SETTLEMENT AND ADR ISSUES

SETTLEMENT AND ADR ISSUES GEORGETO WN UNI VERSI TY LAW C ENTER CONTINUING LEG AL EDUCATION LITIG ATING EM P LO YM ENT C AS ES: VI EWS FROM THE BENCH OCTOBER 15, 2004 NE W YO R K , N E W YO R K Presented by: Michael A. Curley, Esq. Morgan, Lewis & Bockius LLP 101 Park Avenue New York, New York 10178-0060 Introduction This paper focuses on certain issues associated with settlement and alternative dispute resolution of employment law cases. My focus will be on the practical aspects of settlement and ADR more than on the case law, and I will look to provide suggestions as to settlement and ADR strategies based on both my own experiences and the materials I have reviewed in connection with the preparation of this paper. In most settlement and ADR situations, there are no “right” or “wrong” answers because of the nature of the topic. Rather, in the same way that all of us become better trial lawyers based on trial experience, my hope (and that of my co-panelists) is that all of us will be at least a bit better “settlement lawyers” based on the knowledge and information shared at the seminar. Knowing how and when to settle cases, in my view, is as important as being able to try cases effectively. These two aspects of lawyering are very much related in that a reputation of being a skilled trial lawyer will make that lawyer better able to settle cases when settlement is in his or her client’s best interests. It is important for a lawyer’s adversaries to recognize that the lawyer and client on the other side have both the ability and the stomach to try the case if necessary. Statistics on employment cases developed over many years, however, show that far more employment cases are settled than are actually tried to final adjudication. As such, knowing how and when to address settlement and ADR issues in handling employment law cases – including knowing how judges will support, encourage, and even initiate settlement and ADR discussions – is a critically important skill for any employment law practitioner these days. Timing for Settlement Discussions Like cases in all other fields, employment law cases run the gamut from the relatively simple to the incredibly complex. While there has been an increase in class action employment litigation over the past few years, my sense is that the majority of employment law cases are still single plaintiff cases. The timing for settlement discussions will usually depend somewhat on the nature of the case. In single plaintiff discrimination, wrongful discharge, or breach of contract cases, experienced lawyers often will have a strong sense as to how the discovery process from both sides will play out even early on in the case based on their respective investigations. Indeed, in some cases the facts will not be all that much in dispute. Yet, discovery is a laborious and extremely expensive process – even more so these days with e-mail and electronic discovery being a large part of virtually every case – and the costs and fees associated with discovery often end up being a major impediment to reaching a settlement. In addition, while emotions can run high in any litigation, emotions typically run very high on both sides in employment cases. The emotions associated with going through the discovery 1-NY/1827122.1 2 process, especially those emotions associated with depositions, often become an additional impediment to settlement of employment cases. These factors counsel for a genuine and strong focus on settlement early on in employment cases, either before a complaint is even filed or at an early status conference before the discovery process begins. To that end, more and more judges are requiring parties in employment cases to explore the possibility of early resolution before the costs of discovery and the emotions associated with discovery become impediments to settlement. Judges take a range of views on how best to have these early settlement discussions, with some overseeing the settlement discussions themselves (in jury trial cases), others referring the cases to magistrates for the early settlement discussions, and still others encouraging the parties to retain the services of private mediators. Some jurisdictions even have designated magistrates for mediation based on the demonstrated skills of those magistrates in helping parties reach settlement through early mediation. In more complex cases, it is typically difficult for the parties to have fruitful settlement discussions early on in the case before any discovery takes place. This does not mean, however, that the parties and the courts should not focus on settlement early on in such cases. Rather, it merely means that the substantive settlement discussions may need to be put off until some point down the road. In those instances, developing a discovery plan that has distinct discovery phases, 1-NY/1827122.1 3 both with regard to depositions and written discovery, is becoming more and more common. In my view, such phased discovery is very useful. Specifically, the court will usually work with the parties in allowing only certain key depositions and in calling for the production of the most relevant documents from both sides. After the first major phase of discovery under such a plan is completed, the parties and the court (or the parties and a private mediator) will address the possibility of settlement before completing discovery and moving towards motion practice and trial. In some jurisdictions, these settlement issues are driven