Alternative Dispute Resolution
Lessons Learned in the Court of Appeals Settlement Program
*This article represents the personal observations of the author. These comments do not represent the official view of the Court of Appeals or its judges.
The Michigan Court of Appeals has had a confidential and flexible formal settlement program (using the facilitative mediation model) for several years now.1 Although a complete statistical analysis has not been performed, there are many important lessons we have learned from the program so far.
A NOTE ABOUT TERMINOLOGY
In every state except Michigan, and in nearly every country, ‘‘mediation’’ is a process in which a neutral assists in negotiating a settlement. There are no penalties for failing to settle. In Michigan, however, ‘‘mediation’’ is a specific process under court rule MCR 2.403 where three attorneys evaluate a lawsuit. Penalties may be assessed if the case does not settle. What we Michiganders call ‘‘mediation’’ is known as ‘‘evaluation’’ everywhere else, and what we call ‘‘facilitation’’ is known as ‘‘mediation’’ everywhere else.
To further complicate matters, the court rule calls the Court of Appeals process a ‘‘pre-argument settlement conference,’’ and the person conducting the conference is a ‘‘moderator.’’
Michigan’s terminology may be straightened out by a proposed rule pending before the Michigan Supreme Court.2 That rule would rename the ‘‘mediation’’ process under MCR 2.403 as ‘‘case evaluation,’’ and would set up a new trial court facilitation system to be called ‘‘mediation.’’ Thus, Michigan’s terminology would match the rest of the world. The Court of Appeals would then plan to update its rule to conform.
This article will use common Michigan terminology and call the Court of Appeals process a ‘‘settlement conference’’ and refer to the neutral as a ‘‘facilitator.’’
An experiment was conducted during the summers of 1995 and 1996. The court wanted to determine whether settlement conferences would be feasible at the Michigan Court of Appeals. Similar programs were very successful at the federal appellate level, but results from state appellate courts had been inconsistent.
Our court was interested in settlement conferences for many reasons, some internal and some external. Settlements bring higher satisfaction among litigants and can be a cheaper, quicker alternative to litigation. The Court of Appeals was actively seeking to reduce the length of appeals. If the settlement rate could be increased, and if settlements could occur at the front end of an appeal rather than toward the day of oral argument, the court’s resources could be devoted to those cases less likely to settle.
Attorneys active in the State Bar’s Appellate Practice Section and the Alternative Dispute Resolution Section agreed to serve pro bono as facilitators in the experimental program. During the two summers, 120 cases were assigned to 40 attorneys. The cases were taken off the court’s regular docket, and in many cases, briefing was suspended to allow the parties to focus their energies on settlement.
Many cases settled fairly quickly; others settled after the program ended. When we officially closed the experimental program, 40 percent of the first year’s cases and 32 percent of the second year’s cases had settled.3 This compared favorably with the court’s normal settlement rate, which was estimated to be 17 percent.
The 32 percent rate was enough to suggest that a permanent settlement program had great promise. The experimental program showed that it is never too late to settle a case (despite concerns that it would be too late once an appeal had been filed) and that an active settlement program would not only increase the rate of settlements, but improve the timing of settlements.4
Moreover, we concluded that these results would likely be attained only through a ‘‘mandatory’’ settlement program.5 In one survey of participants, we determined that in two-thirds of our cases, no settlement offer had been made between the time the appeal was filed and the time the case was enrolled in the settlement program. In approximately one-quarter of our cases, a single offer of settlement had been made. In a scant one-eighth of our cases, an offer plus a counter-offer had been made. Quite simply, attorneys were not actively pursuing settlement as an option in the early stages of an appeal.6
With the results of the experimental program in hand, the Court of Appeals compared and contrasted various programs in other jurisdictions before deciding on a hybrid system. Our system would employ staff attorneys to handle the bulk of the cases while preserving the parties’ right to retain an experienced outside facilitator of their own choosing. These two programs operate side-by-side, although the vast majority of litigants have decided to use the court’s staff attorney program (offered free of charge) rather than hire an outside facilitator.
The permanent program became fully operational in February 1998. In the two years since then, we have enrolled approximately 300 cases each year. The Settlement Office currently settles about one out of every three cases. This is similar to mandatory appellate programs across the country, which appear to settle between 25 and 45 percent of their cases.
