Everyone loves BATNA. It has more than 16 million hits on Google.
I have loved BATNA too. Of course, people should consider alternatives to a negotiated agreement when negotiating or mediating.
Unfortunately, people have loved BATNA so much that it has become a cliché that is widely misunderstood, even by some dispute resolution experts.
When bargaining in the shadow of the law, the expected court outcome (aka BATNA value) is only part of the more important consideration for negotiators – their bottom lines. Tangible and intangible costs of litigation, which can dramatically affect parties’ determinations of their bottom lines, are critical considerations for parties but they often get much less attention than shiny BATNA values.
So, in real-life negotiations, BATNA values are much less important than we probably think – and teach our students.
That’s the takeaway from a new article in the Harvard Negotiation Law Review, Sizing Up Settlement: How Much Do the Merits of a Dispute Really Matter?, by US Magistrate Judge Tim A. Baker based on his experience conducting thousands of settlement conferences. Here’s the abstract:
Legal disputes routinely settle. But to what extent do the merits of the parties’ legal positions determine the terms of settlement? In theory, the party with the more favorable legal position will achieve the more favorable settlement. In actuality, the merits of the legal dispute often play a largely diminished role in achieving settlement. Economic factors, such as whether a party can afford costly litigation or whether a defendant can afford to pay a settlement or judgment, play a crucial role in settlement outcomes. Numerous other factors unrelated to the merits of the litigation similarly drive settlement outcomes.
This Article explores the economic and many other factors unrelated to the merits of a dispute that play a significant role in determining whether and on what terms a dispute will be resolved. Lawyers who are cognizant of these factors and fully capitalize on them during settlement will achieve better litigation outcomes. Mediators who do the same can more effectively move a hard-fought dispute toward settlement.
Attentive readers of this blog recognize that this is consistent with the main premise of the LIRA book, which I co-authored with Michaela Keet and Heather Heavin.
The problem is even greater in arbitration because it is harder to predict the outcome, as described in an excellent article in the same issue of HNLR by our own Jill Gross, Bargaining in the (Murky) Shadow of Arbitration. There is less public doctrine from (often non-existent) arbitration opinions, and parties often don’t have as much factual information as available from discovery in litigation.
Lawyers all too often use disingenuous arguments about supposed BATNA values in the “positional negotiation” game. Of course, faculty should teach students how to play that game to prepare them for real-life practice.
But faculty should also emphasize the importance of clients’ bottom lines and particularly their valuations of their intangible costs / interests.
Lawyer-client relationships are central to legal practice, and yet most law students can graduate without getting the feel of those relationships, especially from the clients’ perspective.
Simulations are valuable because students learn so much from their role-play experiences. Faculty can produce better learning experiences if simulations include students playing clients. In simulations without clients, the “lawyers” often focus way too much on the “positional negotiation” kabuki dance about supposed BATNA values, and they often ignore clients’ interests.
In my experience, having students play clients in negotiation simulations has been eye-opening for everyone. The “lawyers” often want to aggressively maximize their partisan advantage, focusing only on legally-relevant facts and the remedies available in court. By contrast, “clients” often feel frustrated with their lawyers because the lawyers don’t listen to them, take too much control, and ignore or discount the clients’ intangible interests. So the lawyers and clients often are frustrated with each other.
Sometimes, in real life, lawyers are very sensitive to clients’ interests, and they incorporate that concern in their negotiation approaches. This too is replicated in the way that some students enact their roles as lawyers.
Using simulations with clients who have significant intangible interests generally produces fabulous debriefs.
Faculty can add material to existing negotiation simulations to get the benefits of these insights. To really enhance this learning, it helps to include substantial time for students playing lawyers and clients to consult with each other before negotiating or mediating with the other side.
Discussing BATNA values is particularly important in client counseling because they are important elements in clients’ bottom line calculations. In some cases, using decision trees can be very helpful in assessing BATNA values. For an authoritative primer on decision trees, see Marjorie Aaron’s Risk and Rigor book, which is available for free. Marjorie’s Client Science book provides valuable guidance for lawyers in giving clients bad news – such as when the expected court outcome is likely to be much less favorable than the clients hope. She is happy to share materials about this with legal educators.