Beyond Winning

by Robert H Mnookin

  8. See Victor, “The Proper Use of Decision Analysis to Assist Litigation Strategy.” “Dependency diagram” is Victor’s term for what businesspeople refer to as “influence diagrams.”

  9. For the sake of simplicity, we have assumed that the jury will decide either that all of the plaintiff’s damages are attributable to the accident (rather than to her failure to wear a seat belt) or that none of them were. In the real world, this is not likely to be the case, as the jury may apportion the plaintiff’s fault anywhere from 0 to 100%. In such circumstances, Paula’s lawyer can assign probabilities to a range of comparative negligence findings. For example, she may estimate that there is a 60% chance that the jury will find that 10% of Paula’s damages were seat belt damages; a 25% chance that the jury will conclude that 25% of the injuries were seat belt damages; and a 15% chance that the jury will conclude that 50% were seat belt damages. Through simple arithmetic, these estimates can be averaged out to a net-expected-outcome figure. In our example, however, we have chosen to keep things simple.

  10. For a discussion of the factors contributing to the time value of money, see Robert C. Higgins, Analysis for Financial Management (5th ed. 1998).

  11. In its more elaborate forms, litigation analysis can be more useful still. Techniques exist by which lawyers can gauge how “sensitive” the net-expected-outcome-estimates are to shifts in predictions about any of the sources of legal uncertainty. “Having made initial assessments of the various uncertainties in a tree, counsel can identify those issues about which having more information would be really critical to determining the client’s settlement amount. This can be done with a sensitivity analysis, in which the probabilities of a particular outcome on a particular issue are varied and then the difference in settlement value resulting from this change of probabilities is calculated.” Marc B. Victor, “Litigation Risk Analysis and ADR,” in Donovan Leisure Newton & Irvine ADR Practice Book (John H. Wilkinson, ed., 1990).

  12. See Jon G. Auerbach and Dean Takahashi, “Pentium Line is Targeted by Aggressive Action: Move Jolts Stock Prices,” Wall Street Journal, p. A3 (May 14, 1997).

  13. See Dean Takahashi and Jon G. Auerbach, “Intel Expected to Face Little Damage From Digital, Cyrix Suits,” Dow Jones On-Line News (May 15, 1997).

  14. See Auerbach and Takahashi, “Pentium Line is Targeted by Aggressive Action,” p. A3.

  15. See Dean Takahashi and John G. Auerbach, “Intel Consensus DEC, Escalating Patent Fight,” Wall Street Journal, p. A3 (May 29, 1997).

  16. Bruce Rubenstein, “Aggressive Litigation Strategy May Pay Off for Digital,” 7 Corporate Legal Times 25 (November 1997).

  17. See id.

  18. See Dean Takahashi and Jon G. Auerbach, “Intel Countersues DEC, Escalating Patent Fight,” Wall Street Journal, p. A3 (May 29, 1997).

  19. See Dean Takahashi and Jon G. Auerbach, “Digital Raises Antitrust Issues in Intel Dispute,” Wall Street Journal, p. B6 (July 24, 1997).

  20. See Jon G. Auerbach, “Alpha Male: Digital’s Palmer Faces an Unsettled Future After Intel Settlement,” Wall Street Journal, p. A1 (October 30, 1997).

  21. Joann Muller, “David, Goliath, and the Hired Gun: Digital’s Schwartz May Teach Giant Intel a Lesson in Patents,” Boston Globe, p. D1 (July 8, 1997).

  22. Auerbach, “Alpha Male,” p. A1.

  23. Id.

  24. See Jon G. Auerbach and Dean Takahashi, “Digital to Sell Plant to Intel Amid Dispute,” Wall Street Journal, p. A3 (October 28, 1997).

  25. Christopher Grimes, “Digital, Scoffed at First, Gets What it Wants from Intel,” Dow Jones News Service (October, 27, 1997).

  26. See Jon G. Auerbach and Dean Takahashi, “Digital to Sell Plant to Intel Amid Dispute,” p. A3.

  27. See id.

  28. Auerbach, “Alpha Male,” p. A1. Explaining the choice to file in Worcester, Digital spokesperson Dan Kaferle explained that “[a] corporation that expects to be sued can go to court first and bring the legal battle to a venue of its own choosing. For Intel, that would have been California . . . By moving without advance notice we were able to file in Worcester, which is convenient to our headquarters and has a less-crowded docket.” Rubenstein, “Aggressive Litigation Strategy May Pay Off For Digital,” p. 25.

  29. “Intel Asks for Judgment in CA Case; Answers DEC’s Infringement Charges,” Andrews Computer and On-Line Industry Litigation Reporter, p. 24435 (July 15, 1997).

