A law school professor once opened a class with the observation, “This morning we will be considering a case from the Ninth Circuit.  Nevertheless….” 

The U.S. Supreme Court has granted cert in AT&T Mobility v. Concepcion, which has claimed the attention of many ADR wonks for its ramifications on class action waivers in arbitration clauses.  I read a more alarming teaching in the Ninth Circuit’s holding:  namely, that the purpose of a civil court is not to make deserving claimants whole, but to punish defendants that owe them the money beyond the amount of the money they owe them. 

That is to say, offering to pay a claimant a hundred cents on the dollar is not justice enough. 

The facts are these:  When AT&T advertized “free cell phones” it did not state that California sales tax on the value of the phone would have to be paid.  So claimant Vincent Concepcion hired a lawyer and sued in California state court seeking $18.60 on behalf of himself, and another untold millions on behalf of every person in California who had accepted a free cell phone.  AT&T moved to stay the court action on the ground that the cell phone agreement contained an arbitration clause. 

The arbitration clause provided that AT&T would pay the arbitrator’s cost and, if the arbitrator found that AT&T owed the claimant more than AT&T’s offer, would pay the claimant another $7,500.  This policy was, all agree, an incentive for AT&T to offer to settle all claims submitted pursuant to the process at  100% of their value, and for customers to accept that offer.  It was designed to make consumers whole, out of court.

In addition to every imaginable consumer protection (waiver of AT&T fees, no waiver of small claims court, no confidentiality, full court remedies including injunctive relief, AAA consumer arbitration rules, proceedings at consumer’s location, etc.) the arbitration clause featured a class action waiver.  That is, the claimant agreed not to take part in a class action with respect to the claim arising from the agreement.

After first renewing his service agreement with AT&T, Concepcion pursued his court case on the ground that the class action waiver rendered the entire arbitration agreement unenforceable.  This argument seemed to be “You owe me $18.60 and you can’t make me accept it!”  He won at the trial level and won again at the Ninth Circuit — victories that must have taken quite a chomp out of his $18.60.

I focus on only one aspect of this perplexing decision.  The Ninth Circuit accepts that AT&T is prepared to pay Mr. Concepcion every cent that he claims he is owed.  But it adopts the posture of the California Supreme Court in holding that the purpose of class actions is not to provide efficient treatment of multiple claims with the attributes of numerosity, commonality, typicality and adequacy, but rather to “serve the important policy function of deterring and redressing wrongdoing….” 

Thus, the fact that AT&T has given consumers an incentive to assert claims, and itself an incentive to satisfy them, is irrelevant to the court.  “We must determine only whether the [procedure] provides adequate incentive to pursue individual arbitration, not informal resolution.”

Indeed, the Ninth Circuit is explicit in expounding on this Alice-in-Wonderland logic:

AT&T will simply pay the face value of the claim…. Thus, the maximum gain to a customer for the hassle of arbitrating a $30.22 dispute is still just $30.22. … As a result, aggrieved customers will predictably not file claims… thereby “greatly reduc[ing AT&T's] aggregate liability. [fn 7]

In my life, if I got paid $30.22 every time somebody owed my $30.22 I’d be overjoyed.

The court’s logic seems to be that our justice system is not there to make sure that people who file claims get their claimed damages, but to make sure that defendants pay all claims, including ones that have not been made.  (While bemoaning the civil claims that are not pursued, the court conveniently ignores the infinitessimal number of members of putative classes who choose to participate in ultimate classwide relief — a rate some estimate at as low as 3%.)

I was involved in a case once where the claimant had bought a game from a big toy chain, and it looked like the box had already been opened.  His attorney brought an action against the toy chain on behalf of every purchaser from any store in North America, seeking the cost of “every used toy that had been fraudulently sold as new” as well as punitive damages, attorney fees, etc.  We took a picture of a 10′ x 14′ sign in the front of the store that announced: WE WILL GLADLY ACCEPT ANY UNSATISFACTORY PRODUCT YOU WISH TO RETURN WHETHER PURCHASED AT THIS STORE OR NOT and handed the photo to the court.  We got summary judgment.  The reasoning?  The claimant, and all claimants he purported to represent, could be made whole simply by returning the defective game to the store, no questions asked.  No class action, no law suit, and no lead attorney’s fee.

AT&T Mobility v. Concepcion seems to be at odds with this logic.  It seems to stand for the proposition that court procedures exist for a purpose independent of making claimants whole in an efficient and effective way.  In opining on convoluted esoterica of waiver, class actions, unconsciounability, arbitration and so on, the AT&T Court marginalizes, or even ignores, the underlying purpose of the whole exercise: How to provide consumers with meaningful redress for damages.

At the ABA Annual Meeting, in the course of a panel on arbitration developments, veteran arbitrator Deborah Rothman tee-ed up a fascinating challenge.  Clients regularly engage consultants in litigation.  Why not in arbitration?

Indeed, isn’t the value of a consultant in arbitration much more evident?  Arbitration has special challenges, different legal standards, truncated discovery and a distinct enabling procedural statute.  And the unavailability of appeal puts far more emphasis on getting a right outcome.  Rothman suggests that a very strong argument can be made for the arbitration consultant.

Arbitrators rarely see well-considered arbitration agreements.  Some contractual arbitration clauses are pathological.  Yet the arbitration panel is bound by the terms of that agreement.  An expert who is steeped in arbitration law and practice can be of invaluable assistance in the drafting of the agreement, and subsequently in urging a panel’s interpretation of an agreement on terms favorable to the client.

During a trial, jury consultants are broadly accepted.  Why is there not a similar receptivity to arbitration consultants?  They can help an adocate and her client through sticky problems such as putitive class treatment, limits of discovery, seeking information from parties who are not signatories of the arbitration agreement, and other issues that are unique to the arbitration process. 

A consultant who is familiar with members of the arbitration panel can also offer invaluable advice on tactical matters.  Would this panel welcome an argument stated this way or that?  Would the proffer of this evidence, or that brief, be received favorably?  How can a point be presented to avoid (or, if sought, to provoke) an emotional response from the panel? 

How can the proceeding be conducted to minimize (or maximize) the likelihood of establishing grounds for vacatur?  When does an advocate press a panel and when does she defer?  How should the panel be selected in the first instance?  What information should be sought, and what questions should be posed, in pre-selection interviews of prospective arbitrators?  How does one prepare for and conduct case management conferences, including seeking protective orders and other matters of unique importance to the client?

Rothman terms the arbitration consultant “a second set of neurons.”  That is to say, it reflects not at all on the competency of counsel to engage on the team a consultant whose experience and instincts are a complement to — not a substitute for — counsel’s own.  Taking a collaborative posture with counsel and client, the consultant enables counsel to take advantage of the flexibility that characterizes the arbitration proceeding, to yield both the legal and business result that the client seeks, and also to create an environment condusive to negotiation with the counterparty towards mutual business gains.

