By Dr. Ken Broda Bahm:
As the year winds to an end, all the attention is on the “fiscal cliff” and whether there will be a last-minute save or whether, when we “Ring in the New” on January 1st, we will be ringing in large tax increases and drastic cuts to Federal programs. As of Monday morning and this post’s press time, there is a vote to be scheduled on the administration’s plan, but still significant distance between house Republicans and the President. Adding to the frustration is the fact that Congress itself loaded the gun and set the trigger, creating this cliff as a consequence of the contentious debt ceiling debates in Summer of 2011. That makes the current countdown a “politically manufactured crisis” in a real sense. Regardless of whether it comes to pass tomorrow, the levels of delay and dysfunction shown by our politicians in creating and addressing the cliff has tried the nation’s patience, tanked congressional approval ratings, and jeopardized the confidence in the U.S. and world economies.
A different way of viewing the current predicament is to see it as a settlement deadline gone awry. Much like the deadlines and sunsets that litigators use when trying to resolve a legal dispute, the idea is to create urgency by manipulating the circumstances. But in some cases, like the fiscal cliff negotiations, the manipulation is artificial and the negative consequences are entirely avoidable. The point? Cliffs have consequences, and manufactured duress may not be all it’s cracked up to be. In this last-of-the-year post, I’ll take a look at some research and experience on deadlines, as well as the general question of whether deadlines tend to help or hinder settlement.
It Has to Settle by When?
The idea of a settlement deadline is common in class action suits where a judge sets a timetable for individual plaintiffs to accept an offer or proceed to trial. For example, a deadline for settlement in foreclosure lawsuits against the top five mortgage lenders is swiftly approaching. At a more basic level, however, litigants facing pressure to know whether the case is going to trial or to settlement will sometimes internally set and externally communicate a deadline for that decision. For example, a party might say, “If we get to January 1st and still resolved the case, then we should all assume we’re going to trial.” While that desire for certainty and closure is understandable, it also may be unrealistic and harmful. After all, a good deal should never be rejected simply because it comes after a deadline. DivorceSource, a site focusing on family law, gives the following example: “Where the other side gives a ‘Friday at 5 p.m.’ deadline, try the following response: Dear Joe: My client was going to accept your proposal on Friday when she noticed that it was 5:10 p.m. See you in court.” If that ever happened, the other side would, of course, offer an extension and reveal the deadline’s artificial nature in the process. When that happens, the deadline becomes a threat without much to back it up. “In any event,” that source concludes, “If you want the case settled, do not use deadlines any more than you would use any other type of threat or ultimatum.”
The Research: Are Deadlines Effective?
To some extent, but not entirely. People show a preference for having deadlines, even where those deadlines are artificial. But when it comes to setting one’s own time limit for action, people tend to set them in a way that detracts from the best result. One study (Ariely & Wertenbroch, 2002), for example, looked at professionals enrolled in an executive education course at MIT, and how they set their own deadlines for paper completion when allowed to do so by the professor. Specifically, students were assigned three papers to write and had to commit to due dates for those papers. The due dates could be any time prior to the end of the term, but once selected, the student had to commit to it. The result of this choice was that “many did not set their deadlines to bind themselves optimally.” Logically, it would make sense to set deadlines as late as possible, since there was no advantage to early completion and there were penalties for missed deadlines. But instead, students tended to set their own deadlines early, apparently in an idealistic belief that they would perform better by holding their own feet to the fire. Ultimately, however, many ended up accepting penalties as a consequence of missing their own deadlines.
And the author’s conclusions could just as easily apply to Congress in the fiscal cliff negotiations: “People sometimes impose deadlines on themselves, even when missing those deadlines leads to penalties.”
Bottom Line: Don’t Rely on Artificial Deadlines for Settlement
Of course, some deadlines in litigation are going to come from the court or from the surrounding circumstances. Summary judgment decisions, close of discovery, and expert disclosures are all events that may create natural moments that are ripe for settling your case. Recognizing those natural moments adds to your effectiveness, while creating artificial moments out of thin air can detract from your effectiveness. As the study concluded, “self imposed deadlines are not always as effective as some external deadlines in boosting task performance.” It may seem like a good idea to set a hard date by which time you require the other side to accept your settlement offer or proceed to trial, but in practice, the artificial constraint can end up cutting the settlement discussion short and reducing your options.
Whether the nation tomorrow finds a solution on the fiscal cliff, or whether we join hands like Thelma and Louise and plunge off together, it is still the start of a new year. So, it may be a good time for a new year’s resolution: If you rely on settlement deadlines, tie those deadlines to events and to natural needs created by the case itself. This is the lesson of the fiscal cliff: Staking your settlement on an artificial and arbitrary deadline just creates opportunities for posturing and for self-inflicted wounds.
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Other Posts on Settlement:
- Settle Your Case Without Setting the Dominoes in Motion: Research on the Demonstration Effect
- Break Through the Barriers: The Settlement Series, Part One
- Don’t Play Chicken With Your Case: The SettlementSeries, Part Two
- Know When to Give Your Mediator a Voice: TheSettlement Series, Part Three
- Don’t Forget About Happiness: The Settlement Series, Part Four
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Ariely, D., & Wertenbroch, K. (2002). Procrastination, Deadlines, and Performance: Self-Control by Precommitment Psychological Science, 13 (3), 219-224 DOI: 10.1111/1467-9280.00441
Photo Credit: Martin Cathrae, Flickr Creative Commons