Trial Vs. Settlement
We arrived at the Justice Center at 8:35 a.m. Tom and Melissa showed up a few minutes later. The defendants and their lawyers arrived around 9 a.m. Apparently no one came expecting to go to trial except us. Pierce was ready to resume settlement discussions. Because of problems with Ralph's deposition, Tom felt that further talking was also in our best interest. We remained on the 16th floor of the Justice Center most of the day. The courtroom itself was like a scene from the TV show `Night Court.' While the lawyers huddled in a back room somewhere, the Judge carried on business as usual with other cases. Courts are of course open to the public, so we were never asked to leave. We heard a man plead guilty to stealing food stamps (his sentencing would come later), observed another man being sentenced for drug dealing (20 weekends in jail), and sat through part of a trial of a man arrested during a drug raid on his house. Periodically Tom came out of conference to tell us of the latest negotiations.
The day was like a legal kaleidoscope. First, all the lawyers met. Then the defendants and their lawyers met as one group, and we and our lawyers met. Then each defendant and his lawyer met separately. Then all the lawyers met again. It went on like this for five hours. The whole time we spoke not a word to the defendants, though they were often no more than 15 feet away. By early afternoon everyone had reached an understanding, or at least our lawyers thought so. The defendants, plus Murdock's insurance company, agreed to fix the house and pay all of our experts' fees except Sloan's. His fees weren't included because, according to Tom, "they don't want to pay for two structural engineers."
Larry and I had no idea of the details, or who was contributing what to the offer. We were more concerned about their intent. Was it genuine? We didn't believe so. Events had taught us not to trust these men. We spoke to our Tom and Melissa in the hallway outside the courtroom. "Tom," I said, "I bet they have no intention of fixing our house properly. I'll cook you dinner if they sign any agreement that obligates them to fix the house."
"We'll have to wait and see," said Tom.
What choice did we have? We had to follow our lawyer's advice, especially since he was not comfortable proceeding with trial under the circumstances. We assumed the defendants did not want a trial either, since their reputations (Nelson & Murdock) and pocketbooks (Nelson and Cooper) could suffer. But we believed even more strongly that they had no intention of honestly fixing our house, and would sign no agreement that legally obligated them to do so. We saw their "offer" as simply a way to postpone trial. Of course, repairs would cost much less than proceeding with litigation and then being ordered by the court to fix the house. So why wouldn't they fix it? Why were we so pessimistic about their intentions? Every act, every move on their part had shown a total unwillingness to help us, an unwillingness to cooperate to resolve the problems and end the impasse. Since there was nothing to indicate they either understood or cared about our house problems (either before or after we filed suit), how could they possibly agree to fix the house properly?
Murdock believed that a little drywall and paint could remedy all his mistakes. Nelson, who at least admitted some design errors, maintained that his mistakes could be fixed for only a few thousand dollars. And Cooper still didn't understand why he was involved. Any settlement agreement that went beyond such simplistic understanding would surely be greeted with contempt and rejection. Even though our experts had thoroughly documented the defects, and even though the opposition had no experts to counter our claims, the defendants were psychologically unable to admit their mistakes and pay for proper repairs. We predicted (to each other, to Tom, to anyone who would listen) that the defendants would respond to a legitimate settlement contract the way they responded to our complaints from day one: deny, distort, and/or attack the complainers.
But what about the insurance company? Wouldn't they want to settle? Perhaps. But if the company was relying solely on Pierce's judgment, the evidence suggests that Pierce only followed what Murdock and Nelson told him, i.e. that the house could be fixed for a few thousand dollars. What evidence?
1) Pierce's October and December 1987 letters, which reflected ignorance of the documents available to him;
2) Pierce's failure to obtain a legitimate investigation of the house, even after insurance company expert Anderson's testimony regarding the sloping floors was discredited;
3) Pierce's ignorance of the facts during the five pretrial hearings (as reported by our lawyer).
4) Pierce's handling of our depositions.
Whatever their lawyers' intentions, Larry and I were confident the defendants would not fix our house. Still, we had no choice but to go along with our attorney. Nothing was put in writing on May 16 (we wondered why not; Tom said he didn't think it advisable at the time). Instead, it was left that Tom would submit a formal written Agreement based on the discussions. All the lawyers would meet again June 3 in the Judge's chambers. If the defendants refused to sign the Agreement another trial date would be set; if that happened Tom would have time to secure another repair estimate, one that would stand up in court.
