achieving better settlements

Achieving Better SettlementsAuthor(s): Jim SullivanSource: Litigation, Vol. 8, No. 4 (Summer 1982), pp. 8-10, 59-60Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/29758722 .

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Achieving Better Settlements

by Jim Sullivan Law schools do not bother to stress the art of negotiating settlements. Yet, at least 92 percent of all civil cases filed in federal court settle before trial. So, somebody connected with the trial team needs to be a highly skilled negotiator.

Do not automatically assume that lead counsel should be the lead negotiator. Consider using someone else to ne?

gotiate and keep that first chair lawyer out on the bat? tlefield and away from the peace conference. Placing him in the negotiating role could be a mistake for several reasons:

? A trial lawyer must be fired up about the case, and settlement talks bank that fire.

? Settlement talks can be protracted, but trial prepara? tion must continue because trial is always possible.

? Preparation for successful settlement conferences re?

quires techniques that are different from trial prepa? ration.

? Most of the great trial lawyers are fighters, not peace? makers.

? An outside lawyer may not be sufficiently enthusiastic about a settlement that would terminate the need for his services.

The best bet for the role of chief negotiator often is the inside lawyer. The in-house lawyer can be invaluable in ne?

gotiating sessions. Since he continues to get paid after the case is over, he can be more objective. He also knows the client's people and what is acceptable industry behavior. He also may have better knowledge of the other side's in? side lawyer, especially in a case involving competitors, customers, or suppliers.

Lawyers should take cues from negotiation methods used

by diplomats and other professional negotiators. If their

techniques can turn enemy nations into friends and secure the freedom of hostages being held by maniacs, perhaps they can even be used to bring about rational compromises of commercial lawsuits.

Even experienced negotiators could benefit from books on negotiating techniques aimed primarily at nonlawyers,

The author is a member of the San Diego law firm of Sullivan & Jones,

and is a fellow of the American College of Trial Lawyers.

such as You Can Negotiate Anything, by Herb Cohen. Mr. Cohen and other masters of the art of negotiation teach that the first rule of successful negotiation is: you must

project awesome power plus the will to use it. Nations as different from each other as Russia and Israel fully understand and follow this basic rule. America under Carter did not become militarily inferior to Russia, but friends and foes alike perceived this nation as reluctant to use its awesome might. Similarly, America has not sud?

denly become more powerful under Reagan, but its

negotiating power is thought by many to be much greater simply because other nations perceive an increased will?

ingness to use that power. Many corporations have vast economic power, but only

a few are viewed as willing to use that power in a competi? tive or legal dispute. Similarly, there are many large and

powerful law firms. Each has highly competent lawyers who are experienced in discovery and motion practice. But there are only a few lawyers and law firms that regularly and convincingly project the will to try a business lawsuit. This may be because a large, highly publicized loss could

damage a firm's reputation. There are many cases that should never be tried because the risk of loss is too great, but it is especially important in such a case to project a will?

ingness to go to trial. The designated negotiator on the trial team should make certain that the correct image is be?

ing conveyed consistently to the other side.

Uncomfortable Enforcer It is not enough for the lawyers to convey this image to

each other. The client must understand the importance of

projecting the correct image to the other side at the

management level as well. A competent negotiator takes the other side's pulse constantly and looks for clues to answer one basic question: Is the other side serious about

going to the mat? Executives understand the importance of this image in

business negotiations and will quickly grasp the impor? tance of it in a lawsuit. Failure to explain this tactic ade?

quately could be disastrous. For example, in a lawsuit in?

volving an antitrust claim by one large company against

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another, a chance remark by an executive employed by the

plaintiff indicating that his company feels uncomfortable in its role as an enforcer of the antitrust laws will result in that side leaving a bundle of cash on the table. Conversely, a well-prepared executive's remark to the effect that the

company's honor is at stake and that the case will be

presented (or defended) as a matter of principle sends ex?

actly the right message. Also, be sure that all in-house

lawyers, whether or not members of the trial team, observe these rules, since they may have contacts at the other com?

pany and unwittingly convey a weak image. There are many ways the trial team can convince the

other side that they are not only willing, but eager, to go to the mat. First, at the very start of the case, send the

message to all outside and in-house lawyers that there is no

possibility of settlement because an important principle is at stake. Second, make certain that the lawyer in the first chair loves to try lawsuits and that it shows. Most impor? tant, convince the other side that you are preparing for trial diligently and enthusiastically and have no interest in

discussing settlement. The last message sometimes is difficult to deliver in a

believable way but it can be done. Try to convince the other side that they are dealing with a bunch of fanatics who in? sist on going to trial regardless of the cost or consequences. This can be done from the start if you write the last act first. Draft your closing argument and jury instructions first. If the other side receives a set of proposed jury in? structions when the case is only a few weeks old, they will

pay attention. A demand to videotape all depositions is also a clear signal that the case will be tried, since the

primary value of the videotapes is at trial and they are somewhat expensive.