and monitored by the judges themselves. Even where they are not, most judges are more than receptive and are very supportive if the parties suggest such phased discovery in order to focus on possible settlement. ADR: Binding and Non-Binding The two main types of ADR, of course, are arbitration and mediation. They are not mutually exclusive and, indeed, more and more companies are using both of these ADR methods together in looking to address the costs and other burdens associated with litigation of workplace disputes. The courts have addressed the need to protect the interests of all parties, as well as the public policy considerations involved, in addressing the very emotional and hotly-debated issue of mandatory pre-dispute arbitration provisions. This paper will not address those 1-NY/1827122.1 4 issues – and readers will not have any trouble finding case law or articles addressing the issue. Rather, this paper will focus on the practical issues associated with arbitration and with issues associated with the much less controversial ADR mechanism of mediation. (a) Arbitration As controversial as the topic was in the 1990s after the Supreme Court’s decision in Gilmer, the law is rather well-settled now that employers can implement and enforce mandatory pre-dispute arbitration provisions provided that such provisions are fairly drafted in accordance with the recent case law. In my view, every employer should at least consider the pros and cons of mandatory arbitration of employment disputes. Many employers swear by it as being much better for employers and employees, mainly because of the costs associated with litigation, but many other employers have considered it and opted against it. In the months and years ahead, practitioners will face the issues of the amount of discovery allowed in arbitration cases as compared to court cases and the role of motion practice in employment arbitrations. How these critical issues play out, in my view, will shape the role and extent of arbitration as an ADR method in the years ahead. While there are obviously many skilled arbitrators in our profession, my sense from speaking with practitioners on both sides is that there is a shortage of 1-NY/1827122.1 5 arbitrators with experience handling statutory employment law cases. Some of the top arbitration service providers and law schools are taking steps to address this shortage, with programs in employment law for experienced arbitrators and with efforts to attract experienced employment law practitioners into the arbitration field. (b) Mediation As noted above, mediation as an ADR mechanism is far less controversial than mandatory arbitration of employment claims. The EEOC has been a strong supporter of mediation, and most judges support mediation at any stage of the proceedings. In New York and in most jurisdictions around the country, there are many skilled and very experienced private mediators who focus exclusively on employment cases. In addition, because of the percentage of employment law cases on their dockets many judges have become truly expert in mediating employment cases as well. Very few would argue against the increased use of mediation as a means of addressing and resolving employment cases. Starting from that point, though, there are many important issues that parties, lawyers, and judges need to address in dealing with mediation of employment cases. The issue of when it is best for the parties to go to mediation in employment cases parallels the discussion above with regard to settlement generally. That is, it depends on the nature of the case. My own experience has been to focus hard on 1-NY/1827122.1 6 the possibility of early resolution in most cases, even where one of the parties expresses the view that any settlement discussions at the early stage would be a waste of time. There will be cases, as noted above, where the nature and complexity of the case truly would make early settlement a waste of time and money. In those cases, the parties and the court may want to set up phased discovery (as described above) with the prospect of substantive settlement discussions being put off until at least after the initial phase of discovery. Even in those complex cases, however, the parties and the court can benefit from a discussion of how the future settlement discussions may best be structured. Such early discussions can address the selection of a mediator, the need for a formal mediation agreement, and a range of other mediation-related issues. The selection of a mediator is obviously a very important aspect of any mediation. While mediators (like everyone else it seems) have web sites and other ways to make practicing lawyers aware of their experience and availability, my sense is that most selecting of mediators is done based on experience and word of mouth. In the way that all of us as lawyers develop reputations based on our styles and our areas of expertise, the same is true for mediators. The very best ones and thus the ones most in demand have strong people skills, integrity, experience in the field, and tenacity. They truly want to help the parties resolve the cases and they can be very aggressive (in a professional way) and very creative in their efforts to 1-NY/1827122.1 7 accomplish that goal. In recent years, many federal court and state court judges have left the bench to become private mediators, and their experiences on the bench are especially helpful in a host of ways as they mediate cases. All mediators use two skills in the