Conversation with Peter Benner about PEDR, Part 7

This conversation started with my post about planned early dispute resolution (PEDR).   My friend, Peter Benner, and I exchanged comments in that post.   Here are links to Part 2-ish, Part 3, Part 4, Part 5, and Part 6 in this conversation.  This is the last part for now.

Peter, throughout this conversation, you have focused on corporate culture and the tradition of referring disputes to “legal” and deferring to lawyers’ judgments.  The exception, when top management gets more involved, is when they see major disputes as strategic threats.  In general, they may see dispute resolution as a necessary overhead function, like accounting or janitorial services, rather than an area of strategic opportunity.

You also talked about decision-makers’ cognitive biases and their difficulty in making accurate predictions.  You quoted Daniel Kahneman as saying that they feel “naked” when others second-guess their decisions.  I have heard that executives sometimes prefer to have a court make a decision instead of having the parties settle the dispute because they could blame the judge or jury for an unfavorable decision.

I don’t understand this logic because I would think that they could be blamed even more for a bad court decision, which could be much worse than a settlement.  They generally have some control over a settlement and much less control over a court decision.  Yet this logic apparently makes sense for some executives.

All this points back to powerful fears of risk and loss.  Although PEDR should help companies manage and reduce risk, executives generally seem to feel that a PEDR system would be riskier than litigation.  Perhaps this is because they fear that they would lose advantage through PEDR due to others taking advantage of them in adversarial conflict.

Of course, executives normally do settle cases, at least late in the process, presumably because they fear unfavorable court decisions.  But perhaps they consider this to be preferable to early resolution because of elements of the prison of fear we have talked about.  Perhaps they calculate that taking a tough line up front scares away some potential litigants and reduces their liability (or increases their recovery), outweighing the extra litigation costs.  Or perhaps, for some executives, this is due to procrastination at the beginning of lawsuits, when the threat is less imminent and there is less urgency to settle.

Yet some executives and businesses “swim upstream” and overcome these fears to adopt PEDR systems.  As a result of this conversation, you and I plan to interview corporate executives and lawyers to find out why.  Stay tuned.