33. See Freund, Anatomy of a Merger, p. 60 (“[F]irst, although not usually legally binding, the letter of intent does represent an explicit moral obligation of the parties, which reasonably principled businessmen seem to take quite seriously; and second, it memorializes the basic terms of the understanding, which makes it more difficult for misunderstandings and convenient loss of memory to surface later on in the proceedings. In only slightly irreverent terms, it’s a form of anti-renegotiation insurance.”).
34. See William J. Poorvu with Jeffrey L. Cruikshank, The Real Estate Game (1999).
35. See Gilson, “Value Creation by Business Lawyers,” p. 269 (“The portion of the acquisition agreement dealing with representations and warranties . . . [is] the portion that usually requires the most time for a lawyer to negotiate . . .”); See also Freund, Anatomy of a Merger, p. 229 (“[L]awyers spend more time negotiating ‘Representations and Warranties of the Seller’ than any other single article in the typical acquisition agreement.”).
36. See Freund, Anatomy of a Merger, p. 146.
37. Bernstein, “Law and Economics and the Structure of Value Adding Contracts,” pp. 198, 206–208, 232. Bernstein calls these “error costs.”
38. Id., p. 199.
39. See id., pp. 231–232.
40. “Innocent landowner provisions, which set forth the conditions under which a new owner will not be liable for pollution created by a previous owner, require that the purchaser (1) did not contribute to the contamination, (2) made all appropriate inquiry to detect the presence of contamination, (3) took due care once waste was discovered, and (4) acquired the property at a price which did not signal the presence of possible contamination.” James Boyd, Winston Harrington, and Molly K. Macauley, “The Effects of Environmental Liability on Industrial Real Estate Development,” 12 Journal of Real Estate Finance and Economics 37, 42 (1996).
41. Freund, Anatomy of a Merger, p. 231.
42. Note that CERCLA “allows current owners or the government to sue previous owners for clean up costs if the condition of the property was not adequately revealed at point of sale—even when a transaction agreement explicitly transfers liability . . . via an “as-is” clause.” See Boyd et al., “The Effects of Environmental Liability on Industrial Real Estate Development,” p. 42.
43. Id., p. 47.
44. See Gilson, “Value Creation by Business Lawyers,” pp. 239–313.
45. Id., p. 255.
6 Psychological and Cultural Barriers
1. Daniel Kahneman and Amos Tversky, “Conflict Resolution: A Cognitive Perspective,” in Barriers to Conflict Resolution, pp. 45–60 (Kenneth Arrow, Robert H. Mnookin, Lee Ross, Amos Tversky, and Robert Wilson, eds., 1995). See also John S. Hammond, Ralph L. Keeney, and Howard Raiffa, Smart Choices: A Practical Guide to Making Better Decisions (1999).
2. See generally Chapters 1–5 in Barriers to Conflict Resolution. See also Judgment Under Uncertainty: Heuristics and Biases (Daniel Kahneman, Paul Slovic, and Amos Tversky, eds., 1982); Margaret A. Neale and Max H. Bazerman, Cognition and Rationality in Negotiation, p. 12 (1991); Robert H. Mnookin, “Why Negotiations Fail: An Exploration of Barriers to the Resolution of Conflicts,” 8 Ohio State Journal on Dispute Resolution 235 (1993).
3. Robert H. Mnookin and Lee Ross, “Introduction” in Barriers to Conflict Resolution, p. 10. See also Charles G. Lord, Lee Ross, and Mark R. Lepper, “Biased Assimilation and Attitude Polarization: The Effects of Prior Theories on Subsequently Considered Evidence,” 37 Journal of Personality and Social Psychology 2098 (1979). For a useful discussion of how to overcome the problem of partisan perceptions, see Douglas Stone, Bruce Patton and Sheila Heen, Difficult Conversations: How to Discuss What Matters Most (1999).
4. See Margaret A. Neale and Max H. Bazerman, “The Role of Perspective-Taking Ability in Negotiating under Different Forms of Arbitration,” 36 Industrial and Labor Relations Review 378 (1983). See also Margaret A. Neale and Max H. Bazerman, “Perspectives for Understanding Negotiation: Viewing Negotiation as a Judgmental Process,” 29 Journal of Conflict Resolution 33 (1985). For a general discussion and cites to the psychological literature on overconfidence, see generally Kahneman and Tversky, “Conflict Resolution,” pp. 45–60.
5. See Mnookin and Ross, “Introduction,” p. 17.
6. See Irving L. Janis, Victims of Groupthink: A Psychological Study of Foreign-Policy Decisions and Fiascoes (1972); David Dunning and Lee Ross, “Overconfidence in Individual and Group Prediction: Is the Collective Any Wiser?” (unpublished manuscript, Stanford University, 1992).
