Thursday, December 17, 2009

Impasse

We’ve all seen it. The parties negotiate back and forth all day, only to bog down in the late afternoon, leaving a sizeable gap between demand and offer. All sides announce that they have gone as far as they can and look to the mediator to figure out a way to reach resolution despite the frozen state of negotiations. Sometimes a good mediator can help find a way to create some additional value to bridge the gap. Unfortunately, though, all too often the parties are not looking for ways to close the gap; instead, their view of the mediator’s job is to make the other side see things their way! When the parties feel like this, the result is called "impasse," a/k/a "a predicament affording no obvious escape."*

True impasse comes about because each party believes it is correct in its analyses. The difference usually arises because there are pieces of the puzzle that haven’t yet been found or, if found, have not been fully understood.

John DeGroote, in his Settlement Perspectives web log, observed: "If you and the other side value the case differently, at least one of you is wrong." See John’s November 7, 2008, post entitled "Better Settlements From Better Information: Early Case Assessments IV." Of course, if the only unknown is what the result of a trial will be sometime in the future, you won’t find out for sure who is wrong until the proverbial "twelve [people] good and true" have rendered their verdict. However, since the parties decided at one point to mediate, I will hopefully be pardoned for assuming that they want to avoid that particular risk.†

On the other hand, if pieces to the puzzle are missing because discovery is incomplete, the parties and the mediator may want to consider adjourning and returning later after gathering further information. But the best way through impasse to resolution may not always be to complete the requisite discovery. Discovery costs money, so deciding whether to go ahead with it will require a cost-benefit analysis: is the cost of finding those additional puzzle pieces justified by the amount of money still at stake? And bear in mind that the parties might end up spending the money only to learn that they were both wrong or the results are still inconclusive.

Often the best way through impasse is to simply bite the bullet, recognize that you have pushed the other side as far as you can, split the difference in some fashion, and go home.


* Merriam-Webster Online, accessed December 11, 2009.

† See "Jury Prognostication," posted October 15, 2009.

2 comments:

Joe Markowitz said...

I agree with you that impasse is generally caused by one or both sides evaluating the case incorrectly. But I think there is sometimes something else going on as well. Sometimes the parties are close enough on their evaluations of the case, but one or both sides still has a hard time letting go of the conflict. Say you understand at least in the rational part of your brain that you only have a 50% chance of getting that $400,000 judgment that you believe you are entitled to. But you still hate the defendant's guts and you still believe that in a just world you would get exactly what you think you are entitled to. You might in that scenario want to punish the defendant with further litigation costs, and you might even want to take your chances at trial, even though you know you have a 50% chance of losing everything. To accomplish your goal, all you have to do is refuse to agree to a reasonable settlement number. Same thing if you are the defendant. You might know that the plaintiff could very well be awarded a sizable judgment, but in your heart you know he doesn't deserve it, you hate his guts for dragging you through this frivolous lawsuit, and you hate paying his extortionate demand. So you might refuse to pay a reasonable settlement amount even though you know that your refusal could end up costing you a lot more. (Don't you love those clients who say they'd rather pay you than pay the SOB on the other side of the dispute? They are the ones who keep trial lawyers in business.)

So in order to break the impasse, you sometimes have to deal with the irrational considerations of the participants as well as their incorrect evaluations of the case. You have to get them to see the value of putting the dispute behind them.

John Lassey said...

Dealing with irrationality is a challenge, especially when trying to help people to see “the value of putting the dispute behind them.” I covered the plaintiff’s side of this in “The Dick Francis Solution,” posted September 17, 2009. From the defense perspective, I find that control by liability insurance companies (usually) tends to minimize the irrationality. When the claims reps say they would rather pay their attorney than the plaintiff, 99 times out of a 100 it is posturing. What they are really saying is that the odds are sufficiently in their favor that they can push harder.

Of course, with some insurance contracts the insured’s permission is necessary for the carrier to agree to a settlement. In such cases the named defendants may maintain a “not one cent for tribute” stance. They usually back off, however, when the “hammer clause” is explained to them and they learn that they will be responsible for all defense costs, including attorney’s fees, from that point on and also will be responsible for any adverse judgment in excess of the amount for which the case could have been settled.