'Desmodromic' settlements

At the start of a recent mediation one of the parties told me that while they expected to settle the case, they also expected to be disappointed. When I asked why, they explained that they had been told that "a good settlement is where both sides leave a little unhappy." It made me wonder if this is the way that it has to be. Have we have come to accept disappointment as the norm for mediated settlements? Should we be taking a different approach to the settlement process - an approach where the parties leave happy and not unhappy?

A few days after the mediation (which did, in fact, result in a settlement, and one where both sides seemed more happy than unhappy), I was reading an article in Hemmings Motor News (shows you what I like to read) on the subject of desmodromic intake and exhaust valve assemblies in internal combustion engines. For those of you whose knowledge of engines may be limited, intake valves open to allow the mixture of air and fuel to enter the combustion chamber and exhaust valves open to allow the release of the exhaust gases from the combustion chamber. In a conventional engine, one mechanical component (either a camshaft lobe or a pushrod and rocker arm) pushes the valves open and a second and different kind of component, a powerful metal spring, pushes the valves closed. For a very long time, this was considered to be the only way to open and close the valves in an engine. One day, however, an enterprising engineer wondered if this was the way it had to be. He decided to think about valves in a different way and the desmodromic approach came into existence. In a desmodromic valve assembly, only a single mechanical component both opens and closes the valves. It's an elegant engineering solution, although not one that gained any broad acceptance after the materials and technology used to make valve springs improved - in fact, the only manufacturer of engines that still uses this approach is Ducati, the Italian motorcycle company.

It started me thinking again about whether the "unhappiness model" of settlement is the way things have to be. Maybe, like the engineer who was trying to think about valves in a different way, it might be time to think about settlements in a different way.

It's fair to say at the outset that it's a challenge to resolve litigated cases where money must change hands and end up with both parties feeling good about the result. It's much easier to accomplish that in cases that don't involve the exchange of money because both the parties are usually expecting a benefit from the resolution of their differences. In cases where money changes hands, a defendant who pays money rarely thinks that writing a check is a positive act. At the same time, plaintiffs, who receive money, are sometimes disappointed in the result because they feel that they should have received more and are thus "giving up" by settling. It is this mutual disappointment, and in particular, the sense of loss, that seems to support the idea that a settlement has to leave each side a little unhappy.

Perhaps there's a different and maybe better way to view the process. In a simplistic way of looking at the settlement process of distributive bargaining, one would assume that a defendant who pays money to settle a case has "lost," and is naturally unhappy. But in a deeper and more rational analysis, that defendant has, in fact, "won." You might ask how this can be, given the fact some individual, company or insurance carrier has had to pay money that they would prefer to have kept in their checking account. While it's true that the defendant has had to part with money, the defendant has also achieved something positive - the defendant has mitigated and managed risk in a positive way and has controlled the outcome of the otherwise involuntary process of litigation. Yes, it has cost money, but usually far less money than if the case had not settled and usually far less money than the potential exposure. In addition, it's rarely the case that the defendant's full time job is to be a party to a lawsuit. Most people, when sued, would rather spend their time more productively. By resolving the case, the defendant is freed from the constraints of the litigation process and can return to using his or her time productively. Finally, the defendant has achieved one more, perhaps more intangible but nonetheless very real, benefit: relief from the stress, anxiety and emotional turmoil caused by being sued. All of these are positive attributes of the settlement process.

For plaintiffs, the resolution of lawsuits carries with it many of the same positive attributes. Plaintiffs, even those who end up with less money than what they hoped for (sometimes substantially less, especially in cases where liability and damages are clear but the ability to pay a judgment just isn't there), still benefit from resolution. Among other things, the expense of funding the prosecution of the lawsuit ends. The anxiety about the final result is gone. The time away from business pursuits and family is brought to a halt. The plaintiff, like the defendant, has controlled the process and achieved an outcome that is at the very least satisfactory (and, in many cases, better than what the plaintiff may have expected) and often a very good outcome under the overall circumstances. In short, a positive result.

In order to change the accepted "business model" of mediated settlements, lawyers and their clients, and mediators as well, may need to reframe their thinking about settlements. To some degree all of the people involved in the mediation process are responsible for the notion that it's an acceptable norm for the parties to be a "little unhappy" as an essential aspect of settlement. Mediators often - probably too often - tell parties that they shouldn't expect to be happy with the result. That comment is usually made right after a party tells the mediator that they don't like what they are being asked to pay or take in settlement. Lawyers also reinforce the concept, by talking about compromise (which many people interpret as a form of loss) or some other approach designed to make the party feel better about "giving up" (which, again, many people feel is losing).

Just about every study on the subject shows that people are highly adverse to loss. In fact, this loss avoidance principle is so strong that most people will make a decision to avoid loss, even if the loss is small, instead of taking a risk that has the chance of substantial gain. Given this, one approach to reframing the settlement paradigm in order to achieve greater satisfaction with the mediation process might focus on the concept of balance. In any lawsuit and any mediation there is a balancing of goals and realities (one could more accurately substitute the word "risk" for the word "realities"). The plaintiff has a goal of winning substantial amounts of money or achieving some other form of vindication. The defendant has a goal of defeating the plaintiff's claim or paying only a small amount of money. In every case, however, those goals run smack into a wall of reality. The reality is that the plaintiff might not win, or might win, but not much, or might win a great deal but never collect. The reality for defendants is that they may not succeed in defeating the plaintiff's claim and may end up facing a substantial judgment and will spend a great deal of money along the way. The final reality for both parties is that the process is very expensive and hugely uncertain.

The resolution of the conflict between a person's goals and the realities of the litigation process is the principal focus of the "balancing" that is part of every successful mediation. In this regard, discussing the concept of balance may be of critical importance to the ultimate satisfaction of the parties. When a lawyer or mediator tells a party that they need to forget about the goal of winning (or defeating the plaintiff's claim) and focus instead on settling, that party is likely to feel a sense of loss because they are giving up their goal. They may also feel that their lawyer or the mediator isn't hearing or understanding the importance of the goal, because the party is being told to "give it up." The sense of loss translates directly to unhappiness with the result. Perhaps a better way to frame the discussion is to talk about the need to balance goals against the realities of risk. This avoids the negative reaction that people have when they are told to throw away their goals. When a person is asked to balance the goals against the realities of risk, the person knows that the lawyers and mediator have heard and understood their goals. They know that the goals have been acknowledged and given importance. The person is not being told to throw the goal away but instead to balance it against other considerations in a rational way. When the person makes a settlement that reflects that balance, there is less loss and more gain ("I achieved at least some of my goals"). A sense of gain leads to greater happiness with the result.

Mediation can be more than just a means to resolving disputes. It can, when structured properly, also be a means to resolving disputes and leaving both parties happy with the result. Like the desmodromic valves, one action can produce two positive results. <