6.4 Alternative Dispute Resolution
Some form of alternative dispute resolution is likely to be offered, or may be required, before or after filing a federal lawsuit. Before an action is filed in court, some federal agencies make use of either voluntary or mandatory, nonbinding ADR procedures as part of their investigative or adjudicative operations./1/ Federal courts are mandated to provide for nonbinding ADR procedures, although the courts have discretion to determine which cases are appropriate for ADR referral./2/ Settlement offers made during the litigation of a claim, either as part of ADR process or informal negotiations, may present challenging ethical, strategic, and legal issues for the practitioner. This section examines the ADR issues that are most likely to come up in cases handled by legal aid attorneys.
6.4.A. Early Use of ADR
A well-prepared plaintiff should consider pursuing settlement of a case before filing and, after filing, through use of the federal court’s ADR procedures. Sending a settlement offer or a demand for relief to defendant or to defendant’s counsel shortly before filing the action, if nothing else, permits the plaintiff to say that an attempt was made to resolve the matter outside of court. Plaintiff’s counsel may want to present a written settlement offer again to defense counsel before the first pretrial conference. The court’s ADR process may require a report of prior attempts at settlement. Developing a settlement offer requires you to consider carefully the objectives of the lawsuit and to ensure that your client fully understands their interests and priorities as well as the costs and benefits of settlement. Having a clear sense of objectives and the prospects for settlement early on is important because the Rule 26(e) conference requires the parties to discuss and assess the prospects for settlement.
The plaintiff’s request, in a Rule 16 report or subsequent conference, to refer the action to ADR forces the defendant who does not want to participate to have to object to a settlement conference. Scheduling a settlement conference early in the case, before completion of discovery, can be helpful to a legal services program with limited resources to pay for deposition transcripts and other expenses. Consider asking that the settlement conference be set after the time for service of initial written discovery and before holding any depositions. A plaintiff with good command of the facts may want to set the conference for a date after service of the written discovery, but before answers are due, to give an incentive for the defendant to settle without having to complete time-consuming discovery.
Early use of ADR process may help the plaintiff in several ways. First, if the case is not fully settled through ADR, the defendant may be pressured to stipulate to key facts, and thus avoid the need for expensive discovery. Second, when there is statutory authority for award of attorney's fees, the settlement conference is an opportunity for the mediator to discuss with the defendant and its counsel the costs potentially involved in further litigation. Third, a plaintiff who prepares a thorough and factually detailed complaint before conclusion of discovery can present a more thorough explanation of the case and relevant law than defense counsel. This may result in pressure by the mediator to the defendant to settle. Given the uncertainty of success in federal litigation and the common interest among clients to resolve matters promptly, creative opportunities for settlement should not be overlooked. This, of course, will require close coordination and consent of your client.
6.4.B. Forms of Judicial ADR
The Alternative Dispute Resolution Act of 1998 requires that “[e]ach United States district court shall authorize, by local rule . . . , the use of alternative dispute resolution processes in all civil actions, including adversary proceedings in bankruptcy . . . .”/3/ The ADR process “includes any process or procedure, other than adjudication by a presiding judge, in which a neutral third party participates to assist in the resolution of issues in controversy, through processes such as early neutral evaluation, mediation, minitrial, and arbitration . . . .”/4/ Many variations in ADR processes are used in the federal court system, but the most common is some type of mediation. The use of ADR in a case is frequently first raised at the initial Rule 16(b) pretrial conference, and the parties may be ordered to participate in a settlement conference held before or after completion of discovery./5/
6.4.C. Successful Use of ADR
If the local ADR process uses third-party neutrals (rather than court officers or court staff) there might be an issue regarding the expense of compensating the neutral. If the court previously granted permission to proceed in forma pauperis, the indigent party may not be required to pay anything. The local ADR rule may provide a procedure to substitute a magistrate or court officer for the third-party neutral when the expense of ADR is an issue. The other party may agree to cover the full cost to utilize a third-party neutral. Perhaps a volunteer mediator would be available through your local pro bono referral program. If ADR cost is a concern, the problem should be raised before the court issues a referral order requiring participation in the ADR process. The referral order addresses compensation of the neutral when there is a cost to the parties. Whether the court uses a standard form referral order or modifies one for particular cases, asking to see the court’s form well before a referral may be made is a good idea.
The referral order to ADR will probably require the parties to submit at least one settlement conference statement. The local procedure may call for exchanging these statements, followed by filing a confidential letter or supplementary statement given only to the mediator. There is no commonly employed format for settlement conference statements; they may not even be uniform within the same district. Typically, the referral order may require exchanging statements approximately one week before the conference and filing confidential statements the day before the conference. On the date of the settlement conference, counsel and the parties are expected to appear (in person or by telephone) and orally summarize their litigation positions. The mediator typically meets separately with counsel and the parties to discuss the case and facilitate reaching a partial or full settlement of the action.
The instructions for preparing the settlement statements emphasize that they should be concise or may set a short page limit. A page limit on the written statements is a significant advantage for the plaintiff who filed a detailed complaint. Attaching copies of the favorable cases to the statements and including the citations in the written statements may be helpful. One reason to prepare a more detailed complaint than is required by the federal rules is to have a full exposition of the legal claims and factual bases for them and thus reduce the amount that needs to be stated in the settlement conference statement./6/
An issue that may arise in settlement discussions when monetary relief or damages are sought is how to deal with a lump-sum offer. The plaintiff may be asked to offer a number for settlement of any monetary claims. How do you calculate this when you are seeking future wages or private disability benefits for an unknown duration? The amount of such prospective income can be discounted to present-day value, and there are various formulas to calculate this, depending upon assumptions about inflation and other factors./7/ The well-prepared plaintiff should anticipate this issue. For the mediation or settlement conference, plaintiff’s counsel should have available the relevant case authority for the formula to be used in computing interest, inflation, and present value and may wish to consult with a professional expert in making these calculations.
3. Alternative Dispute Resolution Act of 1998, 28 U.S.C.§ 651(b).
4. Id. § 651(a).
5. See Fed. R. Civ. P. 16(c)(2)(I). The Federal Judicial Center, www.fjc.gov., issues useful publications on federal court procedure, including Robert J. Niemic et al., Guide to Judicial Management of Cases in ADR (2001), and Robert J. Niemic, Mediation and Conference Programs in the Federal Court of Appeals: A Sourcebook for Judges and Lawyers (2d ed. 2006). The Civil Litigation Management Manual, issued jointly by the Federal Judicial Center and the Judicial Conference of the United States, the Committee on Court Administration and Case Management (adopted Mar. 2001), includes sections on ADR and judicial settlement guidelines and offers insight into many other aspects of federal practice. See www.fjc.gov/public/.
6. Another drafting practice with particular benefit for later use in ADR is annexing key documents as exhibits to the complaint. Reading the correspondence and notices preceding the filing of the action gives the mediator a more objective impression of the history of the dispute (and the lack of responsiveness of the defendant in resolving the dispute without need for litigation). A defendant who does not similarly append the key supportive documents to the answer may be at a comparative disadvantage when there are page limits to settlement conference statements.