Nor are consultants suitable only in “bet the company” arbitrations.  A consultant can offer insight into how to “streamline” a case, how to respond to “scorched-eath” discovery demands, and how to get the best outcome for the least financial outlay.  Having a second, arbitration-specific, pair of eyes review critical pleadings and briefs may result not only in heightened probability of success, but also in substantial savings of money.  This is particularly true where the consultant has served with one or more panel members in the past.

Deborah Rothman has raised an interesting prospect, and I will be curious to learn whether the bar picks up on it.

Last Spring, the ABA Sections of Business Law and of Dispute Resolution featured several programs anticipating the release of the Protocols for Expeditious, Cost-Effective Commercial Arbitration promulgated by the College of Commercial Arbitrators.  The Protocols are the main product of the multi-party Summit that was convened by the CCA in October 2009.

The Protocols have now been released in final form and are available here.  I encourage attorneys, arbitrators and users of arbitration to print out a copy and study it carefully.

On Saturday of the ABA Annual Meeting a group of judges presented a panel on “ADR in the Business Courts: How Commercial Judges Encourage Settlement.”  Joining Vice Chancellor Don Parsons (Delaware), Judge Steven Platt (Maryland), Judge Ira Warshawsky (New York) and Judge Ben Tennille (North Carolina) were Bankruptcy Judge Elizabeth Stong (Eastern District of New York) and New Jersey attorney Robert Margulies, who was instrumental in framing the presumptive mediation program for the state courts of New Jersey.

Judge Stong has been working ADR for 20 years; we first met in her capacity as Willkie Farr’s representative to CPR Institute, well before she went on the bench.  She told the story of settling a matter (while in private practice) during summation of a 6-month trial.  She said all parties knew it would never be decided by a jury, and all wished the settlement could have come earlier, yet no one seemed able to do it.  Whence the ineffable role of the judge.  The Local Rules of the Bankruptcy Court of the Eastern District of New York permit a judge to require mediation.  This judicial intervention “takes the onus off the lawyer,” she said, and facilitates timely discussion of settlement parameters.  Sometimes the mediators are other judges and sometimes they are paid outside mediators.  (I am listed on the EDNY Bankruptcy Panel).  But it is designed to reduce the chances of the kind of trial she endured as a young lawyer. 

Judge Platt reported on the Mayland system that assigns a case to a single judge from filing to conclusion.  Assignment to the “Business and Technology Program” includes a willingness to engage in ADR conducted by mediators who are trained with 40 hours of initial work and another 8 hours per year. 

Judge Warshawsky noted that the New York State system has had commercial courts since 1993.  Judges can refer cases to mediation, but the power is exercised sparingly.  Initially the mediator panel was pro bono; now the first session is without charge and the parties may continue on a paid basis if they elect to do so. The court offers free 40-hour training.  The Judge considers that the mediation system “has to work” because the system can’t provide justice to all of the cases that are filed.  He believes that, in matters where mediation is not attempted, counsel bear responsibility.

Vice-Chancellor Parsons reported that the Delaware Court of Chancery has a mediation program by rule.  The court seeks to be the finest business court in the country, and provision of mediation is therefore a necessary component.  Mediation may be by another judge or by an external mediator.  Parties seeking judicial mediation are charged $5,000.  Mediated cases are reported on a separate docket and the proceedings are confidential.  The program is new; so far 17 cases have been mediated and about half have settled.  The judges are also available to mediate a matter that has not been filed as a pending case, for a charge of $10,000. 

Robert Margulies shared his recently coined term for the nature of modern business law: “liti-gotiation.”  So pervasive has settlement discussion become in the litigation process, he said, that (at least in New Jersey) you can’t think of one without implicating the other.  The observation comports with the metrics: In the New Jersey state courts there are 100,000 filings per year, but 1,800 trials per year.  So the courts are where things get settled, not where they get tried.

With the kind permission of the Pepperdine Dispute Resolution Journal, attendees were treated to a handout of a draft article, “Getting to Yes in Specialized Courts: The Unique Role of ADR in Business Court Cases,” by Judge Tennille, Lee Applebaum and Anne Tucker Nees.  The full article will appear in Volume 11, Number 1 of the Journal.

One of the most in-demand items at the ABA Annual Meeting was a seat at the Moscone Center for the panel titled “Shaping the Law: A Solicitor’s General Roundtable.”  The misplaced apostrophe notwithstanding, it was enlightening and a lot of fun.

Participants on the panel included Charles Fried (SG for President Ronald Reagan, 1985-89), Kenneth W. Starr (President George H.W. Bush, 1989-93), Drew Days (President Bill Clinton, 1993-96),  Gregory Garre (President George W. Bush, 2008-09) and Edwin Kneedler (Acting Solicitor General for President Barak Obama, 2009).  Theodore Olson (President George W. Bush, 2001-04) could not attend as scheduled because he was appearing that morning before Judge Walker, just a few blocks away, to argue the stay of that Judge’s recent order invalidating the California statute prohibiting same-sex marriages.

The panel was confronted with several questions that seemed straightforward but posed layers upon layers of substance.

WHO IS THE SOLICITOR GENERAL’S CLIENT?  General Fried said it was the government of the United States — as distinguished from the people of the United States, or the President of the United States, the Legislature of the United States, or the “Tenth Justice” of the Supreme Court of the United States.  General Days further explained that the Solicitor General does not make policy, while the Department of Justice and the Attorney General do.  General Starr called the office “the Article II creation of the Executive Branch, created by Congress.”  (Those interested in pursuing this topic are urged to review a great article by Seth Waxman on the historical context of the office.)

The enabling statute, enacted in 1870, created the Department of Justice and the Solicitor General who was to be “learned in the law” and was to “assist the Attorney General in the performance of his [sic] duties.”  A central duty of the Solicitor General is to defend laws enacted by Congress — including laws that are passed over a presidential veto.  Moreover, the Solicitor General is not restricted to practice before the Supreme Court — the General also can (and occasionally does) argue before lower federal courts, or indeed any court, when it is important to convey the interests of the United States.  Indeed, one of the panelists, Edwin Kneedler, had only weeks before appeared in federal District Court and  successfully argued in favor of a preliminary injunction staying the enforcement of the Arizona immigration statute.

HOW DO YOU DETERMINE THE INTEREST OF THE UNITED STATES IN A GIVEN CASE?  The Solicitor General’s office sends requests for memoranda to all government departments and agencies, seeking both statements of interest and legal rationale with respect to matters before the courts.  And, according to all of the panelists, they get back materials of outstanding quality.  General Garre said that the “process elicits very helpful information from a vast resource, to learn of various interests,” including the impact of litigated matters on federal legislation.  The requirement of legal analysis, not just statements of preferred outcomes, means that opposing views among departments and agencies are very frequently resolved in discussion and debate.

