United States: Judicial Involvement In The Settlement Process

Judges should … judge. They should decide legal issues. But some judges think their primary role is to "manage" litigation. It turns out that such management often means strong-arming parties into settlement. Is that appropriate? We wondered about that. We wondered it aloud. We wondered it in the presence of one of our Summer associates, Catherine Houseman (Temple 2020). She came up with research that we thought was interesting, so we will now share it with you. (We have edited it very slightly, not to alter or improve the substance, but to add the flippant tone so many of you have come to expect from us. Oh, and the screed at the end is entirely ours.)

I. Rule 16 and the Code of Conduct

Sometimes the judicial jaw-boning in favor of settlement begins as early as the Fed. R. Civ. P. 16 pretrial conference. But the Advisory Committee Notes on Rule 16 provide that the purpose of this provision is not to "impose settlement negotiations on unwilling litigants," but rather "it is believed that providing a neutral forum for discussing [settlement] might foster it."

According to the Code of Conduct for United States Judges Canon 3A(4), a judge "may encourage and seek to facilitate settlement but should not act in a manner that coerces any party into surrendering the right to have the controversy resolved by the courts." Canon 3C(1) provides that a "judge shall disqualify himself or herself in a proceeding in which the judge's impartiality might reasonably be questioned." Further, Canon 4A specifies that a "judge should not act as an arbitrator or mediator or otherwise perform judicial functions apart from the judge's official duties unless expressly authorized by law."

In 2009, the Judicial Conference's Committee on the Code of Conduct interpreted the Code's settlement provision in an advisory opinion. The Committee noted that there is no per se impropriety in a judge's participation in settlement discussions or in a judge's conducting of a trial following his or her participation in settlement discussions. However, there are local rules in some jurisdictions that explicitly prohibit judges from handling both settlement talks and trials. See, e.g., D. Idaho. Civ. R. 16.4(b)(2)(B) ("As a general rule, the presiding judge assigned to the matter will not conduct the judicial settlement conference."); W.D.N.C. Civ. R. 16.3(d)(3) ("[A]ny judicial officer of the district other than the judicial officer to whom the case is assigned for disposition may preside over a judicial settlement conference convened by the Court."); M.D. Tenn. R. 16.04(a) ("Settlement conferences will ordinarily be conducted by a Magistrate Judge other than the Judge to whom the case is assigned."). In the absence of a local rule, the Committee emphasized that whether ethical concerns arise in a particular proceeding depends on the specific nature of the judge's actions and whether his or her impartiality is called into question. The Committee highlighted that ethical concerns are more likely to arise in nonjury trials, especially in instances where a judge probes the parties' assessments of the value of the case, reviews their settlement offers and possibly suggests specific settlements amounts, and then tries the case and awards damages when settlement talks fail.

In conclusion, the Committee provided that while a "trial judge's participation in settlement efforts is not inherently improper under the Code," settlements must be "examined on a case-by-case basis to determine their ethical propriety." Therefore, certain factors must be taken into account: whether the case will be tried by a judge or a jury, whether the parties themselves or only counsel are involved in settlement discussion, and whether parties have consented to settlement discussions or a subsequent trial by the same judge who presided over the settlement discussions.

II. Case Law

a. Bias

Title 28 of the U.S. Code section 455(a) provides that a judge shall disqualify himself or herself "in any proceeding in which his or her impartiality might reasonably be questioned." A judge can disqualify himself or herself under this section sua sponte. Section 455(b), on the other hand, provides that a judge must recuse himself or herself where he or she "has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding." Recusal under this subsection requires the filing of a motion.

In Johnson v. Trueblood, the Third Circuit determined whether a district court judge's comments during settlement negotiations amounted to extrajudicial bias and justified his recusal. 629 F.2d 287, 291 (3d Cir. 1980) "Extrajudicial bias" refers to bias that is not derived from the evidence or conduct of the parties that the judge observes in the course of the proceedings. Id. at 291. In this case, the plaintiffs argued that the judge's comments that the lawsuit was a "personal tragedy for the defendants" who were "honest men of good character" showed extrajudicial bias. In his opinion denying the motion to recuse, the judge asserted that his remarks were based on his perception of the case and were his attempt at getting the parties to settle. Id.

The Third Circuit determined that the judge's comments at the settlement conference did not amount to extrajudicial bias. In making this determination, the court stated that the relevant inquiry was whether the judge's pretrial comments were linked to his evaluation of the case based on the pleadings and other material outlining the nature of the case, or whether they were based on purely personal feelings towards the parties and the case. Id. Specifically, the court reasoned that his comments "may have been a form of judicial coloration in an overzealous effort to settle what obviously would be a lengthy and complicated case to try." Id. The Third Circuit emphasized that while the "settlement fever" in this case was not enough to warrant recusal, judges "must not permit their role as negotiator to obscure their paramount duty to administer the law in a manner that is both fair in fact and has the appearance of fairness." Id. at 292.

