Negotiators Need To Understand The Power Of Settling Out Of Court

Settling out of court allows you to keep things private
Settling out of court allows you to keep things private Image Credit: Surrey County Council News

Not all negotiations end the way that we want them to. There is the very real possibility that during a negotiation we can encounter an impasse. Both sides may come to believe that they are going to be able to reach a deal by themselves and that perhaps they will need to go to court in order to get the other side to do what they want them to do. This is always a possibility. However, savvy negotiators understand that if they can settle out of court then they may be able to reach a better deal with the other side that the court would hand to them.

The Power Of A Settlement

When disputes arise during a negotiation, negotiators face the difficult question of whether to try to reach a settlement on their own or hand decision-making power over to a judge, a jury, or an arbitrator. Negotiators often benefit from settling their disputes before going to court. Yet negotiators and their lawyers typically overlook the potential costs of a legal battle. We can take a look at why that is so and how you can increase your odds of settling out of court, while also discussing instances when litigation might be preferable to negotiation.

Understanding Transaction Costs

When you decide to sue the other side, you need to understand that both parties can incur significant transaction costs from a looming lawsuit, including legal fees and the loss of their precious time. In fact, if a lawsuit is looming one or both sides to a dispute may take steps to try to persuade the other party to make concessions by deliberately attempting to increase the other party’s transaction costs. An example of this is by requesting mountains of documents and presenting long lists of questions that take many billable hours to answer. Your own legal team may also have financial incentives to drag out a discovery process to pad its fees and this would be to your disadvantage. And when you are estimating likely legal fees, disputants often fail to factor in the time and expense of further litigation if they end up in court and the “loser” decides to appeal the court’s decision.

The widespread misconception among negotiators is that the best lawyers are aggressive and rigid, and never collaborative or accommodating can lead clients to hold back their legal team from exploring creative (and money-saving) tradeoffs. For lawyers, a negotiator’s expectations of toughness can become a self-fulfilling prophecy. It’s not uncommon for both sides in a dispute to begin puffing up their positions and claims in order to give the impression that they won’t back down under any circumstances. In this environment, parties unfortunately can perceive concessions and compromise as signs of weakness and vulnerability rather than as potential value-creating moves.

When It’s Time To Litigate

Though negotiation (whether conducted through lawyers, mediators, or on your own) should lead to better outcomes for disputants in most cases, litigation may be preferable in certain situations.

If you have an uncooperative counterpart. If the other side stalls or refuses to negotiate in good faith, you might turn the case over to courts to ensure that it will eventually be resolved (though not necessarily in your favor). Court-ordered discovery will also legally compel a recalcitrant other side to supply information he might have held back during a dispute-resolution process. If you have a desire for openness and publicity. If you want to draw attention to the other side’s behavior or clear your name, you might choose to pursue a litigation process in which the outcome may be publicized, instead of private negotiations. If you want to deter false charges. If you have been the repeated victim of false claims and opportunism, taking a case to court may (if you win) deter others from targeting you in the future. As a way to settle legal questions. If deciding a dispute according to established legal norms or potentially setting new precedents is important to you, then you might prefer to give decision-making authority to the courts.

Alternatives: Settling Out Of Court

If you want to settle out of court and reach creative, mutually beneficial resolutions to your disputes, with or without lawyers at the table here are some suggestions.

You need to make sure the process is perceived to be fair. Before tackling your dispute jointly, negotiate any key elements of the process with the other side, such as how you will choose experts and whether lawyers will be involved in the negotiations. Doing so will increase the odds that both sides will be able to view the final outcome as unbiased and fair. In addition, you might suggest that both of you hire a professional mediator to lead the settlement process instead of turning the process over to your lawyers.

You will need to identify both interests and tradeoffs. Even when we’re determined to settle out of court, the win-lose format of a looming litigation can encourage us to view each negotiation as a battle. Unfortunately, the desire to prove we’re right can distract us from pursuing what our underlying interests are. It can also propel us to the courthouse steps if our adversary refuses to meet our needs. Just as in business negotiating, you can expand the pie of value in a dispute by opening up about your key interests and preferences, which can help you identify potential tradeoffs.

What All Of This Means For You

Negotiators who are considering a lawsuit often become trapped in a lengthy and time-consuming discovery process that includes searching through reams of data and conducting depositions. You should be able to reduce these expenses by negotiating a low-cost exchange of essential information with the other side. Remember that when you can keep costs down, both sides can win.

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: Do you think that you should ask the other side if they want to avoid going to court?

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What We’ll Be Talking About Next Time

Every negotiation that we enter into means that we are going to be dealing with a different set of people. We always hope that we can work well with the other side. However, this is not always the case. There will be situations in which the other side turns out to be a difficult person to deal with. In situations like this, our chances of reaching a deal with them becomes at risk. This means that we need to develop the negotiating skills that will be required to find a way to work with difficult people in order to have a successful negotiation.