We're now gonna continue with our analysis of a negotiation. The analysis that you conduct in preparing for a negotiation. And as I mentioned earlier there are three key questions. We already talked about the cluster of questions you should ask to complete the analysis. The second big question is, what is my BATNA when I'm involved in a dispute resolution negotiation? The analysis that we did earlier related to a deal making negotiation. So how is a dispute resolution negotiation different? Please try to think about that for a second. If you're involved in a dispute with somebody, what is the alternative if your negotiation fails? Why don't you write down your answer. In a dispute resolution negotiation, the ultimate BATNA might be litigation or an arbitration, which is basically private litigation. And as a result, to analyze your litigation BATNA, especially in a global economy, you should understand some basic differences between the litigation process in the US and the litigation process in other countries. So please hit pause for a second, and try to think of basic differences between the US and elsewhere, and prepare a list. Here are the key differences between litigation in the US and elsewhere. Six key differences, and let's go down the list, starting with contingency fees. In the United States, unlike many other countries, lawyers can be hired on a contingency fee basis. And what that means is that the lawyer's fee is contingent on the results in the litigation. Let's assume for example that you hire a lawyer on a 30% contingency. If the lawyer wins $10 million in a lawsuit, the lawyer's fee is 30% of the 10 million, or $3 million. If the lawyer loses the lawsuit, then the lawyer's fee is 30% of zero. The lawyer does not get paid. That's the contingency fee system used in the United States, adopted in a few other countries, perhaps spreading to other countries in the world. In the US, class actions have long been used in certain types of cases. Let's assume that a company cheats me by overcharging me $1 illegally. I'm probably not gonna sue the company for that $1. It's not worth it. But let's assume that the company has overcharged 30 million customers. Now 30 million customers can join together in a class, and sue the company for the 30 million. Guess who's the big winner in a class action? Given the contingency fee system, it's often the lawyers. The lawyers might take, let's say one-third of the 30 million, $10 million. The other two-thirds might go to the customers. So I would end up with two-thirds of a dollar or $0.66, or perhaps a coupon to buy products from the company that cheated me in the first place. Third feature of the US legal system, it's quite different from elsewhere, is discovery. There are a number of tools that lawyers can use to discover what kind of a case the other side has, and two of these are especially important. One is document discovery, where lawyers can sweep into your business, or if it's personal litigation, they can uncover personal documents and examine those documents and use them in court. So in other words, discovery affects everyone, on the job, every day, and every minute. Every time you create a document, every time you use email, every time you text, use voice mail, all of those are subject to discovery. You always have to be thinking about the potential for litigation as a result of the information you create. That's one form of discovery. The other very popular form of discovery is the deposition, where the opposing attorneys will force you to testify under oath before a court reporter, and that's a very effective way for them to gain information about the litigation. If you're interested in seeing what a deposition looks like, I have a link here to a YouTube deposition of the president of a healthcare system, and he is being questioned about the pricing used in one of his hospitals. I highly recommend that you look at this deposition for a flavor of what goes on, and try to put yourself into the CEO's position. How would you deal with the questions raised by the opposing attorney? It only takes about five or six minutes, but highly worthwhile. Jury trials are another distinction between the US and other countries. A number of other countries use jury trials in criminal cases. The US is one of a very few countries that use jury trials in civil cases, for example, business litigation. Punitive damages, another unique feature of the US system. In every country in the world, if you injure me, and I sue you, I can recover what are called compensatory damages, damages to compensate me for my loss. However, in the US, if your injury was caused by conduct that was malicious or intentional, then the court might tack on punitive damages to punish you for your outrageous conduct. This is sort of like a criminal fine in other countries. The difference is that the criminal fine goes to me, unless there's a local law that provides it should go elsewhere. And finally, in the United States, there is the so called American Rule regarding attorney's fees. And that rule provides that even if I win my case, you do not have to pay my attorney's fees. And this is different from the rule used in other countries, which is sometimes called the everywhere but American rule, sometimes called the loser pays rule. Which provides that if you lose your case, then you have to pay the winner's attorney's fees. So those are the six key features, the six key distinctions between the US and other countries. When you look at combinations of these features you can see why litigation might be more popular in the US than in other countries. For