In a surprise move by the Colorado federal district court last month, the customary D. Colo. magistrate judge settlement conference has essentially been cut back significantly. Apparently frustrated with the typical half-day exercise, sometimes stretching over several sessions, featuring oft-times unprepared litigants, the district judges implemented revised Local Rule 16.6, effective December 1, 2011. The revised rule and the redline edits can be viewed below.

As Magistrate Judge Boland explained at the Faculty of Federal Advocates annual meeting in mid-December, parties will now need to file a motion with their district judge, or the magistrate judge if exercising consent jurisdiction, to warrant a classic settlement conference: “It is going to be hard to obtain, and you will have to persuade a judge that you are close to settlement and need help.” In short, for those parties who historically dropped in unprepared for an early settlement meeting, or did not wish to make the first move – hoping that the magistrate judge would extract offers, uncover and convey key information, and do the heavy lifting in settlement – the game is over. As Boland elaborated, “there is a booming industry of private mediators, and there is only a small cadre who can adjudicate cases. It makes sense in a very busy court to use resources to adjudicate.”

The revised rule puts the burden on counsel to show some good reason (the rule does not require the high showing of “good cause”) to trigger the traditional magistrate-judge-led settlement conference. Though probably not very early in the litigation process, as it appears that any “early” request will qualify only for “early neutral evaluation” (“ENE” in the ADR vernacular) (Rule 16.6A), which theoretically could be quite an abbreviated effort. Thus, parties will likely need to turn to private ADR options unless they can explain in detail to the court that far reaching settlement steps have already been taken by both sides, or perhaps that one of the litigants cannot afford his or her half of the cost of a private neutral.

The revised rule is somewhat controversial. The comment period was relatively short and no comments were disclosed by the court, though several respondents went public with their opposition to the change. In addition, several senior Article III judges were concerned that the freeing up of magistrate judges from settlement work would inexorably lead to an unconstitutional expansion of adjudications by the Article I magistrate judges. Read Judge Kane’s dissent concerning revised Rule 72.2 on magistrate judge consent jurisdiction here.

It is too early to speculate about the ultimate impact of the Rule 16.6 revision. Each judge retains the right to direct the parties, presumably either by motion or sua sponte, to pursue either ENE or an “other” (undefined) ADR proceeding:  this could presumably still be the traditional magistrate judge settlement conference, or more likely a private-sector mediation, or any of a host of different ADR approaches, such as binding arbitration, so-called med/arb (mediation, followed by binding arbitration), a mini-trial, or whatever the parties might jointly consent to. Public reports indicate that the dissenting senior judges are continuing with their traditional approach, and that some other district judges have granted requests for settlement conferences since the revision was implemented in December. Nonetheless, given the new approach, it seems likely that at least a few hundred cases each year will no longer receive free settlement help from the District Court.

There were approximately 700 settlement conferences convened in the District last year. Some 25% involved employment and ERISA disputes, 10% involved personal injury matters, and single-digit percentages were taken up by, in order, contract disputes, civil rights complaints, fair debt collection work, insurance disputes, intellectual property cases, and business and product liability matters. (Notably, the vast majority of these cases settled for less than anticipated defense costs through trial).

How will these now be handled? Although the D. Colo. clerk of the court is designated to “implement, administer, oversee, and evaluate” the court’s ADR program (Rule 16.6 D), the court has quite purposefully chosen not to assemble a referral roster of potential neutrals, as it does not wish to provide an imprimatur for any private person or group. It will thus be left to the ADR professionals in the district to help litigants make their way in the new paradigm.

It is worth noting that this new approach is the way that many federal districts already operate. For those raised in this district court, it might have been assumed that all 94 districts have magistrate judge settlement conferences, but that is not the case. For instance, the Utah federal court refers out its settlement cases, as does the Southern District of Florida, for the most part.

It is possible that the district court or the ADR-designee clerk of the court might later choose to establish a more formal program, or at least a roster of eligible neutrals. The Alternative Design Resolution Act of 1998, 28 U.S.C. § 651, found that “alternative dispute resolution, when supported by the bench and bar, and utilizing properly trained neutrals in a program adequately administered by the court, has the potential to provide a variety of benefits . . . .” The Act provides that the district designee, who should be knowledgeable in ADR practices and processes, “may also be responsible for recruiting, screening, and training attorneys to serve as neutrals and arbitrators” in the court’s ADR program.

Although the private sector ADR community in Colorado is very active (the Dispute Resolution section of the CBA has over 250 members), there are only a few seasoned veterans of this District Court who are serving as neutrals locally, mainly former magistrate judges and senior federal litigators. There is no formal “federal neutral” roster, and the FFA and other similar groups may wish to establish some training programs and eligibility rosters to help fill this gap. As Vice-Chair of the DR section of the CBA, I will personally be contacting the Federal Judicial Center and the Administrative Office of the U.S. Courts to find out what assistance they may make available pursuant to the Act.

Revised Rule:

D.C.COLO.LCivR 16.6 – ALTERNATIVE DISPUTE RESOLUTION

A. Alternative Dispute Resolution. Pursuant to 28 U.S.C. § 652, all litigants in civil cases shall consider the use of an alternative dispute resolution process. A district judge or a magistrate judge exercising consent jurisdiction may direct the parties to a suit to engage in an early neutral evaluation or other alternative dispute resolution proceeding. To facilitate settlement or resolution of the suit, the district judge or a magistrate judge exercising consent jurisdiction may stay the action in whole or in part during a time certain or until further order. Relief from an order under this section may be had upon motion showing good cause.

B. Definition of Early Neutral Evaluation. Early neutral evaluation means a nonbinding, non-adjudicative assessment of a case by a magistrate judge.

C. Disqualification of Neutrals. A magistrate judge serving as a neutral providing early neutral evaluation may be disqualified under the provisions of 28 U.S.C. §§ 144 or 455.

D. Designation of Court ADR Administrator. Pursuant to 28 U.S.C. § 651(d), the Clerk of the Court is designated to implement, administer, oversee, and evaluate the court’s alternative dispute resolution program.

Redline Edits:

D.C.COLO.LCivR 16.6 – A. Alternative Dispute Resolution. Pursuant to 28 U.S.C. § 652, all litigants in civil cases shall consider the use of an alternative dispute resolution process. At any stage of the proceedings, on a A district judge’s initiative or [sic – or] a magistrate judge exercising consent jurisdiction pursuant to motion or stipulation of counsel or the pro se parties, a district judge may direct the parties to a suit to engage in an early settlement conference neutral evaluation or other alternative dispute resolution proceeding. To facilitate settlement or resolution of the suit, the district judge or a magistrate judge exercising consent jurisdiction may stay the action in whole or in part during a time certain or until further order. Relief from an order under this section may be had upon motion showing good cause. Unless otherwise ordered by a judicial officer, cases exempt from this rule are:

1. those in which the plaintiff is a prisoner proceeding pro se; and

2. habeas corpus actions.

B. Definition of Early Neutral Evaluation. Early neutral evaluation means a nonbinding, non-adjudicative assessment of a case by a magistrate judge.

C. Disqualification of Neutrals. A magistrate judge serving as a neutral providing early neutral evaluation may be disqualified under the provisions of 28 U.S.C. §§ 144 or 455.

D. Designation of Court ADR Administrator. Pursuant to 28 U.S.C. § 651(d), the Clerk of the Court is designated to implement, administer, oversee, and evaluate the court’s alternative dispute resolution program.