A New Year Wish

In his annual report on the judiciary, Chief Justice John Roberts expressed concern about the “economic downturn that has imposed budgetary constraints throughout the government, and the persistent problem of judicial vacancies in critically overworked districts.”  In most federal districts that I am familiar with, U.S. Magistrate Judges conduct settlement conferences in civil cases.  In state courts, if you want a neutral third-party to facilitate settlement discussions, you hire a mediator.  Why should the federal courts be different?  My wish for the new year is that the federal courts outsource or privatize the settlement function.  Want to save judges’ time and taxpayers’ money?  Let the judges (and magistrates) be judges.  Let mediators mediate.

Discovering the costs of discovery

A couple of recent articles in the Metropolitan Corporate Counsel highlight the effect that the cost of conducting discovery in complex civil litigation has on settling such cases.  It used to be that an attorney could file a lawsuit on behalf of client and serve it on the defendants along with interrogatories, requests for production of documents, and maybe a notice of deposition or two.  With notice pleading, the plaintiff did not have to be certain of who was responsible for the loss that prompted the lawsuit, or even how exactly it happened.  They would figure that out after reviewing defendants’ records and statements. 

Not anymore.  Most corporate defendants’ records and statements are now maintained in electronic documents and communications.  Accessing such records often requires large investments of time and money in technology and technically savvy personnel.  So the cost of conducting litigation, and e-discovery,has grown enormously for both plaintiffs and defendants.  The courts’ response has been to require more fact pleading and to restrict pretrial discovery by imposing prerequisites such as “meet and confer” conferences to discuss the costs and plan the course of discovery.  Attorneys who normally represent defendants in civil cases complain that this increases the cost of litigation and prompts settlements just to avoid legal costs, even where there is no or minimal liability.  Attorneys who normally represent plaintiffs complain that fact pleading and limits on discovery deter economically impaired plaintiffs from pursuing actions, unless the damages are great enough and liability is clear enough even without knowing defendants’ internal statements and documents.  These considerations apply equally to corporations and individuals.  Corporations can be defendants (e.g., securities, products liability, and employment discrimination cases), and they can be plaintiffs (e.g., intellectual property, real estate, and breach of fiduciary duty cases).  Likewise, individuals can be plaintiffs (e.g., personal injury, breach of contract, and consumer claims) as well as defendants (e.g., embezzlement and fraud schemes, civil RICO actions, breach of non-compete agreements).  Regardless of which side of the fence you sit on, a dispute is going to cost money to resolve. 

It takes investigation and preparation in order to negotiate just as it does to litigate.  The question is whether you need a judge or jury to help you resolve the dispute, or can you do it informally?  Some people are afraid to negotiate because they think it indicates weakness.  But that is true only if they have not investigated or prepared their claim or defense adequately.  So the question of whether to litigate or negotiate a settlement should not depend on the cost of discovery.  If you need a court’s help to get the information necessary to an adequate evaluation of your case, then go to court.  If not, a negotiated settlement is almost always preferable. 

Knowledge is power, and knowledge may cost money.  But, as the saying goes, if you think education is expensive, try ignorance.

Cure-ious

In a unanimous decision, the Wisconsin Supreme Court upheld a ruling that Volvo had to rescind a notice terminating the franchise of one of its truck dealers. Initially, the dealer decided to sell its Volvo truck franchise and took steps to eliminate its efforts to sell Volvo trucks. This admittedly violated its franchise with Volvo. However, about a year later, the dealer decided not to sell its Volvo franchise. Nevertheless, Volvo issued a notice to terminate the franchise because sales had decreased dramatically and the dealer’s actions had breached the franchise agreement. As required by state law, Volvo gave the dealer time to cure the breach. The dealer claimed that it complied with the requirements to cure the breach, but Volvo disagreed. The state agency charged with hearing such disputes agreed with the dealer and Volvo appealed. The Wisconsin Court of Appeals affirmed and so did the Supreme Court. Essentially, the dealer claimed that by recommitting itself to promoting Volvo’s trucks, it cured the breach. Volvo argued that the breach was not cured because the dealer had not restored matters to the way they were before the breach. The courts agreed with the dealer, using the technical legal definition of “cured” rather than the dictionary definition that Volvo preferred. Substantial performance — a term all law students learn in law school — is what the law required. The courts found it was unreasonable to expect the dealer to return to the status quo ante, as Volvo desired.

What is curious about this case is that Volvo was not satisfied with getting a longtime successful dealer back in its fold. It wanted to punish the dealer for temporarily straying from the farm. Obviously, the courts agreed that it should have left well enough alone. I wonder if it was worth the time and expense of litigation to resolve this one ambiguity in the law.

Rites or rights of the season

It’s June — time for graduations.  Let’s go down our checklist:

• take final exams and pass all courses
• get cap and gown
• file lawsuit
• go to church

Hmmm … I don’t remember those last two items being on my checklist when I graduated from high school or college.  But they are today.  A federal judge in Milwaukee recently refused to enjoin a public school district from holding its graduation ceremonies in a church.  The plaintiffs claimed that holding the graduation in the church violated the constitutional doctrine of separation of church and state.  The school district said it could not hold the ceremonies at its schools due to lack of space and the church was the most practical and convenient alternative.  The judge agreed with the school district, at least to the point of refusing to issue a preliminary injunction.  The lawsuit is still pending and a trial date will be set to determine whether the district violated anyone’s constitutional rights.  The plaintiffs have said they will appeal the judge’s decision on the preliminary injunction.  The Milwaukee Journal-Sentinel published an editorial suggesting it would be best to drop the appeal and the lawsuit. 

In the meantime, the school district is building larger auditoriums at its high schools (after 6 to 8 years of using church facilities) and will hold graduation ceremonies at the schools next year.  So much for separation of this church and state.  Now, can we separate the schools from the courts?  

If other school districts make their graduates go to church in order to participate in graduation ceremonies, I suspect the courts will once again be called upon to interpret that pesky 1st Amendment.  What does “establishment of a religion” really mean?  For those who would suggest that this is much ado about nothing, I would ask you to substitute the word mosque, Shinto shrine, Buddhist or Hindu temple, or synagogue for the word church in this story, or in my checklist.  Is it still about nothing?

To settle or not to settle?

The story about the woman who died in a King’s County (New York City) Hospital psychiatric emergency room after waiting a day for service or treatment has raised some interesting questions about both our health care system and our legal system.  The woman’s family settled their wrongful death case with the hospital for $2 million yesterday.  Yet, more than half of the people voting in response to an online story about the case said the family shouldn’t have settled for that amount.  The story mentioned that the family still wanted a criminal investigation to proceed, apparently because there was some evidence that some hospital personnel falsified some records of the incident, which had been recorded on a security video camera.  The City accepted full responsibility for the incident, and the hospital fired several people and made changes to reduce waiting times.  My question is this: if the parties to the civil lawsuit are satisfied with the settlement, and there are other avenues available for addressing potential criminal issues, who cares whether anyone else thinks the settlement is not enough (or too much)?  The civil justice system succeeded in resolving the dispute to the apparent satisfaction of the parties.  Isn’t that what it is for?  This case does raise legitimate issues about how we place a monetary value on a life.  It also raises questions about how our healthcare system can and should deal with pyschiatric patients.  But those are issues for another forum.  As long as neglect and intentionally wrongful conduct can be addressed in the courts, let’s get on with improving our healthcare system by other means.