  30. In August, Craig Barrett, chief operating officer of Intel, asserted that Intel was not inclined to compromise, stating, “You’re more likely to compromise after you’ve been fighting for years and there is a strong difference of opinion and it’s been exhausted in the courts. When you get blindsided, your first reaction is that I didn’t do anything wrong. You don’t compromise.” Takahashi and Auerbach, “Intel Countersues DEC,” p. A3. As late as mid-October, Intel spokesman Chuck Mulloy reasserted that “patent litigation takes time, will power, and legal resources. We have plenty of experience in this kind of thing, and we knew from day one that this could be a protracted affair. We said in May when the Digital suit was filed that we intended to defend ourselves, and we know what that entails: hard work and a big investment.” Rubenstein, “Aggressive Litigation Strategy May Pay Off For Digital,” p. 25.

  31. See Auerbach, “Alpha Male,” p. A1.

  32. See id.

  10 Advice for Making Deals

  1. At the same time, the shadow of the future may make it hard to negotiate assertively. There may be a temptation to avoid difficult issues or unwisely accommodate for fear of damaging the relationship. For example, Peter has a strong relationship with Henry, and he obviously wants that to continue. He has less of a relationship with other members of the Board of Directors, but he very much hopes to build such relationships going forward. For Peter, if the contractual negotiations were protracted or difficult, some board members might infer that Peter was a difficult person to work with. “I don’t want to be unreasonable,” Peter tells Jan, because “I don’t want to alienate anyone.” If both parties feel too restrained, they may end up leaving too many terms vague, and not pushing hard enough for value-creating trades, because neither side wants to upset the other.

  2. Adam M. Brandenburger and Barry J. Nalebuff, Co-opetition, pp. 52–56 (1996).

  3. John Tarrant, Perks and Parachutes: Negotiating Your Executive Compensation Contract, p. 169 (1985).

  4. See id., p. 164.

  5. Id.

  6. Cf. Stephen D. Krasner, “Structural Causes and Regime Consequences: Regimes as Intervening Variables,” in International Regimes, p. 2 (Stephen D. Krasner, ed., 1983) (defining “regimes” as “sets of . . . principles, norms, rules, and decision-making procedures around which actors’ expectations converge . . .”); see generally Eric A. Posner, “Law, Economics, & Inefficient Norms,” 144 Pennsylvania Law Review 1697 (1996) (reviewing and evaluating several definitions of norms in the economics literature).

  7. See James C. Freund, Anatomy of a Merger: Strategies and Techniques for Negotiating Corporating Acquisitions, p. 143 (1975).

  8. Ed Bernstein has suggested that norms are valuable in large part because they can mitigate agency problems for the client. They permit an agent of a corporation—such as a manager negotiating the sale of some of his company’s assets—to say, “Our lawyer tells me that this is a very common representation to give in this kind of transaction.” The manager thereby insulates himself from ex post criticism. Without the capacity to so inform his principal, the manager is really stuck—if things go sour after a deal goes through, the manager will be blamed for authorizing the representation to be made.

  9. See, e.g., Charles J. Goetz and Robert E. Scott, “Liquidated Damages, Penalties and the Just Compensation Principle: Some Notes on an Enforcement Model and a Theory of Efficient Breach,” 77 Columbia Law Review 554, 566–68 (1977) (finding no plausible efficiency justification for the penalty doctrine); Eric Rasmusen and Ian Ayres, “Mutual and Unilateral Mistake in Contract Law,�
�� 22 Journal of Legal Studies 309, 320–21 (1993) (finding no plausible efficiency justification for the contract doctrine of mutual mistake); Ian Ayres and Robert Gertner, “Strategic Contractual Inefficiency and the Optimal Choice of Legal Rules,” 101 Yale Law Journal 729 (1992).

  10. See, e.g., Marcel Kahan and Michael Klausner, “Standardization and Innovation in Corporate Contracting (or ‘The Economics of Boilerplate’),” 83 Virginia Law Review 713 (1997).

  11. See generally Cathy A. Costantino and Cynthia Sickles Merchant, Designing Conflict Management Systems: A Guide to Creating Healthy and Productive Organizations (1996). For a discussion of various “tiered” approaches to mediation and arbitration clauses, see the CPR Institute for Dispute Resolutions web site at www.cpradr.org.

  11 Professional and Ethical Dilemmas

  1. For a discussion of the implications for negotiation of “full, open, truthful exchange” (FOTE) of information, see Howard Raiffa, Lectures on Negotiation Analysis (1996).

