Thursday, August 27, 2009

Mediation as Anti-Social Behavior, II

I first posted on this subject last year (See "Mediation as Anti-Social Behavior," May 16, 2008) following a post by Geoff Sharp, in which he discussed Prof. Owen Fiss’s 1984 article, Against Settlement, 93 Yale L.J. 1073. Others have continued the discussion, which centers on whether justice is ill-served by people who settle their legal disputes without considering whether society as a whole would be better off if they fought things out in the courts. See, e.g., Michael L. Moffitt’s article, "Three Things to Be Against (‘Settlement’ Not Included) - A Response to Owen Fiss,"

In my earlier post, I deliberately put off discussing "whether individual litigants should be asked to spend their own money to carry society’s banners into battle (presumably for the honor of the thing)." This aspect of the issue appears to have been given little attention by those participating in the debate, but I believe it to be the nub of the matter. The idea that people who have a chance to quickly and efficiently resolve their grievances by settlement should nonetheless be encouraged to forgo that option for a protracted and expensive court battle seems foreign to any concept of justice with which I am familiar. To me, it is basic that the litigants’ interests are paramount, and if society wants a different benefit, society should bear the burden of getting it.

To help clarify the issue as I see it, let’s return to the Supreme Court’s decision in Brown v. Board of Education, a case that is often cited to suggest that settlement would not always be the ideal. To some, the proper question apparently is: "Would the country have been better off if the Browns and Topeka’s Board of Education had settled?" Perhaps not. But to me, as a practicing attorney and mediator, the proper question is: "Would the Browns and the Board and all the other litigants in the cases consolidated in Brown by the Supreme Court — the clients, i.e. — have been better off?" Would Linda Brown have been better off if, instead of litigating, her family had been able to resolve matters early on with the Topeka Board of Education?

This is not to suggest that litigants should be discouraged from fighting for a principle if they want to, and are able to garner the necessary support for their battle. I have never felt that litigants should be forced or coerced into settlement negotiations of any kind. See, e.g., my post of May 17, 2008, "Should Mediation be Mandatory?" There is certainly nothing wrong with individuals or groups choosing to fight passionately for a worthy cause. We need to remember, though, that while the creation of omelets may benefit society, the eggs are seldom better off afterward.

It is beyond the scope of this blog to do complete justice to this topic, but I think it would be beneficial if we started focusing at least some of the debate on it.

Saturday, August 22, 2009

That’s My Money We’re Talking About!

This post is mostly for defense attorneys in tort litigation. Hopefully, however, plaintiffs’ attorneys will also gain some insight from it. It has to do with a twist on the so-called "endowment effect" described by Barry Goldman in The Science of Settlement: Ideas for Negotiators, ALI-ABA (2008), § 2.01(e). In a nutshell, the endowment effect is a quirk of human nature that causes people to dislike losing something they already have more than they like gaining something they don’t have. I.e., all else being equal, folks would rather not lose than win. It has been posited that the effect causes plaintiffs to make larger concessions in negotiation than defendants. See James A. Wall, Jr., & Suzanne Chan-Serafin, "Processes in Civil Case Mediations," 26 Conflict Resolution Quarterly 261, 266 (2009). The idea is that it is easier for plaintiffs to "give up" something they never had than for defendants to pay out something they do have.

Conversely, if plaintiffs have an "ownership interest" in an off-the-wall settlement amount fueled by unreasonable notions of value, they are more reluctant to accept less than otherwise. Smart plaintiff attorneys are aware of this effect and resist the temptation to over sell a case’s value to their clients.

Defense attorneys can take advantage of the endowment effect by making a reasonable offer in advance of mediation. By "reasonable," I mean something at the lower end of the range of values,* but still within the ballpark. See my discussion of so-called "reverse demand letters" in "Preparing (Your Opponent) for Mediation" (May 12, 2008). This offer should be made far enough in advance of mediation that plaintiff’s counsel has the opportunity to communicate some optimism to the client (e.g., "I’m encouraged by this offer; they’re not there yet, but I think mediation is likely to be productive"). Bolstered by the attorney’s qualified optimism, the plaintiff is more likely to start taking ownership of the offer. Given some time, the plaintiff will be inclined to start thinking about what he or she can do with that money. It stops being the insurance company’s money and starts becoming the plaintiff’s new pickup, remodeled kitchen, down payment on a vacation home, or — in some cases — the ability to take early retirement.

Given most people’s preference for not losing over winning, such a mind set is likely to lead to a greater reluctance to walk away from a settlement, even if the amount offered is "not quite there."

* See my post entitled "Ask Not for Whom the Bell Curve Tolls . . .."

Friday, August 14, 2009

Goodbye, Geoff

I want to add my voice to others who have expressed regret over Geoff Sharp’s decision to discontinue his very popular and always pithy web log (mediator blah . . . blah . . .). Geoff was one of the first to welcome me to the world of online posting last year. I will miss his insight.