A few examples might be helpful. Suppose you repre? sent a plaintiff with a weak case that is in whole or in part contingent. You must find a way to demonstrate the will to roll the dice. Assume an antitrust claim for $1,000,000 single damages, but that the best shot is realistically about $500,000, and the recovery range is $300,000-$500,000. The odds favor a defense verdict by about 3 to 1. Typically, the initial offer from the defendant will be nominal, perhaps $50,000. An appropriate plaintiffs response would be $1,500,000. This will prompt the other side to

point to your weakest points and to try to convince you that

your client cannot possibly win. An answer that increases

the odds against a win ("Sure, it's a 5 to 1 shot but it will

give our young lawyers a chance to hone their knives.") is

disconcerting to the defendant's lawyers, especially if the

aggressive young lawyers are pushed to the front while the

partner moves to the third chair.

This technique also can work for defendants. For exam?

ple, assume your client is charged with antitrust viola? tions, that evidence of the violation is clear-cut and that the plaintiff has a credible damage study indicating possi? ble single damages of $50 million. The odds are about 5 to 1 against a defense verdict and a loss would produce single damages of about $25 million. The plaintiffs trial team will be drooling over the case and will be enthusiastic in ex?

plaining their chances to the corporate client. Executives are not accustomed to dealing with fired-up and optimistic lawyers, so when outside and inside counsel give a written

opinion that the company "should prevail" instead of "could" or some gloomier lawyer-like term, they are sur?

prised. When the lawyers add that the victory would most

likely result in a $25,000,000 recovery but the recovery could be as high as $50,000,000, they are astonished.

They might even wonder if their lawyers are wrong, and that is a weakness the opposition must exploit.

Exude Optimism Since the plaintiff's lawyers seem so sure they have a

powerful case, its executives will expect an early settlement overture with a hefty opening figure. Obviously, members of the defense team must acknowledge that the exposure is

heavy. But the defense team in this case must convince

management to exude optimism consistently both inside and outside the company.

The trial team must also stay completely away from set? tlement negotiations. In a major business lawsuit there are

usually premier trial lawyers on both sides. Therefore, the defense team's assessment of exposure will be fairly close to the plaintiffs. More important, the plaintiffs counsel will know that the defense team recognizes that their client

really does not have a chance. It would be tactical suicide to use them to try to project willingness to use power to try a sure loser?they simply would not be credible.

Initial contacts regarding settlement should be made by one executive to another executive. Alternatively, the con? tact can be by an inside lawyer who is not primarily a trial

lawyer to a similar lawyer on the other side, or between an executive and an inside lawyer.

The key to success is to exploit the prevalent executive doubts about lawyers. Do not take it personally. However, top corporate achievers find it difficult to put up with cautious and negative people, and lawyers who give business advice tend to be exactly that. Defendant's

negotiator should not denigrate plaintiffs trial team, but

merely project a very positive, confident hard line.

The crucial image of the will to use power can start with the cross-claim or counterclaim. There is almost always some basis for some such claim in business lawsuits. The initial settlement overture from the negotiator for the defendant and counterclaim plaintiff might well be an of? fer of a mutual release for the payment by the plaintiff of

$15,000,000. If the plaintiffs negotiator is not very ex?

perienced, he may never recover from this unexpected shock.

9



The plaintiffs negotiator who is suddenly placed on the defensive often concludes that the other side sees

something highly significant that his side has missed. Do

they have a better expert? Are our lawyers misreading the law? How about the facts? How will my future be affected if I ride with our lawyers and we lose or get a marginal result? Can I force our lawyers to agree on a settlement sum that will minimize my career risk?

If this happens, the plaintiffs trial team is likely to be

grilled by management representatives: Is everyone agreed that recovery is a virtual certainty? Is everyone agreed on the recovery range? Can we safely rule out any recovery by the other side? Can we all agree on a settlement sum that would be a good, if not a great, result? It is as if the defendant's skillful negotiator has turned the plain? tiffs negotiator into an arbitrator.

