September 2001

Better Late than Never: Settlement at the Federal Court of Appeals - Part One

by Mori Irvine

[Part Two of this two-part article]

Nearly 95 percent of all federal civil cases will settle before trial,1 leaving less than five percent of civil cases to be appealed.2 Those cases are the most difficult, most intractable, and least likely to resolve short of a definitive judicial adjudication at the highest level. Their longevity, tenancy and staying power have been well-proven during the course of litigation.3 Can anything be done to aid them in Settlement? The federal courts have decided to make the effort.

Federal District Court Programs4 

The first codification of dispute resolution in any federal court came when the U.S. Congress passed the Civil Justice Reform Act (CJRA or the Act).5 The Act encourages all federal district courts to implement alternative dispute resolution (ADR) programs to help reduce delay in civil litigation and provide litigants alternative means to resolve their disputes.6 

The Act authorizes the courts to use dispute resolution and specifically lists a variety of processes the district courts might implement. As a result, the federal courts have experimented with dispute resolution,7 and a variety of settlement mechanisms are present in the courts. Mediation,8 arbitration9 and neutral case evaluation10 are the most common, but there are summary jury trials11 and other hybrids12 available. Each brings a different settlement opportunity to the parties. Each provides a different approach toward resolution without the need for final intervention of the courts by way of order or decision.

Since the passage of the Act, the district courts' efforts reflect diversity and experimentation in promoting settlement to the litigants. In addition to the traditional judge-directed settlement conference,13 the courts have elected to adopt one or more of the six processes authorized by Congress in the Act. Nearly half of the district courts have established a court-managed mediation program.14 A third of the courts offer some form of arbitration.15 Thirty-nine federal trial courts approve the use of summary jury trials,16 and 25 have authorized the use of minitrials.17 Early Neutral Evaluation (ENE) has not been adopted with the same enthusiasm. Only 16 courts have included ENE in their dispute resolution program offerings.18 

Congress has since decided this experiment in dispute resolution should become an integral part of the district courts. The Alternative Dispute Resolution Act of 1998 mandates that all district courts establish and offer dispute resolution to the litigants.19 Where there had been experimentation, there is now a mandate: The courts must give litigants a clear opportunity to resolve their problems themselves before the courts take that control away from them and decide their cases.20 

The Act requires all U.S. district courts to authorize the use of ADR processes in all civil actions. The courts are required to devise and implement an ADR program to encourage and promote the use of ADR in each district, to examine the effectiveness of existing ADR programs, and to adopt appropriate improvements. Each court must retain or designate an employee or judicial officer who is knowledgeable in ADR practices to implement, administer, oversee and evaluate that court's ADR program.21 

The federal trial courts may have been the first federal courts to adopt dispute resolution in some form, but they are no longer alone in providing settlement opportunities. The U.S. appellate courts have also implemented programs to provide alternative avenues for settlement to disputants.22 

The U.S. Court of Appeals for the 2nd Judicial Circuit took the lead when it established a settlement program in 1974. Its goal was to assist litigants in resolving their cases without the need for the appeal to result in a final decision by the court.23 Inspired by district court dispute-resolution programs, Chief Judge Irving R. Kaufman believed that similar settlement efforts would benefit the Court of Appeals.24 This vision of settlement at the Court of Appeals became the Civil Appeals Management Plan (CAMP). Virtually all civil cases that reach the 2nd Circuit are referred to CAMP.25 First in time, CAMP may have served as the impetus for subsequently established circuit-court mediation pro-grams,26 all of which were created to help litigants settle while on appeal.

Why Settle on Appeal?27

Settling a case while it is pending on appeal may seem counterintuitive. There is already a winner and a loser, so what would motivate them to compromise and settle at this point? The answer is that, even though the case is on appeal, it is still driven by the professional, practical and personal motives of the participants. Consequently, appellate cases remain ripe for mediation and do settle on appeal.

The parties' professional motives often include a concern with the probabilities of winning on appeal (does the client want to take the risk of losing on appeal?), an interest in protecting a favorable lower court opinion (does the client want to lose that decision?), and the availability of alternative legal avenues that are better suited to resolving the client's problem (the federal court of appeals is not always the best forum).

The parties' practical interests may also push them towards mediation. An appeal takes a long time to reach a final decision,28 and waiting may be disruptive to the client's business. It may cost the client less to settle now rather than later, and the payments can be structured to be convenient for the client and to maximize tax benefits.

