January 19, 2017

Is Offering an Apology an Effective Strategy in Construction Mediation?

Burns Logan

Almost every kid over the age of 2 is taught to say "I'm Sorry" when they have caused an injury to someone else.  In my own life, I was forced to offer and accept many insincere apologies between myself and my older sister.  Most of those apologies were delivered through clenched teeth.

My apologies to my sister were generally ineffective.  But, can an apology be effective to help resolve construction-related disputes?  To the chagrin of our 2nd grade teachers, the data shows the answer is "it depends."

Is an Apology Admissible In Court?

The stock-in-trade advice from many attorneys is that you should not offer an apology when there is a potential for litigation.  The root of this advice is the risk that the apology itself could be admitted as evidence of fault in the litigation.  You don't want to help prove the other side's case by offering an apology when you have other valid legal defenses.

In order to address this issue many states have passed legislation intended to make certain apologies inadmissible in lawsuits.  The purpose of these statues is to encourage parties to feel free to offer an apology without fear it will hurt them in subsequent litigation.  Many of these statutes are the product of effective lobbying by the medical malpractice industry.

However, the legislation does not apply to all situations.  For example, in my home state of Colorado, the "apology statute" applies only to cases involving "…an unanticipated outcome of medical care…."  Colo. Rev. Stat. § 13-25-135 (2016).  Other states, such as Indiana, exclude the apology itself from admissibility as evidence in broader circumstances, but not any acknowledgment of fault.  See Ind. Code Ann. § 34-43.5-1-5 (2016)   

For example, if the apologizer said to the claimant, "I'm sorry.  This is my fault."  The "I'm sorry" statement would be inadmissible.  However, the "this is my fault" statement would be admissible. 

Given the confusing nature of how apologies must be worded in an "in the moment" situation, it is no surprise that most advice focuses on not offering an apology at all.   However, if you are already in a dispute, there is a way to offer an apology with a small risk of its admissibility as evidence against you.  Statements made during mediation are typically not admissible in trial under Federal Rules of Civil Procedure Rules 501 & 408 (and equivalent state rules). Fed. R. Civ. P. 501 & 408.  In addition, many states have enacted mediation statutes that protect certain communications in mediation.

These rules along with equivalent state rules are intended to provide protection to parties who are in discussions to settle a case.   So, generally (but not universally) if you think you have a moral or strategic reason to offer an apology, you can do so during the mediation of a construction dispute.  

Initial Considerations

I believe there are two initial considerations that should be thought through when determining whether an apology should be a part of your resolution strategy.  First, do you believe you have a moral obligation to apologize?  Second, will an apology help or hurt your overall settlement strategy? 

You must decide at the outset if you believe you have a moral obligation to apologize.  Professor Jonathan Cohen has argued many times that lawyers have taken the wrong approach to advising clients on whether or not to apologize for a claim.  See Jonathan R. Cohen, The Immorality of Denial, 79 Tul L. Rev. 903 (2005); The Culture of Legal Denial, 84 Neb. L. Rev. 247 (2005).  Professor Cohen argues that if you have committed a wrong, you have the moral obligation to apologize whether it hurts your resolution strategy or not.  See The Immorality of Denial at p. 904.  This concept of atonement is supported by almost all of the world's major religions and, outside of religion, many people's internal moral compass.  

Professor Cohen's perspective is that an apology goes further to heal the wronged party and the wrongdoer than just a monetary settlement.  Professor Cohen states that "[t]he injured party, and more generally the community too, can be healed through [apology], and, equally importantly, escalations of conflict can be avoided."   

I find it difficult to disagree with Professor Cohen's position from a moral perspective.  However, the world is not so black and white that it is easy to determine when an apology may be morally required.  There are many situations (especially on a construction project) in which an apology may not be justified, even if one party owes another some type of damages.  For example, from a moral perspective, are you required to apologize for a breach of contract that only affects another parties' contractual expectations on a construction project?  Maybe.  But, each situation requires separate consideration of the moral aspects. 

In addition, even if you have decided that you need to offer an apology (for moral reasons or otherwise) I do not see any moral hazard in being strategic about the components of that apology and the timing of that apology.  So, the second initial consideration is what effect an apology could have on your overall settlement strategy. 

General negotiation research has consistently shown that one of the primary drivers for resolving disputes is the relationship between the two party's respective expectations going into the negotiation.  Professors Deepak Malhotra and Max Bazerman have written extensively about this in their book Negotiation Genius.  Deepak Malhotra and M. H. Bazerman. Negotiation Genius. Bantam Books, 2007. 

In their book the professors advocate for negotiation preparation that focuses on gathering as much information as possible to determine both party's Best Alternative to Negotiated Agreement ("BATNA").  The goal of the negotiation is to position yourself to claim as much value within the zone between both parties respective BATNAs.  Considering this framework, a critical strategic question is how an apology can affect the claimant's evaluation of their own case.