7. Mnookin and Ross, “Introduction,” p. 18.
8. See Amos Tversky and Daniel Kahneman, “The Framing of Decisions and the Psychology of Choice,” 211 Science 453 (1981). See generally Kahneman and Tversky, “Conflict Resolution,” pp. 54-59 (and sources cited therein); Max H. Bazerman, Judgment in Managerial Decision Making, p. 51 (4th ed. 1998).
9. See Mnookin and Ross, “Introduction,” p. 17; Jeffrey J. Rachlinski, “Prospect Theory and the Economics of Litigation” (unpublished Ph.D. diss., Stanford University, 1994).
10. See Russell Korobkin and Chris Guthrie, “Psychology, Economics, and Settlement: A New Look at the Role of the Lawyer,” 76 Texas Law Review 77, 96 (1997).
11. If you construed the lawyer’s statement as meaning you had a 50 percent chance of winning at trial, then in both cases a settlement of $21,000 is higher than the expected value of $19,000. (.50 x $28,000 + .50 x $10,000). They point out that “[s]ubjects need not have inferred from the attorney’s analysis that their chances of prevailing at trial were exactly 50%. Whether individual subjects made different assumptions about their trial chances does not affect the validity of the experimental results as long as Group A and Group B subjects did not draw systematically different inferences from the same analysis.” Id., p. 98 n.81.
12. Max H. Bazerman and Margaret A. Neale, Negotiating Rationally, pp. 35–37 (1992).
13. See Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler, “Experimental Tests of the Endowment Effect and the Coase Theorem,” 98 Journal of Political Economy 1325 (1990).
14. See Lee Ross, “Reactive Devaluation in Negotiation and Conflict Resolution,” in Barriers to Conflict Resolution, pp. 30-33 (Kenneth Arrow, Robert H. Mnookin, Lee Ross, Amos Tversky, and Robert Wilson, eds., 1995); Constance Stillinger, M. Epelbaum, D. Keltner, and Lee Ross, “The Reactive Devaluation Barrier to Conflict Resolution,” (unpublished manuscript, Stanford University, 1990), discussed in id. See also Mnookin and Ross, “Introduction,” pp. 15–16.
15. See Stillinger, Epelbaum, Keltner, and Ross, “The Reactive Devaluation Barrier to Conflict Resolution.”
16. See Mnookin, “Why Negotiations Fail,” p. 246.
17. See Robert H. Frank, Passions Within Reason: The Strategic Role of the Emotions, p. 18 (1988).
18. Defining the word “culture” is a risky business, going to core differences among social anthropologists about the nature of their enterprise. Our preferred definition, suggested by Kevin Avruch, relates culture to bundles of cognitive processes and structures, consisting of schemas and models, that are internalized by individuals to “allow us to solve life’s problems by assimilating new problems to old and trying old solutions for new problems.” Kevin Avruch, Culture and Conflict Resolution, p. 106 (1998). Avruch suggests that “schemas” are “networked cognitive structures that contain ‘canned procedures’ or instructions for dealing with recurrent situations.” While socially transmitted, Avruch emphasizes that these schemas or models are not timeless, but “must be reinvented and revalidated by each generation” and are “responsive to situational change.” He suggests that many groups and institutions can be “containers” for transmitting various cultures, and that the more complicated and differentiated a society is the more subcultures there will be. Most fundamentally, Avruch argues that, especially in complex societies, each individual is a unique amalgam of many cultures.
“To ‘know’ an actor’s cu
lture (‘he is Mexican’) will not allow you to predict his behavior unless you know ‘all’ of his cultures—he’s an engineer, educated in the United States, of southern indio background (remarkably), evangelical Protestant, etcetera, etcetera. And this is tantamount to saying that you cannot predict an actor’s behavior unless you know the actor fully as a person, in which case you still might not be able to predict his behavior.” Id., p. 105.
19. See S. M. Samuels and Lee Ross, Reputations Versus Labels: The Power of Situational Effects in the Prisoner’s Dilemma Game (unpublished manuscript, 1993).
20. Research has shown that negotiators commonly tend to assume that the size of the pie is fixed—that the other party’s interests are opposed to their own. See Max H. Bazerman and Margaret A. Neale, “Heuristics in Negotiation: Limitations to Effective Dispute Resolution” in Negotiating in Organizations, p. 51 (Max H. Bazerman and Roy J. Lewicki, eds., 1983); Leigh Thompson and Reid Hastie, “Social Perception in Negotiation,” 47 Organizational Behavior and Human Decision Processes 98 (1990); Leigh Thompson and Dennis Hrebec, “Lose-lose Agreements in Interdependent Decision Making,” 120 Psychological Bulletin 396 (1996). This basic bias toward assuming opposed interests is different—although related to—the cultural set of assumptions that seem to prevail in legal negotiations. In the legal context, there is a widely shared and enforced belief—often spoken of quite explicitly—that the pie is fixed in legal cases.