General Starr nevertheless emphasized that the President is “The Boss.”  The office runs independently but the President, as Chief Executive, will very infrequently overrule an intended position.  If the Solicitor General is offended by that, the proper course of action would be to resign at the appropriate time and in the appropriate way; but things do not come to that.  General Days recalled just one instance where President Clinton directed the withdrawal of a proposed brief, and all panelists consider that the president acts entirely appropriately in doing so.  General Days also recounted his job interview with President Clinton, who asked him “Professor Days, what’s the difference between the authority of the Solicitor General and of the President to assert the interests of the United States in legal proceedings?”  Days’ response:  “Mr. President, you’re in the Constitution and I’m not.”

WHAT IS THE ROLE OF THE PRINCIPLE (A/K/A “POLITICAL”) DEPUTY SOLICITOR GENERAL?  General Fried explained that, from time to time, sensitive and delicate decisions need to be made that have social or political implications.  It was awkward, and in some respects inapproriate, for the President or the Office of Legal Counsel within the White House to communicate such concerns directly to the Solicitor General.  The creation of the office of Principle Deputy was very welcome, he said.  The others agreed.  The Principle Deputy is a presidential appointee and receives and discusses concerns that, entirely appropriately, emenate from the Executive.  The effect, according to Fried, was to gain advantage for the professional staff of the Solicitor General’s office, immunizing them from concerns that are directed instead to the Principle Deputy.  The Principle Deputy thus tends to preserve, rather than to dilute, the independence of the office. 

General Kneedler added that the position is both a buffer and an explicator; when other departments challenge or protest a decision made by the Solicitor General, the Principle Deputy is appropriately the one to explain the “big picture” and assure the various constituent agencies that they have been heard and not merely ignored.

The topic continued into the role of the Solicitor General in mediating among fueding agencies and departments.  Almost without exception, General Starr said, agencies accept the decision of the Solicitor General as to which writs for cert to support and for which position.  It is inapproriate for an agency to appeal to the Attorney General or the president.  General Days said this practice obtains because the Solicitor General will frequently meet with heads of agencies to ensure that they know they are being heard.  He related a telephone call from the Secretary of the Army, after making a decision against the Army’s recommendation, and hearing on the other end, “General, I understand that you have decided against our recommendation and I’m calling only to let you know that I appreciate the attention you gave us and respect your decision.”  General Friend recounted an extremely unpleasent difference in views between the Controller of the Currency and the Federal Reserve.  But it is broadly understood that any agency that goes forth independently, intending to appear before the Supreme Court without the endorsement and approval of the Solicitor General, will lose.

WHAT HAPPENDS WHEN ADMINISTRATIONS — AND POLICIES — CHANGE?  General Fried said that, during the early Reagan years,  he “frequently” had been obliged to press a position that he knew the justices didn’t like and that hadn’t been taken by prior administrations.   In such a posture, he said, you of course go forward; but the brief must be “perfect.”  No overstatement, no oversight.  General Days said it comes down to what all appellate lawyering comes down to: What arguments can be mustered, what record can be built to justify the change in position.

Each panelist agreed that it is an error to gear argument to a particular Justice.  An appeal is directed to the entire court.  In answering questions one is aware of the leanings and concerns of various members, but the brief itself is the “correct” statement of the law that can be relied upon by the entire court.  General Fried added that to do otherwise would be “transparent and offensive.”

“You’d better be careful — you’re about to negotiate with the King!”

We’ve all heard this at some point in our careers.  Our counterparty is well-connected with the judge.  He’s an influential member of the local bar.  He has fifty years’ worth of hard-earned reputation as the lion of the district.  He’s the man with the power.

A panel comprising mediator Elizabeth Bader of San Francisco, insurance counsel Steven Joseph (of Western Word Insurance in New Jersey) and Gerald Strachan (of Chartis Insurance in Philadelphia) and plaintiff attorney Jacqueline Tessendorf (of Columbus, Nebraska) shared perceptive and subtle views on how to get what you need from the King, across the negotiating table.

Steven Joseph relayed his trial strategy:  To say in his opening statement “I will promise you the following and I always keep my promises;” and to say in his closing argument “I like to argue cases that rely on a jury’s common sense, and that’s why I like to argue this case.”  He carries this strategy when negotiating with the King.  He conveys at the outset, with politeness and deference, that however many threatening hitters the King may have, he has Roger Clemens and he is entirely willing to play ball.  This, said Joseph, is called getting back the power.

Gerald Strachan reminded us that the King became the King for a reason — he has a formidable skill set and is by now used to being deferred to.  So Strachan is respectful to the King, because he needs the King to listen, to consider and to respect him back.  The most effective negotiators are ethical, experienced and trustworthy, and Strachan takes pains to be seen by the King as that kind of negotiator.  He also demonstrates, early on, that he has the ability to take the King to a place the King doesn’t want to go.  In a nutshell:  He shows the King both that he can be trusted, and that he can compel an unpleasant result.

Elizabeth Bader took us to an uncomfortable but familiar place: She noted that almost all negotiators enter the room with an inflated sense of confidence, which eventually becomes deflated until reality yields a resolution.  She called it the “IDR Cycle” and cautioned that negotiator’s overconfidence in preparation infects their sense of who they are.  The negotiator’s powerful gesture, unconnected to the reality of the situation, delays resolution and inhibits the real work of problem-solving.  Real power, says Bader, is knowing who you are and negotiating from that place.  Very often, when she mediates, she finds that is responsible for the process of getting inflated egos past deflation and into the reality of who they are, who they’re not, and how to solve the problem before them.  “It’s about the shared problem,” Bader said; “it’s not about them.”

Ms. Tessendorf begged to differ.  As claimants’ representative, she said, “It is absolutely about them.”  The defendant has injured her client.  Her client has been unable to get over it.  Indeed, her client is obsessed by it, she can’t get past it.  The lawyer assisting this client needs to help her get through this strong emotion before the client can be ready to negotiate.  The claimant needs to say what she needs besides money, and the defendant (often an insurance company, not the tortfeasor himself) may not understand why. 

Ms. Tessendorf gave a memorable example of a client seriously injured when a car crossed the center line.  The client needed to know why — what had the driver been doing beforehand?  Were they drinking?  Sneezing?  Talking on a cell phone?  Reaching for a fallen cigarette lighter?  Neither attorney understood the claimant’s insistence on this — liability was conceded and they didn’t need to establish that fact that the client sought in order to settle the case.  But Ms. Tessendorf eventually realized that they needed it to settle the claimant.  It turned out that the other driver was trying to brush off a spider that had descended on her and was inattentive.  The client, for the first time, learned what had happened, how the accdent had occurred.  The claimant needed to tell how bad things have been for her, and needed to learn why they had happened.  She needed to satisfy her emotional inquest (if you will).  She needed to get an apology.  Without respect for these emotions, at least in this case, there could have been be no eventual, “reasonable” outcome.

