Last Friday, out of home attorney Richard Hamlin discussed how to avoid conflict when your out of home company raises private equity. Today he discusses how to resolve conflicts.
Resolving Conflict: Try reframing the situation. Instead of looking at something as a conflict, consider it a disagreement. Be curious. What are the other party’s concerns? What does the other party believe? Is it possible the other party has noticed something that you missed? Is it possible that both of you will be better off if you can resolve the other party’s issue?
If that doesn’t work and disagreement becomes conflict, it is still best resolved by negotiating directly with each other. Try re-stating your understanding of the other person’s position something like this, “If I understand correctly, you are concerned that/think that. Is that right?” Another helpful question, “What do you think I meant/said/am trying to do?” Start with the assumption that the other person still wants the benefit of the contract.
Recognize that people can disagree in good faith. Don’t assume that other people are liars because they’re saying something that is wrong (or that you believe is wrong). It’s lying only if they know what they are saying is wrong.
At the same time, some people do act in bad faith. Don’t be naïve about it, but the safer assumption is that the other party is acting in good faith. A careful discussion of background facts and objectives will go a long way toward uncovering bad faith and other situations that make the parties a bad fit for each other.
Remember that people suffer from confirmation bias. Once they decide something is so, they focus on evidence that supports their belief. They discount evidence that doesn’t. They value their own views more than the views of others. All these biases can turn disagreements into conflicts.
Mediation: Mediation is a guided negotiation. Unlike a judge, a mediator cannot impose a decision on the parties. The only thing a mediator can do is to help the parties find common ground, or at least a resolution. We recommend including a provision that the parties mediate for at least one full day before filing a lawsuit. It may not help, but it can’t hurt.
Arbitration: Unlike a mediator, an arbitrator has the power to decide the case and to make an award in favor of one party or the other. It is offered as faster and less expensive than a trial in court. It eliminates the possibility of a jury verdict. (That’s not necessarily a good thing. Despite the odd sensational verdict, there are thousands of cases a week in which juries reach the right result. The collective experience and judgment of twelve neutral people is usually accurate.)
We recommend rejecting arbitration. Arbitration and arbitrary have the same root. An arbitrator is not required to follow the law. I have seen some very strange arbitration awards, and the only grounds to challenge the award are failure to accept all evidence or failure to disclose a pre-existing relationship with a party to the arbitration.
If the case is large enough to require three arbitrators, their hourly rates are likely to be as high or higher than the rates charged by the parties’ attorneys. The organization administering the arbitration usually charges a hefty fee based on the size of the case. It also becomes very difficult to coordinate the calendars of three arbitrators, the parties, and their attorneys. As long as it takes to get to trial, if the arbitration can’t be resolved in the first sessions scheduled, it may be months before it continues and it will have to be tried piecemeal.
Litigation: We cannot leave conflict resolution without mentioning lawsuits. They are seldom the best alternative to a negotiated agreement. It is rare that even the “successful” party will be made whole after considering court and expert witness fees, attorney fees, and the opportunity cost of focusing on the lawsuit instead of the party’s business. Consider it a last resort.
If you cannot avoid a lawsuit, help your attorney to help you. Assemble all documents and correspondence relating to the case. Put them in date order with a summary of each. Include dates and summaries of conversations related to the case. Identify your losses/damages and document them with receipts, third-party estimates and photos, if any. Again, put them in date order.
Conclusion: The best way to avoid conflict is clear and simple language. Spell out the parties, the background facts, and each party’s objectives. If an issue arises, think of it as an opportunity to learn something and to improve the agreement. If the parties cannot resolve the disagreement themselves, consider mediation. A professional neutral may help everyone to find a solution.
We recommend against arbitration, mainly because the results can be arbitrary. There is no practical appeal from a bad decision, or one that does not follow the law. Sometimes a lawsuit cannot be avoided. At the same time, it is seldom the best alternative to a negotiated agreement.
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