Ken Feinberg (And Me!) On How To Settle A Dispute

     Ken Feinberg is probably America's most well-known neutral - an attorney, mediator and special master in administering mega-settlements such as those formed to compensate the victims of the 9/11 attacks, the Virginia Tech massacre and the BP Gulf Coast oil spill. Although some might say its not difficult to make everyone happy when you have virtually unlimited funds to disburse, not everyone is happy with the outcome of his work, and that's probably how it should be.

     Having read about his work and heard Mr. Feinberg speak in person, he impresses me as someone who deserves the recognition he's achieved. That's why I was anxious to learn what he had to say when asked about his "priority list" for how to settle a dispute. Appearing in the 7/29/12 NY Times one page magazine (hat tip to the ADR Prof Blog), Mr. Feinberg told Spencer Bailey -

In all the negotiations I do, there's a priority list: One, know the facts. Two, be dogged. Three, keep an open mind. Next, be creative in getting to "yes." Finally, a very important basic proposition: Put yourself in the other person's shoes.

     Amazing, I thought to myself. These are exactly the priorities I would have listed in answer to the same question. What does that tell me? It probably says that I've had some great mediation instructors, and enough experience to have learned what works and what doesn't.

     It is quite another matter to have the ability to carry out the priorities Mr. Feinberg identifies. That's where the work really begins. Harder still is convincing parties to mediation (and their counsel) that you know the right priorities and have the ability to make mediation worth their effort. Ken Feinberg has their trust and confidence when he walks in the room. The rest of us work to earn it every chance we get.

[Image: Ken Feinberg, NY Daily News photo, 2010]

NJSBA Offers Program On Decision-Making By Judges And Arbitrators

       "Decision-Making By Judges And Arbitrators - How Decisions Are Made And Influences On The Process" will be the subject of a program by the Dispute Resolution Section of the New Jersey State Bar Association at 6:30 p.m. on Tuesday, February 28, at the Law Center. This is the second program in a series, and follows one covered here previously. The panel for this program includes retired Judge John W. Bissell, John E. Sands and John R. Holsinger, all noted arbitrators. They will discuss how they go about deciding cases, how judges and arbitrators differ, and what advocates should and should not do to influence a decision in their client's favor.

       I will be asking the panelists to address the role of "intuition" in the decision-making process. Four years ago I wrote here about a study that indicated state court judges are predominantly intuitive decision-makers, and intuitive judgments are often flawed. I see that as another reason to opt for arbitration, where a more deliberative approach and subject matter expertise can overcome intuition errors. 

       Registration is through the NJSBA. The program includes dinner and CLE credits. If you attend, please stop by and say hello.

[Image: Figurines representing three of the ten judges of Diyu, December 29, 2006, by Wafulz]

Garth Brooks' Hospital Lawsuit - Decision Error On Display?

       Garth Brooks was just awarded $1 million in a breach of contract lawsuit against his hometown hospital. Brooks alleged that the hospital reneged on its promise to build a women's health center in honor of his late mother, towards which Brooks contributed $500,000. Brooks asserted the hospital agreed to build and name the project when he made the contribution. The hospital said the donation was unconditional, and his requests for the naming rights came later. The women's center was never built, and the hospital told Brooks they intended to use his money for other construction projects.

       Apparently, the jury believed Brooks' side of the story. They ruled that the hospital must return Brooks' $500,000 donation and pay him another $500,000 in punitive damages. Brooks is a home town hero, generally regarded as a likable guy and was trying to do a good thing on behalf of his beloved, deceased mother. Just how did the hospital decide to go to trial on this one?

I don't know. I wasn't there, I don't know those involved and it may be that there's more to this story. If so, I hope someone will comment to fill us in.

       It appears, though, that the hospital suffered from what Randall Kiser calls "decision error." Speaking at a meeting of the New Jersey State Bar Association's Dispute Resolution Section this week, Kiser delivered a tour de force review of his empirical research and recommendations for effective pretrial decision-making by lawyers and their clients. As described in his book, Beyond Right and Wrong, The Power of Effective Decision Making for Attorneys and Clients, "decision error" occurs when the result a party achieves after trial is inferior to the other party's last offer of settlement before trial.  

       Using this definition, it appears likely that the hospital's election to go to trial in the Garth Brooks case was a decision error. The more interesting question is how this decision was made. Randall Kiser offers a multitude of potential explanations, but without being on the inside, one can only speculate. My take away from the Garth Brooks case and Randall Kiser's work is that mediation offers the perfect mechanism to reduce decision error. If all of the factual assumptions, legal theories and cost benefit analyses of both parties are subjected to the crucible of a thorough mediation process, the chances of a decision error will be greatly reduced.

