Most litigators are familiar with the traditional mediation process, where all parties present their positions to the mediator, and the mediator gives his or her view of a likely outcome, and the reasonable value of the case.
This article is devoted to an examination of the mediation of a very complex fraud case in federal court with numerous issues of fact and law. The mediation for this type of case required the mediator to hold numerous sessions with the parties, ruling on interim factual and legal issues, before coming to an advisory decision on the ultimate resolution. As will be demonstrated below, these cases require the assistance of the court, an experienced mediator, and skilled trial lawyers representing the parties. I will illustrate this concept with an examination of the mediation and settlement of United States, ex rel. Hunt and Gauger v. Medco Health Solutions, Inc., Civ 00-737; 99-2332 (ED Pa.) (hereinafter Medco) settled on October 23, 2006, after mediation sessions held over the course of five weeks, for 155 million dollars plus legal fees and court costs.
Medco was a case brought pursuant to the federal false claims act, 31 U.S.C. § 3729, et seq., commonly referred to as a Qui Tam action, which was filed originally by two separate former employee whistleblowers, referred to in the statute as relators, through their private counsel. The complaint was thereafter adopted by the U.S. Department of Justice. Under the statute, once the DOJ adopts or intervenes in the complaint, the DOJ assumes the role of plaintiff’s attorney. If the matter proceeds to trial, attorneys for the relators also participate in the discovery and trial, and share in the damages awarded to the United States through trial or settlement.
In the Medco case, after extensive discovery and depositions, Judge Shapiro (who drew the case after Judge Newcomer, the original trial judge died) chose Senior Judge William Ditter (on recommendation of all parties) to act as a court ordered mediator. According to Marc Raspanti of Pietragallo Gordon Alfano Bosick & Raspanti, who was lead counsel for the two relators, the parties wanted an Article III judge as a mediator because there were so many unsettled federal legal issues to be resolved. The parties wanted someone who was in the business of ruling on open questions of law, and had been doing so for a considerable period of time. This was especially important to the corporate defendant who would have to sell any final settlement to its board of directors. The parties were reluctant to deal with someone who might give the appearance of “splitting the baby” in order to reach a settlement. This may be an unfair statement regarding professional mediators, many of whom are former jurists, and have extensive experience (and unfair to sitting magistrate judges); however, the particular parties in this matter felt it was a necessary ingredient for the clients. Enu A. Mainigi, of Williams & Connolly, one of the attorneys who represented Medco, agreed with Raspanti. “The parties were looking for someone whose job it is to rule on the law, i.e., judicial skills,” she said. Both Raspanti and Mainigi used the term “gravitas” when describing the desired capacity of the mediator. The parties were of the opinion that each side had to feel at the end of the process, they had the benefit of a full and fair hearing of their positions, and the legal issues had been fully explored.
This mediation was facilitated by the fact that all discovery had been accomplished during the course of two years. Over 130 fact and expert depositions had been conducted, and over 9 million documents had been exchanged prior to mediation. Although there were interpretations of fact that may have been in dispute, the crucial facts were contained in the record and the mediator did not need to rely on the attorneys as to who said what. Raspanti said that when Judge Ditter was assigned the mediation, all the facts had been disclosed, the legal issues were ready for resolution; the parties needed a forum, short of an actual trial, to meld them together.
Judge Ditter initially approached the mediation in a traditional manner, and attempted to reach a global settlement after receiving initial memoranda from the parties. After several meetings with the parties this plan proved unsuccessful as there were too many interim issues that required resolution, before a final settlement could be discussed. Judge Ditter then proceeded in a very systematic manner to deal with the factual and legal issues. Most required a decision on open legal questions. The task was further complicated because there was scant legal authority in any of the circuits on most of the issues. Judge Ditter requested legal memoranda and heard arguments from the parties on most of those issues; often several hours of arguments on any one day. He then rendered his opinion as to how he thought the courts would decide the issue, very similar to a judge deciding a partial summary judgment motion. Raspanti said the parties were encouraged in seeing a judge doing a judge’s formal job, applying the law to the facts to make a decision. Mainigi said that Judge Ditter “kept us at the table, in a very measured manner”.
The parties, in a light hearted moment, labeled the numerous damage issues as “buckets”, and assisted the judge in deciding the possible damages in each bucket. The damage models proved to be the most difficult issues, as the case was unique and unprecedented, and the damage models submitted by each of the parties, required substantial modifications.
As the mediation approached the final phase, Judge Ditter told Raspanti and his plaintiff colleagues they needed to propose a number that would tempt the other parties, and the other parties needed to propose a number that would tempt Raspanti and his colleagues. Without the decisions on the interim issues, the mediation would not have reached that point.
On March 28, 2006, the parties spent the entire day and well into the evening with Judge Ditter, reviewing and revising their position, and conferring among themselves. Each party had its own agenda as to what it wanted. The Department of Justice, the relators, the corporate defendant, each needed a number that would reflect their positions.
At 8:30 p.m. in Judge Ditter’s chambers, the parties wrote the final number on a plain sheet of white paper. The paper simply stated a settlement of $155 million dollars had been agreed upon, with attorneys’ fees to be decided later, and was signed by the five attorneys. The mediation process took five weeks from the start to that day. Raspanti commented that no one got what they originally requested, but all were satisfied that it was a fair result. He said the effort saved what would have been a long hard fought jury trial, with the chance that the results would have been unsatisfactory for most parties. There would have been lengthy appeals from any jury verdict.
Raspanti said that a complex mediation such as employed in Medco can be very effective provided a number of key factors exist:
- All crucial facts underlying the controversy are of record. This does not mean that there is no dispute as to an interpretation of those facts, or there are not two versions of the same event. What is important is there are facts of record from which the mediator can draw factual or legal conclusions.
- The mediator is prepared to follow a disciplined judicial route, and does not attempt to solve the entire matter at the outset; the mediator must have the “gravitas” for the task;
- The attorneys are experienced trial lawyers who can make a realistic appraisal of the evidence, the law, and the chances of winning at trial.
- The mediator must trust the attorneys to give candid responses; attorneys must trust the mediator give his or her best effort in solving issues and trying to arrive at a just result, not simply trying to arrive at a settlement.
- The attorneys must fully prepare for the process, as if preparing for a trial or appellate argument.
Other courts have utilized this process or a variation of it. Judge Charles Kocoras, of the Northern District of Illinois, followed a similar procedure in a case before him. He agreed to personally engage in the mediation process if the parties waived any objection to him presiding at the trial if the mediation failed. He held several days of hearings and arguments determining interim issues similar to the Medco case. He then gave a decision on a proposed verdict and damage amount. The parties settled shortly thereafter.
Judge Kocoras said the most important task in getting a complex mediation started is to first clear out the legal underbrush. Without that step, the parties are simply jousting about the strengths and weaknesses of their case. Judge Kocoras said, no matter how skilled the advocates, they need a realistic view of the legal issues, which can only come from someone who is capable of making those decisions. Judge Kocoras said when the advocates for each party give their initial presentation to the mediator as to their view of the case, the opponents should be present. This will have a salutary effect on each one.
This process is not meant for every case, and requires the skills and the high degree of preparation described above. The advocacy required is trial advocacy, and all those skills necessary for the courtroom. Only trial lawyers can take such a complex mediation from start to finish. When done well, and the parties give it a serious effort, this process can produce good results.
I predict we will see more of these complex mediations.