  2. See, e.g., G. Richard Shell, “When Is It Legal to Lie in Negotiations?,” 32 Sloan Management Review 93 (1991); James J. White, “Machiavelli and the Bar: Ethical Limitations on Lying in Negotiation,” American Bar Foundation Research Journal 926 (1980).

  3. See Jones v. Clinton, 36 F. Supp. 2d 1118 (1999) (holding President Clinton in contempt).

  4. The American Bar Association’s older Model Code of Professional Responsibility, of course, is still a viable alternative to the approach in the Model Rules. Nevertheless, the more recent Model Rules seem to have been more widely adopted and more widely discussed by practicing lawyers. We therefore focus on the Model Rules in the text. In the Model Code, Disciplinary Rule 1–102(A)(4) prohibits “dishonesty, fraud, deceit, or misrepresentation,” and Disciplinary Rule 7–102(A) requires that a lawyer “shall not . . . knowingly make a false statement of law or fact” or “conceal or knowingly fail to disclose that which he is required by law to reveal.”

  5. The states vary in their approach to this issue. See Geoffrey C. Hazard and W. William Hodes, The Law of Lawyering: A Handbook on the Model Rules of Professional Conduct, §§ AP4: 101–107 (2d ed. 1996).

  6. The Official Comment to Rule 1.6 provides that “[n]either this Rule nor [others] prevents the lawyer from giving notice of the fact of withdrawal, and the lawyer may also withdraw or disaffirm any opinion, document, affirmation, or the like.” Such flag-waving will signal to the other side that the lawyer’s client is in some way suspect. See id., AP1:994.

  7. 15 U.S. (2 Wheat.) 178 (1817).

  8. See Shell, “When Is It Legal to Lie in Negotiations?”

  9. In 1985 California became the first state to enact legislation requiring affirmative disclosure in home sales. See S.B. 453, ch. 223, § 4 (1985) (codified at California Civil Code §§ 1102–1102.17, 2079–2079.24). The California statute was a direct result of Easton v. Strassburger, 152 Cal. App. 3d 90 (1984). The National Association of Realtors issued a resolution in 1991 encouraging support of “legislation or regulation requiring mandatory property condition disclosure by the seller.” National Association of Realtors, “Property Condition Disclosure” (1991). Since 1992, a number of other states have also enacted legislation requiring doing so. See generally Robert M. Washburn, “Residential Real Estate Condition Disclosure Legislation,” 44 DePaul Law Review 381 (1995).

  10. Interestingly, buyers don’t have similar duties. For an economic rationale for the differential treatment, see Steven Shavell, “Acquisition and Disclosure of Information Prior to Sale,” 25 Rand Journal of Economics 20–36 (1994).

  11. See Paul Ekman, Maureen O’Sullivan, and Mark G. Frank, “A Few Can Catch a Liar,” 10 Psychological Science 263 (1999).

  12. See Max H. Bazerman and James J. Gillespie, “Betting on the Future: The Virtues of Contingent Contracts,” Harvard Business Review, pp. 155–160 (September/October 1999).

  13. For a very helpful discussion of the problem of common knowledge in negotiation, the ways in which responses to the other side’s lying can make negotiation more difficult, and the problem of “saving face,” see Ian Ayres and Barry J. Nalebuff, “Common Knowledge as a Barrier to Negotiation,” 44 University of California at Los Angeles Law Review 1631 (1997).

  14. See Scott S. Dahl, “Ethics on the Table: Stretching the Truth in Negotiations,” 8 Review of Litigation 165, 184 (1989).

  15. While the Model Rules obviously create a nuanced obligation, its predecessor, the Model Code, stated more broadly that under Canon 7 “a lawyer should represent a client zealously within the bounds of the law.” The Model Code’s predecessor, Canon 15 of the ABA Canons of Professional Ethics, states even more rhetorically that “[t]he lawyer owes ‘entire devotion to the interest of the client, warm zeal in the maintenance and defense of his rights and the exertion of utmost learning and ability,’ to the end that nothing be taken or be withheld from him, save by the rules of law, legally applied.” See Deborah L. Rhode and David Luban, Legal Ethics, p. 138 (2d ed. 1995).

  16. Philip C. Jessup, 1 Elihu Root, p. 133 (1938).

  12 Organizations and Multiple Parties

  1. Approximately 60% of the 800,000 lawyers in the United States work in solo practice or with a partner. See Carrie Menkel-Meadow, “Culture Clash in the Quality of Life in the Law: Changes in the Economics, Diversification and Organization of Lawyering,” 44 Case Western Reserve Law Review 621, 628 n. 35 (1994).