Tom had Brad Michaels draw up the settlement Agreement. We did not receive a draft of the Agreement until late in the afternoon of May 24. Since it arrived at our house by special messenger, we assume Michaels only completed it that day. (Why it took eight days to draft a relatively simple document is one of those infuriating questions you don't ask your lawyer; no answer would be satisfactory.) Michaels's settlement Agreement was accompanied by `Exhibit A,' a detailed list of items needing repair. This list was dated 5/13/88, the Friday before trial. Presumably Exhibit A was the basis for the May 16 agreement to fix our house. We had never seen the docu-ment, and were not sure exactly what the defendants had agreed to fix. We assumed they had agreed to fix `everything.'
Unfortunately, neither Exhibit A nor the Settlement Agreement was adequate. As drafted by Michaels, these documents would have sent us right back to March, 1987, when we banned Murdock from the house. For example, through an evident misunderstanding, Michaels had collectively named Murdock, Cooper and Nelson as general `contractor' for all repairs. Such a stipulation would allow the defendants the same men who for so long had denied everything and understood nothing to manage the repairs and arrange for all subcontractors. Michaels's Agreement was an invitation to repeat our first eight months in the house, when Murdock repeatedly promised, "Don't worry, I'll take care of it." No way were we going to go through that again.
For its part, Exhibit A was incomplete. It omitted thousands of dollars worth of repairs that had been cited by Sam Russell in his April 1987 letter; many small repairs that we had cited in our 1986-87 letters; and even some repairs Murdock had agreed to before he was kicked out (such as new kitchen countertops). Again we felt disappointed, stressed, jerked around. Why hadn't we seen Exhibit A before May 16? We called Tom at home but he was out of town until May 27.
That evening I spent three hours pouring over all the original letters and reports, in an attempt to make Exhibit A what it should have been all along a complete list of needed repairs and unfinished work. Larry and I had another sleepless night. We each awoke several times to add something to the Agreement or to Exhibit A. Larry typed my notes into a revised Exhibit A. Later that morning he called Michaels and told him what was wrong with the Agreement. Brad pleaded ignorance; Tom had simply not made clear how the Agreement was to be structured.
Brad agreed to make the changes. The defendants would be responsible for hiring an independent general contractor, and that person would in turn hire all the subcontractors. We would have to approve both the general contractor and the subcontractors. Brad said that they wanted to deliver the Agreement and Exhibit A to the defendants by May 27 (then why the delay in sending us the drafts?), and that he wanted to see our revised Exhibit A right away. Larry called a special messenger, who picked up and delivered the document to Michaels's office. That same evening Michaels's revised Settlement Agreement was returned to us by special messenger. It was much better. Cooper, Nelson, Murdock and Murdock's insurance company were collectively called "Contractor," but they would have nothing to do with actually fixing the house.
Tom returned to his office May 27 and called Larry that afternoon. He apologized for the delay in getting out the Settlement Agreement, and blamed himself because he was out of town. Basically, he was satisfied with the Agreement but wanted to add one more crucial paragraph. As drafted by Brad, the Agreement called for us to drop the lawsuit as soon as the defendants signed it; Tom wanted that changed. If there was a "material breach of the Agreement" the lawsuit should remain valid. This way, Tom said, they can't "sign it and walk away." Good for Tom. He had, albeit slowly, come to understand the type of people he was up against.
To reinforce this point, Larry added that he didn't think they would sign with or without the added clause, simply because the Agreement truly obligated them to fix the house. "I agree with you," Tom said. Even if, by some miracle, they did agree to fix our house, what would we gain? Only what we contracted for in 1985, but not our legal fees, not Sloan's fee, and certainly no recompense for the astounding aggravation we had been put through. (As Tom explained, under Ohio law legal fees are not recoverable without a punitive award, which he felt we would have a hard time winning and collecting. Tom felt badly about our loss of legal fees and volunteered to adjust his final bill.)
The final Agreement was airtight. We would be protected if the defendants delayed, defaulted, or did a sloppy job. The Agreement legally bound them to fix the house thoroughly and professionally, something they themselves could not do the first time around. If they signed it and did nothing, the original lawsuit would continue. Any dispute over the completed repairs would go to binding arbitration.