The plaintiffs trial team will tell their negotiator that the whole thing is a giant bluff, that the defendant will not dare to run the risk of trial. "Just wait," they will say, "the defendant is sure to cave in." So the plaintiffs negotiator waits and watches. The defendant fights discovery battles as if preparing for a title bout. There is complete silence from the other side's negotiator. Why are they silent? Why are they obviously getting ready for trial? We seemed to have improved our position during discovery. They should

recognize that. Why not take their pulse? The skillful defense negotiator will stand firm and continue to talk about receiving dollars from the plaintiff.

Awesome Power

This strategy usually results in reassessment of the defendant's bottom line. The most likely result will be a settlement for about $15,000,000. The defendant's repre? sentative has saved $60,000,000 of the estimated

$75,000,000 in possible trebled damages. The plaintiffs directors will be pleased, and the plaintiffs negotiator will have a successful business career provided he stays away from any more negotiating roles. Plaintiffs trial team will shed the only tears, but they will not be too bitter and they will not last long. After all, they witnessed a classic exam?

ple of a successful result derived from the use of Settlement Rule One: The projection of awesome power and the will to use it.

Settlement Rule Two, used by professional negotiators, recognizes the importance of saving face. We recognize this need in our personal lives. Business executives know this is very important, and so do diplomats.

In our example, a clever negotiator probably could have extracted a few extra million dollars from the defendant, and the defendant would have been happy to pay them if it saved face. Is anything really gained by crowing about vic?

tory? Is it necessary to rub the other side's nose in it? Prob?

ably not. If it will assist in achieving a better settlement, consider agreeing to a provision stating that neither side will claim victory nor reveal settlement terms unless it deems that a response to an inquiry should be made, and

agree on a press release describing mutual releases and

agreement on a "commercial solution." You could also structure the settlement as a commercial transaction that will result in lowering the plaintiffs future costs or in?

creasing its profits by an agreed dollar amount.

The next rule used by skilled negotiators is to know your adversary and its representatives and the court. There are numerous ways to get to know the opposing company:

? Study its annual report and SEC filings.

? Check newspaper articles. ? Determine its cost for the product or service involved

in the lawsuit. ? Find out whether it is considered scrappy. ? Does it care about its reputation? ? What are its fiscal condition and its future prospects? ? Who reports to whom and what are the limits of dele?

gated authority? ? Who is the contact executive for each power center? ? What are the firm's short- and long-term goals? ? Has it established any deadlines? ? Has it ever gone through a big stakes trial or is it

regarded as a settler?

Look for these clues about the other side's chief

negotiator: ? Schools attended. ? Military service.

? What does "Who's Who" say? ? What is his employment history? ? What can be discovered about his personal life, in?

cluding religion, hobbies, etc.? ? How is he regarded in the industry? ? Does he maintain a regular daily and weekly

schedule? Work habits are extremely important, since timing is crucial in settlement negotiations.

Examine the opponent's trial lawyers. Start with the outside law firm in general:

? What percentage does business litigation work bear to the firm's total?

? Who runs the litigation section and what is he like? ? Who manages the firm? ? What is the firm's reputation and characteristics? ? Does the firm also handle any advisory work for its

client? If so, does it do so regularly and does it rely on that client for a good deal of income?

? Is its fee contingent or on an hourly basis, regardless of the outcome?

Analyze their trial team: ? Where does the first chair lawyer stand in the firm's

power structure?is he at the top or still on the way up?

? What about the lawyer's track record? Is he an expe? rienced trial lawyer? Does he talk and act as if the case will be tried? Is he calling the strategic shots or is someone else? Does that lawyer have the case orga? nized and have factual control? Is he from the old or new school of trial lawyers?

? What about the rest of the trial team? Are the people in the second and third chairs jockeying for position and, if so, how can this be exploited? Do the parale? gals act as if they expect the case to be tried? Is the trial team fired up or only going through the motions? Do any of the team members have trial experience?

Learn about the trial judge: ? Will the judge apply pressure to settle and even be an

(Please turn to page 59)

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judged by a single quarterly report. You cannot generalize about the

quality of judges or lawyers from ex?

perience with a single judge or lawyer. Litigation and those who serve it deserve the same test of time and breadth of evaluation accorded other institutions and persons. Most people would, I believe, con?

clude that litigation when viewed in

perspective, sows respect rather than mistrust. The respect comes from the

protection of individual and collective

rights. Few avenues allow private citizens a better opportunity to focus attention and seek reform than does a lawsuit. Usually brought for private ends, a lawsuit often has public ram? ifications. Many benefit from the few who participate.

The popular perception that liti?

gators sow mistrust to foment litiga? tion is at odds with my experience and observation. Clients consult lawyers because the clients have been unable to solve their differences directly. Litigators generally do not create or

prolong litigation but more often are the only ones capable of restoring the

relationship of the parties. Indeed, more creative lawyering and energy often goes into our peacemaking role than our trial role.

