Why Settle for Less? Improving Settlement Conferences in Federal Court

By Lynch, William P. | Washington Law Review, September 1, 2019 | Go to article overview

Why Settle for Less? Improving Settlement Conferences in Federal Court


Lynch, William P., Washington Law Review


Introduction

Originally conceived as an alternative to litigation, alternative dispute resolution (ADR) processes have been fully integrated into the federal court system. ADR developed in the United States in several distinct phases. Communities established neighborhood justice centers in the 1960s to allow parties to resolve their own disputes without court intervention.1 In the 1970s and 1980s, states created screening panels and arbitration of medical malpractice claims in an attempt to reduce the cost of malpractice insurance, and the business community adopted mediation and other ADR techniques to resolve claims more quickly.2 In the 1980s and 1990s, both state and federal courts incorporated ADR techniques into their court systems.3 While proponents of ADR claim a variety of benefits, including increased flexibility in resolving issues and the possibility of reconciliation between the parties, the primary motivation of court incorporation of ADR has been to reduce court dockets.4

ADR attempts to assist the parties in reaching settlement by providing them with unbiased information about possible trial outcomes that may encourage them to reevaluate their positions and explore mutually acceptable solutions. While a variety of ADR processes exist, this Article focuses on mandatory settlement conferences in federal court.

Though much has been written over the years about the advantages and disadvantages of court-annexed ADR,5 recent research on decisionmaking and negotiation theory, case law, and empirical studies illustrates significant concerns about settlement conferences in federal court. This Article addresses three primary concerns about settlement conferences. First, because judicial authority exerts pressure even in an informal process such as a settlement conference, there is a danger that parties will feel coerced to settle their cases, especially when the conference is held by the trial judge. Second, when a party raises a claim of bad faith participation at a settlement conference, that claim's resolution can result in a loss of confidentiality. Awareness of this risk (that the confidentiality promised at the settlement conference may later be compromised) may cause parties to bargain strategically at the conference and may affect their perception of the fairness of the process. Third, litigation over the required level of participation at settlement conferences has increased significantly, and this litigation threatens to undercut the premise that settlement conferences help resolve cases efficiently and reduce court congestion.

Settlement conferences cannot be understood and evaluated in the abstract. Part I of this Article briefly traces the development of judiciallyled settlement initiatives in civil cases in federal court, contrasting settlement conferences with privately held mediations. Part II(A) discusses empirical studies of whether parties who turned down a pre-trial settlement offer improved their positions at trial. The studies show that although plaintiffs make many more errors in rejecting settlement offers, the cost of the defendants' errors in rejecting plaintiffs' offers is significantly higher. Part II(B) reviews recent studies of decisionmaking and negotiation theory and practice, and it points out psychological biases and other common problems that may be encountered when evaluating a case for settlement purposes. Many people make decisions based on intuition, and though intuition can be surprisingly accurate, it is not well suited to the resolution of complex disputes with multiple actors and sophisticated rules. Part ii(C) examines the dynamics of the settlement conference from the perspectives of the participants-the parties, insurers, lawyers, and the judge-and shows how intuitive biases and other factors unique to each participant might cause them to incorrectly assess the value of the case and whether it should settle.

There can be distinct advantages to a settlement conference conducted by a judge, and Part III reviews those advantages. …

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