Finally, the parties are driven to mediation by personal concerns. A party may have an immediate need to settle for financial reasons. The client may have developed a willingness to move beyond the conflict and finally let go of it. The client may be motivated by fairness and believe that settlement is the right thing to do regardless of the law. Ultimately, settlement brings peace of mind to the participants.

With these motivations, all the parties need is a forum to allow them to explore settlement. Mediation gives them this forum. A risk-free environment and a trained neutral equipped to fully explore these motivations help the participants fashion a solution that satisfies their interests, even on appeal.

U.S. Court of Appeals, 11th Judicial Circuit Program29

To date, nearly every U.S. appeals court has established a mediation program to assist parties in resolving their appeals.30 These courts-of-appeals programs are generally established under Federal Rule of Appellate Procedure (FRAP) 3331 in conjunction with a local rule or order.32 While each is unique, conducted in a fashion that best suits the individual court's settlement mission, there are more similarities among the programs than differences. The 11th Circuit mediation program, which shares many of its characteristics with other circuit-court programs, is detailed below as an example of the federal courts' mediation efforts.33 

In the 11th Circuit, mediation conferences are conducted by the court's circuit mediators, pursuant to FRAP 33 and 11th Circuit Rule 33-1.34 Under the circuit's rules, judges may participate in the conferences, but rarely do so.35 These conferences may address any procedural questions or problems that are raised by the parties. However, the primary purpose of these conferences is to offer participants a confidential, risk-free opportunity to explore all possibilities for the voluntary disposition of the appeal and the case.36 

Most civil cases are eligible for selection into the program37 and can be placed in the program in one of three ways: selection by a circuit mediator, a confidential request by counsel, or a referral by hearing panels either before or after oral argument.38 Most initial mediation conferences are scheduled before a briefing order has been issued. If all counsel are located in the Atlanta area,39 the initial conference is held in person at the court. Otherwise, initial conferences are by telephone, with the court initiating the calls. At the mediator's discretion, conferences for cases outside the Atlanta area may be conducted in person.

For the most part, participation is mandatory. If there is a compelling reason that mediation would not be appropriate, the lawyer is free to call the circuit mediator and explore those concerns. As a result, the mediator may cancel the conference. Otherwise, the appearance and participation by counsel is expected.40 Settlement, of course, is not required, and the parties will not be coerced into settling by the mediator. Instead, the conference is an opportunity to explore the possibility of devising a settlement that satisfies the parties' concerns and interests.

Like classic civil mediation,41 the mediation conference is conducted in a series of joint and separate sessions, with the mediator initially talking with both sides together and then meeting with each side separately. Conferences generally begin with an inquiry as to any procedural questions or problems that can be resolved by agreement. These might include questions about the record excerpts or the need for a specially tailored briefing schedule.42 If negotiations are productive, and everyone agrees, briefing may be postponed for a reasonable time until negotiations are completed.43 

The discussion then moves to an explanation by each party of the issues on appeal. The purpose of this discussion is not to decide the case, but to understand the issues and to evaluate the risks — to both sides — on appeal. In many cases, a candid examination of the case is helpful in reaching a consensus on the settlement value of the case. This examination may be done in a joint session or with the mediator talking privately to each party.44 

Private sessions are often more candid than the joint session. During these sessions, the mediator and the participants talk about the parties' interests, explore more realistic settlement options, and evaluate the case's shortcomings. The information revealed in these private sessions is not shared with the other side unless the participants permit the mediator to transmit it.

In most cases there is extensive follow-up activity to the initial sessions, including additional telephone calls, in-person conferences, additional telephone conferences, and ex parte conferences with one party.45 Every effort is made to generate offers, counteroffers, and alternative settlement options until the parties either settle or know the case cannot be settled. Where it is possible, the mediator assists the parties in resolving related trial court cases, frequently in an attempt to achieve a "global settlement" of various lawsuits. Indeed, the mediation may continue right up to the point that the court decides the issues on appeal, and issues an opinion. As a result, follow-up discussions may continue for days, weeks or longer.

Throughout mediation, the lawyers play a critical role. Without them, settlement is not possible.46 Unfortunately, our adversary system creates many attorneys who are not adept at negotiating settlement for their clients and are ill-equipped for the mediation forum.47 "Mediation offers enormous potential for lawyers to recognize and honor the missing human dignity dimension in current versions of adversarial lawyering,"48 and by doing so, reach a settlement that satisfies their clients' interests. To fully serve his or her client, a lawyer must be educated about the mediation process and its potential.

Next month: The Ten Commandments of Effective Mediation.

