Mandatory Settlement Conferences Save Court’s Time, Resources
Published in The Daily Journal on January 22nd, 2009
Imagine scheduling a mediation involving 25 parties and a claim of more than $20 million and no one shows up. Since mediation is by nature a voluntary process and both attorneys and their insurance carrier representatives must attend numerous mediations, it becomes a challenge to have all decision-makers present at one time to resolve a large case. In 2007, the decision in Jeld-Wen v. Superior Court threatened to undermine, or at least severely impact, the ability to utilize mandatory settlement conferences to resolve large, complex construction cases. In 2008, the Judicial Council of California adopted a new Rule 3.1380 in an attempt to clarify the rules governing the use and purpose of mandatory settlement conferences and the role of private mediators in assisting settlement judges during them.
A recent case demonstrates the importance of a mandatory settlement conference. The case involved the owners of a luxury single-family residence suing their well-respected general contractor and subcontractors. The plaintiffs alleged over $20 million in damages and involved more than 25 parties. The case was mediated with a private mediator over a nine-month span without agreement. The parties engaged in long and expensive discovery battles. With the trial date rapidly approaching, the parties asked the court to order a mandatory settlement conference with a settlement judge and private mediator to work as a facilitator. The first conference was held in June 2007 with four more being held between June and December 2007, at which time the case was settled.
The practice of co-mediations between Superior Court judges and private mediators has been extremely successful in resolving complex, multi-party cases. The Superior Court judges work very hard to convene mandatory settlement conferences so that all parties with settlement authority are in attendance. The private mediator works before, during and after the conference to bring the parties to the point of resolution. The reason this case settled is because the court had the authority to order the parties and their insurance carrier representatives to attend multiple mandatory settlement conferences; and, because resolving a large construction defect case is a team effort that requires participation by all parties. The mandatory settlement conference process is the only mechanism for bringing all parties together at the same time.
The other reason the case settled was the collaborative efforts of the settlement judge and the private mediator. The private mediator had nine months of experience with the case and the parties. The judge relied on the private mediator’s knowledge of the strengths and weaknesses of each party’s position. The private mediator’s ability to “work the phones” between each conference brought the parties closer together each time they reconvened with the settlement judge. During each conference, the settlement judge and private mediator operated as co-mediators who approached the case and parties from different points of view. The settlement judge’s perspective was from the standpoint of how the case was likely to be perceived by a judge and jury. The private mediator knew the facts of the case and worked with the settlement judge to find a settlement range that might be acceptable to all parties in the case.
The case likely would not have settled without the mandatory settlement conference process. From a practical standpoint it is impossible for a settlement judge to handle 25 or more parties on any given day for a mandatory settlement conference when combined with a judge’s normal daily calendar of motions and or trials. Even with the help of private mediators to facilitate these conferences, many settlement judges work long days and nights (sometimes to 10 p.m. or later) on getting cases resolved. Had this case not settled, it would have occupied four months or more of court resources and bogged down many other cases in the system. The mandatory settlement conference process is a tremendous benefit to both the courts and litigants.
Although the process of using these conferences and private mediators has been successful in resolving construction defect cases, some litigants complain that they are being strong-armed into attending and paying for private mediation sessions convened as a mandatory settlement conference at the courthouse. It is also argued that the process is being used to coerce parties into paying to settle claims without an opportunity to conduct discovery or adequately examine the evidence on which the plaintiffs are basing their case.
The issue of having a private mediator conduct court-ordered mediations was previously raised in Lu v. Superior Court. The Lu court decided that a private mediator can act as a settlement referee and have the parties pay for the private mediator’s fees based on the court’s inherent authority to control its cases and the need for complex cases (like construction cases) to have a mediator present to manage the process. Due to the conflict in authority between the Lu and Jeld-Wen cases, the Judicial Council identified a need to clarify the court’s role in conducting mandatory conferences and the involvement of private mediators in the process.
Effective Jan. 1, 2008, the Judicial Council amended Rule 3.1380, which deals with mandatory settlement conferences.
The new rule provides that private mediators may not be appointed to conduct a mandatory settlement conference while still serving as a mediator in a case. But once the mediation has been completed, the Advisory Committee Comment allows a mediator to act as a facilitator with a settlement judge during a mandatory conference.
Jeld-Wen has been trumpeted by a few defense counsel as a victory over using mandatory settlement conferences as a hammer to force parties to settle cases. Courts have responded to the Jeld-Wen case and the rule change in a variety of ways. Some courts have been reluctant to order a mandatory settlement conference and invite a private mediator.
Some courts set a mandatory settlement conference and allow the parties an opportunity to opt out of paying the private mediator’s fees by filing a written objection. Other courts allow the parties to enter a stipulation to allow the private mediator to participate in the conference and pay the mediator’s fees.
As a practical matter, the parties and their insurance carriers are still using private mediators to facilitate settlement discussions during the conferences.
There are several reasons why parties are not opting out of using private mediators at mandatory settlement conferences: First, mediation of large, complex cases with private mediators has proven successful in resolving such cases; second, mediators encourage an earlier exchange of information than otherwise available under the normal rules of civil procedure; and third, mediators focus the parties on resolution instead of preparing each case for trial. Finally, a collegiality develops through the mediation process that helps to reduce tensions and avoid unnecessary and costly battles.
The mandatory settlement conference process has been used to successfully resolve numerous construction cases involving millions of dollars that otherwise would have languished in the court system for many, many years.
Jeld-Wen and Rule 3.1380 have caused the vourts and private mediators to make sure parties are not being coerced into settlements. The fact that vourts are still setting conferences and using private mediators as facilitators indicates a strong preference for settlement judges and private mediators working together to resolve large construction cases.
The reason the process works is that it saves tremendous time, money and resources by bringing the parties together for settlement instead of waiting for every case to settle on the courthouse steps.