Hardball Negotiations: Is their stonewall made of brick... or bluster?

I recently delivered a one-hour continuing legal education course (CLE) on hardball tactics for about 800 attorneys through the Practising Law Institute. One of the attorneys submitted a great question that I get time and time again in one form or another: 

When an opposing party uses a take it or leave it approach or a good cop and absent bad cop, what's the best way to break through their approach? For example, I'm renegotiating my rent, and the leasing office says we are willing to keep rent level this year because of COVID-19.  I say well, other buildings are offering one to three-month concessions, and they reply, "Ownership has been clear that they're not willing to offer anything more than what they're offering."  I feel as if I encounter this precise scenario over and over again. 

- Appellate attorney in Brooklyn, New York

This Brooklyn tenant, whom I'll call Aaron, isn't the only one with a question like this. A year ago, I was approached by several law firm associates after a negotiation training who asked me one version of another of this question.

I'm often negotiating the boilerplate in things like NDAs, and I feel like I never get anything I want. For example, maybe the other side wants the NDA provisions to last 3 years, but the other side wants 2. The opposing party refuses to budge, and I end up caving. Anything I can do?

- Transactional associate in Charlotte, North Carolina

In both situations, we see the other side is refusing to negotiate. Now what? Is their stonewall made of brick... or is this all just bluster? Let's dig in.

Although this sounds like a hardball tactic at play, don't judge too quickly. The other side may not be engaging in hardball tactics at all. "Hardball" tactics are manipulative tactics designed to gain greater leverage than they would have if all the cards were on the table. In other words, hardball tactics are designed to get someone a better outcome than they deserve.

Let's start with Aaron's landlord-tenant example. Is the leasing agent who refuses to negotiate with you just playing hardball, or is he rationally telling you to beat it because they have the upper hand? The answer lies in the leasing office's BATNA. The "BATNA" is a core negotiation concept: it is a party's "best alternative to a negotiated agreement." If the leasing office doesn't get a deal, what will they do? Get a new tenant? Probably. Whatever their best alternative is, that's their BATNA.

Aaron indicated he was renegotiating his rent. Let's assume that he's not trying to do this in the middle of his lease. (If he were, the leasing office has a particularly strong BATNA, since they can leave the negotiation and just enforce the existing lease as it is. Not much for Aaron to work with here absent some very aggressive tactics we'll touch on later.) If Aaron's lease is up for renewal, then the leasing office's BATNA is whatever they would do if Aaron doesn't renew. Their BATNA would probably be to just list the apartment and find a new tenant. Is that a strong BATNA? In an ordinary market, probably yes; finding new tenants in Brooklyn is, I'm betting, pretty easy. In the middle of quarantine, however, I bet it's much harder. That could lead to months of missed rent.

Of course, Aaron has a BATNA too, and that's just as important. If Aaron doesn't get what he wants in this negotiation, will he leave the apartment? Is he really prepared to do that? Does he have ready alternatives? If so, he has a relatively strong BATNA. The more he can prepare his alternatives, the better off he'll be in the negotiation, and the less likely he is to yield unnecessarily. Research your alternatives to solidify your position before heading into a negotiation is a process known as "strengthening your BATNA.

BATNAs are incredibly important because they indicate the threshold each side is trying to surpass before they'll accept a deal in a negotiation. If you get offered something that is better than your BATNA, you would be rational to take it. It's kind of like how, in an auction, you're willing to pay up to your maximum walkaway price. If the price gets higher than that, it's just not worth it. Similarly, in a negotiation, if two parties are going to reach an agreement, that agreement has to be better than each party's BATNA. That range between the two BATNAs is called the zone of possible agreement, or ZOPA. (For reasons I won't get into now, modern negotiators talk about BATNAs, not walkaway prices, because BATNAs are more informative for complex negotiations. But that nuance isn't critical for today's discussion.) 

Side note: it's true that not everyone is rational. The framework of BATNAs and ZOPAs just gives us a starting point, and that framework doesn't always lead to rational outcomes. For example, some people like to "win" no matter what -- even if that means spiting themselves by walking away from a deal that's good for them! We'll touch on that a bit in a moment, but it's worth a whole post in itself. When dealing with someone like that, making them think they are winning by pretending you're conceding big points could be key to feeding their competitive ego.

