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News 7.1.11

Turning Disputes Into Deals

three questions for resolving conflicts

by William S DeFord
Study after study confirms that in almost all disputes, it is more profitable to settle the dispute early before the parties to the dispute invest more money than necessary in litigation and other transaction costs.   Settling early is not always easy. But Robert H. Mnookin, director of the Harvard Negotiation Project, suggests three questions to ask at the beginning of a dispute to help find a resolution that creates value and avoids unnecessary costs. These questions can be found in Mnookin's book Beyond Winning: Negotiating to Create Value in Deals and Disputes, published by the Belknap Press of Harvard University Press.   The first question, "Is this the rare case where settlement may not make sense even if the other side is willing to settle?" It is easy to rush to the conclusion that your case is one that doesn't make sense to settle, although such cases are relatively rare.   Mnookin provides a few examples of cases that may not make sense to settle: "Some legal disputes may threaten a company's ‘crown jewels'—for example, by putting at risk core intellectual property. In others it may be indispensable to create or defend a binding legal precedent. Or a client may want to deter a particular kind of litigation by demonstrating a commitment to never settling."   In cases where it makes more sense to litigate, regardless of the outcome of litigation, the lawyer and client would be wise to avoid investing much time and money in preparing and carrying out a settlement strategy.   The second question is, "How can I create value by minimizing transaction costs and exploring trades based on differences in time or risk preferences?" Rather than thinking in terms of war and conflict, think in terms of problem solving.   The dispute presents a problem to be solved by both parties. This doesn't mean parties naively agree to whatever initially seems best. Negotiation can be tough-minded and intelligent without being hostile. Disputants should explore both parties' interests and alternatives, develop a broad picture of the interests and concerns at stake, and consider the net expected outcomes, on both sides of the dispute.   The third question is, "Could the parties to this dispute conceivably create value by exploiting opportunities for a broader range of trades?" Parties should think broadly and creatively about what each side has to offer the other side and explore possible trades, often beyond the immediate subject matter of the dispute.   Not every dispute settles, but asking these three questions can help the parties turn their dispute into a deal and avoid the costs and risks of protracted litigation.

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