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What does court-ordered ADR require.

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Vol. 14, No. 3 March 1996
Alternatives 33
CPR Institute for Dispute Resolution
What Does Court-Ordered ADR Require?
I
By Edward F. Sherman
Court-ordered ADR is mandatory in
the sense that the parties are required
to participate, but voluntary in the
sense that they need not settle. The
tough question is: what exactly does
court-mandated ADR order the parties
to do? Must they do more than just
attend (a settlement conference or a
mediation session, for example)? Is
there a broader obligation to “participate?”If so, what kind of participation
is required?
A number of court cases across the
country have addressed these questions, usually in ruling on motions for
sanctions against parties for not complying with ADR orders. Occasionally,
drafters of ADR statutes and court orders have also wrestled to spell outjust
what court-ordered ADR requires. This
is still relatively uncharted legal territory, but a few principleshave emerged.
Judicial settlement conferences
were the first form of mandatory ADR.
For decades, judges have ordered attorneys (and increasingly parties) to
attend them. Judges derive authority
for these orders from Federal Rule of
Civil Procedure 16 (authorizing pretrial conferences) and similar state
rules, from the power to manage their
dockets, or from inherentjudicial authority. Courts have uniformly rejected
constitutional challenges to mandatory settlement conferences. They also
have upheld mandatory mediation,
sometimes under the additional authority of specific ADR statutes.
Complex questions arise when mandatory ADR is more formal and structured than a settlement conference or
a mediation. In a summary jury trial,
for example, the parties present a condensed version of their case to a jury
which renders a non-binding opinion.
A number of federal district courts
have upheld mandatory summaryjury
trials as valid means of promoting
settlement. Two federal circuit courts,
however, have held that federal courts
don’t have the power to order unwilling parties to participate in a summary
Edward E;: Sherman is Edward Clark CentennialProfesssorofLaw at the University of Texas
School of Law.
jurytrial, InreNLOInc.,5F.3d 154 (6th
Cir. 1993); Strandell v. Jackson County,
Ill., 838 F.2d 884 (7th Cir. 1987).There
is no judicial authority, they said, “to
require that an unwilling litigant be
sidetracked from the normal course of
litigation.” Distinguishing these cases
from those upholding summary jury
trials is not easy.
Court-annexed arbitration-where
parties summarize their cases before
arbitrators who render non-binding
opinions-has been treated more like
mediation. Courts have upheld mandatory arbitration programs that exist in
a number of federal and state courts.
Arbitration is less formal than summary
jury trials and arguably is not as serious
a “sidetracking”from normal litigation.
Obligation to “Participate”
Court orders referring cases to ADRuse
a variety of terms to describe what the
parties must do at the proceeding. Some
simply order the parties and their attorneys to “attend and participate.”Others
impose more demanding requirements
to participate “ina meaningful manner,”
“fullycooperate and participate,”or participate “in good faith.”
The outcome of cases challenging
participation requirements may turn on
the wording of the order and the statute, or the rule on which it is based.
However, the kind of ADR process involved is also an important factor. Courts
are increasingly recognizing that the
degree of required participation may
vary depending on what is needed to
make the particular ADR process work.
In an informal “faci1itative”ADRprocess, like mediation, the required level
of participation should be low. For an
effective mediation, it’s sometimes
enough just to require that the parties
state their positions about liability and
damages and listen and respond to what
the other side has to say.
An “evaluative”process, such as “early
neutral evaluation,” requires a more comprehensive presentation of fact and law
to keep the proceeding from becoming
a futile exercise. Sketchy or incomplete
information about the case and the parties’ positions can lead to an inaccurate
and unreliable evaluation. If they have
no faith in the evaluation because of lack
of participation by one side, it is a waste
of everyone’stime and money.
“Trial run” ADR processes, such as
court-annexed arbitration or summaryjury
trials, may require that the parties do
much more than just talk and listen.
These processes contemplate that each
side will present its case to a third party,
who will make a non-binding decision.
To provide a reasonably accurate picture of how the case might play out if
it went to trial, each side needs to summarize its evidence and arguments.
When the defendant’s lawyer presented only brief summaries of her position and read a few passages from
depositions, one court found that participation in a court-annexed arbitration
was inadequate, Gillingv.EasternAirlines,
Inc., 680 FSupp. 169 (D.N.J. 1988).Another court reached a similarresultwhen
the plaintiffs lawyer came to the hearing without his clients, spent less than
15 minutes discussing his case, and
didn’tpresent evidenceof breach of duty
or injuries, McHale v. Alcon Surgical, Inc.,
1995WL 99658 (E.D.Pa.).
Advance Submissions
A court should be able to order the
parties to submit relevant materials
before the proceeding. For example,
it might order that the parties give
position papers or memoranda to the
neutral, or make certain evidence
available to the other side. Such information lays a basis for meaningful
discussion without interfering with
how the parties present their cases.
A typical order might require each
party to submit a position paper, including a plain and concise statement
of: the legal and factual issues in dispute; the party’s position on those issues; the relief sought (including an
itemized list of damages); and any offers and counter-offers previously
made. Federal courts routinely require
such items for pretrial conferences.
