Why Litigators~ShouldUseSettlement Counsel

VOL. 18, NO.6 JUNE 2000

Based on the answers, settlement counsel willrecommend and help implementa plan to achieve

those objectives and resolve the dispute.

WWW.CPRADR.ORGCPR INSTITUTE FOR DISPUTE RESOLUTION

BY JAMES ,E. MCGUIRESettle business disputes fairly and efficiently.

Most business executives in our global busi­

ness economy would agree that this statementreRectstheirapproachtothereso- ADVANTAGES OFlution ofdisputes thatafI"ect them. SETTLEM ENT (OU NSE lThere are many dispute resolution Focus: The focus of settlement

methods that can be used to counsel is on how to settle the

achieve that objective. Knowing dispute at hand fairly and effi-

what these are and how best to use ciently. The types of questions

them requires special knowledge that are asked when focusing on

and skills. The role of settlement settlement are different from the

counsel in the modern law firm is types ofquestions that a litigator'-----------'

to provide that service to the firm needs to ask to prepare a com-

and its clients. This article discusses the role of plaint and commence a suit. Litigation rem-settlement counsel: edies are limited to the type of relief that the

• What is settlement counsel? legal system is empowered to award.Business solutions to business disputes, how-

• What are the advantages of using settle-ment counsel? ever, have a much broader range of alternatives.

Considering the complete range ofoptions that• Why settlement counsel and litigation

counsel? could be used to meet the business objectives iscritical. Settlement counsel does not filter to ex­

• What does it cost? clude options because a court might nor be ableSettlement counsel assists the client in con- to order the parties to do that which is in

sidering and using all forms ofdispute resolu- everyone's mutual best interest.tion processes and techniques to resolvebusiness disputes fairly and efficiently. Settle- Approach: There is a difference in tone and

ment counsel asks some basic questions readily approach when a lawyer calls counsel on theunderstood by business executives: other side ofa business dispute and introduces

himself or herself by saying:• What are our business objectives? Theirs?• What information do we need to make a "Hello. My name is Jim. 1have been asked

by our client to serve as settlement coun­sound decision?

sel in this matter. It is the business phi-• What do they need to know? losophy of our client and the practice of

• What are the alternatives? our firm to have separate settlement coun­sel on matters of this type."

Contrast that with the type ofintroduetion

that litigators are trained to make:

"I would like to discuss settlement ap­proaches with whoever has the power andresponsibility to explore settlement ofthisdispute, ifyour client is interested in dis­cussing settlement now or later."

(continued on following page)

James E. McGuire is a member in the Boston officeof Brown, Rudnick, Freed & Gesmer and chairman ofthe firm's ADR Practice Group. He serves as settle­ment counsel in civil disputes for corporate clientsin the primary areas of inteLLectual property, com­mercial transactions, securities, finance, employ­ment insurance and general corporate law. He alsois a trained mediator, serving on several CPR Panelsof Distinguished Neutrals.-

This article from theJune 2000 edition ofAlternatives, publishedby the CPR Institute, isreprinted with permission.

The CPR Institute is anonprofit initiative of 500general counsel of majorcorporations, leading lawfirms and promin~nt legalacademics whose missionis to install alternativedispute resolution (ADR)into the mainstream oflegal practice.

Altematives to the High Costs of Litigation(ISSN 0736-3613) is published monthlyby the CPR Institute for Dispute Resolution.

Editorial and Business Offices:366 Madison Avenue,New York, NY 10017-3122Tel: (212) 949-6490

www.cpradr.orgAltematives@cpradr.org

tP 2000. For permission to reprint bylinedarticles, please contact both CPR and the author.

TO THE HIGH COSTS OF LITIGATION

Alternativ~PublisherJames F. Henryjhenry@cpradr.org

EditorRuss Bleemerrbleemer@cpradr.org

-

2 ALTERNATIVES CPR INSTITUTE FOR DISPUTE RESOLUTION REPRINTED FROI~ VOL 18 NO.6 JUNE 2000

Why Litigators Should Use Settlement Counsel

WHY 80TH SETTLEMENT ANDLITIGATION COUNSEL?Why shouldn't a litigator or trial lawyer knowall of this?

The short answer is the same as the devel­opment ofother specialties in the law. There is

(continued on following page)

Settlement counsel knows when and howto seek additional help. Mediation is a proven­effective tool to aid in the resolution of civildisputes. Settlement counsel can educate theclient and other lawyer's mediation options.Settlement counsel can be an effective advo­cate for the use of this process.

Mediator selection is likely to be accom­plished more efficiently and with a better matchif it is directed by someone whose job is to bea sophisticated consumer ofdispute resolution

service providers. This process is not like fo­rum shopping for a favorable judge. Litigatorswho are oriented to think in those terms likely

will describe the ideal mediator as "someonewho is tough enough to beat up on the otherside and persuade them that they have no caseand should settle with us on our terms."Litigators who think in those terms are likelyto distrust any mediator nominated by theother side for just that reason. Settlement coun­

sel can employ techniques in the mediator se­lection process to avoid this type of reactivedevaluation.