Mediator Bader wholeheartedly agreed.  For all the professionals at the table, who do this every day, there is one person — the claimant — for whom this is the greatest tragedy of their life.  The King may not care why the car crossed the center line, but the mediator and the claimant’s representative must.

Some other gems from this insightful discussion:

• Will Rogers said “It’s not what we don’t know, it’s what we do know that ain’t so.”  Good negotiators ask more questions than they answer.  The King is eager to talk about his strength; the underdog gives up less information, and less-valuable information, and gains more insight.
• Burn the mediator who says, “I understand how you feel.”  No you don’t.  What are you trying to do, purchase their trust?  No one understands how they feel.  Better to say “I see that this ruined you, I respect the fact that you’ve been irrevocably injured.”  Just show that you’ve heard what they said, that’s all. Respect the claimant’s unique sorrow, and don’t dare suggest that you — or anyone — knows how they feel.
• The balance of power can abruptly shifts once the injured claimant decides that she needs to go all the way.  At trial, the plaintiff becomes the King.
• The professional relationship with the adversary should be both cooperative and firm.  “I’ve studied this file and, based on my experience, the number is $XX.  It is $XX today and it will be $XX in three years.”  At lunch or talking on the phone about discovery, fit in that number.  A few days after any conference or motion, call with that number.  Engage in “holistic negotiation.”  If the number is not accepted, ask for their cooperation: “Please help me out here, what am I missing?”  or “I know we pick a jury on Monday but  if $XX is going to work, can you let me know by Friday?  My kid has a softball game on Saturday morning and if we’re going to close it up I’d rather know so I don’t spend Saturday with my stuff all over the dining room table.”  Approaching cases aggressively but also interpersonally leads to a much improved way of life.

Jerry Roscoe of JAMS was the able moderator of the session, and a swell time was had by all.

In preparation for next week’s Annual Meeting of the American Bar Association, I have been delighted to get to know a group of judges who will be offering a program on Saturday afternoon, August 7, on the use of ADR in Business Courts.  One of them, Judge Steven I Platt of Maryland, maintains an interesting blog to which he has recently contributed a thoughtful article on the “why” of dispute resolution in business courts.

Judge Platt’s main premise is that business disputes need more than a resolution of the presenting conflict.  They need some analysis of the reasons the conflict arose, and a correction of those underlying causes in order to prevent a recurrence of the same issue.  That is, courts are being asked not just to rule on cases, but to help solve problems that give rise to cases.

He suggests that, for a varity of reasons, there has arisen among the general public “enhanced expectations that disputes should not just be resolved, but that they should be resolved in a manner that economically and efficiently addresses their cause so that they will not be repeated.”

These expectations are made more pressing in the context of business disputes, argues Judge Platt, because businesses have “special needs” that have prompted the courts in many states to create business or commercial courts. 

The “special needs” of the parties and counsel in business cases in all of these states are identified as more timely, rational, legally correct and predictable resolution of these [business] disputes. It is also important that these disputes be resolved or decided in a manner that recognizes that unlike many other types of cases, an untimely, i.e. arbitrarily and unduly delayed resolution of a case or dispute may literally devastate economically one or both of the parties ability to continue to operate particularly in an economy such as the one we’re in now. 

The Judge cites three techniques that judges might use to satisfy these expectations:

1.  Settlement Conferences, run intelligently and with finesse, including at times the opportunity for Early Neutral Evaluation;

2.  Mediation, by which the Judge means “a process, not an event,” and featuring most prominently an early informal exchange of “information [that] may be essential to developing an accurate assessment of risk in order to determine the leverage that a party may have in the litigation;” and

3.  Arbitration that is carefully designed to ”take into account the special characteristics of business disputes and the necessary balance between economy and efficiency and fairness.”  

Clearly we have here a thoughtful and perceptive public servant who has taken seriously the admonition that was stated ten years ago by the Lord Chief Justice of England and Wales Lord Harry Woolf:

“The purpose of a civil court is to assist the parties to resolve their dispute.” 

Many parties in mediation — and many of their counsel — consider that a “win” is a deal that gets them the number they asked for, or close to it.  In fact that’s not so, and a mediator provides important value to disputants by assisting them to determine, in a claim that will go to trial in two years and subsequent appeal,  what the “right” number is today.

Here are three easy steps towards assisting parties to value their claims.

Step One: Discount Transaction Costs.  Every good lawyer will advise the client of the litigation budget in the event that the mediation is unsuccessful.  A business-oriented claimant understands that transaction costs diminish the “real” return.  A claim for $100,000 that costs $30,000 to get to verdict and another $10,000 to defend on appeal will net the claimant $60,000.  (Statutory claims that provide for fee-shifting are exempt from this step, but most business-related claimants must bear their own costs.)  So accepting $60,000 today is the same as a complete win at the conclusion of the litigation.

Step Two:  Discount for Likelihood of Success on the Merits.  No lawyer ever counsels a client that the claim is certain to prevail at trial.  An experienced trial lawyer once told me that, in any trial, there’s a 10% chance that an elephant will walk into the room and take the oath as a witness.  

An aggressive counsel might advise 80% likelihood of success; most advise more like 70% or 60%.  If there is a 75% chance of success at trial (which is to say, a very good chance indeed), then reduce the $60,000 (see Step One) by the 25% chance of losing, and you come up with $45,000.  That’s the number that accurately reflects the value of the claim if you were to wrap it up today and end any uncertainty about the outcome.

Step Three: Determine the Present Value of the Recovery.  Remember that the $45,000 net recovery (reflecting uncertainty) won’t be in the cash till for another three years or more.  At 4% interest, compounding daily, $45,000 in three years is equal to $39,911.68 today.  (A handy-dandy present value calculator is available at http://www.uic.edu/classes/actg/actg500/pfvatutor.htm.) 

All we’re trying to do in a mediation is to help the claimant and the defendant to get out of the lawsuit: to eliminate uncertainty, shut off the costs of the legal action, monetize the claim, release the reserves against the liability, and redirect their resources back to support for their core business.  The three steps outlined above help in this effort.  In this hypothetical, a claimant receiving $40,000 on the day of the mediation is getting one hundred cents on the dollar of her $100,000 claim.  That’s a helpful fact for a claimant to have in her pocket before negotiation begins. 

Who knows?  The defendant’s opening offer might be close to that number, thinking it would represent a 60% “haircut.”  And if that’s the bid, I hope the claimant recognizes its value.

