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Man vs. Machine: Automated On-Line Negotiated Settlements

by Victoria Pynchon

From Settle It Now Negotiation Blog

Victoria Pynchon

(left:  Hal from 2001, a Space Odyssey -- Open the pod bay doors, HAL. I'm sorry Dave, I'm afraid I can't do that . . . I think you know what the problem is just as well as I do. . . This mission is too important for me to allow you to jeopardize it. . . . I know you and Frank were planning to disconnect me, and I'm afraid that's something I cannot allow to happen. All right, HAL; I'll go in through the emergency airlock. Without your space helmet, Dave, you're going to find that rather difficult. HAL, I won't argue with you anymore! Open the doors! Dave, this conversation can serve no purpose anymore. Goodbye).

Charlie Brofman, the CEO of CyberSettle, started his legal career as a criminal prosecutor in the Bronx and ended it as a civil trial lawyer in New York City.

Then he engaged in two activities so contrary to the stereotype of a New York City trial attorney that you feel you've entered the Seinfeld episode with Bizarro Jerry and Kramer and George.    

First, Brofman went into business with opposing counsel.  Then he chose algorithms over stare decisis. 

Math????

Yes, numbers, ladies and gentlemen.  Algebraic, trigonometric, calcuanalytic maddening mind-numbing numbers.  The entire reason most lawyers go to law school in the first place.  Because they can't do math.

So, this extraordinary New York trial lawyer cooperated with the opposition and launched CYBERSETTLE, a company that now helps thousands of math-challenged lawyers and their clients settle more than ten thousand "pure money" cases a year. (see Geoff Sharp's recent post on the same topic here)

How Does Cyber-Settle Work and Will It Put Lawyers and Mediators Out of Business?

Even a mathophobic such as myself can easily understand and use the CyberSettle system.  Here's how it works (unless, of course, I'm wrong; in which case I'm counting on Charlie to correct me). 

You've got an auto accident case and a 15/30 policy.  We'll make it easy with a single injury -- soft tissue -- and $5,000.00 in medical specials.  Liability is 50-50 and, well, you do the math for the probable jury award were anyone taking cases like this to trial anymore.

Plaintiff's counsel and the insurance carrier (with or without counsel) each submit three blind offers (online) and agree that they will "split the difference" if any set of those three numbers comes within $2,500 of the other's number.

No one but the offeror will ever know what these figures are, not even CyberSettle, unless the parties:  (1) settle automatically online; or, (2) authorize the disclosure of the numbers for the purpose of working out a deal -- possibly with one of the neutrals with whom CyberSettle contracts to mediate the settlement.

As you can see, the automated system works a little like a mediator's proposal (the double-blind offers) without the mediator making a proposal.   

Give Us An Example

Say the Plaintiff's demands are policy limits -- $15,000 -- then $12,000 and finally $10,000.  The insurance carrier's are $2,500, $5,000 and $8,000.

The algorithm will compare the first two numbers against one another -- $15 and $25.  They don't match and they're not within $2,500 of one another.  The computer program will move on to the next two numbers.  Once again, $12,000 and $5,000 are neither a match nor within $2,500 of each other.

Finally, the computer hits the parties' Zone of Potential Agreement (the ZOPA). Plaintiff is willing to accept $10,000 or split the difference between eight and ten. The carrier is willing to pay $8,000 or split the difference between ten and eight.  Voila.  The case settles for nine.

Will This Take Business Away from Mediators?

My answer to this question is -- I sure hope so. 

Why? 

Because these are the kinds of cases that don't require face to face (or phone to phone) negotiation, let alone third-party facilitation by a mediator.

I am informed that more than 100,000 lawyers have used this system, including many name-brand insurance companies.  I'm also informed that CyberSettle facilitated the settlement of somewhere between 12,000 and 15,000 cases last year and sent another sizable group to live mediators when the parties authorized CyberSettle personnel to take a look at the bidding to determine whether they were "close enough" to warrant human follow-up.

But don't think this service is only for the slip and fall at your local Ralph's or the 15-mph fender bender at the corner of Merchant and Main.  Recently, two litigants settled a case that had been in litigation for eighteen months for $12.5 million in eleven minutes using CyberSettle.    

The average settlement, however, is in the numeric range you'd expect it to be, between $10 and $20,000 with an average fee paid to CyberSettle of $210 per case.  

I like it.  If the parties with these smaller can can use an on-line bidding system without filing suit or, if the case is litigated, before much money is spent on litigation, it could speed money to those in need and reduce expenses for all concerned.

I'll begin worrying about losing my day job to a computer when they make one that can understand the Rule against Perpetuities. 

Until then, god speed CyberSettle. 

Biography


Attorney-mediator Victoria Pynchon is a panelist with ADR Services, Inc. Ms. Pynchon was awarded her LL.M Degree in Dispute Resolution from the Straus Institute in May of 2006, after 25 years of complex commercial litigation practice, with sub-specialties in intellectual property, securities fraud, antitrust, insurance coverage, consumer class actions and all types of business torts and contract disputes.  During her two years of full-time neutral practice, she has co-mediated both mandatory and voluntary settlement conferences with Los Angeles Superior Court Judges Alexander Williams, III and Victoria Chaney.  As a result of her work with Judge Chaney in the Complex Court at Central Civil West, Ms. Pynchon has gained significant experience mediating construction defect litigation.  Ms. Pynchon received her J.D., Order of the Coif, from the U.C. Davis School of Law. 



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Website: www.settlenow.com

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