Coronavirus Changed the World: Have You Adapted Your Negotiation Tactics?

By Danny Newman

As COVID-19 washes over the United States, the way law is practiced has, at least temporarily, changed—and negotiation strategies must adapt as well. For potential and pending litigation, now is a good time for parties to analyze their own interests and reach out to counterparties to determine if there are any new paths to resolution. Even under the best of circumstances, open communication and honest evaluation of interests is key to resolving litigation matters and benefits all involved. And in a coronavirus-influenced environment, honest communication and re-evaluation of interests is imperative and potentially highly productive.

Pre-litigation and pending litigation objectives may have changed

Clients and counsel in active pre- or pending litigation matters should have honest discussions about how COVID-19, both its economic and societal impacts, may have changed the client’s interests in and, ultimately, strategy for litigation. Once client and counsel are on the same page, counsel should contact counterparties to explore settlement. To make those conversations more productive, counsel should prepare open-ended questions to flush out the opposing parties’ interests in this new landscape, and help determine if there is an avenue for amicable and mutually-beneficial resolution that may not have been feasible before COVID-19. Counsel should also be prepared to reveal their client’s interests to demonstrate accessibility and as an enticement to gain reciprocal information.

Priorities have likely changed for both parties, perhaps dramatically. Maybe one side had earmarked money to pursue a claim but now must use those funds for more immediate needs and is now more open to quickly resolving the pending dispute. Maybe the other values an immediate cash infusion to help pay rent or cover employee cost over the potentially larger payout in the future for which they had originally been holding out. Maybe the parties are former business partners and COVID-19 has presented one an opportunity that it cannot take advantage of without their former partner. Maybe both parties are concerned that the other will soon be filing for bankruptcy and unable to pay on any judgment. And maybe parties simply have more important, life-or-death, sink-or-swim concerns dominating their lives such that resolution and harmony is preferable to conflict. Moreover, given current restricted court schedules, civil trials will be significantly delayed even when operations return to normal (who knows when that will be) due to the constitutional requirements for speedy trials on the criminal side. With enough uncertainty in the world right now, do the parties want to wait through protracted litigation, or come to an agreement now?

Debtors should be proactive with creditors and offer solutions

For debtors concerned about or threatened with collection or foreclosure litigation, proactive communication about cash flow and current business conditions—focused on impacts of COVID-19 and stay-at-home orders—is more likely than ever to be received positively by creditors. Creditors are largely demonstrating unprecedented patience during this crisis, and are significantly more likely to agree to forbearance or other creative solutions if the debtor is open and honest rather than attempting to hide from their problems. Debtors should consider starting a dialogue now, even if they haven’t yet missed any payments, to get ahead of the issue and preserve goodwill. The initial communication should explain clearly why it is in the creditor’s interest to delay collection efforts, including presenting realistic options for future payment to cover the balance. For example, restaurants and bars that were performing well before the pandemic—and who may see roaring demand for their services once the stay-at-home orders are lifted—should consider reminding landlords that their premises are better off filled with a business that will generate revenue in two months rather than an empty space needing to be filled in an economically uncertain time.

And for creditors who have heard nothing from delinquent debtors, communicating a reservation of rights and a willingness to work collaboratively on a solution could greatly diminish the debtor’s stress and improve the likelihood that both parties will emerge from the pandemic closer to whole.

Time is now—don’t wait for mediation

If the parties were banking on a scheduled mediation to leverage a third-party’s creative ideas to help resolve a conflict or to put their chips on the table, they may want to revisit that strategy. Long-distance mediations are often unsatisfying, even clumsy, given the need to confer separately with the parties and for technology to work without glitches. Now is the time to be proactive. Do your own internal analysis and then discuss options directly with the other party.

Tips for renewed negotiations

It’s time to revisit interests on both sides and try to get unstuck from pre-COVID positions. Hear people out and see if they are willing to negotiate. Something that may have been a nonstarter a month ago may be entertained today. Having open conversations can potentially break impasses that both parties previously considered carved in stone.

Here are some tips for negotiating during the pandemic:

  1. Understand your interests: Lawyers and clients may need to reassess their interests, asking: What do I really want? Why do I want that? What is important to me, my family, and my business now? What is my new/altered risk tolerance?
  2. Ask the other party about their interests: Share your own underlying interests and any ways those interests have changed, and ask counterparties to do the same—you may be able to bring new value to everyone
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  3. Build connection: Share how the pandemic has impacted you both personally and professionally. Ask the other party the same, and listen carefully. At the least, opening the line of communication will create a human connection from which both parties will benefit. And likely, the touch of honesty will ease the tension and inspire an environment where a mutually beneficial agreement is possible.
  4. Be collaborative: Maintaining a win-win mindset, rather than a win-lose approach will lessen the need for third-party mediators or courtroom battles. Strive to expand the pie so all parties see benefit. Perhaps the adversarial parties actually have a project to work together on, and are just waiting for the right partner?
  5. Have patience: People have a lot going on in their lives in these tumultuous times. If their email seems short or they take their time getting back to you, don’t jump to potentially inaccurate conclusions. Give them the benefit of the doubt.

If you have any questions about negotiation strategies or have litigation needs, please contact Danny, or one of his collegues in Tonkon Torp’s Litigation Department or Bankruptcy & Creditor Rights Practice Group.

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