As to Exhibit A, Larry and I were resolved not to budge. Any significant dispute, such as over waterproofing the basement, and we would proceed with litigation. We would not have our house fixed half-way if we could help it. The settlement Agreement and Exhibit A were sent to the defendants on Friday, May 27, 1988.
We called Tom on Thursday, June 2. "Any word?"
"Nope, not a peep. I at least expected some call from Pierce. Nothing."
"Don't worry," Larry said. "You'll hear plenty tomorrow." That was the day of the planned meeting.
Tom called Larry the next afternoon.
"Basically, nothing happened. We met at the Justice Center but nothing was resolved. They have not had a chance to meet and discuss the Agreement among themselves. I did get it to them late."
"What did they say?"
"They were very angry."
"Oh, they said this isn't what we agreed to [on May 16], that it's much more than was discussed. And they specifically objected to the fact that the Agreement doesn't release the defendants from the law-suit unless they fix the house."
"What about the basement? Did they object to fixing the basement?"
"No. Nothing said about that. Basically they didn't like the tenor of the agreement, and they're going to draft a response."
"Do we have a new trial date?"
"No, the Judge had to leave early. And his bailiff wasn't there today. We're meeting again next week, and I'll get a new trial date then."
"Tom, why do you waste your time with them? They have no intention of fixing our house. Their response is going to be so insulting, you should just rip it up and hand it back to them. Why don't you stop all this nonsense and just get us a new trial date? Try for July. A trial's the only thing that will affect them."
"I agree, but we have to give them the opportunity to respond."
"Tom, if this Agreement isn't signed [which it clearly would not be], Ruth and I are going to trial. Any settlement offer before trial will now have to include all of our legal and experts' fees, and signing of the document that day in front of the Judge. We're not going through this nonsense again."
"Tom, something's wrong here. We've spent a year in litigation, and tens of thousands of dollars, and we're no closer to a resolution now than last year. We don't even have a trial date! They've never had any honest intention of fixing our house. Don't you see they're philosophically and morally incapable of fixing it? Tom, we're sick and tired of all this jerking around? Don't you see the kind of sleaze you're up against?"
Tom was silent. What could he say? Larry and I were caught in a legal nightmare. For reasons we do not fathom to this day, the three defendants chose to distort, delay, deny and spend more money on lawyers than it would have cost to fix our house. All we wanted was our house fixed. The opposition had an altogether different agenda.
"Tom, why are we in this mess? How can it be that we had a legal contract to build a new home, prepared by our own attorney, and now have this endless nightmare? What good was our contract? How come Brad Michaels's settlement Agreement includes such things as a `performance bond' and `mandatory arbitration' and our building contract didn't? Why isn't that legal malpractice?"
Tom was unsympathetic on this point. "Larry, you have to get someone to say it's malpractice. When you signed that contract you didn't know the kind of people you were dealing with. Just because you made a deal with bad people doesn't make the contract legal malpractice."
"Tom, the truth is we weren't protected against major design and construction mistakes. No protection whatsoever. And there was no spelling out of responsibility for major problems like we've had. Who is responsible for Nelson? And there was that conflict of interest between Schroeder and Cooper. What more do you need for malpractice?"
"You need someone to testify that it's malpractice. I'll run it by Brad again and see what he thinks."
Larry's diatribe reflected growing disappointment with Tom's handling of the case. Our legal expenses were escalating yet getting us nowhere. Was Tom the problem? We doubted it, but by June 1988 we felt he had made two basic mistakes.
1) Despite all evidence to the contrary, Tom continued to act as if the opposing lawyers, and by extension the defendants, were sincere in wanting to settle this case. Belief that the defendants were willing to fix the house was only the most recent example of Tom's misplaced trust. (Of course, not having a solid repair estimate for the May 16 trial, Tom wanted to believe the repair offer was genuine. It got him off the hook of going to trial not fully prepared.) Tom is scrupulous and fair. He never resorts to ad hominem attacks and maintains niceties in all his legal correspondence. He likes to deal with people openly and above board, and the opposing lawyers seemed to take advantage of his penchant for trust and fair play. Even as they jerked him and us around Tom continued to play by the strictest legal etiquette.
