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In an employment discrimination case, a federal court in Connecticut rescheduled a settlement conference when the employer failed to send a representative with full settlement authority. To ensure that a representative with full settlement authority would attend the next conference, the Court ordered the employer's CEO to attend the conference, where he would get an "unfiltered appraisal" of the "staggering costs of litigation."
In Kearson v. Schick-Wilkenson Sword, No. 3:05-CV-1422 (DJS/TPS), 2007 WL 25499 (D. Conn. Jan. 3, 2007), Kearson sued Schick, his former employer, for alleged race discrimination.
The Court scheduled a settlement conference in an order referring the parties to Nick v. Morgan's Foods, 99 F.Supp.2d 1056, 1062-63 (E.D. Mo. 2000). In that case, the court explained that the efficacy of a settlement conference requires the attendance of a corporate representative with full settlement authority because "[m]eaningful negotiations cannot occur if the only person with authority to actually change their mind and negotiate is not present." The court in Nick further explained that availability by phone is insufficient because "[e]ven a conscientious decision-maker cannot absorb the full impact of the ADR conference when they are not present for the discussion."
Despite actual knowledge of the discussion in that case, Schick sent to the settlement conference a representative with only $10,000 settlement authority and no ability to change her position. As the Court observed, Schick's representative "was little more than a messenger."
According to the Court, Schick's failure to send a representative with full settlement authority not only wasted the Court's time but also prejudiced Kearson because he reduced his settlement demand with the understanding that Schick's representative had authority to increase the settlement offer.
When it became apparent that Schick's representative had only limited settlement authority, the Court rescheduled the settlement conference and ordered Schick's CEO to attend the next conference. The Court also awarded attorney fees and costs to Kearson.
Schick subsequently filed a motion for reconsideration, asking the Court to excuse its CEO from attending the conference and permitting the senior attorney handling the matter to attend in his place.
In denying Schick's motion for reconsideration, the Court noted that it had "little confidence" in the senior attorney's sense of discretion since she was responsible for the initial failure to dispatch a representative with full settlement authority. Moreover, as the Court explained, "[m]ost responsible corporations welcome settlement conferences as an opportunity for the court to assist them in avoiding the staggering costs of litigation," and in light of that principle, Schick's CEO "deserve[d] an unfiltered appraisal" of the likely costs of the litigation.
The cost savings of mediation was the subject of a recent study by the Judicial Council of California (the Council). Pursuant to a statutory mandate, the Council conducted a study of five court-annexed mediation programs and discovered that during the two years of the study, the mediation programs saved $49,409,385 in litigation costs and 250,229 in attorney hours. See Judicial Council of California, Evaluation of the Early Mediation Pilot Projects (February 27, 2004) (3.5 MB download).
This Ninth Circuit case is consistent with the preferred Buckeye interpretation that issues raised regarding the "formation" of a contract, including its actual existence, are for the court and all other defenses, including attacks on its validity or enforceability, are for the arbitrator.
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