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The ADR Magistrate Judge in the United States District Court for the Northern District of California has issued an opinion concluding that under the ADR Local Rules, a party cannot disclose the substance of an Early Neutral Evaluation to a settlement judge unless the other party consents to the disclosure.
In In re Prohibition Against Disclosing ENE Communications to Settlement Judges, No. C 07-80133, 2007 WL 1514643 (N.D. Cal. May 21, 2007), the court referred an unnamed case to Early Neutral Evaluation (ENE) pursuant to the ADR Local Rules. Following the ENE session, the evaluator prepared a written evaluation concluding that the defendant was "significantly more likely than not" to prevail on plaintiff's claims.
The court later referred the case to a settlement conference before a settlement judge. Prior to the settlement conference, the defendant submitted a "Settlement Conference Statement" that discussed the ENE evaluation and included it as an exhibit.
The plaintiff, who did not consent to disclosure of the ENE evaluation, filed a letter of complaint with the ADR Magistrate Judge (the Judge). The Judge ruled on the complaint in a private order but issued a public opinion in order to apprise the public of his interpretation of the relevant provisions of the ADR Local Rules.
The Judge concluded that disclosure of an ENE evaluation to a settlement judge, without the consent of the opposing party, violates Rule 5-12 of the ADR Local Rules. Rule 5-12 addresses the confidentiality of ENE proceedings. Paragraph (a) of the rule precludes parties from disclosing an ENE evaluation "to anyone not involved in the litigation." Paragraph (b) lists several exceptions to the rule of confidentiality, but none applied in this case.
In reaching his conclusion, the Judge relied largely on the policy considerations underlying ENE confidentiality. As the Judge explained: "The productivity of an ENE session – how much benefit it can deliver to the parties – depends in substantial measure on the willingness of litigants and lawyers to disclose to one another and to the evaluator what they have learned about the evidence and how they could argue the law."
The Judge also analyzed the difference between an ENE evaluation and a settlement conference in order to demonstrate how an ENE evaluation can shape the perspective of a settlement judge. First, under Rule 5-3(a) of the ADR Local Rules, an ENE evaluator must have "expertise in the subject matter of the lawsuit," whereas the settlement judge is typically a "generalist." Second, an ENE proceeding is "a highly structured process with a predictable, uniform shape," whereas settlement conferences are somewhat amorphous and thus vary from judge to judge.
As the commentary to Rule 5-12 indicates, confidentiality is an essential component of both ENE and mediation. Despite the common feature of confidentiality, these two forms of ADR fundamentally differ. Mediation facilitates an immediate or imminent settlement, whereas ENE "provide[s] a reality check for lawyers and parties relatively early in the case," so that "[t]hey can get good neutral feedback about their case before they have spent a lot of money on attorneys' fees." Ellen M. Maycock, Early Neutral Evaluation, Utah Bar Journal, Nov. 2001, at 36. This "reality check" may ultimately lead to settlement, but it has the additional benefit of informing the cost-benefit analysis that guides the parties' discovery and motion practice.
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