Southern California Arbitration Mediation and Conflict Resolution : Settle it Now Dispute Resolution Services : Serving Los Angeles, Beverly Hills, Century City : Settle It Now Negotiation Blog

If you aren't using writs of attachment in contract cases where the amount due is certain, you aren't using the most powerful means of increasing your bargaining power in litigation.

Attend LACBA's Brown Bag Lunch with Judge James Chalfant at the Stanley Mosk Courthouse 111 N. Hill Street, Los Angeles on May 15, 2008.  Program Description:

Writs and Receivers: Practice tips for those who are rarely there. Judge James Chalfant will host a brown bag lunch highlighting tips and tricks for those who may not have much experience in this area. There is no cost to attend, but participation is limited to the first 12 attorneys who register. The program will be held in the judge's chambers at Stanley Mosk Courthouse, Dept 85. Please note, there is no CLE credit for this program.

Click here to register online.

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You haven't really experienced unvarnished brilliance in a mediator until you've spent some time co-mediating a construction case with Jerry Kurland of JAMS.  When I say "co-mediate" I'm talking 70% Jerry, 29% former Oliver Award winner Judge Victoria Chaney and 1% Vickie Pynchon. 

I have co-mediated at least a hundred cases with various highly respected mediators and bench officers in Los Angeles over the past four years and I have to say that Jerry Kurland is the most supple, savvy, even-tempered, big-picture mediator I have ever had the pleasure to work with.  And the hardest working. 

I know Jerry is booked months in advance, but if I had a sophisticated construction case with dozens of moving parts,  I'd book Jerry at the same time I filed my initial pleadings.

CONGRATULATIONS JERRY.  News item about his nomination below.

ANAHEIM, CALIF. (April 17, 2008) — JAMS Neutral Gerald A. "Jerry" Kurland, Esq. has been nominated for the prestigious 2008 West Coast Casualty Jerrold S. Oliver Award of Excellence. The award will be presented at the 15th Annual West Coast Casualty Construction Defect Seminar at the Disneyland Hotel in Anaheim, California on May 8th.

Named after the late Judge Jerrold S. Oliver, a JAMS mediator and arbitrator, and a "founding father" in using ADR to resolve construction claims, this award recognizes an individual who is outstanding or has contributed to the betterment of the construction community with the same spirit of commitment, loyalty and trust as that displayed by Judge Oliver. The award is affectionately known as the "Ollie Award." The organization puts out a call for nominees from 1,900 members of the construction community.

"We congratulate Jerry for being one of four finalists for this terrific award," said Chris Poole, JAMS President and CEO. "As one of our most respected neutrals in the field of construction, Jerry is known for his experience, talent, and great personal skills. He is certainly deserving of the nomination, and we wish him the best of luck in being selected as the award recipient."

Continue reading here.

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I promised you a series of posts on mediating complex and sophisticated commercial mediation. 

Here's what I'm really most interested in doing -- starting a high level conversation among commercial litigators and commercial mediators about the best way in which we can help one another help your clients to achieve the best resolution possible to their commercial dispute and the legal problem/solution associated with it. 

I'm always looking for the smartest guy or gal in the room because. I'm just a geek who really enjoys spending time with people who are savvy, astute, original well-read, and, well-spoken.  These people tend to see things more clearly than I do and that clarity of vision often results in a way of approaching problems that generates better results in a shorter amount of time than is the norm.

One of the smartest guys in any room is AAA arbitrator and Judicate West mediator, Jay McCauley.  O.K., he's Harvard Law and I'm just a state university girl.  But pedigree doesn't matter to me.  Brilliance and creativity does.  Jay and I have recently spent a lot of time talking about the way we feel that we're sometimes talking past our attorney clients and they us.  So we have plans to write some really interesting articles that we hope will help both mediators and attorneys achieve better results more consistently when they decide to settle, rather than to try, a case.

