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Keys to ADR: Key No. 007 – Occam’s Razor and the Mindful Litigator

January 15, 2015

When you have two competing theories that make exactly the same predictions, the simpler one is the better.”
– Occam’s Razor

FACT 1: More than 97% of commercial cases settle before trial;

FACT 2: Lawyers are duty bound to advocate vigorously and fearlessly for their clients within the bounds of professional and regulatory requirements;

FACT 3: Clients would like to resolve disputes in a manner they perceive to be fair, where they have the chance to be heard and where costs are as low as possible; and

FACT 4: Both the Rules of Civil Procedure and best practice require that lawyers pay regard to the principle of proportionality;

In this KEY TO ADR, I present a thought piece that discusses how to achieve the “best” result for your client in the context of commercial mediation.  To do this, I urge lawyers to be “mindful” of the interplay of factors that are described below.

In this context, mindfulness means a number of things.  First, it requires constant attention to how a commercial dispute unfolds in terms of time, money and potential trial outcome.  Second, it mandates continuous communication with the client to ensure that the client is sensitive to the vicissitudes of litigation.  Third, to achieve optimum results, mindfulness requires litigators to engage in cooperative interactions with opposing counsel so that a consensus on procedure can be formed to move the dispute forward to resolution.

WHAT IS THE MEANING OF THE “BEST OUTCOME”?

There are many views on how the “best “outcome might be defined:

  1. The Efficiency Perspective: the best mediated outcome is one which is efficient in terms of “cost” and “time”. From this perspective, a result which is achieved in the shortest period of time at the least cost is a “best” outcome.  This perspective begins with the proposition that because substantive outcomes at a trial are unpredictable, and there is no metric to determine which among potentially competing substantive results is better than another, the quality or the nature of the outcome is not important.  Hence, the efficiency perspective focuses on time and money to determine what is best, not justice because we cannot predict what justice will look like.
  2. The Justice Perspective: the best mediated or negotiated outcome is the one which is closest to or parallels what the trial result would have been. From this perspective, the shadow trial verdict is what defines best.  By focusing on substantive results rather than procedural fairness, parties can select for themselves the appropriate time to determine the approximation to the shadow verdict.  Using the shadow verdict as the metric requires the parties to engage in enough of a truth finding exercise to accurately predict trial outcomes, the cost and time to get there are not necessarily relevant.
  3. The Consent Perspective: this approach argues that neither the result of a mediation or the efficiencies of the process matter. What matters in the end is that the parties consented to a settlement and are satisfied with the result.  Hence, the motive to settle is not of importance.  From this perspective, consent not only equals justice and efficiency, but also indicates psychological acceptance and satisfaction.

For the purposes of this thought piece, I pose the following definition of “best outcome” at a mediation: an accepted negotiated result, which advances some or all of the basic competing needs, rights or interests of both parties at the lowest cost, in the shortest period of time.  The achievement of a best outcome is not the product of luck or happenstance.  Rather it is the result of mindfulness of a litigator who must keep his or her eye on a number of moving parts in the litigation machinery: time, money, result, client satisfaction, fairness in result, process, etc.

HOW TO ACHIEVE THE BEST OUTCOME

When you think about it long enough, each of the perspectives set out above is a binary of countervailing factors that a mindful litigator needs to consider.

THE MEDIATOR’S STYLE

Academics have for a long time suggested that mediator styles can be examined on an “evaluative” or “facilitative” spectrum.  At one end of the spectrum are those mediators who engage in an evaluative style where opinions or observations on the substantive or procedural merits of the dispute are expressed and considered.  On the other end of the spectrum are the facilitative mediators, whose job it is to keep the parties talking but not to engage the parties in any debate regarding the merits of the dispute.  Many mediators employ characteristics of both styles in the course of a single mediation depending upon the case before them.  The point to be made here is that the mindful litigator has to decide what kind of mediator style might achieve the best outcome.

NEGOTIATION STYLES

Negotiation theory acknowledges a spectrum of negotiating styles: competitive, cooperative and integrative.  To achieve the best outcome, you need to be mindful of your own style and how that style can be modified or used to achieve results.  Your negotiation style is not only that which the litigator will use at the mediation, it also includes how the litigator interacts with counsel throughout the dispute.