In preparation for and in participation in amediation, using settlement counsel introducesa positive, results-oriented dimension to theprocess. This comes from a combination ofmind-set and experience. Critical evaluations

of the prospects of litigation success are morelikely to be heard and evaluated with less egoinvolvement. The critique is less likely to be

understood as an attack on the settlementcounsel's professional skills since he or shewould not be involved in trying the case in the

event settlement fails.Keeping the parties focused on continuously

evaluating and considering settlement optionsand alternatives is the settlement counsel's job.

When negotiations are strained, settlementcounsel is less likely to get drawn into a discus­sion of how best to kill the other side in litiga­

tion once the mediation collapses. While everycase is different, certain settlement techniquescan be used on a repeat basis. Settlement coun­sel will have the experience to try these tech­niques to avoid an impasse.

It is difficult forthe litigator to say

convincingly, 'We filed suitthis morning, but we still

want to talk this afternoon:Settlement counsel can say,'The litigation team starteda suit this morning, but myjob is still to continue to

talk settlement thisafternoon:

nology and know-how. Ideas and intellectualproperty are a leading U.S. export. What doesnot sell well overseas is traditional American liti­gation. While formal international arbitrationcontinues as the default mode for resolution ofinternational disputes, mediation and other

parry-controlled processes are gaining new ad­herents every day. Settlement counsel can morequickly fmd a common international language;in dealing with these disputes.

Effective Implementation: Settlementcounsel applies this knowledge and focus to thegoal of a fair and effective settlement. The dia­

logue with the client is central to this process.Promoting and maintaining a dialogue with de­cision-makers for the other party or parties is an

integral part of that dialogue. Establishing a

process includes developing a timeline for imple­mentation. It is part of the settlement counsel'srole to apply consistent pressure on himselfandall other parties to adhere to that timeline and

to avoid unnecessary delays.Settlement counsel can be brought into a

dispute before litigation starts. Early interven­

tion creates more options for settlement. Atthis stage, there are more tools to work with tofind a solution. The parties are likely less po­

larized than they will become after litigationcommences. Settlement counsel need not breakoff communications just because one side orthe other decides to commence litigation. It isdifficult for the litigator to say convincingly,"We filed suit this morning, but we still wantto talk this afternoon." Settlement counsel cansay, "The litigation team started suit this morn­ing, but my job is still to continue to talk settle­ment this afternoon."

(continued from front page)

Every lawyer would consider it his or herethical obligation to discuss a settlement request

with the client. Doing so permits and encour­ages the party to focus on settlement: Do wewant to talk settlement? Who should be involved

in settlement talks? If their litigator is not alsosettlement counsel, should ours be?

Mediators have learned through years of

experience how critical it is to have the keydecision makers at the mediation session. By

definition, only the client has the power to sayyes. More important, involving the business

executive encourages the parties to focus oninterest-based negotiations: What are yourbusiness goals? What solution(s) can best fur­ther those goals? For this reason, some compa­nies employ outside counsel to litigate andassign settlement responsibilities to businessexecutives and in-house general counsel. Settle­

ment counsel can help the prospects for promptsettlement by getting the right people involvedin the process.

, )Knowledge: Settlement 'counsel can help

by suggesting approaches and techniques thatmay be new to the clients (on both sides) andto the lawyers on the other side. The disputeresolution specialist in a law firm knows theever-expanding processes and service provid­ers that might be employed in resolving a par­ticular dispute. Settlement counsel can helptailor a process for exploring settlement thatdraws on all of this information.

Settlement counsel has extensive training inmediation and negotiation. There are distinctteachable skiMs that will improve the prospectsfor a mutually advantageous interest-based reso­lution ofa business dispute. To an executive whohas been trained at a business school, that state­ment is so self-evident as to be trivial. Yet onlythe most recent law school graduates have eventaken one course in general area ofnegotiation,

dispute resolution or conflict management.Some firms now offer seminars for media­

tion advocacy training. Many agencies of the

federal government offer such training as anintegral part oftheir efforts to promote the useofdispute resolution alternatives to tradi tional

litigation. These are useful first steps that areimproved by repeated use and practice. Forsettlement counsel, such training and experi­ence are central to the practice and are not side­line ancillary skills.

In a global economy, disputes are transna­tional. The world economy seeks out U.S. tech-

REPRINTED fRO~l VOL. 18 NO.6 JUNE 2000 CPR INSTITUTE fOR DISPUTE RESOLUTION ALTERNATIVES 3

just too much out there for one person to know

it all. All litigators have heard of mediation;most no longer confuse it with meditation orarbitration. Some firms now provide media­tion advocacy training, but the primary focusof most litigation training, not surprisingly, istraining to be advocates in an adversarial pro­cess. Discussions with mediators about theirsense of attorney's ADR knowledge and theeffective use of dispute resolution processesleads to the conclusion that we still have a wayto go before the typical litigator is as skilled inthe mediation process as he or she is in the

litigation process.Both litigation and settlement skills are

needed, even if performed by the same person.