I am spending this week in beautiful Silver Bay, New York, on the western side of Lake George.  There, at a grand old historic YMCA summer camp, the New York Yearly Meeting of the Religious Society of Friends (Quakers) holds its annual summer conference.

Quakers are  a “peculiar people” and proud of being so.  But spending time with a whole nest of them coming from around the country and around the world is surely a blessing. 

Many readers are familiar with the drawing of three mice looking at a wedge of cheese and drawing different conclusions as to the shape of the object, based on their positions and perspectives:

Well, when Quakers meet to conduct business they don’t vote or persuade; they share perceptions and senses of what the right thing to do might be, and let it float out there until the entire group is in unity with the right decision.  Folks who have never watched this procedure or taken part in it themselves find it very difficult to understand, but the mouse drawing is as good an entry into it as any.

I just plain like the way Quakers think, how they approach problems.  Here in Silver Bay, or in my small Quaker Meeting in Cornwall, New York, a matter will be raised in a meeting for business and a period of silence will ensue.  Then someone will pipe up and say, in effect, “I see a rectangle here.”  There will be a pause for several minutes, and someone will say “I see a square.”

At that point most folks would see a disagreement.  But Quakers? 

Quakers sense there might be a piece of cheese nearby.

Monday, July 12, is the cut-off date for Early Bird Registration for the ABA Annual Meeting in San Francisco.  I will be speaking on a panel on arbitration, with such luminaries as Mark Trachtenberg, Deborah Rothman and Rob Friedman, who argued Jackson v. Rent-a-Center before the Supreme Court.  (Honestly, sometimes I really am amazed at the clubs who will let in the likes of me!)

But a specially interesting panel is one that Lawrence D.W. Graves has assembled as Chair of the Dispute Resolution Committee of the Business Law Section: “ADR in Business Courts.”

The panel will be moderated by Chief Judge Ben Tennille of the North Carolina Business Court.  Speakers include Judge Steven I. Platt of Maryland; Judge Ira B. Warshawsky of the Commercial Division, New York Supreme Court; Robert E. Margulies, who designed the 15-year old Complementary Dispute Resolution program for the Superior Courts of the State of New Jersey; Judge Elizabeth Stong of the United Stated Bankruptcy Court for the Eastern District of New York; and Vice Chancellor Don Parsons of the Delaware Court of Chancery.

Listening to these ladies and gentlemen discuss the court’s interest in clearing its docket, and their own commitment to helping commercial parties to resolve their disputes, should be a rare and valuable opportunity.  Be there!

Prof. Joseph Allegretti wrote an interesting article ten years ago titled A Christian Perspective on Alternative Dispute Resolution, 28 Fordham Urb. L.J. 997 (2001).  In it he tells the tale of St. Francis of Assisi’s mediating a conflict between the residents of a town and a ravenous wolf that was terrorizing them, “devouring both animals and human beings.”

The story contains an interesting reminder of the Christian tradition of self-interested forgiveness, and also of the principle (espoused by all mediator trainers) that everybody has an underlying interest that informs their behavior — even (or especially) wolves.  

And it describes an unorthodox method of mediation in which the neutral starts off by telling each party that they’re schmucks.

It seems that Francis was visiting the town of Gubbio and took pity on the townspeople who had been so abused by the fierce wolf living outside. 

Francis went unarmed to find the wolf, and when they met Francis chastized him:  “Brother Wolf, you have done great harm in this region, and you have committed horrible crimes by destroying God’s creatures without any mercy.” 

But Francis also saw that the wolf was driven to kill because he was mad with hunger.  So he proposed as follows:  “Brother Wolf, I want to make peace between you and the people of the town, so that they will not be harmed by you any more, and after they have forgiven you all your past crimes, neither men nor dogs will pursue you any more.”

Francis then proposed that, if the wolf agreed not to kill any more animals and people, the townspeople of Gubbio will feed it each day.  The wolf extended its paw in agreement, and followed Francis into town.

The wolf listened calmly at Francis’ side as the saint preached to the people, explaining to them that the wolf’s attacks were in response to their own sins of neglect of its needs.  They consented to Francis’ proposal that they attend better to their neighbors by looking to their needs.

From that day on, both parties lived up to their promises.  The townspeople fed the wolf, and the wolf became so peaceful that dogs would not even bark at it.  When the wolf died, the townspeople mourned its passing.

It’s interesting that Francis took the “hard approach” with each party.  That is, he did not tell the people that the wolf had been bad and he did not tell the wolf that the people had been bad — he told each one that they themselves had been bad!  He even suggested to the wolf that the final compromise would be subject to the willingness of the townspeople to forgive his vicious acts (though he seems not to have required it in the event).

The technique seems to be along the lines of (a) convince each party to see the situation from the other guy’s point of view and acknowledge their own responsibility for having created the problem; (b) urge each party to remove whatever obstacles to resolution are in their power to remove, in exchange for the other guy’s doing the same; and (c) convince both parties to undertake a permanent change in their behavior towards the other guy that in turn provokes a permanent change in the other guy’s behavior towards them.

Now, this ain’t me.  For one thing, I don’t talk to animals, even kittens.  For another, when I mediate I almost always sympathize with each party as they tell their story, hoping to gain their trust by allying myself with their problem.  I try to meet them where they are and explore possible avenues of resolution as their partner, not their rebbe. 

By contrast, Francis tried to convince them that their problem was, at least partly, of their own making, and they had to do a better job of living if they wanted to live a better life.

Applications to secular dispute management?  Yes?  Anyone?  Anyone?

In the Bankruptcy Court for the Southern District of New York, a judge held a hearing upon Order to Show Cause why Wells Fargo, which had been required to participate in a mediation, should not be sanctioned for the conduct of its counsel in that mediation.  The mediator testified, Wells Fargo’s counsel testified, and at least one other counsel for a participating party testified — all concerning Wells Fargo’s conduct during the mediation.  The court held that there had been a failure to mediate, held Wells Fargo in contempt of the mediation order, and sanctioned them.

The case is In re A.T. Reynolds and Sons, Inc., 424 B.R. 76 (Bnkr. S.D. NY  2010).  The parties were ordered to mediation by order dated August 27, 2009.  On November 17, 2009, the mediator reported to the court that one of the parties failed to participate in good faith, and that a report would be submitted.  That report alleged that (a) Wells Fargo was unclear about the issues to be mediated, and sought a mediation statement identifying them; (b) Wells Fargo demanded to know the names of the individuals who would attend the mediation; (c) Wells Fargo sent a “junior” counsel to the mediation; (d) Wells Fargo’s counsel “repeat[ed] a pre-conceived mantra that indicated that Wells Fargo was not open to any compromise”; and (e) when the mediator threatened to report his conduct to the court, Wells Fargo’s counsel replied that his “client would never agree to my acting as mediator in the future in which Wells Fargo might be a party.”