Case selection criteria have evolved at the Court of Appeals. During the first year of the experimental program, almost all cases were what the court calls ‘‘box cases,’’ i.e., cases in which the record occupies one or more boxes. The second year brought a more representative sampling of cases on appeal and included more cases on appeal from summary disposition.
In 1998, the program continued selecting a representative sample of cases, although certain types of cases were automatically excluded for logistical reasons or because they required certain specialized training. Such cases included prisoner appeals, custody actions, paternity cases, termination of parental rights, divorce, cases where parties represented themselves (in proper persona), and worker’s compensation actions. All other civil cases were considered eligible for the program, even if they involved equitable relief.
In 1999, the program took a less representative sampling, shying away from cases that were clear winners for one side or the other. Toward the end of the year, we added to the mix a few worker’s compensation and divorce cases (property division). We are continuing to examine those types of cases to see whether they might be suitable candidates despite our facilitators’ lack of specialized training.
There are four ways cases come into our program: mandatory selection, opt-in, party volunteer, and judicial referral. There is a 10 to 15 percent chance that a civil appeal will be assigned to the settlement program once it survives early jurisdictional review or an application is granted.7
The vast majority of cases are selected by court staff after reviewing basic procedural and factual information in the docketing statement required to be filed in all civil appeals.8
We have been experimenting with a method called the ‘‘opt-in group’’ to bring cases in on a voluntary basis. In this experiment, a letter is sent to the attorneys informing them that their case will come into the settlement program only if they unanimously agree to it. In 1998 and 1999, 32 cases came into the program this way. The opt-in group will be discussed in more detail later in this article.
In addition, a party may ask the court to consider its cases through a telephone call to the Settlement Office (313-256-9282). This request is kept confidential. The case is evaluated and must, of course, meet our normal screening criteria. If it does, the staff will send out its usual letter indicating that the case has been selected for the settlement program. Only a small number of cases come into the program this way. We hope more attorneys will take advantage of this opportunity when they learn more about the program.
Finally, a small number of cases are referred by the judges. Judges have placed cases at all stages of the appeal.
CONDUCT OF CONFERENCES
Once a case has been selected for the program, the court’s first step is to send all attorneys of record a scheduling letter announcing a date and time for the first settlement conference. The letter includes general information about the program.
Most conferences are conducted at the court’s office in downtown Detroit. When attorneys outside the Detroit metropolitan area are involved, we use telephone conferences. Most facilitators agree, however, that telephone conferences are less successful than in-person conferences. Our staff attorneys also periodically travel to Grand Rapids to conduct conferences at the court’s facilities there, and we have conducted conferences in Pontiac, Jackson, and Lansing. When outside facilitators are employed, the location can be any site agreed upon by the parties.
We do not ask the parties to prepare any new materials for the conference. We do, however, ask for copies of any briefs filed at the Court of Appeals, and we sometimes ask for copies of important trial court documents. The scheduling letter references all materials to be provided by the attorneys at the settlement conference.
We prefer to have clients or client representatives with full settlement authority present.9 In a few cases, we have requested that only the attorneys appear (without clients). This approach is used when we have complex litigation and need to map out logistics, or when the parties are obviously at each others’ throats and we need to size up the possibility of settlement before asking them to sit at the same table.
When the conference commences, the facilitator gives an opening statement outlining the process and the ground rules (such as confidentiality). The litigants or their attorneys are invited to make opening remarks. Since the primary purpose is to discuss settlement, we ask attorneys to tailor their statements to the settlement process rather than speak as though they were at an oral argument. There is no need to impress or even persuade the facilitator, since he or she is not there to decide the case. In addition, the usual form of oral argument does not generally make the opposing side more amenable to compromise.
Eventually the parties are separated and we hold caucuses. The most significant progress is usually made in caucuses. Greater candor is possible, and options can be explored more deeply.
Some cases revolve around the specific issue on appeal, some involve broader issues. For instance, as part of the settlement of a Court of Appeals case, we may also have the opportunity to settle related cases pending in the Michigan Supreme Court, a circuit court, a probate court, a federal district court, or elsewhere. Of course, we hope and expect that a settlement reached in the Court of Appeals’ program will have the effect of limiting remands to trial courts and will eliminate the need for any appeal to the Michigan Supreme Court.
