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Negotiating when there is no BATNA!

PGP Mediation Blog by Phyllis G. Pollack

Recently, I conducted a mediation in a matter which probably should never have been filed as a lawsuit; the economics simply were not there. Realistically, plaintiff could not have a Better Alternative to a Negotiated Agreement (BATNA); every scenario would have been more costly no matter what the amount of the settlement.

Plaintiff ("Joe") purchased a motorcycle for about $16,000. About a week after the purchase, he claimed that the clutch was slipping and so took it back to the dealership for repairs. The dealership tested the clutch and opined that it sounded normal. Then, about two weeks later, Joe returned to the dealership with his new motorcycle because the clutch had worn out completely; he would disengage the clutch, accelerate yet nothing would happen; there was no power. At this point, there was about 1000 miles on the motorcycle.

Both the dealership and the manufacturer’s representative inspected the clutch and its parts and determined that Joe had overused the clutch (i.e., abused and/or misused it). The clutch plate was shattered and the clutch, itself, burned. As a consequence, both determined that the repair would not be covered by the warranty and so requested Joe pay for the installation of a new clutch.

Since he had to pay for it, Joe took his motorcycle to an independent repair shop which made the repair. Allegedly, the repair shop did not do the repair properly because a few weeks later, Joe’s motorcycle suffered an engine failure necessitating a new engine. The dealership estimated this repair would cost about $7500 but refused to cover it under the warranty claiming that the independent repair shop had not completely cleaned out the shavings from the clutch, causing those shavings to clog the engine inducing the failure.

So, Joe sued the manufacturer claiming that the motorcycle was defective because neither the clutch nor the engine should have failed within a month after purchase. Joe denied any misuse or abuse of the clutch which precipated the events.

At mediation, what was Joe’s BATNA? The total cost of the motorcycle was $16,000. Joe claimed that the clutch was defective, not misused, but did not keep the parts and has no expert to back him up. The only opinion his potential future expert might provide will be one based on the analysis done by the dealership and the manufacturer. In short, it will be hypothetical testimony at best while the defendants will be testifying based on their own personal examination of the parts in question.

Further, the cost of going forward to trial will be a lot more than the cost of the motorcycle. The retention of an expert will be a few thousand dollars and there are depositions to be taken which will run another few thousand dollars. Plus, the jury fees and fees for a court reporter during the trial. And….Joe’s own attorneys’ fees which are probably on a contingent basis although the costs may not be (i.e., filing fees, deposition fees, expert fees etc). Moreover, should Joe lose, he may be facing a cost bill from the manufacturer requiring Joe to pay some of the costs that the manufacturer incurred in the suit.

In sum, if Joe does not settle this matter at mediation, his BATNA will be quite unattractive, and probably more than the cost of the motorcycle, itself.

The moral: assess your BATNA before even suing. To do this (as explained in a Harvard Law School Program on Negotiation report entitled BATNA Basics: Boost Your Power at the Bargaining Table) (13_BATNA.pdf ) think about and then list each of your alternatives should you not be able to resolve the matter quickly and easily; carefully evaluate each of those alternatives, placing a monetary value or cost on each one; choose the course of action that you believe will provide the highest value for you; that will be your BATNA; and then, finally, determine what is the lowest amount of money you are willing to accept to the point that if the offer is lower than that sum, you will walk away and pursue your BATNA.

In the mediation, plaintiff realistically, could not have a BATNA as engaging further in the litigation process and/or going to trial would probably cost him more than any potential recovery at trial after deducting all of the expenses of litigation and trial.

…. Just something to think about.

                        author

Phyllis Pollack

Phyllis Pollack with PGP Mediation uses a facilitative, interest-based approach. Her preferred mediation style is facilitative in the belief that the best and most durable resolutions are those achieved by the parties themselves. The parties generally know the business issues and priorities, personalities and obstacles to a successful resolution as… MORE >

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