If you offer the leasing office new terms, and they look at that and say, "Well, my alternative is more attractive than what he's offering," they are quite rational in telling you to take a hike. If they are being rational, that's not hardball. It's just the reality of the negotiation. They may simply have good alternatives.

Hardball tactics are manipulative tactics designed to gain greater leverage than they would have if all the cards were on the table. In other words, hardball tactics are designed to get someone a better outcome than they deserve.

Okay, so now comes the interesting part: How do you know if they are acting based on a legitimate BATNA or just employing hardball tactics to pull one over on you? And in either case, what do you do next?

First, you'll want to conduct research to anticipate and understand their BATNA. If they have a strong BATNA, your job will be to poke holes in it. For example, maybe they think it'll be easy to replace you. You could remind them of the challenge of finding a new tenant in the COVID era. (They probably have already thought of this, of course.) Or you could go for a more aggressive posture and make clear that if they don't negotiate, you'll refuse to pay rent and become a squatter, forcing them to evict you, which is incredibly difficult in many cities. In these situations, what you're doing, essentially, is making their BATNA less attractive. If their best alternative to negotiating with you is evicting you as a squatter... yuck. Making their BATNA seem less attractive is a tactic called "weakening their BATNA."

Alternatively, you could also make clear to them that you have a strong BATNA. After all, if they think your alternatives are all terrible, they may think they have the upper hand and refuse to negotiate with you. They think they're calling your bluff. You may threaten to leave, but they don't believe you. In this case, your job is to convince them you're serious, not bluffing, by showing them you have genuine alternatives. For example, if you have other places to stay, such as a relative's home down the street, tell them so. Show them pictures of the beautiful apartment you can't wait to move into down the street for a lower price. Then maybe they will see your threat to leave as legitimate.

in other words, before we start assuming everyone who refuses to negotiate is playing hardball, make sure you consider and play out the above types of strategies first. Believe it or not, those are all principled negotiation tactics, not hardball tactics. If your threat to squat and let them evict you is all bluster and not something you're willing to do, then yes, you're just playing hardball. But if you seriously believe being a squatter is better than paying rent or finding a new apartment, despite all the obvious negative repercussions for you, then you're not playing hardball; you're being honest about your alternatives. For some people, being a squatter is a legitimate, if unpleasant, thing to do. So don't mix up "unpleasant tactics" with hardball, or you could end up fighting an unwinnable battle.

Again, research and preparation are the key here. Investigate their BATNA and yours, and talk to them about those alternatives to see if you can understand how the other side is thinking about it. If you think they have a BATNA that's superior to the proposal you're making, then they're being rational, not playing hardball. Might be time to move on and live to fight another day.

Alternatively, you can test their hardball defenses. That's what my hardball CLE was all about. For example, if they are refusing to negotiate, you can start by asking them, "Why?" You could imagine this exchange:

• Them: This is our offer. Take it or leave it.

• You: Why is that the right offer?

• Them: Because it's what we're willing to do. Take it or leave it.

• You: I just want to understand why this is the right outcome. How did you select this proposal?

• Them: Because management said so. I'm just the messenger.

In my example, by asking them "why," you got a slightly different answer. They've moved from "refusal to negotiate" to "lack of authority." Believe it or not, that's progress. The goal is to keep them talking. The more they talk, the more you're negotiating. That's a start.

But lack of authority is still a difficult barrier to penetrate. Stay calm and--for now--keep asking questions as though they are being reasonable. If someone tells you they lack the authority to negotiate, the obvious thing to do is to ask to talk to the boss. For example:

• You: Okay, you said it's management's decision. I understand it's them, not you, who's calling the shots here. I'd like to set up an appointment with them to discuss it.

• Them: They won't speak to you.

Now what? Continue to stay cool, and try to keep them talking. Avoid getting hostile for as long as you can. If you can keep things calm, maybe you can flip them to your side. If you get angry, they'll double down. For example:

• You: I don't understand. I'm not trying to be difficult, and if I could better understand their perspective, maybe I'd see why their offer makes sense. I'm open-minded here. If I can talk to them, they can explain their view, and maybe we can get on the same page. Sorry if you're caught in the middle here. I really think it'll help to talk to them.

• Them: They won't talk to you. They only go through me.