Development of an alternative to a negotiatedagreement is a key component to a successfulnegotiating strategy. Without an alternative, ne­gotiation becomes capitulation. Litigation maybe the best available alternative. To make thatalternative viable, work on the litigation processmust be done. The litigation team must do the

necessary factual and legal research to developlegal claims and defenses.

Since most court-irp.po~dsolutions dependupon the facts and the law, litigators are trained

to focus on developing a faCtual record that willstrengthen the legal claims. Those facts are typi­cally historical: What happened? What did they

say? What did you say? What does the contractsay? That information gathering is critical to thelitigation process, but it may be substantiallyirrelevant to an interest-based business solution

that focuses on future conduct.Litigators do settle disputes. When? Later.

Development of an alternative will frequentlyprompt the litigator to me the complaint as aprelude to any discussion. This prompts theother side to respond to a litigation process,not to a settlement process. Litigators will wantfactual discovery both to support the litigationclaim and to help evaluate the strength of itsclaims for settlement purposes. Ineluctably, thatprocess leads to delay.

When settlement counsel is employed, thelitigation process can proceed independently.Settlement counsel coordinates with litigation

counsel, but does not control that process.Whatever the formal litigation process dictatesfor pleading and discovery proceeds on a paral­lel and independent track. While both partiesmay decide to stay litigation because ofthe sub­stantive progress being made bysettlement coun­sel, there is no necessity to do so.

The settlement process usually has a needfor information as well. The focus may be quite

different. What are they trying to accomplish?What information are we lacking to make or

evaluate settlement proposals? Can we find away to further both parties' business interests?

The methods for gathering that information

typically will be quite different. An informationexchange is part ofa mediator's toolbox. Settle­ment counsel who is familiar with this protocolcan advocate for an informal information ex­

change process. Settlement counsel can offer afurther guarantee: Information produced by this

smLEMENT COUNSEL UPDATE

Author James E. McGuire discussed therole of settlement counsel on a panel atAlternatives' publisher CPR Institute forDispute Resolution Winter Members'Meeting in New York in January 1998.See "Winter Meeting Supplement: III.ADR and the 21st-Century Law Firm," 16Alternatives 47 (March 1998). See alsoWilliam F. Coyne Jr., "The Case for SettLe­ment CounseL," 14:2 Ohio State Journalon Dispute ResoLution 367. McGuirenotes that the Coyne article "providesvery useful information on prior schol­arship in this area and provides compel­ling arguments for the need forsettlement counsel." McGuire is revisit­ing the subject in a session he is Lead­ing at this month's CPR Spring Meetingin Charleston, S.c.

process is for settlement purposes only, and willnot be used or quoted in any further litigationproceeding and will not be shared with litiga­tion counsel.

Settlement counsel can work whether thelitigation team is from the same or a differentlaw firm. There appears to be little differencein dynamics or results. This author has had

several engagements where litigation counselwas from a different firm in a different city ina different state. In some cases, litigation coun­

sels have participated in some aspects of thesettlement process.

For example, as part ofan information ex­change, it may be useful to have litigation coun­

sel make a presentation of the legal claims anddefenses. While that presentation will not initself create a settlement, it may be of someassistance to the parties and the process.

WHAT WILL THIS COST?This author has been privileged to be a guestlecturer in Prof. Frank Sander's mediation

course at Harvard Law School. When we dis-

cussed the settlement counsel's role, he joked,"Only a lawyer could say with a straight face,

'Our firm wants to save you money so we wantyou to hire rwo of us, not just one.'''

But the use ofa settlement counsel has beenproven to be a true source of cost-savings inresolving business disputes. Experience overseveral years has confirmed that:

• Cases settled sooner with the use ofsettle­ment counsel;

• Actual litigation expenses are less than bud­geted for the same time period, and

• Fees paid for settlement counsel are a per­centage of the cost savings.

Various alternate fee arrangements have been

used by settlement counsel. Some are based onusual and customary hourly rates. Some are to­tally contingent on achieving a result that ex­ceeds client expectations. Some have been a fixedretainer with a premium based on cost savings.One alternative is to respond to the true con­cern contained in Prof. Sanders' quip:

"Double or nothing. Based on my expe­rience, I believe that I can settle this casewithin X months. If so, you agree to payrwice my hourly rate. Ifno, then you paynothing."

Since the client retained control of thesettlement and would settle only if the pro­posal made good business sense, it seemed asafe bet for the client. When the case settled tothe client's satisfaction, the fee and premiumwere cheerfully paid. Attorneys who act assettlement counsel agree that a concern for costsshould not be an obstacle to using settlement

counsel.The use ofsettlement counsel to settle busi­

ness disputes fairly and efficiently is now partof the legal landscape. Try it. You will like it. t