a TRACK RECORD of creative dispute resolution
Click an industry below to read about some of our successful past engagements.
- The Dispute
An international celebrity had sold her name and likeness to a large entertainment company for tens of millions of dollars in stock. Unfortunately, the company filed for bankruptcy, and the shares became worthless.
The celebrity sought to reacquire her name and likeness from the debtor’s estate, but the bondholders holding the most senior claims balked at the price offered. The celebrity’s leverage was that if she stopped promoting herself, her name and likeness would become worthless. The parties were at an impasse.
During mediation, it was determined that the bondholders’ intransigence on price stemmed from a fear that they would return the celebrity’s name and likeness to her for a “low ball” price, and then look like fools when the celebrity resumed promotion of her brand, and its value skyrocketed.
To get past this fear, a royalty deal was structured that would provide bondholders with a percentage of revenue so that if the value of the celebrity’s name and likeness increased after the sale, bondholders would share in the upside.
The parties were ostensibly fighting over price. But in reality, the bondholders were scared of losing face. In the end, it’s usually never just about the money. Ascertaining underlying interests typically helps bridge gaps between parties on price.
- The Dispute
A large retailer owned a warehouse located on a former landfill that was sinking into the ground. Remediation costs had exceeded $20 million, and experts predicted a complete fix would cost an additional $30 million.
A leading global insurance company, which had issued an excess liability policy for catastrophic losses over $25 million, had commenced a declaratory judgment action before an arbitration panel in London to deny coverage. A “white shoe” law firm representing the insured and a “Magic Circle” law firm representing the carrier litigated for years, at a combined cost in excess of $5 million.
The insured had suggested a “split the baby” (50/50) settlement that the carrier promptly rejected.
One of our mediators met separately with senior executives from both the insured and the carrier to ascertain their underlying business concerns.
The mediator learned that the insured, who respected their expert, believed they had to spend another $30 million to fix the problem. The carrier, on the other hand, knowing that the insured “got by” without additional remediation for years, suspected that the problem had already been resolved. Why pay now, the carrier argued, if there may be no further problems in the future? Also, the carrier wanted the insured to have “skin in the game” so that the insured would not make unnecessary and costly repairs simply because they would be paid by someone else — a classic “moral hazard” argument.
To accommodate the reasonable concerns of both parties, the mediator proposed, and the parties accepted, a “pay as you go” option. That is, as, when, and if the insured made repairs, the carrier would reimburse half.
In hindsight, the solution sounds like common sense. But in litigation, adversaries are often blinded by their unreasonable and unyielding legal positions. By disregarding the parties’ legal positions concerning such issues as contract interpretation, and instead focusing on their underlying business interests, a mediator can forge an optimal solution based on critical information disclosed during informal meetings with the key decisionmakers.
- The Dispute
A large chemical manufacturer confronted a deluge over 30,000 claims for damage caused by one of its herbicides.
A leading global reinsurer was at the top of a “tower” of policies providing the last $100 million in coverage for the claims.
The reinsurer denied coverage, and the parties had been fighting in court for several years at a cost of approximately $5 million in legal fees.
During informal meetings with both sides, our mediator learned that the carrier had long sought to win over the insured’s D&O insurance coverage business.
Under the solution proposed by the mediator, the carrier increased the coverage it was willing to provide to pay the product liability claims. In exchange, the insured gave the carrier its D&O insurance coverage business.
By shifting the focus of the parties from their narrow legal dispute to seemingly unrelated aspects of their existing business relationship, it becomes possible to “expand the pie” by incorporating extraneous but valuable considerations into the settlement discussions.
- The Dispute
A leading reinsurance company, and a start-up title insurance agency financed by a prominent private equity fund, entered into negotiations to launch a joint venture. Each side conducted due diligence, and then proceeded to draft legal documents. The deal was all set to go. But on the morning of the closing, the reinsurer refused to proceed with the deal.
Litigation ensued, which for years bounced up and down the trial and appellate courts — with no end in sight and ongoing expenditure of millions in legal fees.
The $20 million legal question at the heart of the litigation was whether the jurisdiction where the action was pending would recognize a promissory estoppel exception to the Statute of Frauds (as had eighteen other states to date). The insurer was sincerely 90% confident the answer was “No” (and so would settle for $2 million), while the startup was sincerely 60% confident that the answer was “Yes” (and thus demanded $12 million). The $10 million delta created a huge roadblock to settlement.
Our mediator structured a settlement that permitted the central legal issue to proceed to a decision by the jurisdiction’s highest court. In turn, the court's decision (which ultimately vindicated the insurer’s position), affected the settlement amount and resolution of subsidiary issues. A class "high/low" agreement.
By providing for a range of outcomes within a narrow band, the settlement significantly limited risk for both sides by resolving a litigation that would have otherwise likely dragged on for several more years. At the same time, by allowing the court to render a decision, the settlement did not compel either side to abandon their strongly held legal positions.
A mediator's attempts to persuade a side that their legal arguments are weak may sometimes prove futile when both sides have already invested enormous time, energy and money into their litigation positions whether for fear of losing face or confirmation bias.
Nevertheless, creative, "out-of-the-box" thinking can yield a solution that minimizes the risk of an adverse outcome for both sides without requiring either side to concede weakness, thereby resulting in a win-win.