Putting the “Alternative” Back in Alternative Dispute Resolution

business conflict resolution concept

A recent settlement victory showed me once again that you can achieve amazing results at a mediation if you never lose sight of the fact that you are unrestrained by any “negotiating rules”, even if (or perhaps especially because) no one else in the room understands that to be the case.

Most who attend a mediation have in their minds that meditations must go a certain way, completely forgetting the “Alternative” in “Alternative Dispute Resolution”. Use that to your advantage, and don’t be afraid to let your crazy out.

I’m reminded of the scene from Fort Apache the Bronx, with Paul Newman. Not the greatest movie, but in one memorable scene, a cop (played by Newman) is confronted by a knife-wielding crazy person. The standard approach would be to order the man to drop the knife, and to shoot him if he failed to comply. Newman instead just out-crazies the bad guy, and resolves the situation peacefully while the guy is trying to figure out what is going on.

That’s basically the technique we used at this mediation. My partner and I often both attend a mediation (charging for only one of us because that’s just how we are), because our varied attitudes create a powerful settlement juggernaut.

There are certain moments in a litigation practice that go down in history, and remind you why you became a litigator in the first place. This was one of those moments.

Our mediation was on an employment case, and we were representing the employer. Plaintiff sued for wrongful termination, using the kitchen sink approach, claiming she was fired because of her gender, nationality, age and religion. She also claimed that an employee had sexually harassed her, going so far as to grab her breasts. As is often the case, her attorney had also added a claim for unpaid overtime, because that creates the threat of an attorney fees award, even if all the other claims are proven to be bogus.

We don’t take a case unless we are on the right side, and our investigation had revealed that the claims were all bogus, except for a minor violation involving the overtime claim. While our client had always dutifully paid any overtime, for reasons not important to this story, it had failed to pay about three hours of overtime during the three years the plaintiff had been employed.

In their mediation brief, plaintiff’s counsel claimed $21 million in damages based on the discrimination and harassment claims, and stated they had already incurred $300,000 in attorney fees, and $30,000 in costs. Keep those numbers in mind. If Plaintiff’s counsel was telling the truth about the time and money they had spent on the case, and assuming they were handling the case on a 40% contingency, they needed to walk away with a settlement of at least $800,000, just to break even!

The mediation started at 10:00 a.m., and ended at 2:00 a.m. the following morning. You read right. It was a 16-hour mediation. Given that plaintiff started at $21 million and basically went down in $1 increments, the process took awhile.

At one point, the mediator decided it might be beneficial to have the attorneys discuss the case with one another. She kicked the plaintiff out of the conference room, and the attorneys met to discuss the pros and cons of the case. Big mistake. Opposing counsel apparently thought that strong advocacy requires shouting, and I’m certainly no shrinking violet, so the meeting almost came to blows.

But what the meeting did reveal was that plaintiff’s counsel actually believed some of the outlandish claims by their client, or was at least doing a good job of pretending. If true, the claims would indeed entitle plaintiff to significant damages, but we knew the claims were all lies, and apparently plaintiff’s counsel did not. That is why they were making such ridiculous demands.

I removed my foot from opposing counsel’s neck, and we returned to our conference room with the mediator in hot pursuit. As soon as she entered the room, she said, “See, your client has huge exposure, and no one is going believe your client’s lies.”

Now, I get that mediators tell both sides that they have a terrible case/defense in order to motivate settlement, but stating that my client was lying, in front of my client, was beyond the pale. I made very clear to the mediator that I did not appreciate that remark, but it had shown that the case was being stalled by the competing impressions of the parties’ candor. I had left the joint meeting thinking the mediator would feel compelled to apologize that we were having to waste our time responding to plaintiff’s outlandish claims, and here she was stating that in her view, our client was the liar. Quite a dichotomy.

Then my client said something brilliant. It was apparent to him that the case was coming down to credibility, so he offered to be polygraphed about the claims being made by plaintiff. At that point, plaintiff’s demand was down to about $20,999,992, and our offer was $1,560 – the penalties we calculated were due for the three hours of unpaid overtime. But given the comment of our client, we presented a much larger alternative settlement.