21. See Mary Wisneiwski, “Civility Ain’t What It Used To Be: Seminar Aims To Find Out What Can Be Done,” Chicago Daily Law Bulletin (July 31, 1991).
22. See ABA Commission on Professionalism, American Bar Association, “. . . In the Spirit of Public Service: A Blueprint for the Rekindling of Lawyer Professionalism” (1986). For an example of commentary on the incivility of attorneys, see “Infectious Lawyers,” 148 New Jersey Law Journal 30 (April 7, 1997); Paul L. Haines, “Restraining the Overly Zealous Advocate: Time for Judicial Intervention,” 65 Indiana Law Journal 445 (1990). For a particularly troubling example of incivility by an attorney in the context of a deposition, see W. Bradley Wendel, “Rediscovering Discovery Ethics,” 79 Marquette Law Review 895, 904 (1996) (providing transcript of deposition that an attorney was eventually sanctioned for). For a critique of the civility movement, see Kathleen P. Browe, “A Critique of the Civility Movement: Why Rambo Will Not Go Away,” 77 Marquette Law Review 751 (1994); Rob Atkinson, “A Dissenter’s Commentary on the Professionalism Crusade,” 74 Texas Law Review 259 (1995).
23. Raoul Lionel Felder, “I’m Paid to be Rude,” New York Times, p. A23 (July 17, 1997).
24. Cornelia Wallis Honchar, “Right to Remain Silent Can Quiet Incivility,” Chicago Daily Law Bulletin, p. 5 (May 2, 1997).
25. See Mary Wisneiwski, “Civility Ain’t What It Used To Be.”
26. See Stephen A. Saltzburg, “Lawyers, Clients and the Adversary System,” 37 Mercer Law Review 647 (1986). See also Monroe H. Freedman, Lawyers’ Ethics in an Adversary System (1975) (noting the basic assumption of “zealous advocacy”).
7 Behind the Table
1. There is a vast literature on the lawyer’s proper role in the lawyer-client relationship. For an introduction to client-centered lawyering in particular, see especially David A. Binder, Paul Bergman, and Susan C. Price, Lawyers as Counselors: A Client-Centered Approach (1991); Robert M. Bastress and Joseph D. Harbaugh, Interviewing, Counseling, and Negotiating: Skills for Effective Representation (1990); Gary Bellow and Bea Moulton, The Lawyering Process: Ethics and Professional Responsibility (1981). See also Donald G. Gifford, “The Synthesis of Legal Counseling and Negotiation Models: Preserving Client-Centered Advocacy in the Negotiation Context,” 34 University of California at Los Angeles Law Review 811 (1987). Although we use the term “client-centered,” our approach differs in some ways from that espoused by Binder, Bergman, and Price.
2. For an in-depth exploration of the importance of mindset and the complexities of establishing a mutual learning orientation, see Chris Argyris, On Organizational Learning (2d ed. 1999); Chris Argyris and Donald A. Schon, Theory in Practice: Increasing Professional Effectiveness (1974).
3. Our discussion of “more limiting” and “more helpful” assumptions is similar in structure to the way in which our colleague Roger Fisher has long presented his popular workshops on negotiation, although to our knowledge Roger has not explored the special problems of a lawyer’s assumptions in the lawyer-client context as we do here.
4. The American Bar Association’s Model Rules of Professional Conduct explicitly permit attorneys to raise moral, economic, social and political considerations with their clients. See Model Rules of Professional Conduct Rule 2.1.
5. See generally Daniel Goleman, Emotional Intelligence (1995).
6. See Douglas Stone, Bruce Patton, and Sheila Heen, Difficult Conversations: How to Discuss What Matters Most, pp. 94–97(1999).
7. See id., pp. 44–57 (discussing impact and intent).
8. See Max H. Bazerman, Don A. Moore, Ann E. Tenbrunsel, Kimberly A. Wade-Benzoni, and Sally Blount, “Explaining how Preferences Change across Joint Versus Separate Evaluation,” 39 Journal of Economic Behavior and Organization 41 (1999).
8 Across the Table
1. For a general discussion of how lawyers negotiate in either competitive or collaborative ways, see Gerald R. Williams, Legal Negotiation and Settlement (1983).
2. See Ronald J. Gilson and Robert H. Mnookin, “Disputing through Agents: Cooperation and Conflict between Lawyers in Litigation,” 94 Columbia Law Review 509, 548 (1994).
3. David A. Lax and James K. Sebenius, The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain, p. 216 (1986).
4. Michael Wheeler, “Engaging, Framing, and Norming,” working paper presented at Harvard Law School (April, 1998). See also Leigh Thompson, The Mind and Heart of the Negotiator (1998).