Jay's written a lot already.  And because I'm now getting around 11,000 hits/month (!!yay!!) I've decided to simply pull up his existing articles on mediating particular commercial disputes before launching our jointly written posts.  If any of those 11,000 monthly "hits" come from commercial litigators, we'd LOVE to hear back from you on this series.  

That said, here's Jay's article on Wage and Hour Class Action Mediation.     

There is no such thing as a "cookie cutter" mediation. Nonetheless, most mediations have, among other things, the following general characteristics: 

•  At least four participants whose interests are not naturally aligned - Plaintiff, Plaintiff's counsel, Defendant and Defendant's counsel. 
• Little or no genuine concern that a settlement will foster future claims. 
• Some prospect of integrative, or "value adding," resolutions. 
• A rich body of applicable case law to serve as the empirical basis for risk-based claims valuation analysis. 
• A virtually unrestricted free market where almost any resolution agreeable to the parties can be turned into a contract fully enforceable by the courts.

Wage & hour class action mediation, by contrast, has none of these characteristics.

• Mediating with Only Three Participants

All fictions aside, there are three, not four, interested participants in a wage & hour mediation. They are the defendant, its counsel, and the counsel for the class. Plaintiffs themselves (including the named representatives) are literally absent from the negotiation altogether, and are typically absent physically from the mediation sessions.

Any imbalance resulting from the absence of plaintiffs themselves is, in theory, "corrected" by an institutional device unique to class actions: the fairness hearing, in which a court imposes outside boundaries on the settlement for the protection of the plaintiffs.

Nonetheless, the absence of the plaintiffs themselves is significant. The court is not, in any sense, a substitute negotiator for the plaintiffs. It simply either approves or rejects the settlement agreement, in accordance with reasonably well-established standards, after the settlement has been negotiated by plaintiffs' counsel and the defense team.

The actual negotiators have a common interest in avoiding agreements so extreme that they will be either rejected by the court, or undermined by excessive "opt-outs" from the plaintiffs themselves. But subject to these outside limits, the three players at the negotiating table have an interest in maximizing two things: the portion of the settlement funds that goes to plaintiffs' counsel as approved fees; and the portion of the settlement funds available to be returned or otherwise used by the defendants.

The upshot is this: Plaintiff's counsel seek, and usually get, one third of the settlement funds as fees; amounts unclaimed by class members revert to the defendant to the extent the court permits ; and the stated settlement amounts include the resulting social security and FICA charges the company will have to bear as a consequence of the settlement - an amount that turns out to be 13.85% of the total paid to the class members. These terms are easily arrived at because those at the negotiating table can "give" each other these benefits, without cost to themselves.

The absence of the plaintiff also eliminates one of the most common challenges a mediator has to face in "ordinary" litigation - the challenge of plaintiffs resisting economically advantageous proposals because of a desire to use the courts to obtain perceived benefits that go beyond economics: retribution for perceived wrongs; public vindication; and principled refuge in the Rule of Law.

This not to say that the issues addressed in wage & hour class action mediations are entirely economic. But the non-economic issues characteristically arise from the defense side, and tend to break down into two categories. The first category is the common "principled" resistance to a fairly rigid statutory scheme that typically strikes defendants as entirely inconsistent with the statutory purpose and with common sense. Specifically, those rationally thought to be managers cannot be treated as exempt in California if the time they spend in identified categories of non-exempt functions (e.g. sales) happens to take up more than half their time. The "player-manager" may be thought of as a manager, but there will be exposure if he is paid like a manager, and that fact is a hard-to-swallow surprise for many companies. 

• The Defendant's Need to Deter Future Claims
  
  Then there is the second form of defendant resistance to otherwise attractive settlement opportunities. This one is born of a genuine dilemma: the company concludes it cannot "turn managers into foremen" without losing the critical work incentives or esprit-de-corps or "company culture" that it concludes comes with classifying class members as exempt; but to "buy off" the class action claim through settlement without also turning class members into non-exempt workers for the future would be to inspire, by that act, endless waves, every three or four years, of new wage and hour claims.

