More than 60 students from UM Carey Law School and Johns Hopkins Carey Business School got some practical experience in the tactical—and ethical—issues of making a deal when they met for a three-hour joint session of their respective negotiation classes at Carey Business on February 25.
“This type of collaboration is excellent for the students and makes perfect sense,” said UM Carey Law Professor Dawna Cobb, whose class participated in the joint session. “Lawyers represent business people all the time and business executives need to know how to work effectively with a lawyer. A class like this is a win-win for both parties.”
The simulation appeared to be straightforward, but came with constraints that made striking a deal exceptionally challenging, noted Professor Cobb.
For example, on the buyer’s side of the deal, each of the 24 UM Carey Law students played the role of a senior partner at a leading real estate firm whose client was a corporation owned by a blind Bahamian trust that was controlled in turn by a large, publicly held chain of luxury hotels. The law students were required to meet with their client—the chief operating officer (COO) of the chain, who was played by an MBA student.
The chain was eager to buy a row of more than 50, once grand but now dilapidated townhouses and transform them into the lobby, restaurants and bars of a large, high-rise hotel serving conventioneers, which it would build. The COO made it clear to the law student representatives that neither the buyer’s full identity nor its development plans should be disclosed to the seller.
On the seller’s side of the transaction, an MBA student/realtor was assigned to represent a closely held corporation owned by several elderly members of the same prominent family, all of whom had grown up in the townhouses. The sellers sought a buyer who would restore them to their former elegance as luxurious private residences.
The sellers were already considering three other offers. Two prospective buyers promised to develop the property as large, upscale private residences, while a third proposed a mixed-use development modeled after Boston’s Quincy Market—a plan which alarmed some of the sellers who feared the market might contain shops of questionable taste.
To complicate matters further, the seller’s representatives had no way of reaching their clients during the negotiation.
“There are really only three ways in which the negotiators could strike a deal,” observed Professor Cobb:
“None of the options are good,” noted Professor Cobb. “In fact, if the competing negotiators are faithful to their respective clients’ wishes, it’s impossible to make a deal—an outcome that was surprising to students.”
How did the students handle the constraints?
After an hour of negotiating, some weren’t able to reach an agreement. Others did, however, largely by evading the issue of the buyer’s plans for the property or in a couple of cases stretching the truth a bit, according to Professor Cobb.
“I found the negotiation to be an enlightening experience,” said third-year law student Matthew Bosak. “It was especially helpful as a way of learning how to reconcile the issues of concealing information from the opposing side with zealously representing a client.”