It is also likely that much of what

goes right does so because the courts are open to those who would otherwise be wronged. And, when courts are criticized for excessive activism, ask who else stands ready to correct the

wrong. Generally, Jethro Lieber man's observation holds up:

The controversies in which

judges have been the most

roundly condemned for over?

reaching?racial equality, reap portionment, prison and mental

hospital reform?are precisely those areas in which the institu? tional breakdown was the great? est.

Finally, consider how much indi? vidual security and institutional sta?

bility results from Americans' races to the courthouse instead of to the streets. In the past 40 years, the power of the federal government has been

greatly extended and economic deci? sion making has become increasingly concentrated. In that environment the individual lawsuit has become

society's most important counter? balance.

All of this is not to say that there is not room for vast improvement in the way we resolve disputes. There is, and

litigators should initiate those

changes. We need more and better statistics.

We should explore new ways not only to reduce expense and delay, but to

improve the quality of justice. We should question simplistic solutions to reduce court backlogs that erect new barriers to access.

Lawyers and law schools must focus not only on how better to try a lawsuit but also on how better to re? solve a dispute. Three years of inten? sive study directed only at the litiga? tion process is not enough. Law schools must teach how to diagnose what methods are best to resolve var? ious kinds of disputes and then train students how to carry through with those techniques.

The macho mentality that only jury trial lawyers deserve respect and that other lawyers "eat quiche" is ego gratifying but wrong. The jury trial will remain, as Wigmore once said, "the greatest legal engine ever in? vented for the discovery of truth." But

lawyers should take pride in design? ing and applying other means of re?

solving disputes. Not "winning," but

serving the client's best interest is the

goal.

Finally, as we apply the litigation process, I commend to all of you the advice of one of my most respected partners. Constantly reverse roles: it is the best way for testing the weak? ness of a proposition or a process. If

you were the litigant instead of the

lawyer, would you benefit from litiga? tion? How much litigation would you buy at what hourly rate or contingent fee? Is litigation more likely to pro? mote a fair resolution than sow mis? trust and exacerbate the wrong? And, from the prospective opponent's point of view, is the purpose of the lawsuit or its defense not only legally permissible but ethical and fair?

If we recognize and respond to re?

sponsible criticism, articulate and ad? vocate meaningful reform, and occa?

sionally test ourselves by reversing roles, I am certain that litigation will

remain, as Lieberman predicts, the "hallmark of a free and just society."

* * *

As I close my last Opening State?

ment, some parting comments seem

in order. It has been a great privilege to address the membership through Litigation. It has made me acutely aware of the outstanding efforts of those who regularly contribute to and edit this journal. It is a Herculean task performed with great distinc? tion. I have been proud to be associ? ated with Litigation and with all of

you. Thanks for your interest and

support.

Better

Settlements

(Continued from page 10) active participant in settlement conferences? If so, you must con? dition your client so that the ex? ecutive who attends such con? ferences will not be surprised when the judge pokes holes in his case.

The last fundamental rule used by top negotiators recognizes the impor? tance of timing. Japanese business? men are masters of the art of timing and generally can out-wait and thus

out-negotiate Americans. Most suc? cessful American businessmen and

lawyers operate on a tight schedule. It is important to remember that major decisions are never made until close to the end of scheduled meetings or con? ferences. If a one-hour negotiating session is scheduled, there will be 55

minutes of sparring. If three days are

scheduled, not much will happen un? til the final hour of the last day.

So, find out about the other side's travel habits and plans and how much time they have set aside for the settle?

ment conference. Spar and avoid

making any commitments until the other side's negotiator is starting to

worry about catching a plane or train. An inexperienced negotiator who is

away from home will always do two

things wrong: ? He will check out of the hotel in

the morning of the last day of the

meeting; and ?

Bring his luggage to the meeting. This means that he intends to catch a

plane and nothing will stop him.

Do not worry about your own

59



schedule?it can be revised. If you are out of town, force yourself to leave your luggage in your room. Do not check out of the hotel. You must con? dition yourself to act like you have no deadline.

Trial teams must learn to apply modern settlement techniques. The stakes in modern business litigation and the size of the attorneys' fees in? volved are too high to settle cases without using the most persuasive methods. If you do not use them, you will find the opposition using them

against you.