Copyright © 1999 by Mori Irvine. This article is the next installment of a discussion started in Mori Irvine, The Lady or the Tiger: Dispute Resolution in the Federal Courts, 27 U. Tol. L. Rev. 795 (1996). In that earlier article, the author examines what the federal courts are doing to assist litigants in settling their cases, and ventures some thoughts on their success, and more importantly, on the appropriateness of their efforts. The reader should treat this article as a side trip from that journey — the appropriateness of federal court dispute resolution — which the author still intends to treat at greater length in Mori Irvine, Settlement at the Court of Appeals: Distilling or Diluting the Law? (work in progress). The views expressed in the article are solely those of the author and do not reflect the views of the U.S. Court of Appeals, the 11th Judicial Circuit, the chief circuit mediator or the Circuit Mediation Office.

Reprinted by permission of The Journal of Appellate Practice and Process, University of Arkansas at Little Rock.

NOTES

1. The exact percentage of lawsuits that settle out of court varies by jurisdiction and the nature of the lawsuit. One study, now over 20 years old, found that only 4.2 percent of claims filed against insurance companies reached trial. See H. Laurence Ross, Settled Out of Court: The Social Process of Insurance Claims Adjustment 179 (1970). A 1980 study found 6.5 percent of federal district court suits reached trial. Director of the Administrative Office of the U.S. Courts, Annual Report of the Director A-28 (1980). A study conducted in the mid-1980s found that less than eight percent of civil suits filed in state and federal courts did not settle and were tried. See David M. Trubek et al., The Costs of Ordinary Litigation, 31 UCLA L. Rev. 72, 89 (1983); see also Harry T. Edwards, Alternative Dispute Resolution: Panacea or Anathema?, 99 Harv. L. Rev. 668, 670 (1986) (observing that over 90 percent of all civil cases settle before trial).

2. There is no clear statistic on the percentage of civil cases that are appealed, but it is a safe assumption that not all losers appeal. Nonetheless, "[b]ecause the decision to file a notice of appeal is a virtually cost-free, risk-free proposition, it is often a knee-jerk reaction to an adverse decision." Jerrold J. Ganzfried, Bringing Business Judgment to Business Litigation: Mediation and Settlement in the Federal Courts of Appeals, 65 Geo. Wash. L. Rev. 531, 540 (1997).

3. As circuit mediator I call these cases "the toughest two percent."

4. A similar discussion can be found at Irvine, supra note,* at 796.

5. Civil Justice Reform Act of 1990, Pub. L. No. 101-650, §§ 101-06, 104 Stat. 5089 (codified as amended at 28 U.S.C. §§ 471-82 (Supp. V 1993)).6. Id. § 103(a). These civil-delay reduction plans were required to be completed by December 1, 1993.

7. The first formal recognition of ADR's role in the federal courts came with the 1983 amendments to federal rule of civil procedure 16, which provided for the use of "extrajudicial procedures to resolve the dispute." Fed. R. Civ. P. 16(b)(7). However, federal district court experimentation began with court-based arbitration programs in the late 1970s. Donna Stienstra & Thomas E. Willging, Alternatives to Litigation: Do They Have a Place in the Federal Courts? 4 (1995).

8. Mediation is the use of a third-party neutral to facilitate a settlement that the parties themselves devise. S. Rep. No. 416, at 29 (1990), 1990 U.S.C.C.A.N. 6803, 6832: "In its simplest form mediation is a process through which two or more disputing parties negotiate a voluntary settlement of their differences with the help of a third party (the mediator) who typically has no stake in the outcome. The parties' negotiation is guided and structured by the mediator, who acts primarily as a catalyst for the process by shaping both the agenda and the discussion. The mediator helps the parties identify issues and explore possible solutions. The mediator also encourages each party to accommodate the other party's interests. As mediation expands and develops, providing a single universal definition of this process becomes increasingly difficult. The preceding description, however, illustrates the classic mediation model." Mori Irvine, Serving Two Masters: The Obligation Under the Rules of Professional Conduct to Report Attorney Misconduct in a Confidential Mediation, 26 Rutgers L.J. 155, 158 (1994) (internal quotes and footnotes omitted): "A mediator can be envisioned as the Sherpa guide of the negotiation process. The Sherpa guide does not tell the explorers which mountain to climb, or whether to climb a mountain, the Sherpa guide helps the expedition find the best way to the top. Similarly, a mediator does not tell the parties when or how to settle a case, but will help the parties maneuver towards resolution." Id. at 158 n.13. For a more detailed discussion of mediation, see Id. at 158-61.

