An Interview with Richard C. Daley
RICHARD C. DALEY is a Senior Lecturer in Law at the Moritz College of Law at The Ohio State University. Prior to joining the Moritz faculty, Mr. Daley spent twelve years in the private practice of law, specializing in the representation of real estate developers, followed by 13 years as Executive Vice President and General Counsel of The Pizzuti Companies, a real estate development firm headquartered in Columbus, Ohio. As both an executive and attorney for Pizzuti, Mr. Daley was involved in the development of over 20 million square feet of office and industrial space throughout the Midwest and Southeast regions of the United States. After retiring from Pizzuti in 2003, Mr. Daley spent the next three years providing legal and business consulting services to private developers and corporate real estate departments throughout the country.
In an interview with a Mayhew-Hite Report editor, Mr. Daley shares his thoughts on dispute resolution as both a developer and an attorney.
Generally speaking, how important was the art of negotiation to you while working in real estate development?
First of all, I really don’t think there is much of an “art” to negotiation. A business lawyer’s goal in any negotiation is quite simple – achieving a result which works for the client. Preparation and knowledge of the client’s business are the keys to completing a successful negotiation. Polemics, psychology, body language and all of the other negotiating “arts” are really quite tangential to the process.
Real estate development is well known to have many different "phases." Which would you characterize as the most contentious?
The only parts of the process where a developer can afford to be a little contentious are in the buy and sell phases. When you are buying or selling real estate, there is no continuing relationship with the other party to the transaction and, hence, there is no compelling reason to “play nice.” Being overly contentious during a negotiation with a party with whom the developer is going to have a long-term relationship (for instance, a tenant or a debt or equity provider) is a prescription for failure.
Do you have an example in mind that best exemplifies this contentiousness?
There are obvious “deal killers” in any negotiation involving the purchase and sale of real estate – price, contingencies, etc… A good negotiator makes it clear at the outset what those deal killers are and why his or her client can’t budge on those points. I have found over the years that being upfront and thoughtful in discussing points of possible contention usually shifts the flavor of the negotiation from “fist banging” to a reasoned discussion of how the legitimate interests of both clients can be served in the deal. I have also found that, almost without exception, the most contentious negotiators are those who are the least prepared for the task at hand.
Given that the industry can be prone to conflict, what steps did you take to protect your company? How important were alternative dispute resolution principles to the equation?
When I went in-house with a developer back in 1990, one of the first things that I noticed was that the company had a pervasive attitude that it needed to do whatever it took to punish folks that had “done it wrong.” The best advice I gave my colleagues at the company was to grow up and focus not on punishing the bad guy, but rather on doing whatever made the most sense for the company in the long-run. Embracing conflict is a short-term strategy, which seldom has any long-term benefit.
As for ADR procedures, I liked them only when I was on the wrong side of both the facts and the law. My primary experience in the ADR world was in court-mandated, voluntary, mediation sessions in Florida and Indiana. In every instance, the sessions were conducted in a fashion which, in my mind, was solely focused on producing a compromise of some type – even if the facts and the law did not merit a compromise or the level of compromise being bandied about by the mediator. To say the least, I do not look back fondly upon the countless hours I spent being forced to mediate “disputes” with folks whose only leverage was their perception that I didn’t have the patience to continue to say “no” throughout the day to a well-meaning mediator. My perception of the mediation process is certainly colored by the fact that the party I represented almost always had the deeper pocket in the dispute – and, hence, was typically both willing and able to spend the money necessary to resolve the dispute in the courts.
What about arbitration?
I have never participated in an arbitration proceeding. It is fairly common for general contractors to include an arbitration provision in their standard construction contracts. I resisted including an arbitration clause in our construction contracts for a couple of reasons -- (1) I thought that withholding payment from a contractor gave me the ultimate leverage in any dispute that I might have with a contractor and (2) arbitrators in construction-related disputes are commonly thought to be unduly sympathetic to the contractor (in large part because so many arbitrators used to work with or for large construction and engineering companies). As an overall matter, I believe that developers are best served by staying away from arbitration and other ADR proceedings.
How effective were the safeguards you implemented? Was litigation over disputes an exception or the rule?
During my 13 years as EVP/General Counsel for The Pizzuti Companies, we were only involved in one lawsuit of any magnitude – and that involved a National Hockey League franchise and not anything having to do with the real estate business. Except for some minor collection actions against delinquent tenants, the Company never filed a lawsuit as a plaintiff in any of the ten or so states in which it conducted business. The Company was named as a defendant in a few construction cases, all of which were settled when my patience ran out during the voluntary mediation sessions mentioned above. That was the extent of my litigation experience during my stint at Pizzuti – a decent testament to the “grow up” conflict resolution policies that I put in place when I first joined the Company back in 1990.
Do you think being both a Principal in and General Counsel for your company affected the way you approached a negotiation? How?
No doubt. As a business person, the only successful negotiation is one that results in a deal getting done. When I put my “businessman hat” on, I quickly figured out that the successful negotiator is the person who focuses on what matters and avoids wasting time and money negotiating issues which, while interesting from a purely legal perspective, have no real bearing on the achievement of a company’s business objectives. Having to pay (rather than collect) legal fees to outside counsel also gave me some needed perspective on the negotiation process.
If you could impart one piece of advice about the right way to approach a negotiation, what would it be?
Mick Jagger and Keith Richards said it best – “You can’t always get what you want, but if you try sometimes, you just might find that you get what you need.”