Understanding Dispute Resolution: Negotiations

Lawyers should be at the forefront of dispute resolution. The practice of law, particularly litigation, involves courtroom conflict, the presentation of arguments, and the questioning of witnesses, but what it should really involve is the resolution of controversies and disputes among parties. Trial is often compared to combat, and it has many similarities to actual combat. However, as the ancient Chinese General Sun Tzu wrote in The Art of War, “the greatest victory is that which requires no battles”. As attorneys, it should be our goal to resolve disputes on behalf of our clients without engaging in bloody courtroom battles.

The Art of War is studied by military officers around the world despite the fact that it was written more than 2,000 years ago. Many of the thoughts contained in Sun Tzu’s writing are as applicable to the law as they are to politics and war.

The resolution of disputes involves a lot more than excellent trial skills. It requires superior research skills and the ability to understand human nature. Each case must be approached without emotion or ego and without losing sight of the ultimate goal in the case. The goal should be determined before negotiations begin (that is, before the first letter is written or the first phone call is made), and the goal must be based upon a complete understanding of both the facts and the law. The resolution of the matter therefore is premised upon a complete understanding of the controversy. Simply sending off a letter in hopes of a positive response is rarely the best thing to do.

Also, each dispute is different, and each dispute is going to be resolved differently. Some disputes will be resolved with a letter and a couple of phone calls. Other disputes will lead to lengthy jury trials and appeals. And in between, there is mediation, arbitration, and other forms of alternative dispute resolution. It should be the goal of every attorney to resolve every dispute at the lowest possible level but not at the expense of the client. Mediation, for example, is frequently an effective method of resolving disputes, but the goal should be a fair resolution of the dispute and not any agreement one can get.

I. The Psychology of a Dispute

After thirty-five years working to resolve disputes, I have concluded that people are predictably unpredictable. While this may not be surprising in criminal cases, where government punishments are ruinous—if the government is trying to put someone in prison for years, one would not expect that person to respond in a calm, dispassionate matter—it surprises me that there are professional businesspeople who will often become emotionally involved in what is essentially a commercial transaction. I have been involved in cases where companies have spent hundreds of thousands of dollars fighting cases they were destined to lose, or which could have been settled for tens of thousands of dollars. Therefore, emotion may play a large role in a dispute, and it is important to understand this factor at the beginning of any matter.

Next, many people are “conflict averse”. This often results from a psychological personality trait that makes in difficult for them to handle confrontation. While the psychology behind the personality trait is interesting, for our purposes, it can result in different approaches to conflict that are not helpful. People who are conflict averse may completely abandon a valid claim or “give up” when an invalid claim is made. They may become passive/aggressive in their approach to the conflict. Worst of all, they may overcompensate for their aversity by becoming overly and personally aggressive in the dispute. Each of these approaches complicates dispute resolution.

On the other end of the spectrum are people who seem to thrive off of and enjoy conflict. These people are referred to by psychologists as High Conflict People or HCPs, and these people actively work against the applicable resolution of a dispute. There are lawyers who are HCPs and parties that are HCPs. Since these people thrive off of the dispute, they are frequently unwilling to compromise in any way, even when further conflict undermines the business or will result in greater loss than is necessary. HCPs will often see an attempt at reasonable compromise as a sign of weakness and respond with an even more extreme position than they had originally.

One way to avoid disputes is to avoid HCPs. How can one know if a party is an HCP? One way is to look at the person’s history of litigation. If a company is frequently involved in litigation, and if the company’s CEO relishes talking about litigation, that may be a sign that the party one is about to deal with is an HCP. These relationships normally end in litigation and are best avoided if possible.

In one case in which I was personally involved, I represented a railroad client that found itself subject to litigation by a well-funded HCP. This HCP filed multiple lawsuits against the railroad, several of which resulted in severe financial sanctions from the court. Eventually, the lawyer for the HCP moved to withdraw from the case, and, in opposition to the motion to withdraw, the HCP filed a copy of the fee agreement with the court which reflected a seven-figure retainer for the case. After the cases against the railroad were eventually dismissed and the railroad’s request for injunctive relief against the HCP was granted, the HCP sued his lawyer.

The personality of the parties to the dispute is a frequently overlooked factor in resolving the dispute, but it is an important factor. The pressure caused by the dispute itself, and certainly by the litigation of the dispute can amplify preexisting psychological issues often resulting in behavior that appears irrational. An experienced attorney, however, may be able to help his or her client avoid self-destructive actions and, at the same time, spot these same issues in an opponent, allowing for a more fruitful approach to litigation.

II. Preparations for Dispute Resolution

Before the first call is made or the first letter written, it is important to understand the law and the facts involved in the dispute. It is also important to understand the relative positions of the parties. This should consist of completing whatever investigation is necessary in order to understand the facts behind the dispute and the evidence supporting those facts. If the evidence supporting a particular fact is unknown or disputed, then the attorney needs to understand the evidence supporting both sides, and, if possible, harmonize the conflicting evidence. Frequently, this will not be possible, such as when two parties to a conversation remember it differently. In those cases, it will be necessary to assess the relative credibility of the two accounts.

Equally important to prepare for resolving the dispute is understanding the law that applies to the case. Too many attorneys will simply file a complaint without understanding the legal basis for the claim expecting that there will be a negotiated settlement. Rather than moving closer to the resolution of the dispute, this approach can move the parties further apart. A party receiving a poorly researched demand letter may conclude the other party has no basis for the dispute or is sloppy in its approach to dispute resolution. Either way, it does not move the dispute closer to resolution.

