Pawn Stars and Shark Tank – Proof that Americans Have Lost the Art of Negotiation.

As the dog days of summer dwindled, I stumbled upon two new TV programs that I found fascinating on several levels.  The first was Pawn Stars, a “reality” show about a family run pawn shop that mixes a little Antiques Roadshow with the dysfunctional family dynamics of American Chopper.  I admit, I enjoy watching people bring in treasures they found in the attic find out they have an authentic John Hancock of John Hancock or the gullible people learn that the 1675 flintlock pistol they got from a guy at a flea market was a Chinese reproduction.

The second show was Shark Tank, the American version of a British show called Dragon’s Den (also available on BBC America).  Shark Tank gives various Ralph Kramden-types the opportunity to pitch their business ideas to five very successful business-people who then compete for the right to buy a stake in the start-ups.   As an avowed capitalist, I enjoy seeing the ideas that these entrepreneurs cook up and then watching the multi-millionaires fight to see who gets a stake in the business.

But the disappointing, and somewhat shocking, aspect of both shows is the abject inability of most these people to negotiate.

On Pawn Stars, the people are interviewed by the producers before they enter the shop.  They describe the article they are trying to sell and are asked what they would like to get for it.  Some know roughly what the item is worth and this is invariably the exact same amount they tell Rick the pawn shop owner when he asks what they want for the item.  At this point, they’ve lost.  From there, Rick only goes down with this offer and the usually dejected seller reluctantly accepts 30-50% of what they claim they wanted.

Now, they may be savvy and really got more then they expected to get, but something tells me that people who try to sell an authentic Civil War saber worth several thousand dollars to a pawn shop and not a private collector might not be the shrewdest of the shrewd.

Likewise, on Shark Tank, the minnows either think they are setting an anchor point or have no idea how to value their business.  Most massively overvalue their business and offer a minuscule equity stake. A recent example saw a woman ask for a six figure investment in exchange for only 25% of her business.  She therefore “valued” her company at more than $400,000.  In the last two years, however, she had only $18,000 in gross sales.  By standard business models, her business might have been worth $40,000.  The only successful minnows are the ones who realize that having 49% of a successful business is better than 100% of a failing one; or are the ones that put forth a more reasonable number at the start.  The others walk away mumbling, “I’m going to show them…..”

As someone whose job it is to facilitate negotiations, I can’t say that I am surprised.  I run into both sets of bad negotiators all the time.   I guess I should be happy to a certain extent, because if people really understood how to objectively value their claims, express their needs and interests clearly and effectively and negotiate on their own, I’d be out of a job.

Never underestimate the power of a meaningless gesture.

When I first read the story of Ria Ramkissoon, I was horrified that such a story could still happen in 2009 in a civilized, modern society.  In short, Ms. Ramkissoon is a member of a whack-job cult.  At some point in 2006, the leader of the cult,  “Queen Antoinette,” decided that Ramkissoon’s one year old son was a demon because he refused to say “amen” after meals.  The “Queen” ordered that the boy be refused food and water.  Sadly, he died.   When the authorities caught up with these charlatans and fools two years later, the mother and several cult leaders were charged with first-degree murder.

As sad as the story is, it turns out that there is actually a useful negotiation and dispute resolution lesson to be learned from the plea agreement that Ramkissoon’s lawyer’s struck with prosecutors.

When confronted with what she had wrought,  Ramkissoon apparently insisted that her son would be resurrected per the “teachings” of “Queen Antoinette.”   She would only agree to enter into a plea agreement and testify against the cult leaders on the condition that all charges against her would be dropped if her son resurrected from the dead.

Apparently, being on the “losing end” the first case of resurrection since Jesus Christ was a risk the prosecutors seemed willing to take.  Sometimes, making a meaningless gesture, such as the “resurrection clause”, can induce a party to enter into an agreement they otherwise would not.

[Ken from Popehat (who gets my hat-tip) takes a different tack, arguing that her insistance on these terms illustrates that she simply isn't competent.]

Fordham Law Symposium – “Against Settlement”: 25 Years Later.

One of the worst things about being 900 miles from my law school alma mater is that I typically cannot attend the excellent events they hold.   Case-in-point:  Against Settlement: Twenty-Five Years Later. The Fordham Law Review has assembled an impressive roster of well-known professionals from the ADR, complex litigation, and public interest communities to discuss the role of settlement and adjudication in civil litigation, including Owen Fiss, the author of the seminal article Against Settlement, Kenneth Feinberg, and Michael Moffit of ADR Prof Blog, as well as distinguished members of the Fordham faculty and family.

Jeff Krivis’ Excellent New(ish) Blog.

I recently found Mediator Jeff Krivis’s new(ish) blog [Not to be confused with a Jewish blog].   Jeff has been a mediator in Southern California for almost 20 years and is a recognized leader in the field of mediation and negoiation.  I look forward to some great posts on negotiation, mediation and other ADR news.