TIME

This binary seems obvious.  If a given result can be achieved in a shorter rather than a longer time, the shorter time is preferable.  But time is often a function of and reflection of the complexity of facts and the law.  Digging deeper, disputes are a binary of countervailing facts and countervailing principles of law.  From this perspective there are the following possible combinations:

  1. Simple facts; simple law
  2. Simple facts; complex law
  3. Complex facts; simple law
  4. Complex facts; complex law

Of course a more refined analysis would be to apply these metrics to each of the issues in the dispute.  The corollary of this is that the simpler the facts and law, the less time it should take to resolve them.  It does not follow however, that less time equates to less transaction costs.

TRANSACTION COSTS

Again, if a given result can be achieved with less in transaction costs than more, the lesser is preferable.  But the expenditure of transaction costs is itself a function of a number of factors: the amount of “factual truth” or fact finding is required before an informed decision to settle can be made; the number of interlocutory steps necessary to regularize the expression of the dispute or the interlocutory protection of rights; the negotiation styles of the litigators; the objectives of the clients; and the extent of financial resources dedicated to the dispute.  Again, the mindful litigator will work to ensure that transaction costs are minimized and are proportional to the dispute.

PUTTING IT ALL TOGETHER

By paying continuous attention to the binaries and factors set out above, you should decide when in the litigation or dispute process it makes sense to mediate.  You should have already determined the quantum of sunk and future costs necessary to acquire that amount of information necessary to make an informed decision on the best outcome.  It is critical that the client understand your approach to risk and that you understand the client’s risk tolerance.  Put your mind to processing alternatives such as arbitration or independent fact finding.

I make the following tentative and general observations:

1. Simple Facts and Simple Law

In my view, a best outcome can be achieved where the parties mediate after the delivery of the Affidavit of Documents, but before discoveries.  Often, integrative bargaining styles and facilitative mediator styles work well here.  If no settlement is achieved at a mediation, consider either arbitrating the entire dispute or a gateway issue (interpretation of a contract, damages first, etc), works better than the litigation process.

2. Simple Facts and Complex Law

Here, a best outcome is achieved where the parties mediate after delivery of the Affidavit of Documents and before discoveries.  However, a more evaluative form of mediator style might be appropriate in these circumstances.  In the absence of settlement, an arbitration which determines the points of law, in a timely manner, is more efficient than waiting for the trial outcome and its attendant costs.

3. Complex Facts and Simple Law

Where factual disputes are determinative, it is best to mediate after discoveries. However, I recommend that the mindful mediator use “smart bomb” discovery techniques.  Here, the parties agree to limit discoveries to those important and determinative factual issues in dispute and then proceed to mediation.  If the mediation fails, the parties agree to resume the discovery process to deal with the remaining issues.  In cases such as this, an evaluative mediation is best.  Depending on the case, consider arbitrating the factual dispute (relating either to liability or damages).

4. Complex Law and Complex Facts

Not surprisingly, these kinds of cases will involve high transaction costs and take the most amount of time to deal with where the amount involved is modest (say under $250,000) it is likely inefficient to take this to trial.

In these kind of cases, in order to minimize transaction costs and time, it may be appropriate to: mediate more than once; employing evaluative mediation techniques; arbitrate some or all of the issues; arbitrate interlocutory motions in the litigation; use “hot tubbing” techniques with a mediator for expert and non expert evidence; employ jointly retained fact finder/experts to determine important and disputed facts or issues.

AND IN THE END

In the end, the more mindful you are of the negotiation and mediation process, the more likely you are to achieve a best outcome and have a satisfied client who will appreciate the time and money saved in resolving the dispute.  Occam’s Razor requires the mindful litigator to resort to these simple and elegant procedural alternatives that arrive at a solution which, when compared to the litigation and court processes, results in a quicker and cheaper result yielding an accepted settlement which may parallel the shadow verdict.

If you have any questions about this article, please do not hesitate to contact Gary Caplan at Mason Caplan Roti LLP.