U.S. Magistrate Judge Janie S. Mayeron (D. Minn.) recently chided lawyers on both sides of a lawsuit for showing up at a court-ordered settlement conference without their clients and without permission of the Court to show up without their clientsWe have to assume that the lawyers involved did not have very much litigation experience because that is a pretty significant mistake — two families showing up for a wedding but each forgetting to bring the prospective bride and groom? Isn’t the point of a settlement conference: to consummate a deal?
The “practice pointer” here should be self-evident. Do not forget the guests of honor when you’re throwing a settlement party.
But I note the court’s order also to reflect on the notion of “full settlement authority.” Orders to attend settlement conferences generally, if not always, include this provision. The question is particularly tricky when it comes to cases in which parties are business entities and not human beings and in lawsuits that are not “bet the company” cases.
Imagine, for example, you represent a very large publicly traded company that is a party in a relatively small case. (For purposes of our exercise, it is irrelevant whether the client is a plaintiff or a defendant.)
The Court orders you to attend the settlement conference accompanied by a representative “with full settlement authority.”
What, exactly, does that mean? Whom are you required to bring along?
Taken to the extreme, must you show up with the C.E.O. and the board of directors? Presumably these are the decision-makers with true “full settlement authority.” For a relatively minor or small dispute, however, that would be impracticable and absurd.
How far down the line of authority, then, is one allowed to go? In some businesses such as assessment is quite straightforward; different tiers in some organizations are expressly tied to dollar amounts — imagine, for example, stock traders who are ranked by how much money they are authorized to risk in their trades without seeking permission of a supervisor. I imagine the same holds true for insurance companies and many other businesses, where job title and “spending thresholds” are expressly linked. If a lawsuit has a fairly clear “dollar amount at risk,” finding someone with “full settlement authority” would be easy if your client is organized in this way.
But in many organizations, there are no such clear lines. Assistant Branch Manager? Branch Manager? Regional Manager? C.F.O.? Controller? Etc.
The rough idea is simple. The person attending the settlement conference should be expected to be able to settle the case without running it past any other person in the organization. They should be deputized to settle.
But the problem with this “rough idea” is that the choice of the entity representative reflects the entity’s understanding of the amount at risk in a case. The judge presiding over the settlement conference or the other side might have very different assessments of a case’s settlement range.
Imagine, if you will, that a Vice-President of a company sends an Assistant Vice-President with instructions to “take no less than $50,000” (or “pay no more than $50,000”). Is the A.V.P. deemed to have “full settlement authority”? If the original claim was for $100,000? $50,000? $10,000? Under any of these scenarios, is outside counsel supposed to push back and tell the client that someone with more authority must attend the settlement conference?
The correct answer to this question, as far as I know, does not exist. Lawyers and their clients are simply required to exercise their good faith and best judgment in settlement negotiations and also in staffing settlement conferences. But, at a minimum, you always need to show up with a client representative (or get the court’s permission to show up “stag”).
Copyright David Dixon and licensed for reuse under a Creative Commons Licence