A Good Business Apology

This blog usually reviews public apologies that fall short of the mark, but here’s one that has been praised: it was by Andrew Benin, chief executive of Graza, a small startup that sells olive oil. Graza started just a year ago, and this was its first holiday season. Apparently some gift packages arrived late, or poorly packaged, or with damaged labels. So Mr. Benin sent an email to everyone who had ordered Graza’s olive oils in the previous 60 days to apologize.

The subject line of the email was, “Learning from our mistakes.” This is a promising start, indicating that the writer knows that he made a mistake, and that he has ideas about how to prevent future mistakes – two critical elements of an effective apology.

He went on to acknowledge that the gift packaging was inadequate, that the company did not communicate well, and to say that he was sorry. A good apology lets the recipient know that the offender knows what they did wrong, and how that affected the recipient.

The final element of a good apology is some form of repair or restitution. In this case, the email offered a small discount on future orders of olive oil.

It landed well in the eyes of many recipients. One was Ben Cohen, whose shipment of Graza olive oil leaked and was poorly wrapped. He wrote in an article for the Wall Street Journal that he was won over by Mr. Benin’s apology. Apparently hundreds of other recipients wrote Mr. Benin to thank him. “Thanks for your honesty,” one wrote back. “These messages go a long way,” another wrote.

The article notes that business apologies are tricky; research shows that repeatedly apologizing is actually worse for a business than not apologizing at all. Research also shows that the most effective apologies cost the business something, so a coupon or discount can be even more effective than an apology.

Mr. Cohen notes one of the ironies of a good apology: it can make the relationship better than it was before the unfortunate incident happened. This is true of inter-personal relationships, and it can be true of business/customer relationships too.

Kidnap Plotters Apologize

Kidnap Plotters Sentenced

 

Pete Musico offers an example of how not to give an apology. At his sentencing hearing in a Jackson, Michigan, court last week, he seemed to blame Congresswoman Maxine Waters for his plan to kidnap the Michigan governor. He and two co-defendants, all members of a Michigan militia group, were found guilty after a trial by jury of aiding a terrorist plot. His pre-sentencing statement, at least in the portions reported in the media, did not say anything about the impact of his crime on his victim, which was arguably not only the governor, but all elected officials.

In contrast, his co-defendant Paul Bellar did apologize to Governor Whitmer for his “highly inappropriate” comments, and apologized to his family as well. Both Mr. Musico and Mr. Bellar, along with a third co-defendant, Morrison, expressed regret for their poor judgment.

They each acknowledged a lapse in judgment, but somehow that doesn’t satisfy, leaving listeners believing that they still don’t understand the seriousness of what they did. They seemed contrite, but it’s hard to tell whether that’s due to remorse or to their impending incarceration. They will have years in prison to reflect on this.

Former Alameda CEO Apologizes

Caroline Ellison, the former CEO of Alameda Research, the crypto-trading firm connected with FTX, issued an apology when she plead guilty to fraud and other offenses in a New York federal court this week.

There was no public notice of the hearing, but a transcript was released yesterday. She agreed to cooperate with the government’s investigation in exchange for the prospect of a lighter sentence.

“I am truly sorry for what I did. I knew that it was wrong. I want to apologize for my actions to the affected customers of FTX, lenders to Alameda, and investors in FTX. Since FTX and Alameda collapsed in November 2022, I have worked hard to assist with the recovery of assets for the benefit of customers and to cooperate with the government’s investigation. I am here today to accept my responsibility for my actions by pleading guilty.”

When the judge asked Ellison if she knew what she did was illegal, she replied, “Yes.”

She described how she and former FTX CEO Sam Bankman-Fried “provided materially misleading financial statements to Alameda’s lenders.” Alameda, she said, lent a lot of money to Mr. Bankman-Fried and other FTX executives, then used FTX customer funds to finance its loans to Alameda. She said their quarterly financial reports obfuscated “the extent of Alameda’s borrowing.” She acknowledged that FTX’s investors were kept in the dark about the nature of the co-mingled relationship between FTX and Alameda: “I agreed not to publicly disclose the true nature of the relationship between Alameda and FTX.”

Plea deal apologies are notoriously suspect, but we can still scrutinize them for clues to good apologies. She takes responsibility, and doesn’t try to place all the blame on her former boyfriend, Mr. Bankman-Fried. She goes into detail regarding what she did wrong, and she acknowledges the various groups of people she hurt.

The statement, “I have worked hard to assist with the recovery of assets for the benefit of customers,” sounds too canned. We would prefer to hear something like, “I know lots of innocent people lost a ton of money because of my greed, and I’m going to do whatever I possibly can to try to get some of that back for them.”

There’s also no reason given for her new-found remorse, leaving us to assume that, had she not been caught, she wouldn’t be sorry.