For its part, Wells Fargo replied that its counsel was a senior attorney with 10 years’ experience; that the client representative at the mediation had full settlement authority; that Wells Fargo could not prepare for the mediation when the mediator said that the issues would be determined at the proceeding itself, and they “will go where the river takes us”; and that parties to mediations are fully entitled to take “no-pay” positions.

At the hearing the court called the mediator to testify.  He reported that Wells Fargo’s counsel interrupted his adversary and  ”did not go through risk analysis.”  Counsel for the opposing party testified that the mediation ended “because we weren’t even getting past square one.” 

The court, in its opinion, engaged in a legal analysis of what constitutes “good faith” in mediation and noted that the case law “cannot be construed to mean that a party can decide ahead of the mediation that it will accept a single, preconceived settlement, then refuse to engage in the risk analysis that is fundamental to mediation.”  While a party can’t be forced to settle, concluded the court, it must participate in the process “beyond insisting that it won’t settle.” 

Moreover, the court found that “counsel to Wells Fargo sought to control the procedural aspects of the mediation by resisting filing a mediation statement and demanding to know the identities of the other party representatives.”

Wells Fargo and its counsel were therefore required to pay the mediator and the other parties their costs in preparing for and attending the mediation.  “The Court concludes that attendance at a mediation without participation in the discussion and risk analysis that are fundamental practices in mediation constitutes failure to participate in good faith.”

Now, I’m still learning.  But so are we all (I hope) and there’s enough in this opinion that’s contrary to my practices as a mediator that I need a reality check.  Or maybe a reality slap.

A.  My mediation agreement requires the parties to inform each other of the identities of their representatives a week ahead of time, and vests in me the power to exclude people.

B.  I tell the parties at the start of a court-annexed mediation that I will tell the court only whether it settled or whether it didn’t, and will maintain every other aspect of every communication in confidence.

C.  I also ask them to sign a confidentiality agreement that they will not testify or present evidence as to what happened in the mediation, and that they acknowledge such information and statements are both privileged and inadmissible.

D.  I tell parties that if I’m subpoenaed I will oppose it, and that I have insurance to cover the cost.

E.  I try to conduct the mediation so that the parties control the process as much as possible (this is called party autonomy), and certainly if a party wants to know who is coming and what issues are going to be discussed I will make every effort to get that information to that party (this is called not ambushing a negotiator).

F.  When a party tells me they’ve moved for summary judgment and want to wait for the motion before mediating, I tell them to come on along anyway and explain to the other side why they have a slam-dunk; better we should try to assess the merits than have a judge do so, who knows the law but doesn’t know either of your businesses.

G.  Maybe I’m dealing with a lot of dumb folks, but when I suggest risk analysis, or walk a party through a simple decision tree, most of them are unfamiliar with the technique.  Indeed, the very idea that a 100% win three years from now means a present-value discount for payment today is news to a lot of litigants and often changes their thinking.  Failure to engage in risk analysis is contempt?  Who knew?

H.  If I heard that any mediator threatened a party or its counsel with reporting its mediation conduct to a court, not only would I agree that the counsel should never again engage that mediator — I would never do so either.

Am I nuts here?  Are mediators who practice as I practice making a big big mistake?  Most important, is a party’s clear statement of an unwillingness to pay, accompanied by the facts and law supporting that view, now sanctionable?

Prima Paint teaches that the arbitration agreement nestled in a commercial contract has a legal validity of its own, and that once a court determines that the “nestled” agreement to arbitrate is enforceable, then the arbitrator and not the court shall determine the enforceability of the rest of the contract.

The interesting thing about the arbitration agreement in Rent-a-Car, West v. Jackson is that there wasn’t anything for the arbitration agreement to nestle into.  The document evidenced only an agreement to arbitrate.  Other terms of any commercial agreement between Jackson and his employer were set forth elsewhere.  This was just a “Mutual Agreement to Arbitrate Claims.” 

So when Jackson was prompted to sue his employer for racial discrimination, the federal district court didn’t have an arbitration agreement to sever from the rest of the contract.  It had only the agreement to arbitrate itself, in all its lonely glory.

Which Jackson said was unconscionable because it was thrust upon him and unfairly limited his ability to vindicate his statutory rights.

And which provided that questions of unconscionability were to be decided by (guess who?) the arbitrator, not the court.  Take that, Prima Paint.

As the Court put it, “this case differs from Prima Paint [and other cases] in that the arbitration provisions sought to be enforced in those cases were contained in contracts unrelated to arbitration . . . [while in] this case, the underlying contract is itself an arbitration agreement.”  Slip op. at 8.

No problem, says the Court.  Jackson challenges the arbitration agreement as a whole but not the provision delegating unconscionability to the arbitrator.  Therefore, in the absence of an allegation that that particular provision is unenforceable, the provision is presumptively valid under FAA Section 2.  So the arbitrator, not the court, shall decide the enforceability of the agreement.

The agreement to arbitrate.

The one that Jackson says is unenforceable.

No problem here, right?  Jackson never alleged that the delegation provision in particular was unconscionable — just that the entire agreement was.  And the delegation provision is (guess what?) severable from the rest of the agreement to arbitrate!  Surely, explains the Court, “there is no logical reason why an agreement to arbitrate one controversy (an employment-discrimination claim) is not severable from an agreement to arbitrate a different controversy (enforceability).”  Id. at n. 3. 

Well if you want to press it, there is no reason why the parenthetical phrase that begins this sentence is not severable from the declarative clause that ends it.

I just finished teaching a law school course on ADR and I’m sitting here  trying to figure out this distinction so I can do a bang-up job the next time I teach the course.  I see how the arbitration agreement is severable from the rest of a contract.  Now, is the law that each aspect of the arbitration agreement severable from each of the other aspects of the arbitration agreement?  Professor, can I ask a few questions please?

1.  Is this gonna be on the test?

2.  If I want to allege before a federal district court that an arbitration agreement is unenforceable under FAA Section 2, do I have to allege each aspect that renders it unenforceable?  Each provision?  Each phrase?  Each word?

3.  How about if the Court found for Jackson?  If I enter into a contract to provide McDonald’s with buns, and sign a bun contract with an arbitration clause, could I allege that it’s unconscionable because it was forced on me by a company with greater bargaining power?  At least I can buy myself a few months getting my counterparty wrangled up in federal district court?  And then the Court of Appeals?  And then … ?

4.  Should everybody now draft their arbitration clauses on separate pieces of paper, with separate signature blocks, from the main agreement, so they can evade court scrutiny?