       Randall Kiser's research shows that in only 15% of cases, the result after trial falls somewhere between the last best settlement offers of both parties. This means that one of the parties is wrong  (i.e., makes a decision error) in 85% of all cases that go to trial. Among other things, mediation should get both parties to more accurately measure the true value of their side of the case, and thereby reduce the potential for decision error. Future posts will examine some elements of bad decisions the mediator can help to fix.

[Image: Garth Brooks, Marshall of OSU Homecoming Parade, October 17, 2009, by Fletcherspears]

Randall Kiser To Address NJ Dispute Resolution Section On Effective Decision Making

       The New Jersey State Bar Association's Dispute Resolution Section is offering a three part series of programs on decision making entitled "Judgments: How We Reach Them And How We Can Improve Them." The series will open with a presentation on January 24, 2012 by Randall Kiser, the principal analyst at DecisionSet and an expert on attorney-client decision making. He is the author of two books, Beyond Right and Wrong: The Power of Effective Decision Making for Attorneys and Clients, and How Leading Lawyers Think: Expert Insights Into Judgment and Advocacy.

       Randall Kiser's work first got my attention in 2008 when the study underlying his first book was released and covered by The New York Times. Most notably, his study revealed that in 85 percent of the cases that went to trial, the final outcome after trial was outside the last zone of settlement determined by the parties prior to trial. (In my view, this means that mediation offers much better odds than going to trial.)

       Participants in this program will explore whether our customary means of evaluating disputes is impeding or facilitating their resolution. The program will be offered at the NJSBA's Law Center in New Brunswick at 6:00 p.m., and will include dinner and 1.5 CLE credits. It is a great opportunity to hear a nationally recognized authority address a topic that is central to our professional lives, but not well understood. Pre-registration is available on the NJSBA website.

       Subsequent programs in this series will focus on decision making in the contexts of arbitration (February 28) and mediation (March 27). Details on these programs will follow in upcoming posts.

[Image: Deep In Thought, by Ben Pollard, March 16, 2008]

Contracting For The Unknown Using ADR


[Image: "Cap'n Archie" fortune telling machine, Archie McPhee store, Seattle, Washington, March 20, 2007, by Joe Mabel]


     Healthcare providers and insurers sign contracts every day that extend well beyond the horizon of the world in which they operate. The unknown dimensions of the future healthcare marketplace became even more uncertain with the recent passage of federal healthcare reform legislation. Many of the concepts contained in that law are subject to interpretation and political implementation, not to mention the possibility of repeal or modification by a future Congress.

     Healthcare lawyers routinely seek some protection from future uncertainty affecting their clients' contracts by drafting "out" clauses that spring into effect upon the happening of certain significant events. Among these are governmental findings of illegality or adverse tax effects, changes in the law and substantial failure of economic expectations. Typically, these contractual provisions (1) define the potential adverse event; (2) require that the parties attempt to negotiate a contractual amendment to resolve the problem; and (3) in the absence of agreement, permit either party to terminate on short notice. Robin Fisk recently discussed this topic in the context of provider - payor contracting in her Managed Care Contracting & Provider Payment blog. I think the concept has even wider application. Hospital-physician service contracts, joint venture agreements and institutional affiliations of all stripes can also expect to be affected by presently unknown legal and economic developments.

     Allowing either party to terminate a contract upon an adverse event is a simple and effective solution to the problem created by that event.  But it leaves the parties without a contract. Rarely is such an event so intractable that it could not have been dealt with had the parties known of it at the inception of the contract. Rather than terminating the contract, the parties can provide in advance for how they want its negative consequences to be resolved, and then employ an alternative dispute resolution process to reach a solution.

     The key elements of such a provision include (1) a clear definition of what constitutes the adverse event; (2) the principles that will guide how the adverse event is to be alleviated (e.g., "the parties agree to implement the minimum change required to eliminate illegality while preserving the structure and economic result of the relationship to the greatest extent possible"); and (3) a process to resolve any dispute in the implementation of this provision.

     With respect to process, a multi-step dispute resolution clause is particularly well suited to this situation. As recently defined by John DeGroote in his Settlement Perspectives blog

A multi-step dispute resolution clause is a contractual provision that requires the parties to an agreement to escalate a dispute through varying levels of management or other processes, such as mediation, using agreed-upon procedures before litigation or arbitration may proceed.

     Along with a multi-step resolution clause, parties seeking to address unknown, adverse events through ADR would do well to define their selection of an ADR neutral to suit the events in question. This requires more than the designation of a neutral to be provided by an ADR service (e.g. AAA, AHLA). It should also include a requirement of experience in representing parties with respect to the issues raised by the adverse event.

