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Negotiation Studies – Five Lessons from the Debt Deal Breakdown

Posted in Settlement

Last week, New York Times reporter Matt Bai published a comprehensive look at the breakdown of the negotiations over extending the debt ceiling in July 2011. Congressional negotiations over debt have no direct application to negotiating class action settlements, but there are still a few lessons we can take from the article when handling any kind of complex negotiation.  Here’s five:

1. In-person meetings can go a long way toward starting off negotiations. I’ve written before on why beginning negotiations in writing (something lawyers love to do) can be a risky strategy. But Bai’s account shows how something as simple as a golf game may help break an impasse.

[President] Obama and [Speaker] Boehner had themselves started meeting furtively in the White House, in secret negotiating sessions that grew out of a much-discussed golf outing in June. Over a few drinks at the clubhouse at Andrews Air Force Base, Boehner suggested they might be able to use the impending debt crisis to achieve something ambitious and significant — not just the kind of cuts that [House Majority Leader Eric] Cantor and [Vice President] Biden were discussing, but fundamental reforms to entitlement programs and the tax code too, a sweeping modernization of the federal budget. The president agreed that they should try to get something started …

(Emphasis added.)  Particularly when a deal may be necessary, but the parties have been locked in accusation and recrimination, meeting in person can help refocus everyone on mutual interests instead of sticking points.  You have to be a real jerk to avoid small talk and pleasantries in a situation like that; and it’s surprising how far those can go toward building just a little but of necessary goodwill. 

2. Confirm all major developments in writing. According to Bai, these negotiations started with drinks at a golf course clubhouse. But they began in earnest after Obama negotiators Jack Lew and Rob Nabors confirmed this conversation in an email.

In this case, Obama’s principal negotiators — Jack Lew, then his budget director, and Rob Nabors, his top aide on legislation — sent a proposal to Boehner’s team that included $1.5 trillion in new revenue over 10 years. The White House negotiators knew this had about as much chance of happening as a meteorite falling on the Capitol, but the real question was whether Boehner was willing to go some distance toward meeting them on the revenue side of the ledger, or whether he would stick to Cantor’s hard line against any form of new taxes.

(Emphasis added.)  Negotiation theorists talk about "creating value" and "getting to yes," but we all often overlook the basic mechanics of a complex negotiation: it involves exchanging complex proposals, which is best done through writing.

3. Sometimes the hardest negotiators are your allies.  Bai’s account makes much of "cryptic" early emails and "furtive" or "secret" meetings. Why? Because Speaker Boehner’s political allies were not necessarily fans of the deal he was trying to put together.

Meanwhile, political pressure was building from inside Boehner’s leadership circle. Cantor, who had heard about the Obama- Boehner talks only when Biden happened to mention it, was nonplused at having been excluded and appalled that Boehner was offering more revenue. He and others pressed the speaker to drop the idea of a comprehensive deal …

(Emphasis added.)  The Republicans were not the only ones who opposed aspects of the deal. Bai also mentions that some provisions "unsettled the stomachs of some White House aides." Even the much vaunted "Gang of Six" apparently had difficulty from its more polarized members. And, much like competing plaintiffs’ lawyers, the Gang of Six wound up undercutting the deal between the White House and the Speaker’s office.

4. The negotiator matters.

Like in class action litigation, politics involves large teams of people who take on different tasks. Often, that means that certain members of a team earn reputations with the other side. The simplistic account of the debt negotiations (which Bai indulges at times) is that Republicans would not make a deal because they could not stand the President personally. What’s more interesting is that, at least at one point, continuing the negotiations required one side changing its negotiators.

[I]t wasn’t Obama but rather one of his chief aides who Boehner had decided was the problem. For weeks leading up to the breakdown in talks, Boehner and his top lieutenants — Barry Jackson, his chief of staff, and Brett Loper, his policy aide — had been talking principally to Jack Lew and Rob Nabors at the White House. But they had become exasperated with Lew, who, in their view, talked a lot but offered few concessions. Lew, whose detailed knowledge of the budget outpaced anyone else’s in the room, always seemed to have a better idea than whatever Boehner was proposing, and these ideas seemed to Boehner like more complicated ways of describing positions they had already rejected. The problem with Lew, Boehner bluntly told the president when he called, is that he just didn’t know how to get to “yes.”
Boehner thought he had a better shot with Bill Daley, the president’s chief of staff, and Timothy Geithner, the Treasury secretary. Daley had made a point of reaching out to Boehner since joining the administration, and he was known to be a pragmatist and a dealmaker. Geithner, clearly rattled by the possibility that Treasury might default on its debt, had been issuing almost daily warnings to Congressional leaders about the mounting fear in the markets. Send me Daley and Geithner, Boehner told the president, and let’s see what we can do.

(Emphasis added.)  Similarly, Cantor’s presence in a later meeting wound up undermining a later negotiating session when he directly contradicted Speaker Boehner in front of the President, clearly signaling that the Speaker might not be able to sell any deal to his party.

5. At the end of the day, the negotiations don’t matter if they don’t close. Like in evidence, what gets said in the negotiation often stays in the negotiation. The President and the Speaker exchanged a number of proposals; they came close to agreement on a number of broad strokes that might have broken the deadlock both sides were fighting. But once the negotiations broke down, the previous concessions didn’t matter at all. Part of this is because once the negotiations break down, parties tend to revert to their more adversarial stances. (In litigation, this is an ethical necessity for a zealous advocate; in politics, it’s a practical one.) And part of this is because incomplete negotiations may damage the negotiators.

Now, with another debt battle looming, the chance of resurrecting some kind of grand bargain doesn’t seem very promising. Obama and Boehner have spoken only a handful of times. The administration’s most driven dealmaker, Bill Daley, never recovered from the episode, which poisoned his relationship with Harry Reid, who blamed Daley for having kept him and other Senate leaders in the dark as the negotiations unfolded. Daley resigned in January and was replaced by Jack Lew — the guy whom Boehner and his aides tried to sideline.

In other words, it’s important in the negotiation to act as honorably as you can, so that if it falls through, you can preserve your credibility–with your colleagues, with your client, and with the other side.  It’s equally important because you don’t know who you may face across the table next time.

Of course, all of these takeaways depend, in part, on how much one believes Bai’s account as opposed to the competing stories from President Obama, Speaker Boehner, and various other news outlets. But partisan allegiances aside, many of these maneuvers ring true to those of us who have had to negotiate complex business deals or litigation settlements. Bai laments the political culture that makes this kind of negotiation so difficult. But the same problem frequently arises in other negotiations (like class actions) where parties find themselves pivoting from heated adversarial rhetoric to attempting to compromise.