A year after the Trump administration came after law firms, the dust has still not settled. (Just last week, the DOJ both withdrew and then refiled its defense against the law firms that sued the administration for unlawful targeting.) But it is worth taking a step back and considering what we have already learned about negotiation theories as we watch this unfold. (And I should note that my comments below are written with my fabulous RA, Jailene Peralta, who has gone down the rabbit hole with me this past year!)
One year ago this week, the Trump administration launched an unprecedented campaign against major American law firms. They suspended security clearances, barred federal building access, and threatened to terminate government contracts. A year later, the legal industry’s fragmented response offers multiple lessons for negotiation theory, as well as a cautionary tale for our institutions. Sheila Heen last year wrote about Negotiation Strategies for Law Firms–and hindsight proves her advice to not negotiate was correct!
The BATNA Problem–or Perception of Risk
At the heart of many negotiations is the concept of BATNA (Best Alternative to a Negotiated Agreement). Targeted firms like Paul Weiss and Skadden had a serious decision to make: fight and risk losing federal contracts (and clients and partners), or settle and preserve business continuity. Many chose the latter, pledging millions in pro bono services to the administration in deals that are likely not even legally binding or weren’t publicly disclosed.
But other firms fought back. Perkins Coie, WilmerHale, Jenner & Block, and Susman Godfrey each filed a suit against these orders and they have won every single case. Every executive order challenged in court in the past year was struck down as unconstitutional.
Law firms’ BATNAs, it turned out, were stronger than some may have initially believed. The Constitution was on their side, and federal courts proved willing to enforce it, albeit this took some time. Resistance also carried reputational value. Clients, partners, and associates took notice. Major clients aligned themselves to the firms that resisted by moving their business there, while many attorneys left the firms that gave in to the Trump administration.
Was this the right call? Some have distinguished among the firms that fought versus negotiated in terms of business (litigation versus transactions); others have distinguished in terms of firm leadership. What do you think?
The Prisoner’s Dilemma Plays Out in Real Time
Another lesson comes through examining prisoner’s dilemma literature. When parties who share a common interest act in isolation, each party can make the rational choice (to defect) that produces a collectively irrational outcome. Firms that settled acted individually rather than in unison, which is precisely what the coercive bargaining from this administration relied on. When Skadden settled without even receiving an executive order, it signaled to the administration, and to other firms, that yielding was an option. The prisoner’s dilemma had arrived in BigLaw. (And, in fact, this is now the argument that DOJ is using–their refiling against the four firms that fought back argues that because other law firms settled, this shows that the administration was acting appropriately.)
One Year Out: What We Know Now
A year later, the consequences of those choices are still revealing themselves. Partners are defecting from settling firms. Clients are shifting business to firms that resisted. The EEOC investigations quietly ended. And the firms that fought are still standing with their reputations arguably enhanced. (For a fun exercise, there is even a law firm tracker from last year that listed what each law firm did.)
The lesson isn’t purely political. It’s about how we respond under coercive pressure, how reputation and principle interact with short-term risk, and how the absence of collective action shapes outcomes. The attack on BigLaw was a negotiation textbook written in real time. The next question for us as professors is how are we teaching this and what (additional?) negotiation theories we need to emphasize to the next generation.