course of a mediation: (1) they facilitate; and (2) they evaluate. Knowing when to be facilitative and when to be evaluative is the most critical issue that mediators have to decide in the course of handling cases. Quite simply, some mediators do it better than others and some, sadly, do not do it well at all. In my view and from my experience, the good mediators are the ones who can and do at some point become evaluative and who, based on their own experiences and strong reputations, can support their evaluative positions. This may mean pushing the defense lawyer and his or her client to pay more than they want to pay or it may mean pushing the plaintiff and his or her lawyer to accept less than the initial demand. Most experienced practitioners tell of mediators who tried to stay on the fence at all times and never to evaluate the parties’ respective positions. While this approach may take some of the antagonism and emotion out of the settlement discussions, it is usually a formula for failure in a mediation. Again, the best mediators do evaluate, they do give the parties their candid views as to the respective positions, they do so in a manner where they retain credibility even when challenging a position held by a party, and they use their persuasive powers to bring the parties to a mutually acceptable 1-NY/1827122.1 8 middle ground whenever possible. I always ask about the mediator’s evaluative skills and about his or her willingness to use those evaluative skills in selecting mediators, and I know many defense and plaintiff lawyers who do the same thing. More often than not, the employer pays the lion’s share of the mediation costs if the plaintiff or potential plaintiff cannot afford those costs. In many cases, the parties will agree to split the costs of mediation, and many of the formal mediation agreements I have seen start from that premise. Quite often, the issue of how the costs of the mediation are split is one of the final issues addressed. While some lawyers have expressed concern that a provision that the employer will pay all of the costs for the mediation services may influence the mediator, I have never shared that view. Again, responsibility for the costs of the mediation is an issue on which the parties need to reach agreement at some point, and they need to address the issue of who pays what if the mediation is not successful in resolving the case. A good mediator will sense it if one of the parties comes into a mediation feeling that it “has to” settle the case – as will a good adversary. I want to go into every mediation with an open mind and a good-faith desire to reach a settlement if one can be reached on terms that are in my client’s best interests. At the same time, however, I want the mediator and my adversary to know that my client and I will move forward with litigation if acceptable settlement terms cannot be reached. I have seen lawyers on both sides in difficult situations when they failed, in 1-NY/1827122.1 9 preparing their clients for mediation, to make sure the clients really understood that sometimes, even with good faith all around and a genuine effort to settle, mediations fail. Mediation is not a cure-all and it is not the answer for every employment case. In my view, though, it is a good thing and parties on both sides should be receptive to it. The keys to effective mediation from my own experience are selecting well, putting the emotions aside, and being creative in finding ways to address the many issues and concerns that typically challenge parties in trying to resolve employment cases. Confidentiality Provisions In Settlement Agreements Contrary to the view held by some of my friends in the plaintiff’s employment bar, I do not believe that all or even nearly all confidentiality clauses in settlement agreements are unsavory or that such clauses run counter to the purposes of the anti-discrimination laws. Indeed, my view is that there are many situations where confidentiality clauses facilitate settlement discussions and thus act to support and foster the policies behind those anti-discrimination laws. Just like plaintiffs, employers settle cases for many different reasons, ranging from a recognition of improper or unlawful conduct by managers, to potential exposure even when there is a strongly held belief of no improper or unlawful conduct, to the costs of litigation even in cases where the employer is 1-NY/1827122.1 10 confident that it can prevail. Each case is different, of course, and in my view precluding parties from having fairly and properly drafted confidentiality clauses in settlement agreements would preclude many settlements that are in the parties’ best interests. My own experience has been that when the EEOC or an adverse party in a case demonstrates a legitimate need for and right to information that would otherwise be covered by a confidentiality clause in a settlement agreement, the information can be obtained with appropriate protections for the employer and the other parties involved being provided by the courts at the same time. Stated differently, my sense is that the approach taken by the courts as to confidentiality clauses in settlement agreements in employment cases is fair and serves the interests of all parties as well as the public interest. As such, I do not believe there is any need for reforms as to the allowability and use of such clauses so long as they are fairly and properly drafted in accordance with applicable statutes and decisions. M.A.C. 1-NY/1827122.1 11