     Some unknown adverse events may so dramatically frustrate the parties' original expectations that it makes no sense to continue their contract. Most do not. Rather than abandon or renegotiate an entire contract, a multi-step ADR clause can often preserve the benefit of the original bargain for both parties.

Emotions In Mediation: Beware The Runaway Train

     Every dispute comes to mediation wrapped in emotion. Sometimes it relates to the wrong or harm arising from the conduct that triggered the dispute. Other times, it is simply the emotion surrounding months or years of being on one side of the dispute and believing the other side to be wrong. Or it can be both. Traditional mediation theory holds that it is vitally important for both sides to have the opportunity to express their emotions, and for the mediator to acknowledge them. This is thought to be beneficial because:

- It may be the first and only opportunity a party has to meaningfully "vent," without which that party can never put the dispute to rest.

- It enables each party to hear what the other really feels, without which a willingness to address those feelings in a settlement cannot be achieved.

- It educates the parties and their counsel on what the mediator is up against, thus guiding realistic negotiations.

     I have always accepted the wisdom of encouraging parties' expressions of emotion in mediation, and have permitted parties to "vent" with few limitations. ("Venting" by counsel is another matter, and generally not worthy of much leeway.)  I have found that parties appreciate the opportunity to express strong emotions, and that my acknowledgment of their feelings goes a long way towards building the credibility required to resolve the dispute later in the day.

     Recently, Dan Ariely, the author of the terrific book Predictably Irrational and the blog of the same name, wrote about "The Long Term Effects Of Short-Term Emotions." His research in the field of behavioral economics is fascinating, and can be related to the decision-making process of parties in the midst of dispute resolution. He has found that decisions made under the influence of short term emotions are often poorly made, by objective standards. Moreover, such decisions have a powerful, precedent setting effect on all later decisions. What does this mean for mediation?

1. Expressions of emotion can create an ideal environment for bad (i.e., irrational) decision-making. Letting parties "vent" may be valuable for the reasons noted above, but the mediator must recognize that it creates the potential for momentum that may be difficult to keep on the tracks.

2- A decision motivated by negative emotions that creates a dispute will tend to lead to subsequent decisions consistent with the first, long after the initial motivating emotions have subsided. People look for and value consistency in their actions. Revisiting the emotions associated with an early decision will help only if those emotions can be carefully separated from the objective consequences of adhering to that original position.


 [Runaway coal train at Fishs Eddy, New York, in the East Branch of the Delaware River, January 1, 1870, Cornell University Library]

Mediating The Healthcare Reform Debate

     Even before watching the bipartisan healthcare summit on February 25th, I began to think about how I would mediate the divide between the Obama/Reid/Pelosi reform proposal and the position staked out by the Rupublican leadership.  Without knowing it, I was not alone in imagining a mediated solution to this conflict. Mediator Christopher Annunziata wrote in his CKA Mediation and Arbitration Blog that If Anyone Needs a Mediator, It's These People:

"Both sides need to move from their entrenched positions and discuss real options, not just talking points prepared by pointy headed people in Ivory Towers or tucked inside the Beltway.  Having a mediator involved would be very useful."

     A week later, Mediator Lee Jay Berman posted at Eye On Conflict that Real Political Reform Requires Adding a Neutral To the Mix:

"What makes mediation work is the introduction of a neutral third party. Having an unbiased person at the table can bring big picture perspective into the room when all others are mired in the fog of their power games and can't or won't see another approach...A real neutral, who wouldn't be a politician campaigning for reelection, would turn off the cameras, close the door, and encourage everyone to disclose his or her needs, pressures and underlying interests in the privacy and confidentiality of the mediation process."

     Leaving aside all of the ways in which the healthcare reform debate does not resemble the setting required for effective mediation, I began to imagine what I would do if thrust into a room with a commitment from both sides to mediate in good faith.  Having reviewed the parties' respective positions on numerous, individual proposals for reform, I first thought that there must be a way to parse and compromise among these proposals to reach a mutually acceptable outcome. But the more I thought about it, the clearer it became that such an effort would fail. I had an intuitive sense of why it would fail, but I struggled to explain that result in terms familiar to traditional mediation theory. In fact, I started a blog post on this subject, but put it aside, unfinished.

     Shortly after that, I read a description of the Frank Sander Lecture to be given by Professor Lawrence Susskind as the opening plenary of the ABA Dispute Resolution Section's Annual Spring Conference on April 8th: "Values and Identity Conflicts: Proposing a New Dispute Resolution Doctrine." The summary, which appears in the ABA Section of Dispute Resolution's February Just Resolutions Enews (members only), turned on the light bulb in my head.