Study Shows That Settlements Result in Better Outcomes for Both Parties

A few weeks ago, I noted in passing that I had mediated several cases in a row in which the plaintiff walked away from reasonable settlement offers, only to have the court find in favor of the defendant.  It turns out that this is actually a common occurrence.  The New York Times reports that a study to be published in the Journal of Empirical Legal Studies finds that “most of the plaintiffs who decided to pass up a settlement offer and went to trial ended up getting less money than if they had taken that offer.”

The basic premise of the article seems elementary to me.   Everyone is convinced they (or their position) are unique and that others will see their position exactly as they see it. As the article notes,

“Most clients think they are completely right,” Michael Shepard, a lawyer at Heller Ehrman in San Francisco. A good lawyer has to be able to tell clients that a judge or jury might see them differently.

And it is not limited to clients – there are apparently naive, self-deluded lawyers “dismissive of the study, noting that the statistics mean nothing when contemplating a particular case, with its specific facts and legal issues, before a specific judge.”  So, the fact that people pass up perfectly reasonable settlement options didn’t seem like earth shattering news.

The two things that really made my eyebrow arch were  1) the percentage of plaintiffs who pass up settlement and “lose”, i.e., are awarded less money than they were offered.  [And yes, as a former defense counsel for various insurers, be certain that even though the defendant is still writing a check, they consider this a "win"]; and 2) the discrepancy between what happened when a plaintiff passed on a settlement and what happened when the defendant passed on it.

According to the article:

Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial — meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.

That means that nearly two-thirds of all plaintiffs are offered more than they are awarded at trial.   That seems staggering.  Until you factor in the other half of the argument – the amount of that “error.”

The article states:

On average, getting it wrong cost plaintiffs at about $43,000; the total could be more because information on legal costs was not available in every case. For defendants, who were less often wrong about going to trial, the cost was much greater: $1.1 million.

This seems ridiculously out of proportion to me.  I would like to see more of the data or have these numbers expressed as percentages in order to determine whether which is more significant.  Which error hurt which side more?  Did the plaintiff receive $57,000 when they were offered $100,000?  Did the defendant get popped for $10 million claim when the plaintiff would have taken $9 million?  Hard to say.

Even so, it seems that while defendants are wrong only 24% of the time, their “mistakes” are far more costly.

The answer?  Well, I’m not sure there is a one-size-fits-all approach.  Like Vickie Pynchon suggests, you can’t very well tell people to take the last offer on the table.  This is, however, where a qualified, skilled, professional mediator can help the parties make pragmatic, informed decisions to resolve the issues before them.

The Effective Use of Visual Aids in Mediation

Nancy Hudgins has a great post discussing the benefit of the use of visual aids in trial that would also work in mediation. As I mentioned in my comment to her post, being a visual person myself, I encourage the use of such aids. In my confirmation letter, I even request that the parties bring “any physical evidence or documents you believe would support your position and help persuade the other side.”  As my current practice involves mainly court-referred cases where one or both parties are unrepresented, it is rare.

But on occasion, I am pleasantly surprised. I find there is nothing more powerful than a visual representation of what is at issue.  In my early days of practice as a defense lawyer, we received numerous “settlement packages” from plaintiff’s firms.  They contained pictures of the plaintiff before the injury with their family or playing sports or simply being an average Joe or Jane; then pictures of the damaged vehicle and pictures of the plaintiff’s injuries; and finally a itemized spreadsheet of the medical bills, lost wages and other economic damages.  The good ones would tell a story without much in the way of narrative.  We could tell quickly which cases needed settlement.

I remember one particular trail where the plaintiff’s lawyer was extremely effective in his use of a demonstrative aid.  The defendant had struck a police officer when he lost control of his car on a snowy and icy interstate highway.  This being Atlanta, such conditions are rare occurrences and the local news media had broadcast numerous warnings on radio and TV to stay off the roads unless there was an emergency.

The defendant was an immigrant who claimed he did not speak English at all and required a translator for his deposition and at trial.  He claimed he had not heard any warnings and if he had, he would not have understood them.  He had no real “emergency” to attend to that Sunday morning, he was simply going to church.

The testimony proceeded as expected, slowly, with the plaintiff’s counsel asking the interpreter the question, then having it relayed to the defendant.  In the middle of testimony, the plaintiff’s counsel turned to look directly at the defendant and quickly asked him to remove his wallet and show him his driver’s license.  Before the interpreter could relay the question and the defense counsel could object, the defendant leaned over, removed his wallet and started to hand over his driver’s license.   Plaintiff’s counsel smugly continued questioning the defendant directly.  It had its desired effect because the defendant got hit with a fairly serious verdict.  (For the record, I was counsel for another party in the case, not the defendant).

Of course, this particular tactic might not work in mediation, but every party should be aware of the impact such aids have on juries, judges and opposing parties.

Welcome to the ADR Blogosphere, Nancy Hudgins!

Take a few minutes and visit the relatively new blog by Nancy Hudgins, a Bay Area mediator and civil litigator. Nancy was kind enough to drop by and comment on one of my recent posts. Her blog has the admirable goal of “making a pitch for putting the “civil” back into civil litigation.” I couldn’t agree more.

Looking forward to more dialogue with Nancy.

Cheers.

