Reference no: EM13946597 , Length:

On May 1, 1995, the famed Boston rock and roll club Euphoria burned to the ground. Luckily, the fire began at 2:00 a.m. and no one was injured. The highly anticipated and sold out May 2, 1995, concert of the New York rock group Zephyr was cancelled by Jack Owens, the owner of Euphoria.

Owens received significant insurance payments following the fire that destroyed Euphoria. Owens also received and rejected numerous offers to rent space for the May 2, 1995 Zephyr concert.

A major dispute between Zephyr and Owens erupted when the May 2, 1995, concert was cancelled. This concert was the first in the "World Tour" of Zephyr, a rising alternative band that had its first hit in 1994 with its Gone Like the Wynd album. Owens refused to pay Zephyr its demand for full payment of the written contract performance fee in the amount of $55,000 for the cancelled concert. The contract provided for liquidated damages of $25,000 to Owens if Zephyr did not show but was silent on any cancellation contingency by Owens. In four years of work Zephyr had cancelled five concerts previously. Zephyr had played to a sold-out Euphoria audience once in 1994.

On May 7, 1995, Lynne Mann, attorney for Owens, contacted Zephyr and presented the group's lawyer-agent, Sam Sharp, with a four-page legal memo that concluded that "there was no obligation of Owens to pay one cent to Zephyr." The letter cited Massachusetts cases that had held that a contract lacking a cancellation provision could not be construed to provide cancellation damages and that performance had become impracticable. Mann visited Sharp's hotel room unannounced, gave him the legal memo, and said "In spite of this we feel sorry for Zephyr and want to pay them for their trouble - $5,000." Sharp's reply was to bark "Holy _. You guys are in dreamland. You screw up our first gig - the world tour - and expect us to get nothing out of it. Get lost." Sharp held open the door and Mann quickly left the room.

A few days later the band instructed Sharp "to file suit or negotiate with Owens to make the band whole." The band members feel that their tour was set back badly at its start by Owens' refusal to arrange an alternative Boston location for the concert. The tour's end was designed to occur at the time of the release of Zephyr's second album.

A few days later Mann called Sharp. She "apologized for leaving the hotel room so quickly." She "offered to pay the Zephyr $15,000 to settle all claims relating to the cancellation of the concert." Sharp's reaction was to say "You've got to be kidding . . . . $15,000 is a drop in the bucket compared to what we're going to get in court" and quickly hang up.

The next day Sharp filed a suit on behalf of Zephyr against Owens alleging breach of contract. Damages of $575,000 were alleged. Most of the damages were for lost profits over and above the concert performance fee. Mann then called to request a negotiation session with Sharp. She urged Sharp to "try to expand the pie and get beyond money in the solution of this problem." They met later that week. Sharp began by urging Mann to "start the negotiation game." Mann declined, saying "I've already made you an offer." Sharp responded by saying "Alright, I'll start, we want $575,000 representing lost profits from possible record sales from the Euphoria publicity and the base contract damages." Mann responded with "Wow. You can't be serious. The contract damages were only $55,000." Sharp stated that "the Euphoria gig is traditionally important to any band and a real dealmaker for record companies and writers from Rolling Stone ... O.K., we can take $400,000." At this point Lynne Mann said, "I'm speechless with your unrealistic attitude" and was silent for a full one minute. When Sharp failed to respond, Lynne asserted that "maybe court is where we belong" and left the room.

One week later Lynne Mann received this letter from Sam Sharp:

"Dear Lynne:

Sorry our negotiations have been so rough. We are both probably better off in court to resolve this dispute. My clients will not take less than $450,000 to settle this case."

Prior to writing this letter, Sam had met with the band who had given Sam authority to settle for $65,000. Lynne met with her client who instructed her to litigate. The case moved forward to discovery.

Neither Lynn nor Sam work on a contingent fee basis. Both plan to hire trial attorneys to handle the litigation. Litigation costs are expected to range from between $41,000 per side (if case is decided on motion) to $400,000 (if case goes to trial and appeal).

Critique this negotiation fully. Comment on the procedure used and the style and strategies of the negotiators.