     As the description of Professor Susskind's lecture puts it:

"Sometimes...disputes are more about values and identities than about interests; when this happens, traditional mediation tactics may not work."

                                                 *  *  *

 "We define values-based disputes as those in which the parties' values and identities are so important to the dispute that they interfere with the parties' ability to settle interest-based issues, or in more severe circumstances, even to proceed with the process of dispute resolution.

                                     *   *  *

Values-based disputes, thus, present special challenges for a mediator.  These include: the usual interest -based techniques may lead to superficial agreements that do not really satisfy the parties' most important concerns (and, thus, may not be durable). This is especially likely when parties conceal their values and identities and initially act as if disputes are really about interests" (emphasis added).


     This is exactly the problem in the healthcare reform debate. For one side, the values associated with providing high quality healthcare insurance coverage to everyone in  America are central to that party's identity, and transcend all of the policy details and budgetary considerations that might be viewed as "interests." For the other side, the values associated with maintaining individual responsibility and promoting smaller government are paramount.

     To really address these differences in values, Democrats would have to acknowledge that, in the end, it doesn't matter how much their healthcare reform will cost, because in their view it assures a fundamental right, and the country will just have to figure out how to pay for it somehow, someday. Not a message suitable for anyone seeking reelection in the current environment. Similarly, Republicans would have to acknowledge that it would not be a bad result if millions of people had no prospect of enjoying high quality healthcare insurance coverage, and instead had to rely on the "safety net" of Medicaid, charity care, and hospital emergency rooms until they could work their way out if it. No great sound bites to campaign on there, either. This is why the proponents on both sides of this public debate speak only in terms of the regulatory nuts and bolts, dollars and cents and parliamentary machinations that continue to make our heads spin.

     I don't know how Professor Susskind's lecture will suggest the mediator should approach this dispute. My guess is that after getting the parties to acknowledge their core values, the mediator would need to facilitate a discussion in which each side accepts those aspects of the other's values that it can agree with, and then builds upon those shared beliefs. Even when values are not shared, each side can be urged to at least respect the other's values, and adopt a willingness to permit the other side to pursue those values in fashioning a mutual resolution to the conflict. I know this probably will not happen in Washington, but the thought process is instructive, and you never know who might be listening to Professor Susskind on April 8th.

Will Healthcare Providers "Game" Quality Measures?

     I just read an interesting post over at John Goodman's Health Policy Blog, "What We Can Learn From The Airlines." Picking up on a story that 79.5% of all U.S. flights were on time last year, he points out that airlines have simply lengthened the "scheduled time" of their flights to improve the chances of "on time arrivals." He goes on to suggest that healthcare providers faced with third-party quality measures will do the same, yielding better measured quality, but no real improvement in quality of care.

     Even assuming the airline assumption is correct (it wouldn't surprise me, but I really don't know), I don't think the conclusion holds for healthcare. Providers will not be able to manipulate the standards imposed by third parties in a way analogous to lengthening scheduled flight times. Perhaps the airline analogy was stretched a bit too far, and his real point is that providers will achieve quality measures in the same way that public school teachers now teach to standardized tests (by which their "quality" is judged). 

     The more interesting aspect of third-party quality improvement measures is that they can only have so much effect before "quality" levels off. Although a worthy goal, that range of improvement is not going to move mountains. The same is true for many of the economic incentive techniques being touted as cost cutting solutions for healthcare (e.g. "gainsharing"). You can only squeeze so much juice out of each tangerine.

 [Image: Tangerine juicers via flickr, by Photocapy, December 13, 2006]

Healthcare Self-Disclosure - "I'm Sorry" Revisited

     I just read an excellent article on the decision process for in-house corporate counsel considering self-disclosure of a regulatory infraction.  Richard Marshall's piece in Corporate Counsel, aptly titled "Uuuhhh, Look, We Messed Up Here," provides solid, practical advice that applies to the healthcare industry as well as the more general business audience for whom it was written.

     At the heart of any effective self-disclosure are the same elements often associated with effective apologies in the healthcare malpractice setting. As with patients and families who have suffered harm, just saying "I'm sorry"  to a regulator is not enough. The healthcare provider in both cases must offer an explanation of what happened; proof that corrective measures have been taken; appropriate compensation for any harm caused; and a sincere acknowledgment of responsibility.


     Having taken these steps, the self-disclosing provider has framed the discussion of future regulatory compliance in a more favorable way. Although a regulator receiving such self-disclosure will not be legally bound to approve a fair and reasonable resolution, most will. 


[Image: Mea Culpa, by Robert Bryce Muir 2006, Sculpture from Grizedale Forest, photo by Russ McGinn, June 2006]