5.  Helpful as Rent-a-Car is, what will the Court decide when confronted with this question with a contract that is (gulp!) written as a single document!!??

6.  Do I still have time to readjust my bets on whether the Arbitration Fairness Act will pass, short-cutting all of this nonsense by rendering all arbitration agreements in all employment relationships unenforceable as a matter of federal law?  And won’t we be happy then?

…At least I’ll know how to teach it….

I had a good chuckle at an article that appears in the current issue of Dispute Resolution International, the journal of the Dispute Resolution Section of the International Bar Association.  Daniele Cutolo and Mark Alexander Shalaby discuss a case brought in Italy to test whether an Italian statute requiring mediation prior to certain consumer court proceedings violates Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms, ensuring access to the courts.  The lower court found that it did.

Ya gotta smile.

The authors note that, in Italy,

civil proceedings have increased by 90 percent from 1979 to 2009.  The average duration is 887 days for a decision of a court of the first instance, 808 days for the court of appeal and 912 for the Supreme Court: 2,607 days in total, or about seven years.

In light of this state of affairs, the Italian Government itself was found to have violated the Convention’s court access provisions and fined €41 million between 2002 and 2006.  So what could possibly be wrong with an alternative procedure to obtain redress during one’s own lifetime?  A lot, in Italy, if you’re a judge, I guess.  (Do these guys get paid by the case?)

In the case at issue, a customer sought €1,000 because the phone company had failed to deliver telecommunications services, including internet.  Her claim, filed before a Justice of the Peace in Naples, was deemed inadmissible because she had not first submitted to mediation as required by the prevailing statute governing consumer complaints in telecommunication.  The mediation is free of charge (unless conducted by a private provider at the parties’ election) and must be completed within 30 days. The Justice of the Peace ruled that the regulation denied the consumer access to the courts and referred the matter to (who else?) the court.

The authors further note:

The World Bank ranks Italy in 156th position (out of 181 ranked countries) for enforcement of contracts, coming after Angola, Gabon and Botswana.  By contrast, in 2009 alone, a total of approximately 30,000 disputes in the area of telecommunications services were settled through mandatory mediation, with an average duration to settlement of 60 days.

Noting that “in most consumer disputes the inordinate length and excessive cost of the legal procedure are out of proportion to the limited value of the case,” the authors review EU Directives concerning both telecommunications and ADR, and mandatory mediation provisions (for and against) in Germany, Poland, Austria, Greece, Slovenia, Spain and England. 

They conclude that “mandatory mediation does not involve the problems connected with mandatory arbitration because access to the courts is only temporarily suspended and the parties cannot be forced into an agreement.  It is only the attempt to resolve the dispute that is mandatory, not the agreement.”  Thus, they conclude, as long as the mediation is quick, transparent, simple and inexpensive, and as long as the claim reverts to the court in the event of impasse, the requirement to mediate ”pursues legitimate objectives in the general interest” and should be permitted.

Two thoughts:  Is anyone bothered by the fact that the analysis starts with a clearly dysfunctional court system and considers alternatives to it, rather starting with the needs of consumers for redress and considering the best way to provide that service?

Second:  Might the United States consider, instead of class action arbitration, consumer protection statutes and other meat-cleaver approaches to reform, a similar system requiring individual consumer claims to be mediated prior to being litigated?  That is to say, having their problem actually resolved promptly and on terms they agree to?  Or is that too radical?

Giuseppe de Palo and I first met in 1999 or 2000, when I was bowled over the first time I learned about his work with The ADR Center in Rome.  Since that time, every occasion I meet Giuseppe I am reminded what a powerhouse of talent, ambition, energy and aspiration he is.  Both his intellect and his physical energy make having a cup of coffee like saying hi to a tornado.  His recent e-mail proves no exception.

ADR Center is now a member of JAMS International, and Giuseppe advises that ”our ”mega’ project, ‘Lawyers and ADR,’ is about to come to an end.”  If Giuseppe says it’s “mega,” you know we’re talking big.

And big it is.  “Lawyers in ADR” comprises three connected, EU-funded projects to promote the purposes of the EU Directive on ADR.  As Project Director, Giuseppe has created a web site to encourage greater sophistication in ADR by European lawyers; conducted a survey to gather data on the cost of not using mediation; published eight e-books in eight languages on mediation advocacy (the English language one authored by our hero Dwight Golann); and prepared a video on cross-border mediation that is currently being translated into 23 EU languages. 

(If you want to count ‘em up, that’s Bulgarian, Czech, Danish, Dutch, Estonian, Finnish, English, French, Greek, Hungarian, Italian, Irish, Latvian, Lithuanian, Maltese, Polish, Portugal, Romanian, Slovak, Slovene, Spanish, Swedish and German.)

In his spare time, Giuseppe has arranged an international conference to present the project’s products, offered training courses for EU lawyers on civil and commercial mediation; continued his teaching at Hamline; and grown wings.

(Just kidding about the wings….)

The project web site is an impressive piece of work,.  Those of us who have labored on the Directive can only be thankful that Prof. De Palo continues his esteemable work to make it happen in Europe. 

Even those who find American baseball deadly dull will acknowledge the grip the sport has had on the American imagination.  Its impact on the American language alone is beyond cavil, and students of the sport have been moved to profound philosophical observations.  Now it has contributed to our understanding of conflict management.

“Baseball is like church,” said Dodger manager Leo “the Lip” Durocher, “many attend,  few understand.”  “It ain’t over ’til it’s over,” Yogi Berra is alleged to have said, along with smackers that capture the core truth of the entertainment industry: ”If people don’t want to come to a ball game, you can’t stop ‘em” and “That restaurant is so crowded nobody goes there any more.”

(These Yogi-isms have entered American myth, but are impossible to prove.  As he himself protested,  “I didn’t really say everything I said.”  Yogi lives in my town of Montclair, New Jersey, and his directions to get to his house are absolutely accurate:  “Go along Edgewood Road, and when you come to a fork in the road, you take it.”)

More to the point of this essay is Bart Giamatti’s famous warning:  “Baseball breaks your heart.  It’s designed to break your heart.”  And it has done it again.

Young Armando Galarraga of the Detroit Tigers pitched a perfect game the other day — 27 batters, three per inning for all nine innings, and got out every one.  This feat had been accomplished only 18 times in baseball history until this year.  The 27th batter boinked a grounder to the infield; the first-baseman grabbed it and Galarraga himself ran over to first base, caught the ball a full stride before the runner with his own foot on the base and jumped in ecstasy….

Until he saw that the umpire called the runner safe.  The man was now on base, the perfect game would not be had, and history had blown a kiss and fled.

A moment of incredulity paralyzed the kid, and then… he smiled.