I think if you randomly polled people on the street, most people would say that offering a sincere apology helps move parties toward conflict resolution (i.e. moves their BATNAs closer).  As it turns out, the data supports that assumption. 

In her research on this issue, Professor Jennifer Robbennolt has found that apologies do make a difference, empirically, in affecting a claimant's attitude toward settlement.   See Jennifer K. Robbennolt, Attorneys, Apologies, and Settlement Negotiation, 13 Harv. Negotiation L. Rev. 349 (2008). Professor Robbennolt notes that her research shows "apologies influenced how individuals evaluated a settlement offer in terms of its ability to make up for the harm suffered, how they appraised their need to punish the other party, and how they assessed their willingness to forgive the other party."  In addition, claimants "receiving apologies judged an offer to be more adequate [and]…increased the tendencies of recipients to accept a particular settlement offer." 

Professor Robbennolt's research indicates that apologies can effectively lower a claimant’s settlement expectations.  If you can decrease a claimant’s degree of anger or need to punish the other party, their motivation to demand a higher settlement diminishes.

Lawyer’s  - A Complicating Factor in a Construction Dispute

However, there is an important complicating factor that is often present in construction disputes…the involvement of a lawyer. 

The data is not necessarily the same when a dispassionate third-party, such as a lawyer or other advisor, is involved.  Professor Robbennolt performed research which was intended to determine the effect an apology had on an attorney's evaluation of their client's settlement position.  

In contrast to when only the claimant was involved, "attorneys whose client received a full apology set somewhat higher aspirations and made somewhat higher estimates of a fair settlement value that did attorneys whose client received no apology."  In addition, Robbennolt noted that "attorney's evaluations [of the alleged incidents] were not influenced by apologies."  This indicates that an apology solely for the sake of settlement negotiation strategy may not be wise if the parties have already involved an attorney. 

Parties in a conflict must realize there an element of strategic risk in offering an apology.  It is possible that an apology, which may be helpful to get parties to the table to negotiate may also increase the settlement amount required for resolution.  

Is "Sorry" Enough?

Let's assume you have decided to apologize and that the apology may help your overall settlement strategy.  What makes an effective apology?

There is significant research examining the components of an apology which produce the most positive reaction from claimants.  In a recent study, the authors examined numerous past studies and conducted new research on what constitutes an effective apology.  See Roy J. Lewicki, Beth Polin, Robert B. Lount. An Exploration of the Structure of Effective Apologies. Negotiation and Conflict Management Research, 2016; 9 (2): 177 DOI: 10.1111/ncmr.12073. 

The purpose of the research was to "subject the structural components of an apology….to rigorous empirical examination from the social psychological, deductive perspective."  This empirical examination was intended to "explore and better understand if and when certain types of apologies may be more compelling than others." 

The authors began by noting the difference in claimant’s reactions to an apology based on the type of wrong that is alleged.  Prior research has shown there is a difference in claimant's reactions based on whether a perceived wrong was either an integrity-based or competence-based trust violation.

Competence-based trust violations relate to a mistake which may or may not have been "under [the actor's] control".  For example, if a subcontractor incorrectly places concrete reinforcing in a high-rise condominium tower the subcontractor has committed an offense.  However, that offense may have been caused by the subcontractor's inexperience, inability to obtain competent labor, or a misinterpretation of the drawings.  All of those are problems.  But, those problems are related to the subcontractor's technical competence in managing the project and placing the reinforcing.

Integrity-based violations relate to a mistake where the "fundamental character and honesty" of the wrongdoer are in question.  For example, if that same subcontractor knew the reinforcing was being improperly placed, but repeatedly represented to the general contractor and owner that the reinforcing was placed correctly a different culpability is implicated.  This misrepresentation by the subcontractor is a bigger problem because it relates to the integrity of the subcontractor, not just the subcontractor's technical competence. 

The research indicates that if a wrongdoer has committed an integrity-based trust violation an apology is not as well received by the claimant.  The authors note that while "apologies have been documented to help repair trust in cases of a competence-based trust violation, influential studies have called into question whether apologies will provide any value - and that they may even be harmful - in contexts of an integrity-based trust violation." 

The dilemma with this issue is, from my perspective, that situations involving integrity-based violations are likely scenarios where you most often need to offer an apology from a moral standpoint.  Offering an apology in such a situation may ultimately be better for the wrongdoer's client relationships, character, and integrity.  However, don't expect that apology to necessarily help get a dispute resolved for less money.

On the other hand, a properly structured apology for a competence-based trust violation can be very effective.   The authors noted that the data "[seems] to indicate that following some form of violation…, victims are highly sensitive since the violation most likely threatens their confidence in their own judgement and sense of personal efficacy."  This lack of confidence in turn creates "[u]ncertainty and tension…[for which] the victim seeks information from the violator that works to restore their own sense of judgment and efficacy." 

