Table Of ContentADR AND THE COURTS
A MANUAL FOR JUDGES AND LAWYERS
By The CPR Legal Program
Erika S. Fine, Editor
Vice President, CPR Legal Program
Elizabeth S. Plapinger, Assistant Editor
Associate, CPR Legal Program
Innovative Strategies for
Case Management, Early Settlement
and Dispute Resolution
•
Butterworth Legal Publishers
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1
PREFACE
In his 1983 Year End Report on the Judiciary, former Chief Justice
Warren E. Burger urged judges, judicial personnel, legal scholars, and
the bar to find new ways to cope with the mounting crises in the courts:
Experimenting with new methods in the judicial system is
imperative given growing caseloads, delays, and increasing costs.
Federal and state judges throughout the country are trying new
approaches to discovery, settlement negotiations, trial and
alternatives to trial that deserve commendation and support. The
bar should work with judges who are attempting to make practical
improvements in the judicial system. Greater efficiency and cost-
effectiveness serve both clients and the public. Legal educators and
scholars can provide a valuable service by studying new approaches
and reporting on successful innovations that can serve as models
for other jurisdictions.
The legal community has begun to respond to the chief justice's call
for action. This book brings together a number of these innovative
responses. It not only presents successful procedures that can serve as
models for other jurisdictions, but also advances new ideas for making
dispute resolution most cost-effective.
This volume is part of the Judicial Project of the CPR Legal Program.
Founded in 1979, the CPR Legal Program is a coalition of 300 general
counsel of major companies, law firm practitioners, and legal scholars
in the forefront of creating alternatives to the high costs of litigation
facing business and public institutions. The Legal Program has
developed a number of private alternative dispute resolution (ADR)
processes. Through the Judicial Project, innovative judicial practices
have become an equally important part of the Legal Program agenda.
The purpose of the Judicial Project is to increase judicial awareness
of ADR and show how it can be used out of court to streamline the
settlement process and produce better outcomes, and in court to
manage litigation, promote earlier settlement, and otherwise improve
the dispute resolution process. The Judicial Project also seeks to gain
information from the judiciary about effective dispute resolution and
litigation management practices.
On the federal level, knowledge of ADR—broadly defined to
encompass innovative ways to resolve and manage disputes—has
become particularly important since the 1983 amendments to the
Federal Rules of Civil Procedure. These amendments give judges
2 ADR and the Courts
greater authority and responsibility to manage cases and intervene early
in litigation to explore settlement and ADR. Rule 16(c)(7) provides that at
the pretrial conference—held at the beginning of the case rather than
the eve of trial—parties "may consider and take action with respect
to . . . the possibility of settlement or the use of extrajudicial procedures
to resolve the dispute." In short, Rule 16(c)(7) encourages use of ADR as
an enhancement to the judicial process.
The CPR Judicial Project is drawing on the Legal Program's extensive
information base to explore ADR processes appropriate for judicial use,
identify constraints on the judiciary, and indicate areas requiring
further research. As the size, number, and complexity of disputes
increase, courts must respond with tools more appropriate than those
designed for a simpler time. The CPR Judicial Project aims to
demonstrate how the courts can regain control of their central
purpose—adjudicating cases that cannot be settled elsewhere—by
adopting ancillary resources to resolve the many disputes that need not
go to court at all.
In closing, I would like to thank the innovative judges and lawyers
who contributed to this volume. We hope the book inspires others to
devise new, creative ways to resolve disputes more efficiently and
effectively.
James F. Henry
President, CPR Legal Program
3
INTRODUCTION
There is ample evidence that the judiciary needs new tools to
promote efficient and effective dispute resolution:
• The rate of civil litigation in the United States continues to rise. In
the year ending June 30, 1985, the number of civil suits filed in the
federal district courts reached a new high: 273,670 cases were filed.
In the past decade, the caseload in the federal district courts has
more than doubled. The picture in the nation's state courts is
similar.
• The costs of litigation to the public—as well as to individual
litigants—are very high. In 1982 taxpayers spent approximately $2.2
billion to process over 8 million lawsuits in state and federal courts.
• The benefits to prevailing litigants are often insubstantial compared
to process costs. In a Rand Institute study of 3,800 completed
asbestos cases, for example, the total costs to defendants and their
insurers averaged $95,000 per claim. Of this, the victim received
only $35,000. Plaintiff attorneys' fees and expenses totaled $25,000,
defense costs totaled $25,000, and the remaining $10,000 went to
insurance-related expenses.
• Litigation delays have become commonplace in many jurisdictions.
Complex civil cases sometimes take more than ten years to
conclude. The median time is for a civil case to reach trial in the
federal district courts is nineteen months.