If sufficient progress is made, we keep talking. Lawyers may need to consult with clients or other attorneys, they may need to conduct research, or clients may need time to consider their options. We often reconvene by telephone, but we can also reconvene in person. The court staff is willing to do whatever seems appropriate based on the needs of the parties and the possibility of success. We must be reasonable, however, in light of the court’s need to keep cases moving towards final resolution.
The Settlement Office may need to put a case back on the regular docket when progress has not been sufficient. This does not mean the court has given up on the possibility of settlement. In fact, many cases settle after being restored to the regular docket. The Settlement Office remains available to assist the parties, and the parties are encouraged to continue their negotiations, even if they are outside the purview of the court’s program.
If it becomes clear that a case will not settle, we restore it to the regular docket. We do not request attorneys to appear repeatedly on a case being handled through the Settlement Office out of some misguided zeal to wear them down. We do expect attorneys to understand, however, that it takes a little time for even the best facilitator to determine that a particular case is not likely to settle at a particular time.
MYTHS ABOUT SETTLEMENT
One of the greatest misconceptions lawyers have revolves around the question of whether a case ‘‘can’’ settle. We have seen many cases where both attorneys say the case can’t settle, yet they settle anyway. Sometimes they say they can’t settle because they’re posturing. Sometimes they say can’t settle because one side closed the door first and no one wants to look desperate enough to compromise. Other times, attorneys say the case can’t settle because they think the other side won’t make sufficient movement. It is a rare case, indeed, where our facilitators do not obtain some movement from each side. Even in cases that don’t settle, lawyers often remark that they saw greater movement than had been achieved without the use of a facilitator. Clearly, the use of a neutral facilitator offers opportunities not found when two advocates engage in direct negotiations.
There is also a misconception about ‘‘settlement.’’ Many attorneys feel it means that both sides must compromise. In fact, several appeals have been ‘‘settled’’ by withdrawal of the appeal or acceptance of an opponent’s position. Without giving away all the facilitator’s secrets, some parties simply need their ‘‘day in court’’ before they bring closure to a dispute. A court-employed facilitator who listens carefully and asks pointed questions can sometimes bring the closure parties need.
An attorney is mistaken if he or she assumes facilitation is a waste of time simply because he or she does not intend to sweeten any previous offers or accept any previously made offers. In support of this assertion, consider the following statistic: Out of the 175 cases that fully or partially settled in the Court of Appeals program in 1998 and 1999, the attorneys in 76 of those cases indicated that settlement was ‘‘unlikely’’ when they filed their docketing statements.
WRAPPING UP THE FILE
If a case settles, a stipulation to dismiss is prepared. The court does not get actively involved in drafting a settlement agreement, nor does it place settlement agreements on the record.
Often, the parties need to obtain court approval for a settlement (such as distributions to minors). Jurisdiction to approve settlement can be conferred upon the trial court under MCR 7.208(A) by stipulation of the parties. Some parties wish to vacate judgments as part of their settlement. Any action affecting the efficacy of the lower court’s orders must be presented to the lower court; the Court of Appeals does not permit parties to stipulate to vacate orders or stipulate to the existence of error. Motions can be filed at the Court of Appeals to seek this type of relief, but the costs involved in motion practice before the Court of Appeals makes relief through the lower court more attractive.
All dismissals achieved through the settlement program are entered with prejudice and without costs.
If a case does not settle, the court issues an order restoring the case to the regular docket and setting due dates for briefs. The court file shows that a case went into the program and did not settle, but no details are found in the court’s file or in the docket printout. The Settlement Office file is confidential. It is physically separate from the clerk’s file, and is not open to inspection by the judges, clerks, or other court staff.
THE OPT-IN GROUP
With a pool of thousands of cases each year, some cases naturally rise to the top of the stack and some fall to the bottom. In 1998, we decided to take some of the suitable candidates that didn’t quite make it to the top of our priority list and test whether the parties wanted to volunteer to come into the program. These cases were designated as opt-in cases. If all parties agreed to negotiate, we would take the case into the program. If any party objected or failed to respond to our inquiry, the case would continue on the court’s normal docket.
