There are smart, and there are dumb, ways to resolve complex litigation. The dumb way is to litigate it for many years, at huge expense to all parties, and then resolve it on the eve of trial or during trial. Studies show 98% of all litigation is resolved before a verdict. So why wait until all the resources have been committed? The question all counsel should answer is what can be done in planning and prosecuting the case to reach that critical settlement-inducing point in a case before resources are wasted.
A few examples tell the story. In one major case involving hundreds of homeowners, it took more than five years to conclude the lawsuit during which the value of attorney time devoted to the case for all parties was three times what was ultimately paid by the defendants and perhaps four times what the plaintiffs actually received. The judicial process wasted years of resources, the defendants paid enormous funds messing around with discovery and other non-productive efforts, and the plaintiffs’ receipt of funds was unreasonably delayed.
In stark contrast, in another recent case involving an action by approximately 100 opt-out policyholders from an insurance fraud class action, a trial date was reached and the case was resolved by settlement, all in just over one year from filing. Settlement was reached after a very compressed period of discovery in a severed test case, extensive mediation efforts, and a smart trial judge who promptly set the case for early trial, and refused efforts to delay.
What is the difference in the way these cases were handled? Often, it’s the experience of counsel, their attitude toward recognizing the importance of a prompt evaluation and resolution, and an experienced judge who realizes how to encourage the parties to promptly and efficiently resolve complex litigation. However, there are practical tools available which, if used properly, can clearly increase the odds that a complex case will resolve efficiently and, relatively speaking, quickly.
Factors Inducing Settlement
Cases settle for a vast array of different reasons. Nonetheless, common elements exist. Boiled down to simple terms, and overlooking the indefinite dissimilarities between all cases, two common elements appear critical. First, counsel and the parties must have sufficient knowledge about the strengths and weaknesses of the case, including that of the opponent. Second, before a party in a complex case with much at stake is willing to act on that knowledge, the party must face a looming deadline, usually trial, that compels a client to make a decision. A simple cost-benefit analysis compels the settlement: the costs and risks of preparing for and going to trial are outweighed by the benefits of a settlement, which most parties have long realized. Other critical stages could be the anticipated revelation of key evidence.
In the insurance fraud case mentioned above, the critical date proved to be a combination of trial, which was days away, and the deposition of defendant’s CEO. The risk to the defendant from the deposition had just escalated considerably with a key ruling by a discovery referee coming in the middle of the deposition, which permitted what would be an embarrassing line of questioning for the CEO and the company. Thus, the critical mass had been reached in barely over a year from filing in a fraud case involving about 100 separate frauds involving different plaintiffs and individual agents.
The lessons to learn, therefore, come from cases where that point of critical mass is reached quickly and efficiently, without the expense of additional resources to simply reach a result that could have been reached much earlier at far less expense. There are many types of cases that fall into the category of complex litigation, ranging from antitrust and insurance coverage cases to environmental and product liability mass tort cases. All such cases, regardless of whether they are prosecuted as class actions or large multi-party cases, can benefit from "special handling," by both counsel and the courts, to ensure that they are resolved promptly and efficiently. The role of counsel in resolving complex litigation is no more, and no less, important than the role of the court.
With "special handling," complex cases can be managed by counsel to assure the case reaches that point of critical mass to determine if settlement can be reached before trial. This includes the necessity for an early and carefully drawn case management plan, the use of representative test cases, if possible, to streamline discovery, and early scheduling for trial.
The Court’s Role
Litigation, of course, is rarely predictable and many elements are often beyond counsel’s control. For example, if only one party is interested in a smart resolution, the assistance of a judge willing to actively manage the case is required. As stated in the draft Judicial Council’s Complex Litigation Deskbook, "[t]he judge’s role in developing and monitoring an effective plan for the orderly conduct of pretrial and trial proceedings is crucial." ' 20.13.
