Keep it Out of Court

By — on / Business Negotiations, Daily

Adapted from “Turn Disputes into Deals,” by by Robert H. Mnookin (professor, Harvard Law School) first published in the Negotiation newsletter.

In 1982, writer and movie producer Art Buchwald wrote a screen treatment that his partner, Alain Bernheim, pitched to Paramount Pictures. Settling upon the title King for a Day, Paramount and Bernheim entered into an agreement: Bernheim would produce the film and be entitled to payment if the studio acquired Buchwald’s story idea. By early 1983, both Buchwald and Bernheim had signed contracts with Paramount agreeing to these terms. Six years later, in 1989, Buchwald and Bernheim sued Paramount Pictures for breach of contract. They claimed that Paramount’s 1988 film Coming to America, starring Eddie Murphy, had been based on Buchwald’s treatment and that Paramount had not upheld its end of the contract.

Buchwald and Bernheim sued for nearly $6.2 million. After three years of litigation, Buchwald was awarded $150,000 and Bernheim $750,000. Buchwald and Bernheim claimed a win, as did Paramount, but the truth is, both sides lost. Buchwald had spent $200,000 out-of-pocket on the suit, and Paramount had shelled out nearly $3 million. Each party would almost certainly have been better off settling the suit before it became tangled up in court. Yet, like too many lawyers and clients, those involved in the Buchwald case overlooked potential opportunities to turn their dispute into a deal.

Rather than pressing their lawyers to rush into litigation, wise managers will use their lawyers to help them negotiate deals through dispute resolution. Here are three strategies that will help you settle quickly and avoid litigation.

1. Explore the possibility of a negotiated resolution. In light of the high risks and costs of litigation, make sure you’ve fully considered dispute resolution before filing a case in court. Indeed, many companies require their in-house counsel to demonstrate to management early on that they have examined the benefits of dispute resolution before hiring outside counsel and filing suit.

2. Look for opportunities to turn the dispute into a deal. Business disputes can arise with customers, employees, suppliers, and government regulators. With all of these groups, the possibility for a productive long-term relationship exists. How can you turn disputes into creative trades and deals? By identifying and expressing your myriad interests—including those that have nothing to do with money. A plaintiff in a sexual harassment suit, for example, might want a formal admission of wrongdoing and a better workplace environment as much as she wants financial compensation. A company that’s willing to explore such options may be able to not only resolve disputes but also preserve valuable working relationships.

3. Open up to your lawyer. In dispute resolution, behind-the-table dynamics between lawyer and client—strategies that inspire honest, open communication and a united front—are at least as important as across-the-table moves. Because lawyers know more about their field than their clients do, they may assume that their clients want them to take control. But cases frequently have personal and emotional dimensions of which even the most experienced lawyer is unaware. Lawsuits between family members who are also business partners, for example, require a careful consideration of family history and past relationships. When facing litigation, make sure your lawyer understands all your interests and concerns, not just those that involve finances.

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