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Speech Given To ABA Legal Malpractice Seminar October 2009

On The Other Hand . . . .

The entire tribe has gone goofy for mediation, at least in big cases. The reasons are so often-repeated, they seem inarguable.

Our jury trial system has, like an old Chevy, seized up, failed. It’s too expensive, slow, fraught with risk. We just don’t know how things will come out and we shouldn’t risk finding out. The system is bloated and inefficient, with too many cases and too few judges, all overworked. And most important, the system doesn’t allow an honest examination of the issues, of the strengths and weaknesses of the case.

Of course, most of the people making these arguments are former judges, the ones who ran the system they now condemn as unreliable and pokey, or defense lawyers who, after thwarting plaintiff’s discovery and needlessly prolonging theirs, make countless in limine motions just before they tell the court the trial has to be adjourned as they are “on their feet” elsewhere. And don’t forget the insurance companies, who make anything they touch, pokey and expensive and incomprehensible.

More about what’s behind the insurance company push for mediation, later in this piece.

Meanwhile, I’ve not had much success at mediation.

I always figured it was just me, that I am hostile and unreasonable (some defense lawyers -- and I have a list -- have said that about me but they can go screw). Perhaps it is that I like jury trials too much and don’t really want to settle. Don’t forget, ours is an adversary system. While getting the money is always nice, getting it after pounding the other guy, that’s the thing. As Oscar Wilde is supposed to have said: “It is not enough that I succeed; my friends must also fail.” A big house, an SL 500, a fancy watch, all good things (especially now), but winning a jury trial, that’s art, that’s joy, that (and not mediation) is the thing that we do.

(And I don’t agree with the indictment. I think the jury trial system is not so risky; in fact, I think it is mostly just great, excellent, always right, at least 80% of the time. The system is a little slow, but that suits most of the middle-aged folks that are in it; we like that pace. Anyway, if you can’t tolerate slow, get away from any job in which you have to deal with a big insurance company.)

In preparing this exercise for you all, our group -- comprised of insurance company executives and defense lawyers, a mediator and a plaintiff’s lawyer, me -- held many, mostly collegial, conference calls and sent around many e mails and draft documents. I usually talk too much, give too many opinions, go on too long, (that’s what my x-wife thought), but I was so fascinated by what I was hearing, that I was unusually quiet.

Our preparation for this exercise has revealed to me clearly that the reason I have felt so frustrated and pessimistic about mediation is not that I am hostile and unreasonable. In fact, now that I understand what your team is seeking in mediation I may do better there.

1. In our first call, the insurance company gang explained that mediation gives them a chance to talk directly to the plaintiff, to get around me.

They want to tell her how bad the case is, how little it is worth, how many defenses there are. They want to explain directly all the ways to lose before or at trial. They want to say directly to the plaintiff that they will appeal. They want to make clear that there may not be coverage for the case so even winning would be a bitter experience. They want to say to the plaintiff that one way or another, they will stomp her, impoverish her, at least make her wait decades for her foolish notions of “justice.”

The insurance company does not trust me to do my job well when I advise my client.

It is a hoot that they think, as between me and my client, it is, me who thinks the case is worth way more than it is, me who is crazy and paranoid. They don’t understand legal malpractice plaintiffs. Remember, they have had something awful happen, hired a lawyer to save them but he screwed it up. They suspect a judge of being corrupt, and then are turned away by most lawyers. Most of the people calling me don’t want to tell who the bad lawyer is, fearing I part of the alien tribe and will run to tell him so that he can destroy the file or manufacture new evidence. And then they, through me, come back to the same system for “justice.” I may be hostile and suspicious but I am a picture of Zen like calm and love compared to my clients. If things don’t work out, it is they who hint darkly of gun play, of a higher justice, not me. This is a Kafkaesque misunderstanding, a suspension of reality.

Besides, I would not permit an insurance company to talk around me, to try to frighten my client, undercut my advice. In fact, to me it is a very hostile gesture even to try to do that, and I would react, as I often do, with even greater hostility. I would talk around the insurance company to the defendant, telling him that the trial will be worse than a {BAD IMAGE HERE}. I would make clear to defense counsel that they have a chance to settle within policy limits for their real client but that they should not let the insurance company boot that chance -- or they might get sued (see number 5 below). Perhaps the plaintiff and I have some disagreements but they are insignificant compared to tectonic fault lines on the other side so vast and unstable they could destroy a city. Or, at least, a law firm.
I think talking around plaintiff’s counsel is very bad form and counterproductive; but it’s good to know that is the thinking over there at the insurance company.

2. I also heard in another call that in bigger cases, the insurance company won’t give any hint of a number prior to the day of mediation.

Not to me and not to the mediator. They often won’t even give a number to defense counsel to begin negotiations prior to the mediation, if at all.
I had a very big case and it went on for 9 years. My adversary was the managing partner of a very big, multi national law firm and a terrific lawyer. We took 25 depositions in several states. Stockholm Syndrome set in and we seemed even to get to the next level; I could not remember if I was the kidnapper or the hostage. But he and I could not talk about settling the case since he was NEVER given any authority to do so.