The Negotiation Guru Blog

Some of you may be familiar with Jens Thang’s Negotiation Guru blog, but I only recently discovered it after he commented on Vickie Pynchon’s recent post “How to Make Your Opponent Do What You Want Him to Do.” I have only skimmed through the content (I have to attend a 2 year old’s birthday party), but what I’ve seen so far is very interesting and well written. I plan to take a deeper look this week and suggest that you do, too.

Some people just don’t understand….

When I began my study of mediation and negotiation in earnest last year, I read that Americans (in particular) get bored or frustrated with negotiations that proceed past offer and counter-offer. In a wired-in, on-demand, point-click-shop culture, the idea of bargaining simply turns people off. As a result, people simply just don’t understand how to negotiate. Wednesday’s small claims mediation was a case in point.

It was a small matter, a dispute over an advance paid to a vendor to provide certain services. After the vendor completed a small percentage of the work, a dispute arose between the parties and the vendor ceased work. The plaintiff felt that he was entitled to his advance back. The vendor felt he was entitled to be paid of his time and effort to date.

The plaintiff admitted early in the mediation that the defendant had performed some of the work and was entitled to some compensation for that work. Optimistic, I asked to caucus with the defendant and learned that he had made an offer to settle about a month earlier. After discussing that offer for a while, he told me to make an offer that was 25% less than the pre-mediation offer.

Having a party make a lower offer than a pre-mediation settlement attempt is not a typical occurrence but it is not terribly unusual either. I assumed that the initial offer was closer to his final position and he wanted some room to move. Fine. I can work with that.

The plaintiff seemed pleased with the offer and made a decent counter offer, knocking about 40% off the initial demand. I thought that we were on to something. We were moving.

Then, I took the new demand into the defendant’s room and all logic and reason vanished.

For some reason, he decided he now wanted to offer less than any of his previous offers – half his pre-mediation offer. Yes. You read that right. Half.

It reminded me of the negotiation I once had with my father about a curfew. Every time I objected or counter-offered, he made the curfew a half-hour earlier.

Needless to say, neither negotiation ended well.

As an aside, I am beginning to think the ADR coordinator at this particular courthouse dislikes me. The last time I was there, she gave me a case involving twin siblings who would barely speak to each other. That ended in impasse as well.

What Can a Lawyer’s Verbal Attack on a Judge Teach Us About Mediation?

A Daily Business Review article explores the case of a Florida criminal defense attorney who is facing Florida Bar ethics charges for critical comments he posted on his blog about a controversial Broward, Fla., judge.

What caused the commotion? Well, I’m not a criminal attorney, but it appears that this centers around Judge Aleman’s attempt to force felony criminal suspects to declare ready for trial within 1-2 weeks of arraignment or seek a continuance, which apparently forfeits the defendant’s constitutional right to a “speedy trial.” This policy also apparently violates Florida’s Rules of Criminal Procedure, which allow a defendant a reasonable time to prepare.

After Sean Conway had one of his defendants placed in this unenviable position, he posted on his blog about the situation. The post, filled with grammatical errors and “txt msg” abbreviations, referred to the Court as “Evil Unfair Witch”, branded the new policy “illegal,” called the Judge “mentally ill” and “unfit for her position” and stated that he (Conway) would not call the Judge “Your Honor” because “there’s nothing honorable about that malcontent.” Conway is now under threat of Bar discipline for violating the ethical requirement that lawyers refrain from making false or reckless statement about the integrity or qualifications of a judge. [As an aside, the judge is also under investigation for an unrelated matter].

Putting aside for the moment the constitutional arguments over free speech (which are explored in the original article), I think this incident can be used to illustrate some (in)effective negotiation/mediation tactics. It would appear that Conway had a valid legal argument that Judge Aleman’s policy was illegal, unethical and possibly unconstitutional. But by resorting to such a crass and classless ad hominem attack, he undermined his argument.

All too often, I see litigants sit down across the mediation table and launch right into the personal verbal assaults.

“He’s a liar”
“She’s a drunk”
“What would you know, you went to [insert name of arch rival university here]!

And this is from the lawyers. Well, maybe not that ridiculous, but I’ve been involved in witness to shouting matches between highly educated, allegedly professional attorneys. More often than not, both sides have valid, legal arguments as to why they may be legally entitled to assert their claim or defense. But the other side doesn’t see them, or care, because they are too busy defending themselves from the personal attacks.

There’s an old Southern saying, “You catch more flies with honey than vinegar.” Took me a long time to realize that, but it works. Had Conway blogged about the alleged illegality of Judge Aleman’s policy in a less invective manner, or drafted a firm, persuasive letter to the Chief Judge or whatever organization overseas judicial ethics, rather than call the judge an evil nutcase, we would likely have never heard of this incident, or if it came to light, hailed Conway as a champion of constitutional rights. But now, if he is remembered, we will simply recall him as that criminal lawyer who resorted to name calling when things didn’t go his way.

The next time you are at the mediation table, put the venom aside, take the proverbial chill pill, and think of a neutral way in which to convey the fact that you think your opponent’s argument is horse dung.