9. In 1988, Congress authorized the implementation of 10 mandatory arbitration programs with 10 more courts permitted to offer such programs. 28 U.S.C. §§ 651-658. Arbitration is a dispute-resolution process where a third-party neutral sits as fact-finder and decision-maker. The arbitrator conducts a hearing during which evidence is presented in a more informal setting and where the rules of evidence are often relaxed. After all the evidence has been presented, the arbitrator rules on the case. A disappointed litigant has the right to pursue a trial de novo.

10. CJRA § 103(a). However, Early Neutral Evaluation (ENE) started before this. In this process the third-party neutral provided the litigants with a nonbinding advisory opinion of the probable outcome if the matter went to trial. Early Neutral Evaluation is also known as Early Neutral Case Evaluation or Case Evaluation. For a more detailed description of this process, see Brazil et al., Early Neutral Evaluation: An Experimental Effort to Expedite Dispute Resolution, 69 Judicature 279 (1986).

11. In a summary jury trial, the parties present condensed versions of their case to a jury, which renders an advisory opinion to the litigants. This advisory opinion then serves as a starting point for the parties to discuss settlement. S. Rep. No. 416, at 28-29 (1990), 1990 U.S.C.C.A.N. 6803, 6831-32.

12. For example, the courts may now refer cases to minitrials. In a minitrial, the attorneys present evidence and legal arguments to representatives of the parties so they may better understand the issues of the case and be in a better position to negotiate a satisfactory settlement. S. Rep. No. 416, at 29 (1990), 1990 U.S.C.C.A.N. 6803, 6832.

13. Settlement conferences are the most common dispute-resolution mechanism. In this process, the attorneys, sometimes with their clients present, meet with a judicial officer, usually a judge or a magistrate, to discuss settlement. Two-thirds of the district courts offer some variation of the settlement conference. Judicial Conference of the United States, Civil Justice Reform Act Report 6 (1994) [hereinafter Civil Justice Reform Act Report]. The Judicial Conference of the United States prepared this comprehensive report on the implementation of the Civil Justice Reform Act, pursuant to 28 U.S.C. § 479(a). Id. at 1.

14. Id. at 6.

15. Id.

16. See generally David Rauma & Donna Stienstra, The Civil Justice Reform Act Expense and Delay Reduction Plans: A Sourcebook, 285-98 (1995) (listing the ADR methods approved by each district court) [hereinafter Sourcebook].

17. See generally id.

18. See Civil Justice Reform Act Report, supra note 13, at 7.

19. Alternative Dispute Resolution Act of 1998, Pub. L. No. 105-315, 112 Stat. 2993, 2994.

20. Id.

21. Id.

22. Interestingly, the success of the federal courts of appeals mediation programs caused Congress to mandate that district-court dispute resolution move from the experimental to the mainstream: "[T]he continued growth of Federal appellate court-annexed mediation programs suggests that this form of alternative dispute resolution can be equally effective in resolving disputes in the Federal trial courts.…" Alternative Dispute Resolution Act of 1998 § 2(3).

23. Irving R. Kaufman, New Remedies for the Next Century of Judicial Reform: Time as the Greatest Innovator, 57 Fordham L. Rev. 253, 261-62 (1988).

24. Id. at 261.

25. Id. at 262 (citing Irving R. Kaufman, The Second Circuit Review — Safeguarding Judicial Resources: The Joint Duty of Bench and Bar, 52 Brook. L. Rev. 579, 586 n.24 (1986)).

26. Irving R. Kaufman, Must Every Appeal Run the Gamut? — The Civil Appeals Management Plan, 95 Yale L.J. 755, 761-62 (1986). Chief Judge Kaufman observed that "[i]f imitation is any measure of achievement, CAMP has indeed earned high marks. Since the inception of CAMP in 1974, four circuits and more than a dozen states have implemented or experimented with preargument conference programs." Id.

27. There is an excellent list of reasons listed in Thomas F. Ball III, Appellate Mediation in the Fourth Circuit: An Idea That Works, 9 S.C. Law., Nov.-Dec. 1997, at 28, 30 (1997). This is a brief summary from that list.

28. In the 11th Circuit it takes a civil appeal an average of 14 months to result in a final decision. See Court Statistical Report (internal court document on file with author).

29. A less detailed discussion of these programs can be found at Irvine, supra note,* at 798. This description of the program and how it operates is taken from a descriptive narrative created by the circuit mediators that is on file with the author.