Thankfully, plenty of authority exists to enlist a judge’s active participation. For example, California Code of Civil Procedure '128 grants the Court power to "provide for the orderly conduct of proceedings before it, or its officers" and "to amend and control its process and orders so as to make them conformable to law and justice." Cal.Code Civ.Proc. '128(a)(3) & (a)(8); see also Id. ' 187 (implied powers of court). This provision, embodying the so-called "inherent authority" of the court to control its proceedings, must be exercised in complex cases. More to the point, however, judges are statutorily compelled under the Trial Court Delay Reduction Act to:
"eliminate delay . . . [and] actively manage the processing of litigation from commencement to disposition, and to compel attorneys and litigants to prepare and resolve all litigation without delay, from the filing of the first document invoking court jurisdiction to final disposition of the action." Gov.Code ' 68607.
Pursuant to the Act, the Judicial Council has promulgated alternative case management plans for use by courts in meeting the proscribed case disposition goals. See, e.g., Cal.Rule of Court 2101-2106. The tendency of counsel in complex cases, however, is to aim for the exemptions to these fast track rules, arguing that case complexity mandates an extended trial date due to the "exceptional circumstances" of the case. See, CRC 2105(d). However, the deadlines are not really that onerous. For example, CRC 2105 provides that even under these management rules, two years are permitted within which to dispose of complex cases. Second, if counsel suspects that delaying tactics are likely from opposing counsel, hard and fast deadlines provide useful ammunition to convince the court that delays should not be countenanced or, in the alternative, will be met with sanctions.
Alternative considerations, however, include asking that a matter be declared "complex litigation" under the Judicial Council’s Standards of Judicial Administration, permitting assignment to an all purposes judge who can proscribe time limits for the litigation. In Master Calendar courts, case management is greatly improved with assignment to an all-purposes judge. In such courts, a party may move, either ex parte or by noticed motion, to have a matter declared complex and request assignment to a single judge who will take the case for all purposes. Cal.R.Ct., Appendix, Div.I, 19(b).
One "complex" insurance fraud case would have fared far worse had the trial judge and discovery referee not taken an active role in managing the case and moving it toward trial. In this regard, assignment of a matter to one courtroom for all purposes is a key step and, in many cases, counsel can take steps to ensure such an assignment. In addition, the use of litigation tools and good planning surely increase the odds of a smart resolution in any case. Some of the tools used in the insurance fraud case provide examples.
One Example Of Efficient Case Handling
In addition to being blessed with an active bench, three key areas come to mind that proved critical in resolving our insurance fraud case, which can be duplicated in other cases.
- First, an effective case management order and other procedures should be adopted to, among other things, expedite a test case, stay pending cases, streamline discovery, and set early trial.
- Second, use discovery to streamline the case by covering all generally applicable issues, but limited by factual elements of the test cases, and enlisting the aid of a discovery referee.
- Third, plan for an early trial of all generally applicable issues in the test case, with the goal of providing a barometer to encourage settlement of the remaining cases.
Key Components For A Case Management Order
Counsel can set a case down the right track shortly after filing, or shortly after receipt of the complaint. An effective case management order will set the tone for the proceedings, create a roadmap for the efficient conduct of the case and, provided counsel is blessed with an active judge, the means for compelling prompt compliance. More importantly, a carefully-drafted case management order can assure that the parties reach the critical point for settlement as painlessly as possible under the circumstances, and at the earliest possible date.
Checklists of key items to include in the order appear in the Judicial Council’s Complex Litigation Benchbook, ' 21.11, and in existing California Rules of Court. See CRC App. Div. I, ' 19(g). A few key provisions in a case management order are worth noting here. First, and most imperatively, advocate inclusion of an early trial date, or a means for advancing any proposed date. Regardless of whether counsel believes trial will ever begin on a particular date, or at all, a trial date nonetheless looms large on the calendar of all parties. By setting an early trial date, the court is creating a time limit on when discovery must be completed and experts must be designated. The amount of discovery can be controlled by the time available to complete discovery before trial. Counsel are forced to develop a discovery plan to focus on issues and efficiently prosecute the case. By limiting the time to complete discovery within a short period of time in a "complex" case, counsel will have to simplify the issues in discovery. In addition, setting the date automatically imposes the discipline of knowing that months prior, summary judgment motions must be filed, if at all, and in the weeks’ prior, witness lists, exhibit lists, motions in limine, and other costly matters leading up to the final pre-trial conference must be done.