Using

Zoning

{Continued from page 46)

ing board would make a change. See, e.g., Board of Commissioners of State Institutions v. Tallahassee Bank & Trust Co., 100 So. 2d 67, 70 (Fla. Dist. Ct. App.), cert, denied, 101 So. 2d 817 (Fla. 1958); Masheter v. Ohio Holding Co., 38 Ohio App. 2d 49, 313 N.E.2d 413 (1973), cert, denied, 419 U.S. 835 (1974); Department of Public Works &

Buildings v. Exchange National Bank, 31 111. App. 3d 88, 334 N.E.2d 810 (1975); McAlester Ur? ban Renewal Authority v. Lorince, 499 P.2d 925 (Okla. 1972).

If the court finds that the real pur? pose of a particular zoning regula? tion is to minimize the cost of ac?

quisition or was the first step in the

acquisition process, the owner may have his property valued without reference to that zoning ordinance. Board of Commissioners of State In? stitutions v. Tallahassee Bank & Trust Co., supra; Dade County v.

St?h 377 So. 2d 689 (Fla. 1979). As in most trials where factual

presentation is the key, carefully planned and prepared exhibits are essential to success. Exhibits that command interest are even more

important in eminent domain cases that judges are known to dread and that, unless imaginatively prepared, can put the jurors to sleep. If possi? ble, use key exhibits in voir dire and

opening statement.

A very effective exhibit for a reasonable probability of rezoning presentation is a large scale aerial

photograph to which separate color coded acetate overlays representing appropriate time intervals are added. If a separate overlay is

prepared for each year (or even a six month period if changes are more

frequent), one color can show rezon

ings, another color could show re? cent construction in the area, another color could show proposed changes, and yet another could show current actual land uses. If these

overlays are carefully prepared, a

powerful case can be built as each

overlay hammers home another cru? cial point.

Another helpful exhibit is a sketch or rendering showing the proposed use prepared by an architect or land

planner. The condemnor's attorney often will try to exclude such an ex? hibit from evidence, correctly argu? ing that the frustrations of the owner's plan may not be considered

by the jury. The evidence is admissi?

ble, however, for the limited purpose of showing a proposed highest and best use. See United States v. Cor onado Beach Co., 255 U.S. 472

(1921). See generally 5 Nichols on Eminent Domain, ch. 18.11(2) (3d ed.). This device should be used with care. If the difference be? tween the physical inspection of the

property and the rendering of the

proposed project is too great, the shock may send the case into a

tailspin. Also, the architect or plan? ner may not be as well versed in the theories and facts underlying the case as thoroughly as the appraisers or may disagree with the appraisers and, therefore, may be very vulnerable on cross-examination.

Sometimes it is better to let each

juror conjure up his own pleasant mental image of what can be done on the property.

Even if your probability of rezon?

ing case is ironclad, you may still have problems. The existence of a restrictive covenant on the land may preclude consideration by the jury of the rezoning issue. In most jurisdic? tions the owner can urge that there is a reasonable probability that the restrictive covenants also can be removed. See Annot., 22 A.L.R.3d 961 (1968). Check the law in your jurisdiction and the chain of title on

your property before you get to this

point. If a problem appears, it may be possible to have the restrictive covenant removed by agreement of all interested parties prior to the valuation date, avoiding the problem entirely. Where the condemning authority

takes title to the property by declara? tion of taking, the trial is likely to oc? cur a year or more after the valuation date. Although it is universally true that the property must be valued as of the date title passed, one eviden?

tiary issue that is likely to arise is whether the appraiser can consider actual or proposed rezoning activity after the valuation date.

Delay Rezoning Where the condemning body is

also the zoning authority there is a natural tendency to delay any rezon?

ing of nearby or similar property un? til after it has acquired title to the

property. The forces that cause the similar property to be rezoned, although present at the valuation

date, may not result in the rezoning of similar property until a much later date. In State v. Gorga, 45 N.J.

Super. 417, 133 A.2d 349 (1957), aff'd, 26 N.J. 113, 138 A.2d 833

(1958), a change in the zoning or? dinance that occurred ten months after the valuation date was held

properly admitted. The court reasoned that the evidence sup? ported the factual claim that on the date of taking the parties to a volun?

tary sale would have recognized and been influenced by the probability of an amendment in the near future in

fixing the selling price. If construc? tion of the project itself was the sole cause of the change in zoning, the rule probably would be different in most jurisdictions.

Changes that occur after the valuation date can be very helpful and persuasive in showing the ultimate result of the forces that were present in the market on the valuation date. Interviews with owners and research in zoning files will often reveal that the original ap? plications or, at least, the factors on which the applications were based, were in existence at or near the valuation date. Because these are

public records, they presumably would be known by well-informed

buyers and sellers.

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achieving better settlements

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