• You: Okay, well now it kind of sounds like they set up this structure because they don't want to have to explain themselves. That makes me nervous I'm being cheated. And they're making you the bad guy so they don't have to talk to tenants. That doesn't seem fair to you either. It makes me worry they're trying to manipulate the tenants and use you to do it.

This last response is called "naming the game." You're articulating what you think might be the hardball, manipulative tactic. By bringing attention to it, but not in a hostile way, you're putting them in the uncomfortable position of explaining why this is not hardball. After all, what are they going to say to you when you voice this genuine concern? If they're jerks, they'll tell you to buzz off. If they're humans, they might cave a little. You could try asking, "What would you do in my situation?" Maybe they'll open up. They may let down their guard a bit and give you some advice. 

But let's say they don't. Let's say they keep telling you to take a hike. Now you have to ask yourself, is this hardball… or just a signal that their BATNA is very strong? If management really thinks you'll renew your lease no matter what, then they are being entirely rational in refusing to budge. And if they're not going to budge, it's rational (albeit rude) to refuse to talk to you. 

So now you have to make a hard choice. Are you going to resort to more aggressive tactics to continue pressing their defenses? You could. For example, you could weaken their BATNA further by collecting tenants and forming a protest. You could threaten to sue for every technical lease violation you can find. You could take to social media and make them look bad, and so on. These tactics would help increase your leverage and force them to the table, but it could make them more aggressive and retaliatory. You could play hardball. And maybe, with some of these paths, just maybe you win in the end. But at what cost? Do you want that relationship with your landlord after all that? That's up to you.

I don't like parking tickets, but the government has more power than I do, and I'm not going to negotiate my way out of paying them.

Instead, you may decide those alternatives are not very attractive, so reluctantly, you end up just accepting the terms as they've laid them out. If you accept their terms, you're essentially saying that their proposal is better than your BATNA. It's frustrating, because we all want to win, but you'd be better off accepting their terms than walking away, don't keep fighting just because you like being tough; you'll likely end up worse off on the end. I don't like parking tickets, but the government has more power than I do, and I'm not going to negotiate my way out of paying them.

In this scenario, I've imagined the opposing party has all the leverage and is quite rude. Most of the time, the world isn't that simple (or cold).

Enough landlords! Let's discuss something far less exciting, but much more common for modern lawyers: NDA negotiations. These nondisclosure agreements are often the first step down the road for a large corporate transaction. In the example at the top of this post, one side (let's say: yours) wants the NDA's confidentiality provisions to last 3 years. The other side wants 2. They refuse to budge.

Here's my take. Are they really willing to walk away over 2 versus 3? If they walk away at the NDA stage, the subsequent deal is scuttled. A scuttled deal is their BATNA. Is that really a better option than caving on your terms? Sure, they may say this: "It's 2 years. Take it or leave it." But if you've done your homework and know they have genuine interest in this transaction, I bet you'll agree they're probably bluffing. After all, their BATNA of walking away from a deal probably isn't superior to just caving on this minor NDA provision. So if you push and poke a bit, you can usually get them to open up. In fact, they're probably counting on the fact that you also don't want to lose a deal over this and hoping you'll cave instead. Both sides might just be playing chicken.

Playing chicken isn't productive. Instead, ask questions to help understand their position. For example, you may respond, "Why do you think 2 years is a fair result for both sides?" (This is called "pivoting from positions to objective criteria," because you're not rejecting their position but just asking them to give a rational basis. It's designed to keep them talking and give you more arguments you can work with.)

If they don't give a compelling reason, then they probably don't have one; they are just pressing for value because they can. That means they're probably bluffing. Now we're talking about hardball. You can respond by saying, "Well here's our reason for 3 years: [give a compelling and objective reason why 3 is fair to both sides]. What do you think about that?" Chances are, they'll feel compelled to explain their disagreement. Lawyers like arguing. And just like that, you broke their stonewall and got them talking. That's a win. Talking = negotiating. Better yet, if they don't have a good reason, hearing yours might make them cave, because they think you're serious. Negotiation over!

The world of negotiation is complex. But if you take things step-by-step, piece-by-piece, and apply these patterns thoughtfully, you can break down any situation into simple stages. Start with research. Investigate their BATNA and yours before you step foot in a negotiation. Then, when you're ready to press their defenses, employ the hardball defusing tactics I laid out in the CLE.

By chipping away at a negotiation in these systematic ways, those stonewalls might just come tumbling down.