedures at the Start of their Cases,” 50 Court Review 126 (2014).
Common Negotiation Practice
I started practicing law in 1980. For the first decades of my career, settlements of lawsuits happened without mediation and went something like this (with varying degrees of intensity and antagonism):
A lawsuit is progressing through the pleadings, discovery and early pretrial phases, when I suggest to my client that the case is ripe for settlement negotiations to begin.
I discuss with the client what our negotiation goals might be and various strategies for achieving those goals, and I get authority for a settlement offer.
Then I call opposing counsel and broach the possibility of a settlement. It goes something like this:
–“Trial is coming up soon, and we’ll both be incurring lots of attorney fees for our respective clients, so it seems like a good time to see if settlement is possible.”
–“What do you have in mind?” the other attorney asks.
–“We feel really good about the merits of our case,” I say. “But we are willing to discount the amount of our demand by $X because that’s a likely amount of fees our client will pay to get this case tried. So, rather than using that amount to pay fees, your client can keep it as a discount for settling now.”
–The attorney responds, typically, with something like this: “We are confident in our position, so that offer won’t work. But I’ll check with my client and see if we can get back to you with a counter.”
–Then, opposing counsel calls back and says, “My client is not willing to do that but will settle for a payment of $Y, instead. Our rationale is this: ________.”
–I then respond with something like, “Hmmm . . . that doesn’t sound very promising. But I’ll check with my client and get back to you.”
–I then discuss the counter-offer with my client, develop a response strategy, get counter-offer authority, and get back to the attorney with the counter-offer and supporting rationale.
This negotiation back-and-forth between attorneys continues until a settlement is achieved . . . or until negotiations fall apart, with the case heading on to trial.
Occasionally, I might have a client with me, in person or by phone, during negotiations with opposing counsel . . . but that would be an exception.
Every litigator of my vintage has been through variations on the foregoing a million times (give or take a few hundred thousand). We like this approach. It’s familiar and comfortable. And it works.
Unfortunately, however, empirical studies (like Prof. Shestowsky’s linked above) find that our clients don’t like our approach:
–clients “want to be present for” and to “participate in, the resolution process”; and
–clients like the resolution process to have “formality.”
Prof. Shestowsky explains that such findings “may come as a surprise to attorneys” because attorneys “assume that they should conduct settlement discussions on their own.” This assumption is false.
So, instead of “excluding litigants from settlement negotiations,” Prof. Shestowsky suggests that lawyers should “anticipate” a client’s desire “to observe or participate in” the settlement discussions.”
–And mediation fits this bill perfectly.
The Bankruptcy Context
Bankruptcy attorneys have been lagging adopters of mediation. Prof. Shestowsky’s findings provide some insights that might help explain this.
–Business bankruptcy cases, for example, are fast-paced with many issues arising quickly, often needing immediate resolution because the continued existence of a fragile business-in-bankruptcy is often on the line.
–As a result, bankruptcy attorneys are going through the negotiations process identified above frequently and quickly on a multitude of urgent issues: and, as they see it, they simply don’t have time for such luxuries as mediation.
So . . . in an adversary proceeding or a plan confirmation context, when someone suggests that mediation could be effective, the gut-level reactions from seasoned bankruptcy attorneys are often:
–“We can resolve this ourselves, just like we do with every other issue. We don’t need mediation!”; and
–“Our clients have always been fine with doing it this way!”
Empirical evidence to the contrary is a troubling thing.
We attorneys, who’ve had many years of experience in resolving legal disputes without mediation—and especially in fast-paced and urgent contexts like business bankruptcy, often look with skepticism upon empirical findings that challenge some of our most-basic assumptions and practices.
But we would be well-advised to take such findings to heart.
Note: All information and quotations on empirical studies in this article are from Prof. Shestowsky.
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