Alternative Dispute Resolution

• Author: Stewart I. Edelstein
• Profession: Commercial trial lawyer
• Pages: 165-218

165

CHAPTER FIVE

ALTERNATIVE DISPUTE

RESOLUTION

A. NEGOTIATION

Because the vast majority of cases settle before trial, you need to know

how to negotiate effectively. This requires k nowing how to deal with

the inherent stresses of negotiating, when to negotiate, the benefits of

making t he first offer, modes of negotiation, negotiation strategies,

negotiation ethics, what to do if negotiation is successful, and what to

do if it is not. This discussion dr aws on the work of Daylian Cai n, Asso-

ciate Professor of Management and Marketing, Yale School of Manage-

ment; Daniel Kahneman, a Nobel laureate psychologist specializing in

decision making; Edward Edelstein, a partnership consultant who con-

ducts negotiation seminars (full disclosure: he is my brother); Deepak

Malhotra and Ma x H. Bazerman, professors at the Harvard Business

School; and, for the discussion of negotiation ethics, Ethical Gu idelines

for Settlement Negotiations promulgated by the Litigation Section of

the American Bar Association.

1. How to deal with the stresses of negotiating.

By its nature, any negotiation triggers external and interna l stresses.

By being aware of them and knowing how to deal with them, you can

9781634256926_Ch05.indd 165 14/12/16 2:31 PM

166 | H  S   T L  

improve the likelihood of a satisf ying experience for you and your client

in any negotiation.

As your client’s advocate in a negotiation, you feel the pressure to

resolve the matter to maxi mize your client’s satisfaction (recognizi ng

that a good settlement is one in which neither party is delighted) while

minimizing the potential costs a nd uncertainties of proceedi ng with

arbitration or litigation.

How do you reduce these external stresses? First, you gather the

information you need to be effect ive in the negotiation—not only

information about the facts a nd the law relevant to the matter but

also an understanding of your client’s motives, priorities and objec-

tives in seeki ng a resolution. Second, you prepare for the negotiation.

This requires an understanding of the negotiation process; t he style of

negotiation that is appropriate for you, tailored to the matter in ques-

tion; the strategies and techniques that will be ef fective for you in this

negotiation; and awareness of the opposing party’s motives, priorities,

and objectives as well as opposing cou nsel’s negotiating style. Third,

you get the support you need from other members of your firm, as

appropriate.

Internal stressors in a negotiation arise from your own self-regard,

confidence in your abilities, personal measures of success, and the real

and presumed career and business implications hinging on t he results

of a particular negotiation. You don’t want to enter into a negotiation

feeling uncomfortable, insecure, anxious, or fea rful—a ll emotions that

can have a corrosive effect on your per formance and sabotage your

negotiation.

You can deal with these internal st ressors by following the advice in

Chapter 7(D and E). You can also second-chair negotiations handled by

more experienced attorneys in your f irm before you negotiate on your

own. If you do so, keep in mind that each attorney has his or her own

style of negotiation. You must develop your own. There is no “right”

or “wrong” way to negotiate, and although you can learn negotiation

guidelines, ult imately there are no negotiation “rules.”

2. When to negotiate.

As in mediation, you should negotiate only af ter you have a solid grasp of

the facts supporting all claims and defenses and a thorough knowledge

of the applicable law. You don’t want to wait too long before negotiating,

9781634256926_Ch05.indd 166 14/12/16 2:31 PM

Alternative Dispute R esolution | 167

by which time the par ties have invested so much time, effort, a nd money

in litigating t hat positions have hardened.

You want to negotiate from a position of strength, such as after you

have obtained material admissions from the opposing part y at a deposi-

tion or after you have filed a compelli ng motion for summary judgment,

putting the opposing counsel at significant risk of loss.

A prerequisite for any settlement negotiation is your client’s author-

ity and then continued authorit y for each settlement proposal you make.

Avoid ambiguity in knowing what your authority is in negotiating. And

promptly disclose to your client each offer and counteroffer when it is

made, as discussed in Chapter 5(A), section 5.

3. Benefits of making the first offer.

Based on the theory of anchori ng, you have an advantage in ma king the

first offer in a negot iation because negotiation is framed based on where

the parties st art. As Malhotra and Baz erman explain in their book Nego -

tiation Genius (Harva rd Business School, 2008):

The primary benefit of making a f irst offer in negotiation is that it

establishes an an chor. An anchor is a number that focuses t he other

negotiator’s attention and expectat ions. Especia lly when the other

party is u ncertain about the correct, fair, or appropriate outcome,

they are likely to g ravitate toward any number that helps them focus

and resolve their uncertainty. As it tur ns out, first offers tend to serve

this purpose well: they anchor the negotiat ion and strongly in fluence

the final outcome.

Of course, when you negotiate, the anchor may include many terms

in addition to a number, especially if the pa rties have a mutual interest in

doing business together in t he future. How do you determine what your

first offer should be? Your first offer should be high but within reason.

The more you ask for, the more value you are likely to get if your first

offer is within t he realm of reasonableness. See the discussion of BATNA

and WATNA (acronyms for best alternative to a negotiated agree-

ment and worst alternative to a negotiated agreement) in Chapter 5(B),

sections 3 and 4, for advice on determi ning what that initial offer should

be. And consider this: In a study, people were asked if they would take

juvenile delinquents to the zoo. Only 17% said yes. But if the study

subjects were f irst asked whether they would adopt a juvenile delinquent

9781634256926_Ch05.indd 167 11/01/17 4:56 PM