The Tenth Circuit expressed a similar caution in Franks v. Nimmo, where the trial judge attempted to persuade the plaintiff to accept the defendant's settlement offer. 796 F.2d 1230 (10th Cir. 1986). Specifically, the judge privately met with the plaintiff and told him "these matters never work out for a plaintiff unless they are settled, and that he ought to settle because the judge could not rule in his favor." Id. at 1233. The court found that the comments did not show any bias on behalf of the judge because his attempt to settle the case was "clearly beneficial" to the plaintiff. Id. at 1234.

There is a case out of the Seventh Circuit, Ghevas v. Ghosh, where the court reached a similar conclusion: "A judge may not coerce a party into settling. Coercion occurs when a judge threatens to penalize a party that refuses to settle. But a judge may encourage settlement, and he or she is not prohibited from expressing a negative opinion of a party's claim during discussions as a means to foster an agreement." 566 F.3d 717, 719-20 (7th Cir. 2009). See also Cantu v. U.S., 908 F.Supp.2d 146, 151 (D.D.C. 2012) ("[A] trial judge may convey his views about a settlement offer to the litigants' counsel who are free to accept or reject the judge's views, so long as the judge does not in any way bring pressure on the parties to settle.”).

b. Coercion

In Kothe v. Smith, the Second Circuit vacated the lower court's judgment because the judge coerced the parties into settling. 771 F.2d 667 (2d Cir. 1985). The judge specifically recommended that the case be settled between a certain dollar amount and warned the parties that if they settled for a comparable figure after the trial had begun, he would impose sanctions—which he did. The court held that the judge's conduct amounted to an abuse of discretion and observed: "[P]ressure tactics to coerce settlement simply are not permissible. The judge must not compel agreement by arbitrary use of his power and the attorney must not merely submit to a judge's suggestion, though it be strongly urged. [Rule 16] was not designed as a means for clubbing the parties . . . into an involuntary compromise. Id. at 669.

In Goss Graphics Sys. v. Dev Indus., the Seventh Circuit reassigned a case to a different judge because the original judge dismissed the case when the plaintiff refused to settle. 267 F.3d 624 (7th Cir. 2001). The court highlighted, "if parties want to duke it out, that's their privilege. Maybe the plaintiff was less than forthcoming in settlement negotiations than it should in some abstract sense have been, but that was its right." Id. at 628. In another case, Cabrera v. Esso Std. Oil Co. P.R., the First Circuit concluded that the trial court abused its discretion by factoring the plaintiff's refusal to settle into its decision to dismiss the case. 723 F.3d 82 (1st Cir. 2013). The court chastised the lower court for "permit[ing] the information gleaned through its involvement with the settlement talks to exert undue influence over its disposition of appellant's motion." Id. at 89. The court further noted that while the court's desire to aid the settlement process was commendable, it became too involved in settlement discussions by obtaining information about the parties' positions that unduly influenced its ruling. Id. at 90.

c. Jury Trial vs. Bench Trial

Another factor considered in determining whether a judge is too involved in settlement discussions is whether the case is a jury trial. In U.S. v. Pfizer, the Eighth Circuit reasoned that while a judge presiding over a jury trial may make settlement comments merely giving the parties his or her educated guess on the jury's finding, a judge presiding over a bench trial who expresses his views on settlement may be guilty of prejudgment and bias. 560 F.2d 319 (8th Cir. 1977). The court reasoned that because of this difference, when the judge is the trier-of-fact, he or she should avoid recommending a settlement figure. Id. at 323.

Notably, a local rule in Texas explicitly prohibits the assigned judge from discussing settlement figures with the parties in bench trials without the express consent of the parties. N.D. Tex. R. 16.3(b).

III. Conclusion

What is our takeaway from this brief tour of the rules and the cases? The principles set forth by appellate courts are reasonably clear, even if enforcement of those principles can seem lax or erratic. Judges should resist the temptation to immerse themselves in details of settlement negotiations. That much seems obvious. What is, or should be, even more obvious, is that judges should not ignore or mangle their judicial duties in order to coerce settlement. We used to labor in front of a judge (many of you will know who we mean) who would constantly badger mass tort defendants to settle cases. If they settled cases, she would reward them by not scheduling trials for the next month or so. If they didn't settle, she would line up the trials, creating a thoroughly unworkable schedule. Is that a dispensation of judicial grace or a form of coercion? To our eyes, it looks like the law as cat's paw. It is also the sort of thing that virtually never gets scrutinized by any appellate court. Every day, in courthouses throughout the land, lawyers encounter settlement coercion. Maybe it happens when a judge tinkers with rulings, or the timing of rulings, to create an in terrorem effect that is designed to induce settlement. Pardon us if we do not applaud such “management.” Why can’t we get fair rulings, and let the parties decide whether settlement makes sense for them? We are entitled to expect justice, not coercion. We should not settle for less.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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