A couple of considerations led us to create the opt-in group. First, we wanted to test whether we could stock an entire, full-time settlement program with only voluntary cases (and abolish the mandatory nature of our program).10 Second, we wanted to make attorneys aware of our program. General articles in legal publications had not effectively informed the Bar about our program. Many attorneys do not retain everything they read unless it is something that affects them or their cases right now. A personal letter from the Court of Appeals about the settlement program carries with it a sense of urgency and compelled many attorneys to become more educated about the program.
The results are not completely in, but there are some interesting statistics from the 1998 and 1999 opt-in program. Out of 381 cases designated for this treatment, 139 appellants and 85 appellees consented to enroll in the settlement program, however, the appellees and appellants matched up in only 30 cases! If we were to apply this seven or eight percent opt-in rate to the court’s entire civil caseload, we query whether switching to a purely voluntary program would generate a sufficient number of cases.
To date, opt-in cases have had only a slightly higher settlement rate (when compared to cases selected for mandatory participation), but the sampling is probably too small to make binding conclusions. If the opt-in settlement rate improves, a voluntary program would become more attractive.
We are continuing the opt-in experiment in 2000.
The Court of Appeals settlement program has benefited the court and the litigants. In two years, we have learned much about what works, and something about what doesn’t. When attorneys understand our process at the Court of Appeals Settlement Office, we are much better able to assist you and your clients to resolve their disputes in a timely and economical fashion.
THE MOST EFFECTIVE FACILITATION
•Facilitation is most effective when decision-makers for all parties are present. In our program, there is a 40 percent chance of settlement when all parties’ decision-makers are present. There is a 33 percent chance when only one party’s decision-maker is present. When neither party’s decision-maker is present, the rate drops to 17 percent. Our experimental program in 1995 and 1996 was successful because the parties’ decision-makers were present in the vast majority of conferences.11 As the attorney representing a party in the Court of Appeals’ Settlement Program, you should do everything possible to bring a client representative with full settlement authority unless the conference is designated as one for ‘‘attorneys only.’’
•Attorneys and clients should talk about settlement strategy, but they should not draw lines in the sand. You should discuss with your client what will happen if you win this case, if you lose this case, and if you settle this case. Many clients think they can’t afford to lose, but we have also found cases where clients couldn’t afford to win. If victory means a new trial in front of a hostile judge and a risky jury (while, to the defendant’s detriment, interest keeps accumulating or, to the plaintiff’s detriment, the injuries keep healing), the risks of trial and the added legal costs can be prohibitively high.
•Parties should keep an open mind about nontraditional ways to resolve a dispute. An injured store patron might be willing to settle for a combination of money and gift certificates or store credits (a store then gets a retail benefit at wholesale cost).12 A large manufacturer might want to settle a case by issuing treasury shares of stock to the opposing side (treasury shares generally have a low book value, while the recipient can benefit from rising stock prices during a bull market). Money might be donated to a charity chosen by both sides, or a memorial might be erected to remember the plaintiff’s decedent. Noncash items could be exchanged. A party could apologize. The focus does not always have to be on money. Settlements offer a rare opportunity to be creative.
•An effective attorney always reads the information sent by the facilitator or the court and lives up to expectations. When briefs or other materials are requested, they should be sent in a timely fashion. The participants should call the court if they have any questions about the process. They should show up on time and be ready to begin negotiating. There might be a certain level of ‘‘getting to know you’’ during the first session, but the process is designed for the attorneys to come and talk, not merely sit and listen. This is the time to send the attorney on whom the client most relies for advice (such as the billing partner, even if that person is not the attorney of record in the matter); it is not the time to send a warm body who will merely report back to the real decision-makers. The settlement process can be every bit as critical to the outcome of the case as writing a brief or conducting oral argument and should be handled accordingly.
•Facilitation is most effective when the attorneys have a conciliatory and civil tone. It is easier to persuade the other side to agree with you when you are not disagreeable. It may be necessary to prepare the client for this tactic, though. It is acceptable to tell the client that, while you will continue to be a bulldog in trial or oral argument, it is appropriate in this particular setting to try a different approach. The vast majority of attorneys who have stepped into our offices have been perfectly civil, contrary to the dire reports we often read about incivility in the practice of law. We try to keep our proceedings informal and (dare we say it?) enjoyable; if attorneys yell, hurl insults, or point fingers at each other, we are generally forced to repair a lot of damage before we can return to the task at hand.