For a competence-based trust violation you can provide information and explanations for why an event has occurred.  To the extent you can provide information that addresses the claimant's uncertainty and second-guessing, you can ease the psychological tension that may be preventing a reasonable settlement.

What is an Apology?

Considering that offering information to the claimant is critical, what is the best way to strategically structure an apology to a wronged party?  The authors decided to conduct research on six individual apology components: 

  1. Expression of Regret
  2. Explanation
  3. Acknowledgement of Responsibility
  4. Declaration of Repentance
  5. Offer of Repair
  6. Request for Forgiveness 

The authors conducted two studies with more than 700 people to determine what role each of these components played in effectively delivering an apology.  The studies were designed to include both competence-based and integrity based trust violations. The authors measured responses to different apologies and used the data to determine which components (or series of components) had the most and least effect.  

Interestingly, both studies showed that "when an apology contains an Explanation for the Offence, an Acknowledgement of Responsibility, and an Offer of Repair…, the apology is perceived as significantly more effective than when it only contains and contains an Expression of Regret, a Declaration of Repentance, and a Request for Forgiveness…."  This indicates that the claimants are more concerned about information about why the alleged wrong occurred (an explanation for the offense) and an offer to repair the damages (acknowledgement of responsibility and an offer of repair) than any other components of the apology. 

This is reasonable because these three components provide information the claimant requires to resolve their own internal uncertainty about the issue.  If you utilize these apology components you can "reduce the distress and uncertainty created by the violation." The authors offer the following guidance on how to structure the apology (not necessarily in this order): 

"[a] An Explanation for why the violation may have occurred, which is an effort by the violator to affect the victim's sense-making about the violation in a way that might make the violation seem fore understandable, less intentional, or less dissonance-creating to the victim.

[b] An Offer of Repair, which may restore the tangible or economic damage that occurred as a result of the violation. 

[c] An Acknowledgement of Responsibility, in which the violator assumes responsibility for having created the violation, hence limiting the number of alternative explanations for why the violation occurred."

What does this mean for construction disputes?  If you've committed a wrong, an apology may help get the parties to a settlement.  But, you don't really have to say "I'm sorry."

Many of the perceived wrongs on a construction project are a part of doing business.  Almost no construction project goes exactly to plan.  There are many situations on a construction project in which the participants must accept risk and transfer risk to other parties.  Part of that risk means that there is a chance (sometimes a high chance) that a participant will be damaged in one way or the other by another party.  The "wrong" however is a part of the risk on a construction project.  It is not necessarily a moral wrong that must be justified. 

Many times I have had clients that clearly owed or were owed some damages to correct a "wrong" on a construction project.  However, the "wrong" was created by business necessity.  It was not a moral wrong.  

For example, one of my subcontractor clients on a large infrastructure project had to occupy some space on the project for an extended period of time.  The subcontractor was trying to meet a specific critical path schedule.  The subcontractor had labor trouble on the project and could not complete the work within its scheduled time.  However, if it left the site, the subcontractor knew it would be difficult to get the labor back on the job to finish their work.  So, my client decided to refuse to turn over its portion of the site to another waiting subcontractor until my client finished its work.

This clearly caused damage to the waiting subcontractor.  However, it would be difficult, rightfully so, to expect my client to offer a sincere apology which includes an expression of regret (if they don't regret it), declaration of repentance (when they very well may do it again), or a request for forgiveness (when they don't feel the need for forgiveness).

In these situations, the parties can offer an Explanation for the offense ("I would be late in delivering my work if I had not done this"), and Acknowledgement of Responsibility ("I agree that my contract requires me to pay for it"), and an Offer of Repair ("I'll pay you 'X' for your delay damages").

Take-Aways

So, what does this research mean for apologies in construction mediation?  Below are my take-aways:

  1.  If you feel you have a moral obligation to make an apology, you probably should.  The long-term benefits of client perception, reputation, character, and integrity are significant.  However, if attorneys are involved, you must understand that there is a risk you may have to pay a higher settlement price if you apologize.
  2. If you are going to make an apology in a case where there is legal risk, I would limit the apology to three components:
    1. Explanation of the Offense
    2. Acknowledgment of Responsibility
    3. Offer of Repair
      The other components don't make a significant difference in how the apology is perceived or its intended effect.
  3. If you are already in a dispute, there is an attorney involved, and you don't feel you have a moral obligation to apologize, you probably should not.  From a strategic standpoint it is likely not going to help you get to a more reasonable settlement amount and there is a risk that it could push you further away from a reasonable agreement.
  4. If you have committed an integrity-based violation, you are in a tough spot.  On one hand, you probably should apologize because the character and integrity consequences in this situation could outweigh the economic disincentives.  However, that apology is probably not going to help you settle the case sooner or for less money.  But, you've already messed up, so I'd lean toward doing what your 2nd grade teacher said…apologize.
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Burns Logan

CH2M, Denver, CO, Division 1 (Litigation & Dispute Resolution)