Mandatory Settlement? Close, But Not Quite.
April 09, 2021
In December 2020, the New York Law Journal commented on the measures the New York State court system would enact to handle the recent $300 million budget cut. These measures included “adopting a strict hiring freeze, deferring raises, suspending countless programs, and declining to extend the judicial service of 46 retired trial and appellate judges.” This was a difficult decision to be sure, but the alternative could have been catastrophic: the layoff of over 300 employees.
Given the combination of the court system’s shrinking workforce and the existing backlog of cases, New York’s Commercial Division is seeking to reduce its caseload through the expansion of ADR, both externally and internally. In December 2020, the Commercial Division Advisory Council (“CDAC”) sought to adopt two new Commercial Division Rules that would expand the opportunities for litigants to settle out of or in court.
The first proposal seeks to “amend Commercial Division Rule 3(a) (22 NYCRR § 202.70(g), Rule 3(a)) ‘to permit the use of neutral evaluation as an ADR mechanism and to allow for the inclusion of neutral evaluators in rosters of court-approved neutrals’” (the “Roster Expansion Proposal“). The CDAC’s Roster Expansion Proposal would reduce the 40-hour training requirement for mediators to allow neutral evaluators, “who only have to undergo six hours of training and have five years of training as per Part 146,” to be added to the roster of neutrals. This change is sought not only to increase the number of neutrals, but also to increase the diversity of the roster. Certification information as “mediator” or “neutral evaluator” would be available to both judges and litigants. The Roster Expansion Proposal went out for public comment in December 2020, closed on January 29, 2021, and is still pending a final decision from Chief Administrative Judge Marks.
The CDAC’s second proposed Commercial Division Rule change, to amend Commercial Division Rule 30, would mandate client participation in settlement conferences (the “Settlement Conference Proposal“), as “the CDAC believes that business clients will find attractive the institutionalization of the settlement process.” While the Settlement Conference Proposal offers parties many options to request different neutrals (the assigned judge, another judge in the Commercial Division, JHO, Special Referee, neutral, mediator from Part 146 roster, or a private neutral), the forced timing of the settlement conference after filing the Note of Issue is perhaps something to be desired. The Commercial and Federal Litigation Section of the New York State Bar Association submitted its comments to the Settlement Conference Proposal noting that “many can debate when a mandatory settlement conference should be held, and that it perhaps should occur earlier than proposed by the CDAC,” such as before the time and expense of depositions. The Settlement Conference Proposal also went out for public comment in December 2020, closed on February 12, 2021, and is still pending a final decision from Chief Administrative Judge Marks.
Both proposals would provide necessary relief to the Commercial Division’s workload, given the required staffing reductions of 2020. And while litigants may initially be opposed to “mandatory” settlement, their control over the settlement process, the reduced time in waiting for a neutral from an expanded roster, and the reduced costs inherent in foregoing a trial, may be welcome news after a particularly volatile year.