Negotiation

23 June

• For #10, I am US, LLC; negotiating with Barreras
• Today: lease negotiation
• No exercise #4 on June 25; it is postponed.
• No class on 7/14 or on 7/16 or on 7/21. #4 will come somewhere in there.
• It might make sense to leave some easy issues to late in the game, to throw them in at the end to avoid the money-only trap.
• Having alternatives on the table simultaneously makes it clear what you're willing to move on.
• On Thursday, we'll talk about ADR.
• Instead of locking into specific terms, maybe agree on a formula-- something that gives a more measured result. Tie rates to some external indicator, maybe.

25 June

• For Exercise 7, Lenz and I are Magna; we are negotiating against Cole and Rostowfske. Interesting; there are no common facts for this one.
• ADR: the A means an alternative to litigation. It's also an alternative to having to negotiate stuff that we forgot about, couldn't reach agreement on, or issues that arise during the period covered by the negotiation.
• There are lots of reasons why neither side would want to litigate (i.e., construction delayed because of rain: dispute is over whether the amount of rain was sufficient to disrupt). These are predictable sorts of problems, and ADR is a way of providing a fact-determining mechanism.
• We want our agreements to include a mechanism for dealing with what happens when the sides differ about some term in the agreement. We want our agreements to protect the benefits for which we've negotiated, and we want to simplify the negotiating process.
• It's a way of taking issues off the table: if you know in advance that a condition can arise that would put one party at risk, you can delegate that to ADR (i.e., if and when this problem occurs, a 3rd party will determine what the price-tag is, and we can make a post hoc adjustment). That means we don't have to fight over this issue as much at the table-- it allows us to narrow gaps based on valuing of risk. We don't want to agree to things that will expose us to bigger problems down the road, and this is a way of insuring the risk.
• We might want an arbitrator only to decide a question of fact, and not the remedy. Arbitration can make it easier to work through some matierial issues.
• The three most common forms:
  1. Arbitration arose simply as an alternative to litigation: kind of a private trial. You don't want to litigate, but you do need to resolve a conflict. The law is clear now that arbitration can be binding, and that decisions can be enforced (it's basically a contract). It mostly looks and works kind of like a trial.
  2. Mediation is a different beast: the 3rd party is simply a facilitator. The goal is to keep negotiations progressing forward. This is a good thing when you've got a situation where it's hard for the parties to work things out on their own. Like if they hate one another or something: the presence of a neutral 3rd party might calm people down, or make it easier for them to say things. Mediation is non-binding: if it works, it works, if it doesn't, you can sue or go to arbitration.
  3. A third option: med-arb. Sort of a hybrid of the two. Instead of having the matter handled in the adversarial form of arbitration, but with more teeth than mediation (both parties might tend to just dig in their heels and wait for the other to make a concession). This allows someone to try and facilitate things, but also to specify what an appropriate result is. So the 3rd party tries first to mediate, but in the end will reach a decision if that's what is called for. Of course, this depends on people giving the mediator the authority to decide this or that thing. Various procedural constraints can be specified. Even if it's not binding, you generally make sure that the mediator's decision is admissible evidence (that makes it harder to prevail in litigation, because you need to convince the judge that a different neutral 3rd party got it wrong).
• Why is this so appealing? We do have courts, after all, and they're stable, not corrupt, and reliable compared to almost anyplace else in the world. But there are still problems:
  • It's slow. Discovery, etc, and other procedures take lots of time. Deadlines tend not to be enforced. Dockets are crowded, especially where criminal cases are packed into the same docket with civil (because the right to speedy trial bumps criminal cases to the front of the queue). There's a right of appeal, which can take even longer. Six years is a commonly-cited average.
  • It's expensive. This is a side-effect of slowness. If you have time to do a lot of work, you will do a lot of work. And experts have to get paid, etc. And there's a lot of coordination to get everything lined up just right. And if a trial gets postponed at the last moment, you have to gear up all over again.
  • There's still a considerable amount of uncertainty: judges and juries. Evidentiary decisions (tending to allow too much in, esp.), incompetence, reluctance to make tough calls in close cases. After all, if we're litigating at all, both sides think they're going to win, so all the cases are close. Judges lean on the parties to make them settle anyway: there's nearly always a mandatory settlement procedure that parties have to go through before trial. But this means that pre-trial motions need to stay undecided (because granding a partial summary judgment motion would derail the settlement process). So you're not always guaranteed to get the right decision on the merits.
  • You can't pick the evidentiary or procedural rules or the decisionmaker. You really don't have much control over your destiny.
• ADR is intended to avoid those problems. It's not a panacea, though. It should be faster (no discovery). You should have better quality judges (can pick subject-matter experts, no political appointees). No waiting: you hire the judge and set the schedule.

  All that stuff is nice, but realistically it's not always that way. Sometimes you need and want discovery (it can help the parties better understand one another). Also, the arbitrators work for profit: you don't want to send people away bitterly disappointed, because they'll badmouth you out on the street and cost you future business. After all, when you rule against someone, it's not like they think you were right. So the arbitrators are under pressure not to antagonize the loser, so they tend towards compromise decisions, rather than just siding with the side that's correct (if there is one). That's not always a problem (union labor negotiations, for example), but it can be, if you're entitled to something and you believe you're right.

  The absence of procedural/evidentiary constraints enables outrageous behavior (manufactured evidence, even).

  And in complex situations, it's not necessarily that much faster than trial.

• We can use ADR techniques, and we can work to minimize the shortcomings and gain the advantages of an ADR system. Decisions of fact as to whether a contract was breached, for example. Litigation would be a mess: there'll be counter-claims, and things will escalate-- if we're going to court, we might as well use all the material at our disposal. We can determine how a dispute will be resolved now, while everyone is trying to be friendly, as opposed to later, when the dispute arises.
• And you can negotiate the remedies in advance: there can't be a compromise remedy-- the arbitrator simply finds whether some condition was met or not. That can also give us certainty about how much risk we're at: we can cap liabilities in advance, etc. The arbitrator need not know the results of his/her decision.