John C. Cruden Named President of Environmental Law Institute

The Environmental Law Institute Board of Directors recently announced that they have selected John Cruden as President, one of the most respected environmental lawyers in the country. Until his selection by the ELI, John was Deputy Assistant Attorney General for the Environment and Natural Resources Division.

An effective advocate, legal scholar and consensus-builder, John Cruden is the perfect choice to lead the EIL.

In the ELI press release announcing his appointment, Cruden is quoted as saying:

“The nation and the world are at an important crossroads,” said Cruden. “For 40 years, the U.S. has been among the world leaders in developing a legal framework to control pollution and manage our natural resources. Republican and Democratic presidents passed historic laws with broad bi-partisan support from Congress that benefit our nation, our people and our economy. That legacy—the essential framework of an efficient system of governance and level playing field grounded in the rule of law, sound science and public participation—is in jeopardy.

While it is a lot easier to develop consensus when you are holding the stick as the enforcer, John is certain to be an effective leader and consensus builder at the ELI. Congratulations to the ELI for the wisdom to select John and best wishes to John as he moves on to the next phase in his distinguished career.

For more information about John Cruden, please click here. For a video of John discussing his new role as ELI President, click here.

CERCLA Liability in Real Estate Transactional Documents

Jose R. Allen has recently posted a blog about CERCLA liability in real estate transactions for the American College of Environmental Lawyers. Transactional lawyers are now very aware of the need to address environmental liability issues in the connection with the purchase and sale of commercial and industrial properties.

I’ve mentioned the American College of Environmental Lawyers website before. Allen blogs about a recent federal district court decision, Stimson Lumber Co. v. Int'l Paper Co.,CV 10-79-M-DWM-JCL (D. Mont. 2011), that “illustrates the importance of not only including provisions in purchase and sale agreements for indemnity as to pre-closing conditions, but ensuring that such provisions unambiguously reflect the parties’ intentions regarding CERCLA statutory liability”.

The Stimson Lumber court held that the purchaser of industrial property could sue the seller for CERCLA costs “even though the period of seller's contractual indemnity for environmental claims had expired under the terms of the sale contract.”

All transactional lawyers drafting indemnification provisions allocating liability for hazardous waste contamination should pay close attention to the lessons from this case. The Stimson Lumber decision tells us that words matter and environmental liability and indemnification provisions in real estate contract must be, as Allen writes: “either very broad and quite absolute in the allocation of future liabilities or very specific and complete in reflecting sometimes subtle distinctions between indemnity for and assumption of liability.”

The only way to effectively protect clients in these cases is to first think through and then draft very clearly and carefully.

Let's Not Make a Deal: An Empirical Study of Decision Making in Unsuccessful Settlement Negotiations

Do lawyers make reasonable judgments regarding settlement of cases? Many experienced mediators suggest they do not. Plaintiffs can overvalue their cases and defendants often fail to see the risks.

But is there evidence that this is true? Do lawyers and their clients really overvalue their cases and reject settlement offers that are better than awards in the subsequent litigation?

Randall L. Kiser of DecisionSet, Martin A. Asher, Director, Research and Scholars Programs, Wharton Undergraduate Division and Adjunct Professor of Finance at The Wharton School, University of Pennsylvania and Blakeley B. McShane, a graduate student in the Department of Statistics, The Wharton School, University of Pennsylvania analyzed 2,054 contested litigation cases in which the plaintiffs and defendants engaged in settlement negotiations, decided to reject the adverse party's settlement proposal, and proceeded to arbitration or trial.

The study defined "decision errors" as either a plaintiff or a defendant rejecting the other side's settlement offer, going to trial, and finding that the result at trial is financially the same as or worse than the rejected settlement offer—the "oops" phenomenon.

According to this quantitative evaluation of errors made by attorneys and their clients about whether to accept settlement offers or proceed to litigation, the answer is clearly yes.

The parties' settlement positions were compared with the verdict. The study demonstrated that non-settling parties had a high incidence of decision-making errors by both plaintiffs and defendants. As the authors write:

[T]he incidence of decision error for plaintiffs is higher than for defendants, but the cost of decision error is higher for defendants than for plaintiffs….Plaintiffs receiving an award less than or equal to the last offer made by the defendant in 61.2 percent of the cases and defendants committed decision error in 24.3 percent of the cases. Table 1

This data, to me at least, is not particularly surprising. What is interesting is that attorney-mediators make fewer such decision errors.

The study identified attorneys with substantial settlement experience and dispute resolution skills and whether the attorney-mediator represented a plaintiff or defendant in a case tried to a verdict. Obviously these are cases in which the attorney-mediator was simply representing a client as counsel, not in cases where the attorney worked as a mediator.

The study concluded that: “The presence of an attorney-mediator generally was associated with a reduced decision error rate....Regardless of which party is represented by an attorney-mediator, the total amount of error is modestly lower.”

Kiser has written a book, Beyond Right and Wrong about legal decision-making based on this and other studies.

According to the publisher:

The book guides attorneys and clients through legal decision making. It analyzes 11,306 attorney-client decisions in actual cases and summarizes decades of research regarding judge, jury, litigant and attorney decision making. To explain why many litigation outcomes are suboptimal, the book describes the psychological and institutional factors that impede sound decision making. The roles of attorneys and clients in legal decision making and the legal malpractice and disciplinary consequences of ineffective legal representation also are discussed. To rapidly promote better financial outcomes in civil litigation and to assist attorneys and clients in becoming expert decision makers, the book presents more than 65 ideas, methods and systems for improving personal and group decision making.

Environmental Lawyers as Problem Solvers

Charles Tisdale, a highly regarded environmental lawyer, mediator and arbitrator of Superfund cost allocation disputes has posted an insightful blog on the American College of Environmental Lawyers website about why environmental lawyers seem not to have split into litigation factions the way other fields of practice have (i.e., plaintiff personal injury attorneys don’t often represent defendants in PI cases, labor lawyers are generally either union or management and so on).

He suggests it is because we all breathe the same air. We all live in the same boat and we all have a stake in whether, in the end, the boat floats or not. As Chet writes:

We may argue over how clean is clean and what is the best available technology for control of pollution. However, our shared belief that earth must be preserved creates a basis for reasoned debate, which results in reduction of pollution and a successful resolution of conflict.

This, and perhaps other factors (see below), can lead to environmental lawyers focusing much more on negotiating solutions with the other side rather than on litigation as the first option. This is not to say, however, that environmental disputes are never litigated.

Environmental cases often involve complex technical issues, multiple parties and voluminous documents. This leads to very high litigation costs. And often the results of litigation are unsatisfying to many of the litigants; especially in Superfund cost allocation disputes where courts have a great deal of discretion. Often in such litigation no one wins.

These factors lead lawyers and their clients to negotiate. And that means that environmental lawyers especially must understand the other parties’ cases to reach a solution that works.

Successful environmental lawyers must establish reputations for honesty. It is difficult to successfully negotiate if you have been seen as hiding data or otherwise dissembling. This does not mean that environmental lawyers are better people or lawyers than other practitioners, just that, to succeed, when lawyers are forced to negotiate with adversaries they must be thoughtful about how to negotiate and must understand the consequences of their behavior – in the particular case and over time.

Another reason environmental lawyers tend to be problem solvers is they often must explain complex statutes to clients; develop productive relationships with regulators who are not going to disappear; and create successful solutions that avoid the need for litigation.