For 15 months Tom continued to act as though the defendants and their lawyers sincerely wanted to settle. One more pretrial, one more meeting, one more phone conversation, and they would settle. We would have our house fixed. He told us over and over again that the last thing you want to do is to go to court. "When you go to trial [on a case like ours] you've scraped the bottom of the barrel," he often said. But the day in June, 1987 that the insurance company's agent Don Henderson told us "Nelson is responsible for 90% of the mistakes," Tom should have known there would be no settlement. If not then, surely the day Harold Pierce wrote blaming us for not "mitigating the damage." Tom could have saved himself and us a lot of aggravation by accepting what was so obviously apparent: the defendants would never come together and fix our house properly.
2) He did not arrange for deposition-proof estimates for the cost of repair. Despite over a year to prepare the case, he never thought to quiz Ralph on his estimate, and thus did not prepare him for deposition and trial. Compounding this mistake, and despite our pleading, Tom never called in another builder to see the house. If we had obtained one solid repair estimate Tom would have been ready for trial on May 16. Tom is a competent attorney but we think he was caught a little off balance by the kind of half-cocked, blame-the-other-stooge defense he was up against. The right attorney for our case, if such exists, would have:
Because of adjustments Tom made in his final bill, we have no complaint about the extra expense incurred in drafting the settlement agreement. But the five month delay of trial was no small pill to swallow; it only added to our despair and, ultimately, cost us a bundle in lost appreciation. We often fantasized about finding another lawyer, but it was just talk. Who can say another lawyer would have been any better? Could have been worse! (Maybe the kind of lawyer we hungered for only exists in the movies.) Anyway, you can't change lawyers in the middle of a complex case. Not unless you have mega bucks. If we had mega bucks we would have moved out of the house right away, and our lawyer's strategy wouldn't concern us so much.
The defendants never formally responded to our settlement agree-ment. Instead, all the lawyers met on June 17 (the eighth pretrial hearing) and a new trial date was assigned: October 11, 1988. Religious holidays and summer vacation months precluded any earlier date. What happened with the settlement agreement? It wasn't that the defendants disagreed with any particular item or with Exhibit A. On June 17 Pierce "mentioned" to Tom that the written agreement was just "more comprehensive" than they had discussed on May 16. How could this be? Tom and Melissa certainly had the impression, from those five hours of intense discussion at the court house, that the defendants intended to repair our house.
But since early 1987 they had repeatedly, almost perversely, either denied the facts or disclaimed all but a modicum of responsibility (Cooper claimed none). If their intent was only more patchwork, more slop job, more substandard repairs, Michaels's Agreement wouldn't allow it. The Agreement he drafted demanded complete and rapid repair of our house to a high quality standard, an act they were incapable of agreeing to. The irony is that Larry and I agreed to lose thousands in legal and expert fees, so the settlement would have represented no real victory for us, only a poor compromise.
Did their reneging on the agreement make any sense? Only if the intent on May 16 was other than to fix the house. A conversation between Tom Baxter and Harold Pierce in June gave credence to this intent. Tom called Larry on June 29, mainly to discuss his bill (about more of which later), but also to report on a call he had received from Pierce. Pierce told him that the three defendants were prepared to give us a total of $30,000 to settle the case.
"Pierce knows it's absurd," Tom volunteered, before Larry could scream.
"Then why did he even offer it?"
"Because he was obligated to report the offer."
"Tom, isn't he aware that amount is only about half our expenses, let alone the cost of repairs?"
"Yes," Tom replied. "I wasn't even going to tell you about the offer. It doesn't mean a thing. Forget it. I'll write a letter saying the offer is totally unacceptable, and also rescind the settlement agreement."
So now we knew how much they were planning to spend on our house. After paying us 11,000 for the experts' fees, and several thousand for move-out expenses, they were going to commit about $15,000 for repairs, less than 25% of even the lowest possible estimate to do the job right. But why, oh why were they going to spend thousands more to go to trial, and risk losing more than it cost to fix the house, not to mention bad publicity from a legal judgment? Tom didn't know the answer to this question.
We think that had Nelson been insured things might have been resolved early on. Had Cooper had any integrity in the deal the case might also have settled early. Had our contract spelled out responsibility for Nelson we might have avoided a trial. But Nelson wasn't insured, Cooper displayed no integrity, and we had a lousy contract. So we were going to trial to prove the obvious and let the Judge (and jury?) assign responsibility. A large judgement against Nelson might result in his bankruptcy. A recision judgement against Cooper might result in years of appeals. Anything could happen, we knew that. But we would have our day in court.