Lie detectorWe offered to pay $100,000 to settle the case, with one condition. Plaintiff would have to take and pass a lie detector test. We would even pay for the test. Alternatively, if plaintiff felt it would just be too traumatic for her to relive the [fictional] events during an examination, my client would take the test. If she took the test and passed, or if our client took the test and failed, plaintiff got the $100,000. And here was the truly brilliant part. We knew plaintiff’s counsel would try to hide behind the claim that lie detector tests are unreliable, so we eliminated any downside. If the lie detector results were in plaintiff’s favor, she got the $100,000. But if they weren’t, or were simply indeterminate, we would return to the negotiating table. So, prove what you are claiming is true, and get $100,000. Fail, and try your luck again at negotiating.

Now your reaction might be the same as the mediator. She viewed this as a complete distraction. She said that it was an unreasonable request because lie detector tests are inadmissible. She very insultingly said that only a “layperson” would make such a proposal; that attorneys should know better. But whether or not the test was admissible was irrelevant. We weren’t suggesting the test as evidence, we were offering it as a creative way to take credibility out of the equation for negotiation purposes.

The mediator argued that whether or not the plaintiff was lying was irrelevant; the only issues for settlement purposes was the money my client would spend defending the case, and the potential exposure at trial. I disagreed, and I hate it when mediators argue “costs of defense” as a basis for settlement. Put yourself in the shoes of your client. The company did nothing wrong, but it should write a check now to avoid the costs of defense later?

I far preferred looking at this case for what it was. If it was established that the plaintiff was lying, then all involved would be forced to recognize that this case was pure extortion. That determination is highly relevant for settlement purposes. With the validity of her claims removed, then the only discussion is how much extortion money my client should pay. Once it is known the plaintiff is lying, then her counsel can no longer argue for more settlement money on the basis of any merit to the claim. They will be left arguing entirely for more extortion money, and that should be an uncomfortable position for even the most jaded attorney.

Aside from the strategic value of our request, there was the pure joy it brought to all of us, knowing the mayhem we had wrought in the other room. The equation was simple. If the plaintiff had somehow convinced herself that the harassment and discrimination had occurred, then she would proclaim that she would happily take the lie detector test in order to recover the $100,000. (This all presumes she would be willing to settle for $100,000, which may appear unlikely since her attorneys were still demanding more than $20 million at that point, but I was of the opinion that even she knew her claims would not withstand the scrutiny of a trial, and that she would jump at the chance to net $60,000.) On the other hand, if her attorneys said no, then she would have to question whether they actually believed her story. Why would they refuse the $100,000 and return to negotiating what would ultimately be a lower amount, unless they feared the result of the lie detector?

But far more likely, imagine that moment when the mediator presented that offer to the plaintiff and her counsel, and the plaintiff rejected the lie detector test. Moments earlier they had been arguing the merits of their case, and casting our client as a monster. With the plaintiff unwilling to stand by her story, that would all be gone. It didn’t matter whether plaintiff’s counsel claimed to reject the offer because it was so stupid, they could no longer seek to take the high ground.

The mediator was gone for a very long time. When she returned, she told us the response to our lie detector offer. Plaintiff would not agree to the lie detector (what a surprise), and her counsel was now no longer seeking millions of dollars, but instead wanted to see if they could negotiate up our nuisance value offer of $1,560. From that moment on, there was never once a discussion of the merits of plaintiff's case. Plaintiff’s counsel and the mediator limited their remarks entirely to dollar amounts.

We did end up adding a few thousand dollars to our nuisance value offer in order to settle the case, but the settlement amount was a tiny fraction of the $100,000 offer. The lie detector offer had completely taken the wind out of the opposition’s sails. Whereas they had previously been very aggressive, fighting for every dollar, they quickly agreed to a nominal amount. Rather than stand by her claims and receive $100,000, plaintiff settled for far less.

The lesson here is that a mediation allows you to be as creative and strategic as your mind can imagine. Drive the bus, and don’t let the mediator force you into perceived conventions.

