Another Look at The Microsoft Mediation: Lessons For the Civil Litigator

By: James Laflin & Robert Werth [1]
Copyright Ó West Group, California Tort Reporter, (2001).
BNA/Pike & Fischer, ADR Report, (2001), reprinted by permission of West Group.

Introduction

On November 18, 1999, twelve months into a trial that was eventually to last eighteen, Judge Thomas Penfield Jackson announced the appointment of Richard A. Posner, the chief judge of the Seventh Circuit Court of Appeals in Chicago to serve as mediator in the Microsoft antitrust case.  Jackson’s appointment attempted to offer the parties an alternative forum in which to meet and, if possible, reach agreement.  After four months of mediation during which the principals met jointly only once, Judge Posner notified Judge Jackson that an agreement could not be reached, effectively ending the mediation process.  What follows is an examination of that process as reported in Ken Auletta’s book, World War 3.0, Microsoft and its Enemies, and related article, “Final Offer:  What Kept Microsoft From Settling Its Case?”, which appeared January 15, 2001 in The New Yorker magazine. Given the distinguished lawyers and judge involved in the Microsoft mediation, this article examines why the process was still unable to yield results.  Comparing the Microsoft process with another high profile mediation, one involving user rights in Idaho’s Sawtooth National Forest, this article considers what can be learned from the two widely divergent approaches and offers suggestions for improving the chances of parties and mediators resolving complex public and private disputes through consensual processes.

The Microsoft Mediation

When Judge Jackson initiated the out-of-court settlement process by appointing Judge Posner to serve as mediator in the case, Posner was neither a practiced diplomat nor experienced mediator.  However, he brought other credentials to the table.  As chief judge of the Seventh Circuit he had gained recognition as one of the most capable, influential members of the Federal bench, a recognized authority in the field of antitrust law; a prolific author of more than thirty books on subjects as diverse as antitrust law, economics, moral and political theory, and the impeachment of President Clinton.  “Posner’s mission as a mediator was to induce Microsoft and the government to shed what he referred to as “emotionality” and come to a rational compromise.”  At the outset, the parties met for lunch at a private club in what would turn out to be the only face to face meeting of the entire mediation process.  In attendance were lawyers representing Microsoft, the Justice Department and three attorneys general representing the nineteen states who joined as plaintiffs in the suit.  In describing protocol, Posner indicated he would refrain from evaluating the strength of either side’s case, “try to deflate unrealistic expectations”, and keep all talks in confidence.  Each side was asked “to make a detailed presentation of the facts and remedies it would consider”.  Posner promised to devote himself almost full time to the process.

To mitigate “emotionality” Judge Posner ordered separate meetings for at least the first month, the government each Monday, Microsoft each Tuesday.  Two months later the process had evolved into a form of shuttle diplomacy interspersed with the judge’s E-mail inquiries seeking additional information.  “He began, in the words of one Microsoft negotiator, “growling at the other side, growling at us””. 

After two months of work Posner outlined the first draft of a settlement proposal.  Over the next several months, some nineteen draft proposals were exchanged between the government and Microsoft, via Posner, who edited them into his own language and E-mailed them either to Bill Neukom, Microsoft’s General Counsel, or Assistant Attorney General Joel Klein, chief of the Justice Department’s Antitrust Division.  Copies went to Tom Miller, chair of the association of the nineteen state attorneys general.

By mid-February, negotiations had stalled.  “Neither side believed that the other was open to a compromise, and both sides were often confused.  At Microsoft, this was reflected by Bill Neukom, who said of Posner, “You keep asking yourself, ‘Is he wearing his hat as a mediator, trying to motivate people to narrow their differences and come together, or is he speaking as the chief judge of the Seventh Circuit, who’s an expert on antitrust law?’”  Compounding this confusion, neither side could be sure whether, or which, terms contained in the successive draft proposals originated with Judge Posner or came directly from their adversary. 

From late February  2000 through the end of March, Posner had extensive telephone conversations with Microsoft , sometimes with Gates directly, and Justice Department attorneys , principally Klein, in which successive draft agreements were negotiated and refined.  In early March Gates seemed close to accepting the deal reflected in draft fourteen, which Posner forwarded to the Justice Department and the states, the latter which had heretofore only received copies of Posner’s memos to the Justice Department and Microsoft.  The states were given ten days to accept, or Posner would terminate the process.  The state attorneys general made it clear that Joel Klein was not their spokesperson and responded separately to the proposal, expanding the list of demands on Microsoft.  The states were angry with both Posner and Klein.  As one state official said, “Posner was more interested in dealing with Gates and Klein and didn’t perceive that he had nineteen other parties to the lawsuit. . . . He got enamored of talking to Gates.  And he’s not a mediator by training, and lacked basic mediation skills.”  Summing up the situation as it existed in mid-March 2000, Auletta writes: “There were now three parties to the negotiations, and Posner knew they had reached an impasse.” 

