Navigating the Litigation Conversation:
Confessions of a Litigator Turned General Counsel Turned Mediator
ack when I was still litigating, before my general counsel days, I was invited to mediate cases for the federal court in San Francisco. Having already litigated for two decades and advocated through many mediations in the process, I thought the mediation work would be, frankly, simpler. Counsel and clients would share their perspectives, and I would help them settle by, among other things, helping them to handicap the likely litigated outcome. But it wasn’t so simple. Not by a long shot. Many times counsel and clients would see things as I did; other times their view of their prospects vastly differed, and those differences remained a puzzle. Where a settlement did not come together, as a sanity check, I began regularly asking counsel to update me of the eventual litigated outcome so I could compare it with where I thought the dispute would end. To the benefit of my sanity, these updates typically matched my prior view of where things would likely end, including all of the good, bad, and ugly consequences for the parties. So I wasn’t crazy, at least most of the time. However, still unanswered for me for several years was what was driving some counsel and clients to unrealistic views of the strengths and weaknesses of their positions. Fast forward a few decades of litigating, managing disputes, and mediating, and the contributing factors became more apparent. Rather than take the easy bait of blaming lawyers for keeping the meter running longer than needed, many answers instead arise from behavioral studies of how lawyers and clients process, filter, accept, and reject information and form positions—often at the expense of grounded decision-making. A few examples should help here: •• In a series of studies comparing pre-trial settlement options rejected by counsel with the eventual outcome of those disputes, the findings show that most plaintiff’s counsel optimistically err to the detriment of their clients by turning down better offers than the amount they actually recover1. On the defense side, that initially sounds pretty good, meaning that defendants on average fare better by fully litigating a dispute than by agreeing to the pre-trial deal on the table. However, when defendants lose, the magnitude of their errors are 10 times as large or larger, and that’s before even factoring in the full direct and indirect cost to clients of litigating the dispute to its end. Obviously this is not a good outcome for clients or client relations. •• Other behavioral studies focus on client perspective, examining such phenomena as cognitive dissonance and reactive devaluation, whereby clients (and all of us) filter information we receive, holding onto the information that seems to affirm our pre-conceived notions much better than the data that cast some doubt. In other words, we hear what we want to hear and often disregard if not seriously underweight the contrary evidence. As one manifestation of this phenomenon, a recent study of litigants’ perceptions found that 57% of litigants believe that they had at least a 90% chance of winning, while roughly 24% believed they
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had a 100% chance of winning 2. I confess to having picked law school in part because there was little math involved, but even I know those numbers don’t add up. So what gives? These behavioral studies point to two things: Litigators on average are overly optimistic about their clients’ prospects, and their clients are all too happy to accept the rosy forecasts— indeed to sear them into their consciousness—and disregard the cautions, conditions, howevers, and on-the-other-hands. Now apply these concepts to client-counsel discussions at the outset of a dispute, and a strange brew is concocted. Specifically, imagine the scenario many of us have experienced—namely the request for proposal (RFP) or “beauty contest” where counsel pitch for work on a litigation matter and clients decide who to hire. A typical pattern involves a public filing of a complaint followed by many firms who monitor such filings and pitch for the representation. Clients—corporate officers and in-house counsel—invite or accept proposals that typically define the desired outcome as winning the dispute at hand. Counsel in turn then shape their proposals around the prospects of winning and the likely cost to get there. Rosy predictions and lower cost projections are better received than the other kind, counsel oblige (remember it’s ingrained in most of us), and clients often respond more favorably to the rosiest predictions (ditto here as well), retaining those optimistic forecasts with elephantine certainty to and through the later mediation process. Hence, it should come as no surprise that clients when surveyed say (and appear to believe with way too much conviction) that most of us will win almost all of the time. So what to do? A few thoughts from a litigator turned general counsel turned mediator:
•• Focus the RFP on ending the dispute as soon as possible. Notice I didn’t use the words “win,” “prevail,” or “not lose,” because the goal of almost all lawsuits should be to end them as quickly as feasible both because of the risks of the calibration errors discussed here, as well as the fully allocated net cost of most litigation in terms of fees, costs, disruption, and loss of focus on the client’s real business (which is rarely litigation). Resist the notion that the dispute is more significant than it really is—whether from your business partners, your in-house team, or outside counsel. With a vigorous discussion, the real answer often is that it a litigated “win” less valuable than the cost, disruption, and dislocation of a fully litigated dispute when measured against all available alternatives. This is easier to say than to implement, because decision-makers may be passionate about vindication or prevailing for reasons more important to them than to the big picture. But a reasoned conversation or two (sometimes more) about realistic options and the total impact of a fully litigated dispute often leads to a better decision and avoids the Pyrrhic victories that can otherwise take place.