The theory here is the same; the insurance company does not trust its hired lawyers to do their job well.

This seems a mistake. In this exercise, the plaintiff has made a demand for $2,000,000; the insurance company will only pay $450,000 and even then, only if it has to. To get this settled at $450,000, the plaintiff and her lawyer will have to travel an immense distance in one day, perhaps too far. We need to know your thinking long before that day, to get it settled. We may or may not take the $450,000 but having to go so far in one day is a big problem.

When I raised that problem on one of the conference calls, the retort was that the insurance company feared setting a floor by speaking (what they feel is) too soon. If they tell me their number I will know it and, being so greedy, will ask for more.

Of course the calculation is no different on our side. If we demand $2,000,000 it only goes down from there; we won’t get $3,000,000. I don’t get how it’s so different for them.

And the price paid, emasculating their lawyers, shoving the mediator aside, having the entire dialogue in one day, well that seems wrong-headed.

3. I’ve always wondered about the pace of mediation.

It seems nothing happens until 3 PM. It’s like a junior high dance, all shyness and desires held in check until the alcohol kicks in. I never knew what the girls were thinking then and, until this exercise, never knew what the insurance company was thinking here.

In this exercise, we’ve demanded $2,000,000 and they -- each of them agreed -- would always offer $25,000. If we came down to $1,900,000, they might go to $35,000. That’s how they see it.

That is also what they would give to the mediator as authority.

They don’t trust the mediator to do his job well.

None of them thought the insurance company gained by making a serious offer, authorizing the mediator to convey a more serious number. They feared that offering anything that was not insulting created a floor, weakened their position and made settlement less likely.

Message delivered, of course. We get it. You control things and you won’t pay the mid point or even make a serious offer until we drop way down.
If the mediator told me that number, in my actual life as a lawyer, I’d curse everyone and leave and refuse to discuss settlement any further. Ever. Reply message delivered.

I think the pace is so slow because the good mediators are not telling either side what the actual number is that is being said; he or she knows the number is nonsense and that if he tells, the thing would blow up. He or she has to cut through a lot of baloney to get to serious numbers, to see if there is a common ground. That takes about 5 hours, it seems.

If the mediator is unskilled and he tells, we walk, even though we might have taken $450,000, if it had been offered and somehow presaged, hinted about early on.

4. Most mediators and especially former judges don’t understand legal malpractice cases very well.

But that’s not the problem. Mediators are often asked to mediate cases in areas in which they are not expert. They often bring to such assignments a bit of humility; the lawyers in front of them are more expert and they often acknowledge that easily.

The problem with legal malpractice cases is not that they don’t understand them; it’s that they think they do, especially former judges. Lawyer-mediators know they may not understand what went wrong in the heart surgery or what constitutes unfair competition but they all think they know the practice of law, of course. And judges are the worst. They think they understand legal malpractice because they were so successful (at least in their minds) at law practice that someone made them a judge, a boss of other lawyers.

I’ve often had former-judge mediators tell me that I was going to lose my case because the jury would find the defendant lawyer more credible than my client. That might matter in a divorce case or criminal case. But legal malpractice cases are rarely about the credibility of the client, anymore than medical malpractice cases are. They are about the behavior of the lawyer and the client is rarely involved. So that is an uninformed by knowledge of legal malpractice cases. And anyway, if it were a credibility case, I’d take even the drug dealing, wife whacking monster over nearly all lawyers.

Juries dislike lawyers that much.

5. Another reason insurance companies are so eager to mediate is this: they can try to get the plaintiff to take less based on an argument that there are coverage issues. Take whatever we offer today because if you win a judgment, we won’t pay it.

While it is important for the plaintiff and her lawyer to understand a coverage issue, it’s a nasty little argument, right? It not only forces the plaintiff to compromise, it gets the defendant to stop his whining about bad faith, the ability to force the carrier to settle within the policy limits.

Defense counsel cannot do that. He can’t tell his client that he should pipe down and let the insurance company do whatever it wants, hope for the best. The defense lawyer has to represent the defendant as if there were no coverage issues.

This is when they look away.

CONCLUSION: The whole point is that for the big legal malpractice cases, the insurance company seeks mediation in order to be in the room and control the discussion. If they have to warp the normal relationships that have been developed over the centuries, that’s justified, that’s even the goal, since we are talking about real money here.

They don’t trust me and seek the chance to speak directly to my client. They don’t trust defense counsel to deliver the various messages. They don’t trust the defendant to maintain fiscal discipline. And they don’t trust the mediator enough to give him a real settlement number to let him do his job.

They want to control the thing; mediation is their only forum, their only chance to do so..
I get it now. It’s fine. We are talking only to the insurance company and the others there are nearly irrelevant.
So, I guess at mediation that I will talk to them and only them. As Churchill said “Don’t talk to the monkey when the organ grinder is in the room.”

I don’t know if this knowledge will cause me to settle at mediation more often or not. I’ll get back to you on that.