• The incidence of complex, multiparty disputes—such as those
involving toxic torts or natural resource allocation—has also
escalated, taxing the resources of an already crowded court system
and challenging the bench and bar to devise new, sophisticated case
management techniques.
• Although most cases are ultimately settled, settlement too often
occurs on the eve of trial, frequently because parties fail to focus
realistically on their cases early enough in the litigation process.
Clearly, dispute resolution needs improvement. Greater efficiency
and effectiveness are in the interest of litigants, the judicial system, and
the public at large. But how do we make dispute resolution better? How
can we make it more efficient, without sacrificing fairness or the
perception of fairness? How can wasteful discovery be eliminated,
while preserving discovery necessary for informed dispute resolution?
4 ADR and the Courts
How can complex, multiparty cases be managed more effectively? And,
if most cases are settled, how can we encourage earlier settlements,
settlements with rational outcomes rather than frenetic results reached
on the eve of the trial?
This book attempts to answer these questions by presenting judges
and lawyers with an array of innovative procedures and techniques-
existing and proposed—to promote better case management, earlier
settlement, and wiser dispute resolution. Its focus is the federal judicial
system, although much of it is relevant to state courts as well. The book
features chapters by lawyers and legal academics, and, perhaps most
importantly, first-hand accounts by federal judges of how they facilitate
settlement or expedite case disposition in their own courtrooms.
The book begins with an overview of the world of dispute resolution
outside the courts. Much of the innovation in dispute resolution has
occurred in the private sector, and judges and lawyers should become
more aware of these new developments. Judges may want to adapt these
private processes for use in court or, through Rule 16(c)(7) of the Federal
Rules of Civil Procedure, encourage parties to "use extrajudicial
procedures to resolve the dispute."
We hope this book will encourage judges, bar groups, and individual
lawyers to put the procedures and proposals presented here into
practice. The book should also inspire bench and bar to devise new
ways to make dispute resolution more efficient and effective. As former
Chief Justice Warren E. Burger stated: "Experimenting with new
methods in the judicial system is imperative given growing caseloads,
delays, and increasing costs."
9
OVERVIEW OF PRIVATE ADR
Erika S. Fine and Elizabeth S. Plapinger
CPR Legal Program
Judges and others interested in improving the judicial process are
beginning to examine the world of private alternative dispute resolution
(ADR) to see how private procedures can be adapted for use in court.
Broadly defined, private ADR encompasses processes for resolving
legal disputes outside of court, as well as techniques for managing
litigation cost-effectively and preventing litigation from arising in the
first place.
The conceptual beginnings of the contemporary ADR movement can
be dated to 1976, when the American Bar Association convened the
Pound Conference, after Roscoe Pound, who in 1906 delivered a talk on
the reasons for the public's dissatisfaction with the legal system. At the
1976 conference, Professor Frank E.A. Sander of Harvard Law School
delivered his now well-known paper, "Varieties of Dispute Processing/'
which reminded the legal community that the traditional court-based
process was but one way—albeit an important one—to resolve legal
disputes. Sander proposed a multiprocess dispute resolution system
that would match different types of disputes to appropriate processes,
such as mediation, arbitration, or fact-finding. The Pound Conference
led to an interest in ADR among lawyers, judges, and legislators, and to
an increased use of such alternatives to litigation as mediation in family
law matters, misdemeanors, and other small-scale disputes.
The ADR movement also focuses on alternative ways to resolve and
reduce the costs of complex, large-scale disputes involving business and
public institutions. This area of ADR is the primary focus of this book.
In 1977, the development of a private settlement process now known as
the mini-trial helped encourage the growth of this branch of the ADR
movement.
10 ADR and the Courts
PRIVATE PROCESSES
The Mini-Trial
Designed by lawyers to untangle years of litigation in a patent case
involving TRW and Telecredit, the mini-trial is not actually a trial at all.
It is a confidential, nonbinding settlement process. Its creators called it
an "information exchange," but it was dubbed a mini-trial in 1978 by a
New York Times headline writer.
The mini-trial has no fixed form, flexibility being one of its chief
advantages. Most mini-trials, however, share certain characteristics.
The process is set in motion by an agreement setting forth the ground
rules, which often include a limited period of discovery. At the heart of
the mini-trial are abbreviated case presentations made by counsel to
principals from each side and a neutral advisor of the parties' choosing,
often a former judge or an experienced lawyer. If the disputants are
corporations, the principals are senior executives with settlement
authority.
The case presentations enable the executives to gain a clearer view of
the strengths and weaknesses of each side's key positions. After the
presentations, the executives meet to negotiate settlement. The neutral
advisor, if requested, gives an advisory opinion on the likely litigated
outcome of the dispute or helps the principals reach agreement.