Ordinarily, there should not be any artificial timelines placed on completing an investigation into the origins of and reasons for the dispute. The attorney should proceed carefully but expeditiously. There are times when this is not possible. One is if there is an immediate and ongoing harm that needs to be addressed immediately. The other is when the Statute of Limitations is about to expire, or some other legal impediment will damage the case. These should be the exception rather than the rule, however.

One example of an issue requiring immediate action would be the potential theft of intellectual property, particularly trade secrets. If an engineer who possesses knowledge of a company’s intellectual property is hired by a competitor, there may be a need to file suit immediately and request a Temporary Restraining Order (TRO) to prevent immediate and irreparable damage to the company. Even then, however, it would be foolish to file before evidence had been assembled.

There are a host of non-legal factors that can influence the resolution of a dispute. Some of these factors have already been discussed, but there are other factors that frequently play a role and sometimes a dominant role in the dispute. Within a corporation, a corporate officer may wish to prevent a resolution of an external dispute in order to weaken another corporate officer. A failed personal or family relationship can interfere with dispute resolution. How many other factors are there? Probably as many as there are possible disputes. Successful dispute resolution requires an understanding that these issues arise and an ability to anticipate, or at least seem, these issues. Otherwise, disputes can drag on.

III. Resolving the Dispute

In my experience, disputes are best resolved by a progressive approach to the dispute. By a progressive approach to dispute resolution, I mean starting at the lowest level possible—after appropriate preparation, a phone call between two mid-level executives in a commercial dispute, for example, and then escalating the conflict in a calculated manner if needed.

The first phase, and frequently the most productive, involves the negotiations phase (as opposed to negotiations which will last throughout the conflict). In the negotiations phase, the goal is to resolve the dispute without the filing of a lawsuit or the institution. The skills involved in negotiations include that ability to convey serious accusations in terms that will not precipitate and immediate rejection and the ability to listen to the opponent’s position. Ego is frequently the enemy of productive negotiations and engaging in argument is usually counterproductive. A dialogue where there is a free-flowing exchange of ideas normally works best. During this conversation, the ability to ask probing questions in a non-confrontational manner is important.

One approach I see for attorneys who are either inexperienced or suffer from personality disorders is what I will call the hyper-aggressive/accusatory style. These lawyers will normally start out with an ad hominin attack on the opposing party, opposing counsel, or both and then lead off with a threat.

Often times, I will hear younger lawyers talk about their duty to “zealously represent” their client and interpret this duty to mean a full-throttled attack on an opponent no matter what. This is not what the Rules of Professional Conduct mean. Model Rule of Professional Responsibility 1.3 requires diligent and competent representation. Zeal is an admirable character trait but must be tempered with common sense. As the Comment to Rule 1.3 makes clear: “A lawyer must also act with commitment and dedication to the interests of the client and with zeal in advocacy upon the client’s behalf… The lawyer’s duty to act with reasonable diligence does not require the use of offensive tactics or preclude the treating of all persons involved in the legal process with courtesy and respect”.

Consider the following comments in an initial demand letter: “You should know that your client has a long history of being a liar and a thief and has assaulted multiple women in the past. We require him to pay the sum of $1,000,000 in damages for the emotional distress he has caused my client in his partnership dissolution. We expect payment by next Thursday. This is non-negotiable”. Is this letter going to further negotiations? Probably not. It may make an emotionally invested client happy (until attorney’s fees accumulate), but it does not help resolve the dispute.

Now, consider another approach to the same dispute:

“Dear Janet,

I hope all is well with you, and I look forward to resolving this matter with you.

As you know, the dissolution of this partnership has been emotional for both of our clients, and I hope that Mr. Felton is doing well in his new business. There remain a few loose ends that we need to resolve. As far as I can tell, Mr. Felton has received approximately 70% of the former company’s intellectual property and most of the legacy customers. Our preliminary valuation of these assets puts their value at $2,000,000, meaning that Mr. Felton would have received approximately $1,400,000 of the assets. Have you conducted a valuation yet?

Please give me a call at your convenience so that we can discuss a resolution of this matter”.

The differences in these two approaches should be self-evident. The second approach invites a dialogue and offers the opponent a role in resolving the dispute. If the recipient of the letter responds in kind, there is a real opportunity to resolve the matter amicably. At some point, it may be beneficial to schedule a meeting with the parties and counsel. The first approach virtually ensures an end to negotiations and invites an ad hominin response. This may work if the goal is increased attorney’s fees, but it will not assist in the amicable resolution of the case.

Unfortunately, not every dispute will be resolved through negotiation. There are other more formal methods of dispute resolution, including: mediation, arbitration, and litigation.

Conclusion

In business and in life, disputes are inevitable, and attorneys should be at the forefront of resolving disputes for their clients. Attorneys should not be viewed as, and should not be, hired guns brought into a dispute after the possibility for peaceful resolution no longer exists. We are not mercenaries. Rather, attorneys should be brought into a case at the inception of a dispute. That is when the opportunity for an efficient and cost-effective resolution of a dispute is at its best.

We represent people in all types of disputes. If you find yourself involved in a dispute or perceive a dispute on the horizon, contact us.