The federal pretrial conference rule
authorizes courts to direct attorneys
and “any unrepresented parties” to attend a conference. Increasingly,courts
have found that attendance by parties,
(continued on following page)
34 Alternatives
Court Ordered ADR
(continued from previous page)
whether or not represented by counsel, increases the possibility of success
in both settlement conferences and
ADR proceedings.
Mandatory Client Attendance
A 1993 amendment to the rule allows
courts to require that “a party or its r e p
resentative be present or reasonably
available by telephone in order to consider possible settlement of the dispute.” (Rule 16(c)(16)) ADR orders
now routinely require that the parties
as well as their attorneys attend the
settlement conference.
Difficult questions arise when the
party is not an individual,but a corporation or an insurance company. A typical
order requires organizationsor agencies
to “be represented by an officer or r e p
resentativewith authority and discretion
to negotiate a settlement.”
Such orders raise a broad range of
difficult issues, which the 7th U.S. Circuit Court of Appeals explored in G.
Heileman Brewing Co., Inc. u. Joseph Oat
Gorp,, 871 F.2d 648 (7th Cir. 1989) (en
banc) . A majority upheld a magistrate’s
order that the defendant send a “corporate representative with authority to
settle”to a settlement conference. The
defendant had argued that it was unreasonable to impose the expense and
burden of requiring its president “to
leave his business [in Camden, N.J.] to
travel to Madison,Wisc., to participate.”
The majority conceded that there
might be circumstances when requiring the attendance of the president
CPR Institute for Dispute Resolution
“would be so onerous, so clearly unproductive, or so expensive in relation
to the size, value, and complexity of
the case that it might be an abuse of
discretion.”However, it found no such
situation here, where the claim was $4
million, the factual and legal issues
were complex, and the trial was expected to take one to three months.
Courts routinely include in ADR orders a requirement that the parties and
counsel come to the proceeding with
settlement authority. Coming without
settlement authority can be a ploy that
allows negotiators to claim inability to
bargain outside a prescribed range. It
also unfairly enables absent persons
with settlement authority, who haven’t
benefited from participation, to disavow agreements made by their negotiating representative.
Hard cases arise when a representative’s settlement authority is ambiguous. What if an insurance company
sends a representative with authority to
settle only up to $lO,OOO? The company
may have reviewed the case, concluded
that there is no liability, and estimated
that, in any event, the reasonable damages are much smaller than that amount.
Settlement Authority
The key question is, what are the
representative’s instructions? If the
representative has no authority to even
consider any settlement above $10,000,
this is essentially a “no authority” case
that violates the court order. A representative should be open to the other
side’s arguments, and to the possibility of settling at any amount that’s persuasive-no matter what the company
Mediation: Is It For You?, a video from the American Bar Association, presents three scenarios in which mediation might be useful for consumer disputes: a divorce, bickering neighbors, and a homeowner/contractor dispute.
The 18-minute video, which could help educate disputing parties and set
the scene for a mediation, outlines the steps toward resolution. Interviews
with mediators explain mediation strategies and leave the viewer with a sense
of the potential results.
The $79 package includes one guide for facilitators and another for consumers ($2.50 forjust the consumer guide). To order, contact ABA Publications: P.O. Box 10892, Chicago, IL 60610-0892. Tel.: 312-988-5522; fax
312-988-5568.
Vol. 14, No. 3 March 1996
has evaluated the case to be worth. If
authority is so limited that a representative cannot respond to any persuasion, the company has not sent the
representative whom the court ordered to attend.
A further question is whether the
representative must have full authority to settle. Should a corporation (or
a governmental body which can only
act by the vote of a governing group)
be required to rearrange its decisionmaking structure in order give its negotiator full settlement authority?
The answer depends on whether the
necessarystructure is reasonable (or required by law) and whether it can be
accommodatedby prompt and efficient
procedures that enable the representative to communicate with decision
makers and get their approval.
Is it sufficient to have the official
with ultimate settlement authority
available by phone? The problem is
that the executive doesn’t participate
in the ADR proceeding, which undermines the effectivenessof the process.
However, one court has relaxed the
attendance rule for a federal government agency if the official with ultimate authority is fully prepared and
availableby phone, I n re Stone, 986 F.2d
898 (5th Cir. 1993). A 1993 amendment to the federal pretrial rule also
authorizes courts to “require that a
party or its representative be present
or reasonably available by telephone
in order to consider possible settlement of the dispute,” F.R.C.P. 16(b).
Special rules may be necessary when,
by law, the decision-makingauthorityfor
a governmental body must reside in a
governing body (for example, county
commissionersor a city council).There,
a representative may need to be given
tentative authority to negotiate on behalf of the governmental entity.
The representative’s instructions
should leave open the possibility of
persuasion, and group members
should be available to give their immediate approval by phone. It also might
be possible for the group to consult
with the negotiating representative at
critical stages of the ADR proceeding.
If an open meetings act requires decisions to be made in public, the group
could then meet in open session to
ratify the settlement.
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