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How do you negotiate settlement with an opponent who cannot or will not see reason?
In their must-read book Negotiation Genius, Harvard Business School professors Deepak Malhotra and Max H. Bazerman tell their MBA students not to jump to the conclusion that their bargaining partner is "nuts," "delusional" or "evil" too quickly. Why? Because negotiators often confuse hidden interests and constraints with irrationality.
Mistake No. 1: They are Not Irrational; They Have Hidden Interests
I once had an associate who took a $30,000 pay cut to accept another job. On hearing this, one of my out-of-town partners said, "she's nuts; that's completely irrational." My partner was making Mistake No. 1. Although he knew that Associate "X" was once a paralegal in the firm, he didn't know the following: Thirty days before a month-long trial, the partner who'd always used X to help him organize his cases, learned that X had been offered an associate attorney position at another firm. He insisted we "promote" X from paralegal to associate. We didn't ordinarily hire attorneys who were graduates of X's law school and many of my partners opposed her hiring. The partner who insisted on hiring X subsequently left the firm without her. Although her written reviews were consistently good and she continued to advance with her class, she felt as if she were being treated as a second class citizen. Because of this (largely accurate) feeling, she left at the first opportunity even though it meant a serious pay cut. Had the entire partnership been informed of the problem and willing to address X's hidden interests, she would have remained at the firm.
Mistake No. 2: They are Not Irrational; They Have Hidden Constraints
Bazerman and Malhotra also suggest that seemingly irrational bargaining behavior can arise from hidden constraints. I once mediated a case that hadn't previously settled because of a hidden constraint. The case concerned overpayment of physicians by an insurance carrier due to an accounting error. The parties reached impasse at a precise but odd figure -- something like $82,250. The carrier wouldn't accept a penny less. In separate caucus, I noted that the figure seemed odd to me, as did the carrier's refusal to compromise that sum by "even one penny." The carrier's attorney finally told me that one of the overpaid physicians settled for 60% of the over payment only because the carrier agreed to accept nothing less from the others. Upon being informed of the hidden constraint, defense counsel concluded that the $82,500 was "reasonable," the defendant doctor accepted the compromise and the case settled.
Mistake No. 3: They are Not Irrational; They Are Uninformed
Often one party believes the other's failure to accept a "reasonable" offer is irrational for reasons that have not yet been revealed. This often occurs when trial is near and the "reasonable" party possesses information they want to surprise their adversary with at trial. In these situations, I usually recommend disclosure at a point in the negotiation where the delta to be closed is narrow enough that disclosure will likely settle the case. If the "reasonable" party does not wish to take the risk that disclosure will settle the case, he cannot complain that his opponent is "just nuts" for not settling.
If your opponent is truly irrational, a mediator's proposal; baseball arbitration or other ways of using mediator influence to settle the case may be necessary. If settlement can't be achieved, there's always the joy of going to trial!
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Victoria Pynchon is a commercial mediator and arbitrator with the Southern California ADR firm, Judicate West. With colleagues, Ms. Pynchon founded two specialty ADR panels, Settle It Now Dispute Resolution Services and the IP ADR Group. She is a panelist with the prestigious International Institute for Conflict Prevention and Resolution. Ms. Pynchon is an Adjunct Professor at the Straus Institute for Conflict Resolution from which she received her LL.M in 2006. Ms. Pynchon writes a regular column, The Human Factor, for the online work-life balance journal, The Complete Lawyer. She received her J.D., Order of the Coif, from U.C. Davis in 1980. She commenced her full-time neutral career after 25-years of complex commercial litigation practice.