Firm discovery deadlines should also be included in the case management order, including deadlines for completion of written discovery, fact witness depositions, and expert discovery and depositions. Firm deadlines work to the advantage of both plaintiffs and defendants. Both parties have the basis for an argument to compel prompt compliance from a recalcitrant party. In addition, defendants often benefit because without good organization and efficient planning, a plaintiff can be hard pressed to complete needed discovery in the time allotted.
Resist efforts to lengthen the filing deadlines otherwise imposed by the Code of Civil Procedure. On specific motions that may arise, additional time can be sought for good cause. However, the inclusion in a case management order of a blanket extension of all deadlines only encourages delay when, in most instances, motions and opposition could otherwise be filed within the standard time periods.
Finally, address in the case management order whether a discovery referee will be used and, if so, the procedures governing appeals from the referee. The use of a discovery referee will allow the parties easy and quick access to a judicial officer to resolve discovery issues efficiently. The parties should have rights to appeal discovery referee orders, but the trial court should force the parties to bring matters to the trial court within days following the issuance of a recommendation to keep the case moving forward.
Identify Test Cases To Expedite Trial Date
Whether determined at the case management order stage or later, the use of test cases can greatly expedite and simplify complex litigation. Judges can often be persuaded to permit severance of a test case as it simplifies discovery, reduces law and motion practice on discovery disputes, simplifies trial management, and encourages settlement of remaining cases. However, whether by voluntary agreement or otherwise, a "test case" will only serve these ends if it is carefully selected.
A test case serves as a barometer for testing the theories in the overall case. This can have the effect of advancing the potential trial date and, again, shortening the time and expense required to reach that critical settlement point.
As an alternative to seeking agreement to proceed with a test case, plaintiffs counsel should determine whether any plaintiffs are entitled to statutory preference for early trial setting pursuant to C.C.P. '36. A party is entitled to preference if they are over the age of 70 and his or her health is such that the party’s interest in the litigation could be prejudiced, such as by not being able to meaningfully participate or assist in their case.
Our insurance fraud case permitted this route as two plaintiffs were aged and in poor health. In a similar situation, the Big Rock Mesa-Ibarra litigation, which involved 391 plaintiffs and 47 separate actions, the 12 plaintiffs who had been granted preferential case treatment due to their age had their case tried first. After this "test case" was tried (to a plaintiff’s verdict), both sides returned to the negotiation table and a settlement was reached regarding the remaining 379 plaintiffs and 46 separate actions. The settlement of these test cases saved valuable judicial time and expense to all parties.
If preference is granted, an expedited trial date is assured. Under California Code of Civil Procedure Section 36(a), a court is required to set a matter for trial within 120 days. Only one 15-day continuance is permitted and even then, only for good cause, such as the party’s failing health. Moreover, a Court is generally without discretion to deny a preferential trial. Koch-Ash v. Superior Court, 180 Cal.App.3d 689 (1986).
Once a test case is selected, or preference is granted to certain cases, counsel should seek a stay in the remaining cases. It is well settled that "granting a stay in an action where the issues in two actions are substantially identical is a matter addressed for the sound discretion of the trial court." Thomson v. Continental Ins. Co. (1967) 66 Cal.2d 738, 746. The issues in two actions are "substantially identical" when they contain the same factual subject-matter. Thomson, 66 Cal.App.2d at 746, n.5. Additionally, an exercise in its discretion to stay an action, the Court should consider the importance of avoiding multiple litigation designed solely to harass an adverse party. Id. at 746-47. Furthermore, the Court should consider "whether the rights of the parties can best be determined by the Court or the other jurisdiction because of the nature of the subject matter, the availability of witnesses or the stage to which the proceedings and the other Court have already advanced." Id.
However, even if the test case does not settle, the discovery obtained in the test case is invaluable to the remaining portion of the complex case that is stayed and provides a huge leg up on the remaining cases — generic discovery, applicable to all cases, is obtained in a matter of months, rather than years. Res judicata and collateral estoppel principles may narrow the remaining issues to be litigated in the complex case that was stayed.