5. See Douglas Stone, Bruce Patton, and Sheila Heen, Difficult Conversations: How to Discuss What Matters Most, pp. 27–39 (1999) (emphasizing the importance of negotiators exploring each other’s stories).
6. Amos Tversky and Daniel Kahneman, “Judgment Under Uncertainty: Heuristics and Biases” in Judgment Under Uncertainy: Heuristics and Biases, p. 14 (Daniel Kahneman, Paul Slovic, and Amos Tversky, eds., 1982); Lax and Sebenius, The Manager as Negotiator, p. 134.
7. See Thomas C. Schelling, Strategy of Conflict (1960).
8. Id., p. 124.
9. A discussion of the history and strategy of Boulwarism can be found in the Second Circuit Court of Appeals decision in NLRB v. General Electric Co., 418 F. 2d 736, 740–41 (2d Cir.1969), cert. denied, 397 U.S. 965 (1970) (enforcing 150 NLRB 192, 207–210). We are grateful to James K. L. Lawrence, who was an attorney with the NLRB when this bargaining strategy was under attack, for providing the details of this example.
10. See Robert B. Cialdini, Influence: The Psychology of Persuasion, p. 238 (1993).
11. See William Ury, Getting Past No: Negotiating with Difficult People (1991). We also are indebted to our colleagues Bruce Patton of the Harvard Negotiation Project and Max Bazerman of the Harvard Business School for their ideas on dealing with difficult tactics.
12. See Roger Fisher, William Ury, and Bruce Patton, Getting to Yes: Negotiating Agreement without Giving in, pp. 108–112 (2d ed. 1991).
13. Of course, under the American Bar Association’s Model Rules of Professional Conduct Rule 4.2 a lawyer may not talk with the client on the other side except through that client’s lawyer. And under Rule 8.4(a), a lawyer cannot accomplish through the acts of another what it would be unethical for the lawyer to do himself. Nevertheless, here the lawyer’s client and the client on the other side agreed together to a plan of action—the lawyer has not acted through them.
9 Advice for Resolving Disputes
1. See Douglas G. Baird, Robert H. Gertner, Randal C. Picker, Game Theory and the Law, pp. 243–244 (1994) (noting that in the litigation game net expected value dominates negotiation).
2. See Richard H. Weise, Representing the Corporation: Strategies for Legal Counsel, § 8–4 (2d ed., Vol. 1, 1997).
3. Id., § 1–8.
4. See William F. Coyne, Jr., “The Case for Settlement Counsel,” 14 Ohio State Journal on Dispute Resolution 367 (1999).
5. Mediators can facilitate dispute resolution in a variety of ways. See Robert H. Mnookin, “Why Negotiations Fail: An Exploration of Barriers to Conflict Resolution,” 8 Ohio State Journal on Dispute Resolution 235, 248–49 (1993); Jennifer G. Brown and Ian Ayres, “Economic Rationales for Mediation,” 80 Virginia Law Review 323 (1994); Ian Ayres and Barry J. Nalebuff, “Common Knowledge as a Barrier to Negotiation,” 44 University of California at Los Angeles Law Review 1631 (1997).
6. Gertner and Miller propose using settlement escrows as an aid to pretrial negotiations. See Robert H. Gertner and Geoffrey P. Miller, “Settlement Escrows,” 24 Journal of Legal Studies 87–122 (1995).
7. “Litigation analysis” applies the principles of decision and risk analysis—which have long been used by businesspeople to model complex decisions involving multiple uncertainties—to litigation. It is a systematic approach to evaluating the risks and opportunities presented by litigation, and was pioneered by Marc B. Victor, the president of Litigation Risk Analysis, Inc. (Menlo Park, California). It is a tool that helps lawyers think probabilistically by requiring them to identify sources of legal uncertainty and to assign probabilities to them. Computational drudgery has been largely eliminated because of the availability of software that helps litigators who wish to use this technique. See TreeAge Software, Inc. (Williamstown, Massachusetts). For an excellent introduction to decision analysis, see John S. Hammond, Ralph L. Keeney, and Howard Raiffa, Smart Choices: A Practical Guide to Making Better Decisions (1999). For other helpful treatments of how decision analysis might facilitate legal dispute-resolution, see David P. Hoffer, “Decision Analysis as a Mediator’s Tool,” 1 Harvard Negotiation Law Review 113 (1996); Marjorie C. Aaron, “The Value of Decision Analysis in Mediation Practice,” 11 Negotiation Journal 123–133 (1995); Marc B. Victor, “The Proper Use of Decision Analysis to Assist Litigation Strategy,” 40 Business Lawyer 617 (1985).
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