Posner was prepared to summon the parties to Chicago for direct face-to-face negotiations starting on March 24th.  Their options would be to accept the basic terms contained in the most recent draft, or face termination of the mediation.  More E-mails and telephone conversations between Posner and the two sides ensued. 

On March 29, Posner sent draft eighteen to Microsoft but by March 31st neither he nor the Justice Department had received a response from Microsoft.  Meanwhile, the states had communicated their disapproval of parts of draft eighteen and added further conditions.  Posner now realized he would have to negotiate with the nineteen state attorneys general to develop a single government proposal agreeable to all government stakeholders, state and federal.  Then, even if that could be accomplished, he would still have to negotiate the divide between the government stakeholders and Microsoft.  That night, before Microsoft faxed Posner its draft nineteen, he telephoned Microsoft and Klein and announced that his mediation effort was over.  The next day, April 1st, he informed Judge Jackson that an agreement could not be reached.  The mediation process was over.

The Sawtooth National Forest Mediation

Later that same year, fifteen hundred miles to the west in Idaho, another mediation concluded, after lasting several months longer than Microsoft’s.  The dispute, though comparatively small in scale, was representative of many land use cases dogging supervisors of federal lands.  In five years it had reached a pitch of “emotionality” that typifies many environmental conflicts.  Nevertheless, after seven months of mediation the disputing skier and snowmobile groups reached agreement over their members’ rights of winter access to public lands in the Sawtooth National Forest.  This agreement and the process through which it was forged were hailed by both of Idaho’s U.S. Senators, and have set a benchmark for resolving similar federal lands “user” issues across the country.

Prior to the mediation each side had contended its own members’ use should exclusively prevail.  In December of 1999 Sawtooth National Forest Supervisor Bill LeVere presented an ultimatum:  either you resolve your dispute or I will.  Had either party been dissatisfied with the federal agency decision, the parties faced the prospect of protracted and costly litigation.  LeVere proposed engaging a mediator to help resolve the dispute.

As part of the mediator selection process the parties posed questions: How would you approach our conflict?  What issues would you tackle, and in what order?  Who should participate?  How long will it take?  What history or affiliations with either group do you have?

Choosing a mediator who was trained as a lawyer, each set of negotiators first met privately with the mediator and told their story.  The mediator in turn posed some questions: How serious was each group about resolving this conflict?  What was each group’s risk assessment of their best and worst case scenarios?

Next, the entire working group met to discuss communication styles, negotiation strategies, and develop a common negotiating vocabulary.  Before adjourning the group had found answers to some critical threshold questions:  Were all necessary stakeholders included at the mediation table? How would each side communicate with its constituents?  What about confidentiality? Who would communicate with the media, and how?

In order for the negotiation teams to familiarize themselves with the geographical boundaries of the dispute as well as each group's particular perspective, skiers instructed snowmobilers in skiing and snowmobilers led the group in maneuvering snowmobiles through the disputed areas. 

To construct a comprehensive map of the area the group divided into five teams, each comprised of a skier and a snowmobiler.  Each two-person team took responsibility for preparing a map of its given area and developing a proposal for solving its attendant uses.  Later, each team would make presentations to the entire group.  Agreement was reached on a set of criteria for evaluating the acceptability of any proposed solution. 

Despite many setbacks, the negotiators persevered for seven months until reaching consensus.  In September 2000, the group presented Forest Service officials with a proposed winter use map approved by all parties.  The following month Bill LeVere officially accepted and implemented the map through a special order of the U.S. Forest Service. 

Process - Questions - Choices

These two cases, dissimilar yet each significant, have been chosen to demonstrate that every case, however varied in scope, economy and facts presents the same basic questions and choices to parties, counsel and mediators.  Several of the most important are mentioned below as a means of highlighting them and suggesting that significant, even outcome determinative, consequences flow from the alternatives they pose.

Thus, in every mediation an issue will exist over the degree to which the mediator should impose a process on the parties versus their negotiating their own process with the mediator.  Involved are considerations of party “buy-in”, as well as the need for deliberate structuring of a process reflective of case-specific goals and constraints usually best known to the parties and counsel themselves.