•Posturing for the benefit of your own client will have an opposite and more damaging effect on the other side’s client. Basic psychological principles tell us that resistance will be raised and the other attorney will go into a ‘‘protector’’ mode rather than the ‘‘conciliatory’’ mode you will need to settle the case. An effective attorney acknowledges the humanity of all the participants and can acknowledge that a disagreement exists without having to rehash all its details.
•Attorneys should know what to expect from the facilitator. In our court, the facilitators do not put a number on the table for the parties to accept or reject. We do not predict the outcome of the case. We may ask questions and make observations that explore the risks and benefits of both settlement and continued litigation, but we are neutrals who are there to keep the process moving. We know that most of our cases won’t settle, and we don’t take it personally when the gap can’t be narrowed. As much as we like settling cases, we will not force, trick, or coerce parties into settling. When a case settles, it is because the parties and the attorneys have worked hard to make it happen.
*This article represents the personal observations of the author. These comments do not represent the official view of the Court of Appeals or its judges.
1 See MCR 7.213(A).
2 See 78 Mich Bar J 623 (June 1999).
3 Eventually the settlement rate of the second group rose to 40 percent as additional cases settled after the program closed.
4 A control group without court intervention showed that only eight percent settled during the early stages of the appeal (compared to 32 percent with court intervention).
5 In a ‘‘mandatory’’ program, the court decides which cases will be placed in the program. Although participation is mandatory, settlement is always voluntary. The United States Court of Appeals for the Sixth Circuit runs a mandatory program (in many ways, its long-running program served as a model for our state court program). By contrast, in a ‘‘voluntary’’ program, the court makes parties aware of the availability of the program, but cases are placed only if all the parties agree to placement. The United States District Court for the Western District of Michigan runs a voluntary program.
6 There are many legitimate reasons why attorneys might not pursue settlement on their own, particularly early in an appeal. They may be new to the file and need to review the transcripts, they might wish to see the other party’s brief before making any strategic financial decisions, they may have great confidence in their case, and there are dozens of other reasons. Nonetheless, experienced practitioners can see that the dearth of settlement offers might reasonably lead court personnel to believe that if settlement is to be discussed, it may have to be at the behest of the court itself.
7 Many appeals are dismissed in the early stages for lack of jurisdiction. Although most appeals in the Court of Appeals are filed as a matter of right, many are discretionary appeals filed through an application process.
8 MCR 7.204(H). Many attorneys risk dismissal of their appeal by failing to timely file this important document.
9 The chances of settlement are vastly improved when one or all clients appear. Some settlement programs shy away from cases involving governmental units since the full decision-making body (such as a city council or school board) cannot reasonably be expected to convene a meeting consistent with the Open Meetings Act for purposes of conducting closed-session negotiations. We take governmental cases into our program and ask that a key opinion leader attend (such as the city manager, department head, or school superintendent). It is essential for all participants to understand the limitation of settlement authority presented by this scenario. We make clear that no settlement is complete until approved by the public board.
10 Voluntary programs seem to have greater user satisfaction and higher settlement rates. Of course, court-annexed programs must consider not only the rate of settlement, but the raw number of cases settled. From a court administrator’s point of view, a voluntary settlement program that takes in 100 cases and settles 80 (for an 80 percent settlement rate) might be less attractive than a mandatory program that takes in 300 cases and settles 100 (for a 33 percent settlement rate). Many viewpoints must be considered when a court decides whether to start a formal settlement program, but the driving force is usually the court itself, so the court’s viewpoint often is accorded greater weight. A settlement program that cannot deliver the numbers will cease to have the court’s financial support. In addition, the court may become unwilling to put a hold on the lawsuit while the parties give peace a chance (particularly if the court is actively attempting to reduce delay).
11 There are other factors we believe contributed to the experimental program’s higher settlement rate, including the prestige of the voluntary facilitators and the amount of time devoted to the conference (about seven hours in the experimentalprogram versus four hours in the permanent staff attorney program).
12 The typical obstacle to this approach: if the insurer is handling the defense, it thinks only in terms of cash since it does not issue the gift certificates or store credits