If an early trial date is set, the discovery will be naturally streamlined because there is a limited amount of time to complete discovery. However, the parties should have the freedom to complete discovery on issues related to plaintiffs and defendants’ cases. The parties should cooperate in coordinating discovery, but the court should not allow any party to delay discovery. If necessary, the parties can double or triple track depositions to complete discovery.
Having selected a test-case approach, the scope of permitted discovery must be addressed. Clearly, having stayed the balance of cases, specific discovery relevant to the stayed plaintiffs can be postponed. However, if a test case is to truly act as a barometer to encourage resolution of the stayed cases, discovery must be open to all generally-applicable issues involving the parties in the test case. For example, in one complex case involving literally hundreds of individual fraudulent statements, discovery regarding each individual plaintiff, and each agent which made the statements, would have dragged the case for years. It made sense, therefore, to limit discovery, in part, to the two specific frauds perpetrated in the test case. On the other hand, there was no reason to limit discovery directed to the defendants that were parties in the test case and the stayed case. Courts are permitted broad discretion in fashioning discovery plans, whether via the case management order or otherwise.
Trial And Trial Alternatives
Although much is written about alternatives to the trial of a matter as a method of resolution, there are various techniques and alternative processes to encourage settlement. These include the use of a mutually agreeable or court-appointed third party to assist as a mediator. A less well known technique is use of a disinterested party to act as an early neutral evaluator.
The benefits of using a mediator are well known. Mediation is a non-binding process supervised by a neutral person to facilitate the parties’ negotiations. Selection of the mediator is critical. Not only does the mediator assure that the parties understand the positions of other parties, but he/she also ascertains the interests and objectives of the parties and quite often assist counsel in advising the clients of mutually acceptable options for resolution.
An early neutral evaluator is used less often, but can be extremely effective. This approach can serve as an alternative and more effective substitute for formal discovery, and perhaps even pre-trial motions. The early neutral evaluator conducts early meetings with clients and counsel and obtains from each side their respective evidence and arguments supporting the most important issues. The evaluator then summarizes the issues and may even provide an assessment of the various strengths and weaknesses of each party with respect to the issues. By providing both parties the independent, or neutral, evaluation, along with the reasoning that supports the evaluation, the evaluator can materially enhance the prospects of settlement, or, if settlement does not occur, can assist the parties in focusing on meaningful discovery to bring closure to disputed issues. If this still does not succeed in resolution, the evaluator can assist the parties in devising a discovery plan on keys issues that will expedite meaningful settlement discussions or resolution by trial.
Still another effective alternative to resolving complex litigation involves a summary jury trial (SJT). The court assists by selecting some agreed number of jurors from the regular jury pool, perhaps five to eight jurors. The jurors may or may not be told of the nature of the procedure. The case can be tried in a few days, or, in a very complex case, perhaps somewhat longer. Each side is allocated a fixed amount of time for opening statements and presentation of key evidence or witness summaries. While procedures are streamlined and jury instructions are abbreviated, the summary jury is then asked to answer specific questions on specific issues. The resolution by the jury of these issues should encourage settlement by informing all parties of the probable outcome of trial, allowing all parties to see and hear key evidence of other parties, and allowing parties to "vent" and have their day in court.
A variation of the summary jury trial conducted with regular jurors from the normal jury pool is some sort of a mini-trial before mutually agreed "jurors," who can either be selected by some survey process, or in some cases consist of senior executives of one of the parties, if convincing that party’s management is considered an impediment to settlement. Such mini-trials are particularly suitable in major commercial litigation where expert testimony is expected to be critical to the outcome.
In summary, there are many ways to skin the complex litigation cat. Resolving complex litigation requires experienced trial counsel who are fully prepared to try the case to verdict, if necessary, but who recognize the advantages to all parties of a prompt evaluation, and the different attitudes and techniques required to bring about a prompt and efficient resolution. This usually benefits everyone. Even if counsel are not initially inclined to consider the alternatives to the usual "fight to the end, then settle" approach, early intervention by the court can change attitudes and the outcome. Sometimes it is counsel, and sometimes it is the court, that needs to be reminded that "business as usual" is not usually in the best interests of the parties or the court.