June 7, 2012

Don’t Play Chicken With Your Case: The Settlement Series, Part Two

By Dr. Ken Broda-Bahm:

There is a perspective on negotiations focusing on tactics, secret strategies, or tricks. The problem with this tricks-based approach is that once you have two sides who think they know the tricks – like “never make the first offer,” – then you’re headed for a stalemate faster than a game of tic-tac-toe played by someone older than four. One such negotiating tactic is playing chicken, or taking an extreme and inflexible stance in order to force the other party to bargain down or face an even greater possible loss. At a time when approximately two percent of legal disputes are ended by a trial, the walk-up to trial itself is often a game of chicken. The strategy is to stick with an improbable “we’ll see you in court” message for as long as possible in order to bring the other side around to your settlement demand.

But is playing chicken an effective tactic? While the threat of some sort of less favored alternative always plays a role in negotiations, the problem with communicating inflexibility is that it is too often believed. It can end up simply motivating a parallel approach, just as righteous and steadfast, from the other party. This post, the second in our series on the psychology of legal settlements, looks at the game of chicken from a couple of different angles, and provides a few bits of advice on avoiding stalemate when trying to resolve your case.

Example: The Once and Future Debt Ceiling Debate

Remember the political fight last summer? A heretofore routine request to increase to the federal debt ceiling touched off an escalating struggle between congressional Republicans and the Obama administration where, for months, the only apparent adjustment was for the parties to harden their positions and escalate their rhetoric. “Both sides are playing chicken,” Sebastian Mallaby put it at the time in a brief from the Council on Foreign Relations, “Both may swerve enough at the last minute to avert a collision. But games of chicken can be hard to exit. Leaders can get trapped by their own angry rhetoric: Having denounced your opponents as extremists, it’s hard to explain to your partisan base why you decided to compromise with them. And recall what happened in the famous game of chicken in the James Dean movie, Rebel Without a Cause – Buzz Gunderson got his jacket tangled in the car door handle and drove off a cliff.”

As it turned out, the political debate didn’t end with a cliff, but it may as well have, since many analysts attribute the reduction in the country’s credit rating to the fissures revealed in this dispute. And the same dispute is just getting ready to play out again this summer. Tactics can be habitual even when they aren’t effective.

The consequence of hardened positions, in either politics or litigation, are predictable — and often predicted. But the parties end up being bound by the tactic. “Chicken is used in competitive negotiation by bluffing and threatening in order to get what you want,” a current negotiation primer (Lewicki & Hiam, 2006) advises. “The problems with this strategy are that it has very high stakes and you must be willing to follow through on your threat.” In legal cases, the threat – or the cliff – is generally trial. It remains a possibility, of course, but when your interests are better served by avoiding it, you want to make sure that your negotiating posture isn’t entangling you in a course that is taking you to the courthouse.

A Few Simple Rules for Legal Settlement Negotiations

1. Don’t Waste Time on Nonstarters. The problem in the debt ceiling debates, both past and present, is that the two sides are starting with positions that they know will be rejected by the other side. Republicans want deep and dramatic spending reductions and/or a balanced budget amendment, which Democrats will not agree to during a recession. Democrats want tax increases on upper incomes which Republicans have pledged not to enact. Both sides start with, and stick to, a proposal that the other side considers a nonstarter.

The same can happen in litigation. I once sat in on part of a mediation with a group of lawyers for the defense. When the mediator came in the door with the plaintiff’s first offer — an incredibly high demand from our perspective. “We’ll take it!” the client representative replied in a chipper voice. The entire room including the mediator burst out laughing in response to the obvious sarcasm — after all, who would expect that the offer would actually be accepted? But as I looked around the room at probably twenty attorneys all billing high rates, it occurred to me that this posturing takes time, and time literally is money in this case. Granted, the initial demand can sometimes be made merely to establish a range and not determine a result. But when it comes to subsequent numbers, why not spend the time where it is most likely to lead to a realistic deal?

2. Don’t Waste Time on Tit for Tat Negotiating. Writing in the Maryland Injury Lawyer Blog, Ronald V. Miller illustrates the common approach of negotiating by saying, “We’ve come down by $100,000 so you need to come up by $100,000” or vice-versa. Reciprocity is a strong principle in human relations, but in the case of settlement negotiations, the two sides aren’t exactly in the same boat. As Miller explains, “the problem is that many adjusters think that plaintiffs have no ceiling on the amount that they can demand, whereas defendants can never offer anything less than zero.” For that reason, the sacrifice in the plaintiff’s reduction is not parallel to the sacrifice in a defendant’s increase.

The problem with the approach is also that it is blind to the case itself. If you’re are haggling over money alone, then you could be talking about anything. Instead, you should be focused on a case with merits that influence the ultimate resolution. We’ve written before that it helps if you separate the “positioning phase,” where you argue merits, from the “bargaining phase” where you make offers and counteroffers, but those stances should still be based on some measure of case value.

3. Base Your Demands on Law and Specific Case Analysis. Ronald V. Miller also stresses that numbers need to be grounded in reality. “If you are demanding the cap in a soft tissue injury claim, you are also sending the wrong message. Similarly, when you demand $5 million in a case where your cap is $2 million, you are sending the same ‘I’m not exactly sure what I’m doing’ message.” While caps help to frame the appropriate range, they have the disadvantage of being blind to the circumstances of your case. A more specific measure of potential exposure or opportunity can often be found in pretrial research. When several panels of mock jurors are reacting to both side’s summary arguments and deciding on the value of a specific case, that can provide very useful information. Of course, the research design has to be customized to that purpose: If mock jurors hear little to nothing on damages, then their deliberations on numbers won’t have much value – the reasoning they use can be interesting, but the values themselves are much less important. If instead, the project is designed to focus on case value and the mock jurors hear each side’s basis, then the resulting discussion and decision can help to set your expectations on a reasonable range. While it isn’t a prediction of trial outcome, when the research is done right it is substantially better than a guess.

One way out of the game of chicken is to hope for capitulation by the other side before you go over the edge. The other way out is not to play the game in the first place. That doesn’t mean giving away the farm, but it should mean focusing on offers and counteroffers that are fair, realistic, and grounded in a specific analysis of your case.


Posts in the Settlement Series: 


Other Posts on Negotiations: 


Lewicki, R.J. & Hiam, A. (2006). Mastering Business Negotiation: A Working Guide to Making Deals and Resolving Conflict. Jossey-Bass. 

Miller, R. V. (December 10, 2009). Settlement Negotiating Psychology: “Tit for Tat” Negotiating Ploys. Maryland Injury Lawyer Blog. 

Photo Credit: The Pain of Fleeting Joy, Flickr Creative Commons


Related Posts Plugin for WordPress, Blogger...