  2. Ronald J. Gilson and Robert H. Mnookin, “Coming of Age in a Corporate Law Firm: The Economics of Associate Career Patterns,” 41 Stanford Law Review 567 (1989).

  3. See generally Ronald J. Gilson and Robert H. Mnookin, “Sharing among the Human Capitalists: An Economic Inquiry into the Corporate Law Firm and How Partners Split Profits,” 37 Stanford Law Review 313 (1985).

  4. See Howard Raiffa, The Art and Science of Negotiation, pp. 257–267 (1982).

  5. For an overview of the tobacco litigation, see Michael Orey, Assuming the Risk: The Mavericks, the Lawyers, and the Whistle-Blowers Who Beat Big Tobacco, pp. 275–371 (1999).

  6. See id., p. 342.

  7. For an excellent discussion of these theories and the coalitions that formed around them, see Benjamin Weiser, “Tobacco’s Trials,” Washington Post, p. W15 (December 8, 1996).

  8. See Castano v. American Tobacco Co., 160 F.R.D. 544 (E.D. La. 1995) (certifying the class).

  9. See Orey, Assuming the Risk, pp. 147–225 (describing the leaking of information).

  10. See Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996) (decertifying the class).

  11. See Brown & Williamson Tobacco Corp. v. Carter, 680 So. 2d 546 (Fla. 1996). The decision was reversed on appeal. See Brown & Williamson Tobacco Corp. v. Carter, 723 So.2d 833 (Fla. Dist. Ct. App. 1998).

  12. See Orey, Assuming the Risk, p. 342.

  13. See id., p. 358.

  14. See Milo Geyelin, “States Agree to $206 Billion Tobacco Deal,” Wall Street Journal, p. B13 (November 23, 1998).

  15. See David S. Cloud and Gordon Fairclough, “US Sues Tobacco Makers in Massive Case,” Wall Street Journal, p. A3 (September 23, 1999).

  16. In some situations, a lawyer may represent more than one client in a negotiation. This can happen in one of several ways. First, a lawyer might attempt to represent parties on both sides of a dispute or deal concurrently. This, of course, generally runs afoul of the conflict of interest rules. Under the Model Code and the Model Rules, a lawyer’s duty of loyalty to his client precludes such dual representation if, as the Code provides, “the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected.” Model Code of Professional Responsibility, Disciplinary Rule 5–105(A). In most cases, attorneys cannot meet this test, and such representation is forbidden.

  Second, a single attorney might represent multiple clients on the same side of a dispute or deal. Such multiple representation is viewed more favorably by courts and the Bar. In some situations, clients on one “side” of a dispute or
deal may seek unified representation because their interests are identical or almost identical, and there are no potential conflicts of interest between them. In this circumstance, there is no presumption of adverse effect from multiple representation. See Julius Denenberg and Jeffrey R. Learned, “Multiple Party Representation, Conflicts of Interest, and Disqualification: Problems and Solutions,” 27 Tort and Insurance Law Journal 497, 504 (1992).

  Under the Model Rules, an attorney can represent such clients provided that they consent after consultation, the lawyer reasonably believes that her representation will not be adversely affected, and the representation of the client is not materially limited by the lawyer’s responsibilities to the other clients. See Model Rules of Professional Conduct Rule 1.7.

  Conclusion

  1. See Ronald J. Gilson and Robert H. Mnookin, “Disputing through Agents: Cooperation and Conflict between Lawyers in Litigation,” 94 Columbia Law Review 509 (1994).

  2. See “Bounds of Advocacy: American Academy of Matrimonial Lawyers Standards of Conduct in Family Law Litigation” (1991).

  3. See Rachel Croson and Robert H. Mnookin, “Does Disputing through Agents Enhance Cooperation? Experimental Evidence,” 26 Journal of Legal Studies 331 (1997).

  4. Pauline H. Tesler, “Collaborative Law: What It Is and Why Family Law Attorneys Need to Know about It,” 13 American Journal of Family Law 215 (1999).

  5. The Center for Public Resources has secured commitments from numerous corporations and law firms, pledging to consider alternative dispute resolution. Approximately, 4,000 operating companies have agreed to the CPR’s Corporate Policy Statement on Alternatives to Litigation, while approximately 1,500 law firms, including 400 of the nation’s 500 largest, have signed the CPR’s Law Firm Policy Statement on Alternatives to Litigation. The Department of Justice has also come out in support of changes in the cultural norms of the profession. See David J. Pasternak, “President’s Page: A Call for Continued Activism,” 21 Los Angeles Lawyer 11 (June 1998) (reporting a keynote speech by Attorney General Reno calling for an increased emphasis on problem solving among lawyers).