But her statement makes their fraud sound much bigger, longer and more serious than what Mr. Bankman-Fried has said about it so far. It’s never easy to admit one’s mistakes, and Ms. Ellison has taken a step in the right direction.

 

 

Mediation Tragedy

Reports of violence associated with mediations are rare, but they do happen.  One occurred this week in Goldsboro, NC, where a client shot and killed his lawyer at the end of the mediation, then killed himself.

While details of the mediation itself are sketchy, reports are that a personal injury mediation was taking place at the law offices of Riddle & Brantley, a personal injury law firm in Goldsboro. Patrick White, an attorney with Riddle & Brantley, represented Francisco Sanchez and his wife, Christine Guerrero. Mr. White’s partner Gene Riddle was assisting him in the mediation. The names of the mediator and the other party have not been disclosed. According to Riddle’s interview with local news station ABC 11, the meeting seemed routine. Mediation progressed throughout the day, all parties landed on an amount, and everyone seemed to be pleased with the outcome shortly after 4 p.m.

The couple asked to speak privately. The mediator went into another office in the building, and White and Riddle went into the attorneys’ quarters. A few minutes later, Riddle saw Sanchez come into the attorneys’ quarters with a gun. The shooter aimed at Riddle, but missed; Riddle trippd and fell backward, and Sanchez turned his attention to White. White yelled at Sanchez to stop, and pushed him against the wall. There was another gunshot, and White fell against the wall. Sanchez left the room; Riddle got up, frantically looking for his daughter, who is also an attorney with the firm. Riddle saw Sanchez in the reception area, and told him to leave. Moments later, Sanchez shot himself in the head. Riddle later praised White as a hero for trying to stop Sanchez.

Although this kind of tragedy is rare, we can’t help but wonder if anything could have been done to prevent it. Should mediators impose a “no weapons” rule for in-person mediations? How would they enforce it? What if a party balks, citing 2nd amendment rights (and perhaps the state’s own gun laws)? I have a sentence in my retention agreement announcing, “All participants will refrain from bringing weapons of any kind into the mediation,” and I usually repeat this at the beginning of the mediation, but is that enough?

One of my colleagues mediated a case where, in caucus, Party A urged the mediator to find out whether Party B was carrying a gun. It turned out that Party B was indeed carrying a gun, but Party B refused to give up her gun unless Party A gave up his – sure enough, Party A had also brought a gun to the mediation. The mediator had both guns placed in the firm’s safe until after the mediation. But, in the few known cases where there was a shooting in connection with a mediation, it occurred after the mediation ended, as parties were leaving. In fatal shootings after mediations in Arizona and in Oregon, the shooter was a party who shot the other party; this North Carolina case is different in that the shooter killed his own attorney, before the mediation was completed.

My heart goes out to the family and colleagues of Patrick White. May he rest in peace.

 

 

 

 

 

More Litigation About Mediation

One of the most interesting mediation articles I’ve read was called “Disputing Irony” by Prof. James Coben, 11 Harvard Neg. L. Rev. 43, 98 (2006). He and his team at Hamline Law School surveyed all the U.S. appellate court cases, state and federal, 1999-2003, that mentioned “mediation,” to see why cases that should have ended in mediation were still being litigated (the “disputing irony”). Almost half of these cases involved an attempt by one party to get out of the mediated agreement, where the question was enforceability. Another portion addressed concerns about confidentiality; in many cases, testimony regarding statements made in the mediation came into the trial court proceeding as evidence, without objection.

Professor Coben has continued to monitor litigation about mediation, and earlier this year he compared what he observed 2013-2017 to what he saw 1999-2003, when mediation was just catching on in U.S. courts. “Litigation About Mediation: A Case Study in Institutionalization,” 28 Dispute Resolution Magazine 18 (January 2022). The first obvious change is the increase in the number of cases; in 1999, they found 172 cases, but by 2017, it was 891. Twenty years ago, questions about enforceability comprised 47% of the cases; more recently, it had decreased to 39%. He found that the likelihood that a settlement will be enforced in the face of an alleged defense increased from 57% to 69% of the time. But, interestingly, standard contract defenses like fraud, mistake, and duress have declined, while procedural defenses have increased.

Concerns about confidentiality declined, suggesting to Prof. Coben that “confidentiality frameworks for mediation are working sufficiently and predictably for parties.”

Questions about fees, costs and sanctions all declined, while procedural questions like whether the court had jurisdiction increased.

Most notably for mediators, litigation about mediators continues to be virtually non-existent. Of the few cases asserting mediator misconduct, none has succeeded.

As his title implies, Prof. Coben sees all of this as a sign that mediation has become institutionalized as part of the ADR landscape.

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