Most mini-trials result in prompt settlements. The process has been
used with particular success in intercorporate disputes. With their
knowledge of business operations and objectives, executives are often
able to reach innovative resolutions that would be beyond the power of a
court to impose, or that lawyers alone could not achieve.
Mediation
Mediation, centuries old, is receiving renewed attention today.
Mediation encompasses a variety of techniques, but its defining
feature is the use of a third-party neutral who, rather than imposing a
solution on the parties, helps them reach their own agreement. The
process allows disputing parties to explore settlement possibilities
candidly. By learning the confidential concerns and positions of all
parties, the mediator can often develop options beyond the perceptions
of the disputants.
The mediator's role and the mediation process can take various
forms, depending on the nature of the dispute and the relationship of
the parties. The mediator can identify and narrow issues, crystallize
each side's underlying interests and concerns, carry messages between
Overview of Private ADR 11
the parties, explore bases for agreement and the consequences of not
settling, and develop a cooperative, problem-solving approach. The
mediator may work primarily with lawyers or directly with the
disputants themselves. He or she can help the parties fashion their own
resolution, or propose a settlement package to them. If they reject the
proposed settlement package, the mediator can then engage in "shuttle
diplomacy/' an attempt to bring the parties to an accommodation
through a series of separate confidential meetings.
Mediation is frequently used in domestic relations cases and
multiparty disputes involving environmental and land use planning
issues. Bringing mediation to large-scale disputes involving business
and public institutions has been slower. Recently, however, some
companies have begun to give mediation a try. For example, in 1985 a
thirteen-year-old antitrust case between two New England
communications companies was settled through mediation. Called the
"sleeping giant" of private dispute resolution, mediation has the
potential for much greater use in the business and institutional context.
Confidential Listening
In confidential listening, a quick, risk-free process, parties submit
their confidential settlement positions to a third-party neutral, who then
informs them whether their positions are within a negotiable range. The
neutral or confidential listener does not relay one side's confidential
offer to the other.
The ground rules of the procedure are fixed before settlement
positions are exchanged and, as in all private processes, may vary
according to needs of the parties and the character of the dispute. For
example, the parties may agree that if the proposed settlement figures
overlap, with the plaintiff citing a lower figure, they will settle at a level
that splits the difference. If the proposed figures are within a specified
range of each other, e.g., ten per cent, the parties may direct the neutral
to so inform them and help them negotiate to narrow the gap. And if the
submitted numbers are not within the set range, the parties might
repeat the process.
This privately-developed device provides a simple way to circumvent
the widespread reluctance of counsel to disclose their realistic
settlement positions early in a dispute. Its users have also commented
that the simple act of estimating the value of a claim may reorient the
disputants towards settlement.
12 ADR and the Courts
Neutral Fact-Finding
In this process, a third-party neutral with substantive or technical
expertise examines and evaluates disputed facts central to the
controversy. The fact-finder, who is not authorized to resolve the matter,
then submits a report detailing his or her findings. Such information
may reduce uncertainty and thus promote settlement.
Negotiation
Negotiation, the mainstay of dispute resolution, has also come under
scrutiny recently to improve the quality of negotiated legal outcomes.
Legal academics are studying lawyers' negotiation behavior and
exploring ways parties can become more effective negotiators. One
major emphasis of the developing negotiation literature, as chronicled
by Professor Carrie Menkel-Meadow in Legal Negotiation, 1983 Am. B.
Found. Research }. 905, is that good negotiators will look beyond the
stated positions of the parties to the concerns and interests they are
trying to protect or develop. Lawyers are being urged to approach
negotiation as creative problem-solvers who can broaden the range of
possible solutions.
One consequence of the new negotiation theory and research has
been the separation of the litigation and negotiation functions: Two
"teams" have been used to resolve disputes, one consisting of
negotiators and the other of litigators, so that lawyers uninvolved in
litigation can conduct settlement talks.
Arbitration
Long used to resolve commercial and labor disputes, arbitration
involves a neutral who hears each side's case and then imposes a final
and binding decision on the parties. Arbitration awards are enforceable
by the courts, and can only be set aside under highly unusual
circumstances, such as fraud. Arbitration is often agreed to in a
contract as a way to resolve future disputes arising out of the contract.
Despite its potential for speed, low cost and informality, arbitration
has been criticized for being increasingly slow, expensive and formal.
In addition, arbitrators have been criticized for their tendency
to compromise or "split the baby," rather than reach well-grounded
decisions.
Special arbitration techniques are being created to prevent the
rigidities that sometimes characterize conventional arbitration. One
example is "final-offer" arbitration. The parties each submit a proposed