Second is the issue of the degree to which the mediator should limit versus encourage direct dialog between the parties and counsel.  The Microsoft and Idaho mediations illustrate the tendency in commercial mediations for direct communication between opposing sides to be more limited in scope than in mediations more focused on public policy issues.  This may reflect several influences: an underlying skepticism with communication as a potent means for resolving rancorous litigated disputes, inertial default to settlement conference techniques common in the commercial/legal arena, and to some extent the ungelled, evolving state of much mediation practice.  Whatever the causes for the differences in approach one of the prices paid for the control gained by a mediator through limiting parties’ access to one another is, potentially, a further erosion of trust between the sides.  Thus, every mediation enacts the predicament of how much and what kind of contact between sides is best in order to bring about mutual decisions to settle since conflicts are negotiated by personalities with few guideposts for predicting either commitment to the process or future performance save their confidence in one another.

Third is the issue of to what degree the mediator should limit stakeholder participation in the mediation versus including all parties throughout the process.  While the negotiation process can be undermined by the numerosity of stakeholders at the table, it can also be jeopardized by the marginalization of stakeholders who grow disaffected with a process that limits or delays their participation in it.  Hence, the challenge in each mediation is to structure a process that is sufficiently inclusive without impeding effective negotiations.

Finally, the two mediations illustrate opposite ends of the spectrum of thought concerning the degree to which a mediator has the prerogative to terminate the process.  At Posner’s instance the Microsoft mediation was formally terminated on April 1st, at which point the remedies portion of the trial commenced.  After that date, Posner would no longer serve as a channel for further negotiations between the parties.  By contrast, the Idaho mediation was not stopped despite encountering periods of difficulty that could have been termed “impasse” and justified withdrawal by the mediator.  Termination, however, was not an option in that case since the mediator’s jurisdiction, negotiated at the outset, did not extend to withdrawal from the process.  Nor did constraints imposed by the Forest Service prevent further mediation.  In the face of party perseverance, it is worth consideration whether the mediator’s authority should extend to termination of the process, or whether it should be limited to remaining a channel for the resumption of negotiations should party attitudes incline again toward that option.

These then represent some of the larger questions that loom in every mediation.  In any given case answers to them may shift or only become apparent as the process proceeds, or may not be reached with any certain clarity, or at all.  In the Microsoft case Auletta observed, “Later, lawyers on both sides wondered whether Posner had made a mistake in keeping the principals apart throughout the mediation effort.  With little personal contact, it was hard for Gates and Klein and their lieutenants to think of their adversaries as flesh-and-blood human beings, and not demons.  Perhaps Posner’s dry, intellectual approach to legal issues ruled out the human factor, which can build trust, as well as erode it.”

Although it is possible that the lawyers interviewed by Auletta were right, their point was a good one, it is also possible that no set of choices by any mediator would have brought the Microsoft case to resolution.  Hindsight is a slippery game when it comes to establishing what might have resulted had other choices been made.  Nevertheless, this article posits that there are choices in every mediation whose exploration may warrant greater consideration than heretofore thought: alternatives that might open unanticipated, promising avenues of approach to the personalities and issues at hand. 

Looking Ahead

One of the vexing difficulties for the participants in the Microsoft mediation was the fact that the pace of change driving the information technology industry far exceeds the speed with which the legal system is equipped to address real and alleged transgressions within it.  In its own way, the plodding pace of the Microsoft litigation itself became, yet again, an enemy in its own right, threatening to render irrelevant or unwise rulings made a mere six months or year before.  Judge Jackson may well have had something like this in mind when he ordered the parties into mediation.  For it was one thing to find, as he did, that Microsoft was a monopoly that had engaged in unfair trade practices.  It was, and remains, another matter to decide what would be best to do about it.  As an approach to solving the “remedy” question, mediation excels for it provides principals, potentially those most aware of the arcane details and complications of their dispute, a potent forum for jointly fashioning solutions otherwise difficult or impossible to reach within the more rigid and imposed constraints of the courtroom.  The untapped capacity in our consensual dispute resolution processes is enormous.  This underutilized capacity represents lost efficiencies and wasted capital value.  If we as customers and citizens, shareholders and business partners value our economic primacy, our competitiveness, we’ll pay attention, recalling the ready wisdom that success often depends not so much on what you know, as on how fast you learn.


[1] James Laflin is a professional mediator with offices located in San Francisco, California.  For further information his web and E-mail addresses are  www.concilium.net, and jlaflin@concilium.net. 

Robert Werth is a professional mediator and consultant with offices in Sun Valley, Idaho.  For further information he can be reached via E-mail at werth@sunvalley.net.