TASK 73

Prepare for Settlement Negotiations and Alternative Dispute Resolution (ADR)

I. WHAT AND WHY
A. Most attorneys engage in some form of voluntary settlement negotiations before trial. In addition, FRCP 16
and virtually every EDR Plan require the parties to engage in some form of settlement negotiations. See
FRCP 16(c)(7).
B. Given the federal courts’ strong emphasis on settlement, be prepared to discuss and negotiate settlement at
any time, including during trial. Remember, the court has inherent authority to order mediation. In re
Continental Gen. Tire, 81 F.3d 1089 (Fed. Cir. 1995).
C. You may attempt to settle the case informally or you may choose from a variety of alternative dispute
resolution (ADR) methods. For example:
1. Settlement conferences: FRCP 16(c) gives the court authority to take appropriate action with respect to
settlement and use special procedures to assist in resolving disputes when authorized by statute or
local rule.
2. Mini-trial: Some districts have a proceeding in which representatives of each party, or an impartial
third party, are presented with an abbreviated version of the parties’ positions. After the presentations,
the representatives discuss the merits of the dispute and issue a non-binding advisory opinion.
3. Mediation: At least 15 of the 34 EDR pilot districts require mediation, in which an abbreviated case is
presented to one to three mediators who render an opinion. See Task 78. Some districts require binding
mediation that may be appealed to the district court for a trial. If the trial’s result is less favorable to
the appealing party than the mediator’s opinion was, the appealing party must pay the other party’s
costs.
4. Early Neutral Evaluation Program: Counsel presents the legal and factual bases of the case to a neutral
pro-tem representative selected by the court. The evaluator identifies the primary issues in dispute,
clarifies areas of agreement, evaluates the parties’ relative strengths and weaknesses, assesses the
value of the case, and discusses settlement. Generally, the recommendations are not binding.
5. Summary Jury Trials: The parties present their case to a jury in a summary form. The jury deliberates
and renders a non-binding decision. A district court has authority to order parties in a civil action to
participate in a summary jury trial despite one party’s objection, when summary jury trials are
authorized by local rules. In Re Southern Ohio Correctional Facility, 166 F.R.D. 391 (S.D. Ohio
1996).
6. Reference to Special Masters: The parties agree to a special master who is authorized to control and
manage discovery, conduct the trial and enter binding findings of fact and conclusions of law. The
special master’s findings are reviewable by the court and can be reversed only if clearly erroneous.
7. Court-Annexed Arbitration: A neutral arbitrator associated with the court evaluates the case. See Task
77. The result is usually not binding, but the party rejecting the arbitrator’s recommendations may
have to pay the other party’s costs if the ultimate outcome is less favorable than the arbitrator’s
recommendations.
8. Judicial Arbitration: The parties present the case to one or more arbitrators under relaxed evidence
rules. The arbitrator renders a binding or a non-binding advisory opinion and, where appropriate,
determines an award. In some districts, a party may request a trial de novo, but if the results are not
more favorable than the arbitrator’s recommendation, the party is liable for the arbitrator’s fees. See 28
U.S.C. §§ 651-658.
9. Contractual Arbitration: The parties agree by contract to binding arbitration before a professional
arbitrator. See Task 77. Courts generally stay the litigation and enforce the arbitration agreement.
Shearson/American Express v. McMahon, 484 U.S. 220 (1987).

II. WHEN
A. While the parties may settle any time, settlement negotiations are most successful as the trial date nears
and the parties better understand the case’s strengths and weaknesses.
B. FRCP 16(c)(9) authorizes settlement as a topic of discussion at the pretrial conference. See Task 97.
III. HOW
A. Carefully review your case file so that you are completely familiar with all the liability and damage issues.
Focus on your proof outline (see Task 4) and your damages evidence. If you do not completely understand
the case before you begin settlement negotiations, you might:
1. Reveal harmful information about your witnesses or evidence.
2. Reveal weaknesses in your theories, strategy or techniques.
3. Fail to appreciate the significance of opposing counsel’s statements that may reveal helpful
information about his or her case.
B. Determine the likelihood that your client will prevail on liability if the case goes to trial.
1. Review the facts relating to liability in the context of the causes of action or theories of liability
alleged in the pleadings.
2. Determine which side will likely prevail on each cause of action.
3. If applicable, estimate the proportion of fault that likely will be attributed to each party.
C. Compute the case’s monetary value, i.e., the amount of money that a judge or jury will likely award the
complaining party if liability is found. See Task 74.
D. Contact your client and discuss your settlement and negotiation recommendations. Obtain your client’s
authority to settle for a specific minimum or maximum amount.
E. Contact opposing counsel and commence negotiations. See Task 75.

IV. PRACTICE NOTE

A. The court can order that a representative of each party with authority to settle be present or readily
accessible at any mandatory settlement conference. This includes instances where a government body is a
party. A court can order that parties participate in mandatory settlement conferences on the basis of three
sources of power: 1) FRCP 16, 2) 28 USC §473(b)(5) and 3) the court’s inherent power to manage its case
load. Schwartzman, Inc. v. ACF Indus., 167 F.R.D. 694 (D.N.M. 1996).
B In determining the value of a case, consider the net value. Take into account:
1. Attorney’s fees (i.e., the contingent fee in a plaintiff’s case or the total of hourly rate fee bills in a
defense case)
2. Trial costs (e.g., experts, jury fees, transcripts, demonstrative evidence)
3. Prejudgment interest claims
4. Collection problems and expenses
5. The likelihood that the opposing party may appeal if you win, and thus delay collection
C. Consider how many of your case’s weaknesses or how much of your undiscovered strong evidence you
should reveal in negotiations with an opponent whom you do not expect to settle.
D. Try to avoid settlement negotiations in front of the trial judge. You may have to argue motions in front of
the same judge. This may be difficult if you already revealed weaknesses in your case on these subjects.