30. The federal circuit remains the sole circuit without a mediation program. See James B. Eaglin, The Preargument Conference in the Sixth Circuit Court of Appeals 5 (Federal Judicial Center 1990); Appellate ADR: D.C. Circuit Experimenting with Mandatory Mediation in 100 Lawsuits, 6 Alternatives 35, 35 (1988); Ganzfried, supra note 2, at 531; John Martin, Eighth Circuit Court of Appeals Preargument Conference Program, 69 Judicature 312, 312 (1986); Pamela Mathy, Experimentation in Federal Appellate Case Management and the Prehearing Conference Program of the United States Court of Appeals for the Seventh Circuit, 61 Chi.-Kent L. Rev. 431 (1985); Robert Rack Jr., Pre-argument Conferences in the Sixth Circuit Court of Appeals, 15 U. Tol. L. Rev. 921 (1984).

31. The rule provides: "The court may direct the attorneys — and, when appropriate, the parties — to participate in one or more conferences to address any matter that may aid in disposing of the proceedings, including simplifying the issues and discussing settlement. A judge or other person designated by the court may preside over the conference, which may be conducted in person or by telephone. Before a settlement conference, the attorneys must consult with their clients and obtain as much authority as feasible to settle the case. The court may, as a result of the conference, enter an order controlling the course of the proceedings or implementing any settlement agreement." Fed. R. App. P. 33.

32. See, e.g., 11th Cir. R. 33-1.

33. For a description of other circuit mediation programs, see Eaglin, supra note 30; David Aemmer, Appellate Mediation in the Tenth Circuit, 26 Colo. Law. 25 (Oct. 1997); Appellate ADR, supra note 30; Ball, supra note 27; Ganzfried, supra note 2; Martin, supra note 30; Mathy, supra note 30; Rack, supra note 30.

34. The circuit mediators are full-time employees of the court who conduct settlement conferences. See 11th Cir. R. 33-1(b)(1). The circuit maintains two mediation offices. The main office, with three mediators, is located in Atlanta, Georgia. A single mediator occupies the branch office in Tampa, Florida. A Miami office is anticipated to be operational within the next two years.

35. Id. at 33-1(c)(1).

36. Id.

37. All fully counseled civil cases except prisoner, habeas corpus, and immigration cases are considered suitable for the program and are eligible for selection. Id. at 33-1(a)(3).

38. Id. at 33-1(c)(1).

39. The U.S. Court of Appeals for the 11th Judicial Circuit sits in Atlanta, and the main Circuit Mediation Office is located there as well. The 11th Circuit encompasses Georgia, Alabama and Florida. As a result, parties and counsel often are located well beyond the Atlanta area.

40. The circuit rule provides: "Upon failure of a party or attorney to comply with …the provisions of the court's notice of mediation conference, the court may assess reasonable expenses caused by the failure, including attorney's fees; assess all or portion of the appellate costs; dismiss the appeal; or take such other appropriate action as the circumstances may warrant." 11th Cir. R. 33-1(f)(2).

41. For an explanation of classic civil mediation, see supra note 8.

42. The mediator has the authority to grant extensions to the parties for the filing of their briefs. This is done to facilitate the settlement talks. Only if the case is in active settlement discussion will this be done, and only with the consent of all the participants. Otherwise, mediation does not delay the appellate process. The court does not know which cases are being mediated, and mediation does not delay final consideration and decision by the court. The mediation is confidential and the circuit mediator does not make a report to the court. 11th Cir. R. 33-1(c)(3).

43. Ordinarily, there is a two-tier program that permits litigants to pursue simultaneously a resolution of their dispute by legal decision or by voluntary settlement. The settlement talks do not change the briefing schedule and time to decision unless all the participants agree to delay that process. Id. at 33-1(e); Irvine, supra note,* at 798.

44. If the mediation has an evaluative component, the conference is akin to neutral case evaluation. Civil Justice Reform Act of 1990, Pub. L. No. 101-650, § 103(a), 104 Stat. 5089 (codified as amended at 28 U.S.C. § 473(a)(6) (Supp. V 1993)).

45. Ex parte contact with counsel is not a concern because the mediator is not a fact-finder or decision-maker. Private caucuses with parties are an important tool of the mediator's trade.

46. Remember, the mediator only directs and assists the participants in reaching their own settlement.

47. In reality, many attorneys actually impede the settlement process and can snatch trial from the jaws of a settlement, or in the case of appellate mediation, snatch an adverse opinion from the jaws of settlement. See, e.g., McKinlay v. McKinlay, 648 So. 2d 806 (Fla. Dist. Ct. App. 1995) (claiming that attorney badgered and intimidated a party during a mediation).

48. Jacqueline M. Nolan-Haley, Lawyers, Clients, and Mediation, 73 Notre Dame L. Rev. 1369, 1370-71 (1998).

Part Two of this two-part article

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