example, let's say that A sues B, they each have their attorneys. B immediately goes to court and has the case dismissed. So what does A have to pay, A the loser, have to pay his own attorney under the contingency fee? Nothing. What does plaintiff A have to pay to cover attorney B's fees under the American rule? Nothing. So in other words, there's a very low barrier to entry into the US legal system, when you look at the contingency fee system in combination with the so-called American rule. So that lays out the basic distinctions between the US and elsewhere that you need to think about in looking at your BATNA in a dispute resolution. And let's conclude this discussion by looking at an actual case. So here's the situation. We've got a grandfather driving a Dodge Caravan with a friend sitting in the passenger's side. His daughter's in the backseat with his eight month old grandson Jason, who's sitting in a car seat. A pickup truck speeding 70 miles an hour in a 35 mile an hour zone crashes into the rear-end of the Dodge Caravan. The passenger side seat in the front collapses back on top of baby Joshua, killing the baby. So those are the facts, and now we have litigation started by Joshua's parents. We can assume that they probably hired an attorney on a contingency fee. That isn't required, but that's typical for a case like this. And in their case they asked for punitive damages, a second feature of the US system. So they sued Daimler Chrysler, the manufacturer. They claimed that the Dodge Caravan seats were defective. Daimler Chrysler failed to warn consumers the seats were dangerous and therefore, the company should be liable for compensatory damages to compensate for the loss. But also for punitive damages because the company acted in an intentional, malicious, or reckless manner. So after starting the lawsuit, then the company has a chance to respond, and they basically said look, our seats were designed to protect occupants of the front seat. We couldn't avoid the design we used. The seat design met industry standards, which was true. The seat designed exceeded government regulations, which was also true. So we've got the filing of the case, we've got the response, and now it's time for discovery. Now other countries, as well as the US, use discovery, but the United States is more liberal in allowing the parties into the records of other companies in searching for evidence. So in this case, the parents' attorneys searched the company's records, and developed this evidence. First of all, they found an expert who testified that the current seat design was not necessary to protect occupants of the front seat, as the company claimed. And they found evidence that the company knew of their seat design problems for 20 years. The company had formed a minivan safety leadership team with employees from a variety of functions. And the team concluded that the seat design was unacceptable and inadequate to protect consumers. So what did the company do? They ordered the chair of the leadership team to destroy the minutes, and they disbanded the leadership team and fired the chair. So this is the evidence that then went to the jury, another feature of the US legal system. And the questions faced by the jury were, number one, should the company be held liable for compensatory damages? Did they do something wrong? Number two, should they also be held liable for punitive damages to punish the company for conduct that was intentional, malicious, or reckless, especially if they knew of the design problem and didn't correct it? And then, how much would you reward in punitive damages? So let's assume you're sitting on the jury. You know the facts, the same facts that the jury had. Please write down your answers to these three questions. Do you think the company should be held liable at all for any damages? Yes or no? Do you think the company should also be held liable for punitive damages? Yes or no? And then if you were on the jury, how much would you award in punitive damages? These are the results in the case. The jury decided that the company and the pickup driver who rear-ended the Dodge Caravan should be liable for $5 million In compensatory damages, 50% each for the wrongful death. And in addition, the company should write a check for $98 million to the parents as punitive damages. After the jury verdict, the trial court reduced the punitive damages from $98 million to $13 million because of the very large discrepancy between the actual damages and the punitive damages. And then the case was appealed to the Tennessee Supreme Court. And this court decided, in 2008, that the trial court was correct, that the parents were entitled to compensatory and punitive damages because the company covered up evidence of the deficiencies of its design seat while advertising the Caravan as a vehicle that put children's safety first. So this illustrates various features of the US legal system that you need to consider, at least in the United States, when analyzing your BATNA. This particular case also applied the American rule, although it was not discussed in the case, which means that the winners, the parents, were not allowed to recover attorney's fees from the losers, which is Daimler Chrysler. So in conclusion, if you can't negotiate the settlement of a dispute, either directly or with the help of a mediator, your BATNA might be litigation or arbitration. And in analyzing your litigation BATNA, especially in a global economy, you should understand the basic elements of the litigation process and how they differ, especially the difference between the United States and other countries.