Do you kiss your mother with that mouth?

One of my proudest moments during a mediation was when a retired judge called me a mother f***er. If you’ve never handled a construction defect case, they have a massive show and tell session where they call the sub-contractors in one by one to beat up on them and try to extract settlement money. I represented an HVAC contractor, and I was a bit sick and tired of the attitude that we should contribute money to any settlement, regardless of whether we had any liability. The refrain is always the same. “It’ll cost you $100,000 to take this matter to trial, so just pay $20,000 now to get out.”

So I entered the room, and the first question out of the judge was, “who is your carrier?” I told him that whether or not my client was insured was a matter for discovery, and that unless he or the plaintiff could show me some conceivable basis for liability on the part of my client, I wouldn’t be tendering the claim to the carrier in any event. That’s when he accused me of incestuous relations with my mother.

“But it’ll cost you $100,000 to take this matter to trial,” he said. “Yes, but how much will it cost the plaintiff to take my client to trial?”, I responded. “And how stupid would the plaintiff have to be, after settling with most or all the other defendants, to nonetheless proceed to trial against my client, knowing he can’t show any liability?”

The case settled globally that day, with my client contributing zero dollars. I’ll take an insult any day for that result.

Find a means to let the parties save face.

I was once involved tangentially in a million dollar settlement, that fell apart over five dollars. The parties had reached settlement, and just as they were about to walk into the courtroom to put it on the record, one of the parties said, “Wait, I also need to be reimbursed for my parking.” The other side refused to pay the five dollars. As you can imagine, all the attorneys offered to pay the five dollars to get the deal done, but the party insisted that it come from the other party. The settlement had to be for $1,000,005. In the end, the case did not settle.

This dynamic arises when one side feels that they were abused in the process. The five dollars became symbolic of who had won the case. In the plaintiff’s mind, the million dollars was less than what was owed, and therefore did not represent a victory. Making the defendant pay that extra five dollars would have been a clearer indication that he was in the wrong than the million dollars.

Don’t always think like an attorney. We always want to include the usual language in any settlement that “neither party admits liability or any wrongdoing.” But that language can really stick in the craw of the wronged party. Throw in non-disparagement and non-disclosure clauses, and the client feels like they are being bought off and forced to remain silent.

Be creative. In one employment case, we negotiated a settlement that exceeded what we were hoping to get at trial, but the client balked. She did not want to settle unless she could let her coworkers know that her termination was not a result of anything she had done. I got the client to agree to the settlement, based on my assurance that she would not be silenced. We did a short-form settlement agreement at the mediation, which included a statement that the employer would provide a more detailed settlement agreement, BUT that in the event the parties could not agree to the wording, the short form agreement would be controlling.

Defense counsel later provided the written agreement, and tried to slip in the non-disclosure and non-disparagement terms, which had never been discussed at the mediation. Since we did not agree to those terms, the short-form settlement was controlling. Our client was free to post the circumstances behind and the terms of the settlement for all the world to see.

Maximize the benefits to your client by taking charge of the negotiations.

In another case, we had answered ready for trial in a case with numerous defendants. The judge insisted that we try one more time to reach a settlement, and sent us into the hall to negotiate. After several hours of discussions, we were only $5,000 apart. This was a high six-figure settlement, so it was absurd that the last $5,000 would be the sticking point, but egos were so strong that the parties would not budge on that final $5,000, and we reported to the judge that our efforts had been unsuccessful.

The judge, hearing how close we were, told us to go back out and negotiate some more. As soon as we hit the hallway, I took charge. I said the time in court was costing our clients more than the $5,000 in dispute, so I said, “each of you add just one thousand to your settlement offer, and we’ll be done.” They agreed, and we returned to court to put it on the record. Only then did they realize that I had not agreed that my client would pay an extra $1,000. I’d gotten the money from all of the other defendants.

For a great book on negotiating, both in your personal and business life, I highly recommend Crucial Conversations Tools for Talking When Stakes Are High, Second Edition, which is the number one best seller on Amazon in several categories.

Leave a Reply

Your email address will not be published. Required fields are marked *