As you see in the clip above, the kid smiled as only someone about to get hit by a truck could smile.  His fate was known, his joy was gone, and it was time to live with the memory of what had happened — he was reconciled to the fact that he would never have the thing he deserved.

So blatant was the umpire’s mistake that even he knew it.  Within minutes of the game’s ending he went to the Tiger’s locker room and personally apologized to Galarraga.

Now, baseball is surely the most over-regulated game imaginable.  Every play is called safe or out.  Every pitch to every batter is adjudicated either within or outside the hittable zone.  Every hit ball is declared fair or foul.  And while all players are demerited with “errors” for their mistakes, the umpires never are.

It would be entirely understandable to appeal this game to the Baseball Commissioner.  To condemn the umpire at fault.  To insist on instant replays of close (or in this case not-so-close) plays.  To “get it right.”  It would certainly be understandable if fists and spit flew; it has happened before.

But that’s not what happened this time.  When he was interviewed after the game, Galarraga said he knew the umpire was a veteran, was doing his best, and had made a mistake.  “Nobody’s perfect,” said the perfect-game pitcher. 

And at the start of the next day’s game, Detroit’s manager didn’t go out to hand the line-up card to the umpire, as is customary.  He sent Galarraga.  The pitcher gave the ump the card and shook his hand, and the ump wept.  “Play ball” went the shout, and Major League Baseball moved on.

There are at least two hard truths nestled in all this sentiment, from the perspective of a problem-solver and a conflict manager.  One is that it’s better when you recognize, early on, when things are out of your hands and beyond your control.  Whether they are fair is an independent consideration: if they are beyond correction, then rational  options are narrow and should be accepted as being narrow.

The second is a saying even older than Bart, Yogi and Leo the Lip.  American notions of justice and the assurances of vindication notwithstanding,

“the race is not to the swift, nor the battle to the strong, neither yet bread to the wise… but time and chance happeneth to them all.”  Ecclesiastes 9:11

A recent article has been making the rounds of ADR professionals. The current issue of the American Psychological Association’s publication Psychology, Public Policy and Law (Vol. 16, No. 2, at 133-57) features a report of a study conducted by a group of scholars from Australia, Sweden and the United States. The group canvassed 481 American attorneys – in civil and criminal cases, both plaintiffs/prosecutors and defense – and found that lawyers are prone to overconfidence. That is, they predict outcomes of their cases that are not only erroneous, but generally too optimistic.

I’m wondering why this is news. I think that we mediators have known this all along; in fact, that’s why we’re hired.

Participants in the study each had a case expected to go to trial within 6 to 12 months. They were asked to designate an outcome that “would be a win” and then to state the probability of achieving that outcome or a better one.

After the case resolved, whether by verdict or by settlement, the participants were contacted again to determine the case outcome or resolution. Approximately 59% of the cases were settled; 31% were tried; and 10% were dismissed.

A mean of 64% and a median of 70% of the participants expressed confidence estimates exceeding 50%. Female lawyers tended to be overconfident only when their predicted success was high, while men tended to be overconfident whether their prediction was moderate or high probability. Both lawyers of less experience and of greater experience exhibited the same levels of overconfidence, and there was no correlation with respect to whether trial date was a few months away or imminent.

Yet only 50% of the civil lawyers achieved their goals, though their mean confidence estimate had been 64%.

This overconfidence persisted even when an effort was made to manipulate the subjects towards more realistic predictions. Participant attorneys were asked to generate arguments counter to their own predictions, or to give reasons for their predictions, in what the authors termed a “debiasing technique.” The participants’ overconfidence did not decrease.

The authors conclude that, irrespective of their trial experience, “[l]awyers frequently made substantial judgmental errors, showing a proclivity to overoptimism…. Lawyers choose a desirable outcome, the anchor, and thereafter make insufficient adjustments for uncertainty even when asked to generate reasons against their initial goal.” Lawyers are poorer predictors than, say, weathermen because (a) lawyers can influence the outcome of their cases and (b) lawyers have an interest in influencing the outcome of their cases. Meteorologists, on the other hand, neither can make it rain nor make money when it does, and thus are less prone to misinterpret the data in favor of their self-serving preconceptions.

I have no reason to doubt these outcomes. I just don’t think it ought to be a surprise. And whatever the authors say about weather forecasters, overconfidence is a phenomenon shared by businesspeople, fishermen, grooms, poker players and well-diggers, not just lawyers and their clients. And that’s why God made mediators.

When I was first trained as a mediator, by Michael Lewis and Linda Singer, I was taught that people – whether lawyers or their clients – suffer from cognitive dissonance and tend to ignore information that does not comport with their understanding of the facts. Dwight Golann and I had a hard time training Chinese judges in American-style mediation in Beijing in 2005, but Dwight had no difficulty at all in discussing cognitive dissonance, which the trainees found absorbing.

In his recent book, Mediating Legal Disputes, Dwight discusses the “endowment effect.” He reports on an experiment in which people were assigned to negotiate the sale (or purchase) of a coffee mug. Each participant was told to make a preliminary confidential estimate of the intrinsic value of the mug, and a control group of observers was asked to make the same estimate. Those assigned to sell the mug estimated its value at $7.12; those assigned to buy it estimated its value at $2.87; and the observers valued the mug at $3.12.

Negotiation literature is chock full of illustrations of psychological obstacles to realistic appraisal. A compelling example of cognitive distortion is related in Dwight’s book as follows:

Students at Harvard Law School are preparing to negotiate the settlement of a personal injury case. Before they begin, the students are asked to make a private prediction of their chances of winning based on their private instructions. What the students don’t know is that there is nothing confidential about the instructions: both sides have received exactly the same data, with different labels. Because both sides have the same information, they should come out with the same answers – but this is not what occurs.

In fact, hundreds of law and business students told to negotiate for the plaintiff assess her chances of winning as being nearly 20 percent higher than students who are assigned to the defense. The two sides’ predictions total nearly 120 percent.

Asked to estimate what damages a jury will award if the plaintiff does win, there is a similar disparity: plaintiff bargainers estimate her damages at an average of $264,000, while defense negotiators looking at the same data estimate a verdict of only $188,000.

There is no sense in bemoaning this data, or in adding it to the tools of the lawyer-bashers. We are who we are; part of who we are is that our observations mature into convictions, and we defend our convictions against perceived attack. Most students of negotiation readily concede that unfacilitated bargaining is necessarily inefficient, because neither negotiator will be completely candid with the other. A facilitator, on the other hand, can become a repository for the data that is not known by the adversary, and thus gains a perception of an economically efficient outcome that is denied the participants because of their own self-imposed constraints.

Not just lawyers make assessments based on imperfect knowledge. Not just lawyers’ assessments are hindered by cognitive obstacles. And not just lawyers benefit when their assessments, and the assumptions underlying them, are subjected to rigorous reality testing.