These claims would come from new employees who are not collaterally estopped or otherwise bound by the class action judgment supporting the settlement. It would also come from its current employees, class members, who have a basis to argue their release can only apply to past "wrongs," but cannot release the continuing "wrongs" that take place after the release is entered into. Such companies are sorely tested take their chances at trial to escape the dilemma. The prominence of that question is an unusual hallmark of wage & hour mediations. And much of the focus of mediations I have handled has involved finding creative solutions to this very dilemma.

• The Absence of Integrative Bargaining Opportunities
  
  While there is a need to find creative techniques to subdue extraordinary needs for deterrence that wage & hour defendants will often have, there is a curious absence of opportunity to employ another form of creativity - that of finding integrative (rather than purely distributive) resolutions to the dispute. With one obvious exception , the "Jack Sprat" non-monetary exchanges that are the special joy of mediators - where parties give what's cheap to get what's dear, and thereby optimize the likelihood, as well as the quality, of the resolution - are not to be found in this arena.
  
  The reason is not that negotiators in this specialty are not creative, but simply that the inherent nature of class actions virtually eliminates any prospect that the form of any exchange will be anything other than money. Specifically, one stricture of class actions is that similarly situated class members be treated uniformly, and the only uniform needs the members will have is the presumptively universal need for money. As a result, the nature of class action bargaining is heavily distributive, not integrative. 
• The Absence of a Rich Body of Case Law to Support Risk-Based Claims Valuation Analysis
  
  It is a bit of an irony that a field which is so tilted toward distributive bargaining is also one in which mediators are essentially deprived of a major tool used to facilitate such bargaining - a substantial body of actual outcomes at trial in analogous cases to provide a realistic assessment of the actual risk of trial, and therefore the reasonable settlement value of a release. Because the large volume of wage & hour class actions is historically new, and because so few that do exist go to trial, little such evidence of likely outcomes in fact exists.
  
  What girds the negotiation in the absence of that evidence? It is four things. First, the statutory scheme in this area is fairly administrable, and results are arguably more predictable for this reason even in the absence of extensive actual results.
  
  Second, there is an extensive and ever increasing body of evidence of actual class certification decisions, and the factors relevant to class certification decisions in wage & hour actions are more closely related to the ultimate issues at trial than they are in other actions (compare, for example, securities fraud class actions, where the class certification issues have almost nothing to do with the significant issues at trial).
  
  Third, some narrowing of the range of potential settlement is achieved by the fact that extreme low ball offers typically are not made, even preliminarily, because both sides know (or can be reminded) that there is a certain threshold that will not survive a fairness hearing, nor sustain the plaintiff's counsels basic need to preserve reputation in the context of a settlement record that (unlike the settlement of individual claims) is always public.
  
  Finally, and perhaps most importantly, parties tend to be guided by a kind of "market price" for these claims - settlements tend to fall within a fairly well defined band established by publicly available information of what other cases have settled for relative to the total potential exposure in the case.
  
  What is notable is that, given the fairly strict and administrable standards of liability set forth in the statutes, the market price of the claims is probably materially below the amounts that a standard risk-based discounted claims valuation analysis would yield. This probably makes sense in light of the various incentives of the participants. Defendants need attractive offers (relative to exposure) to overcome both non-economic resistance factors as well as the lack of extensive palpable evidence of trial results. Defense counsel, paid hourly, have, if anything, an economic advantage to honor the client's resistance, as well as reputational and self-fulfillment benefits to keeping at least some quota of cases to try.

Plaintiffs' counsel, particularly specialists in demand, reach a certain threshold where the economically optimal course is to declare the offered amount to be enough and free up their time to fry another fish. And that threshold, in turn, need be no greater than a respectable outcome as compared only to the settlement market price itself. The Court, for its part, is institutionally loath to second-guess the norm, and institutionally dependant on most large cases settling in any event. Finally plaintiffs, themselves, are, for all practical purposes, absent from the process. They can opt out, and thereby preserve the right to bring claims on an individual basis, but the value of individual claims is rarely enough to warrant the transaction costs.

• Role of the Mediator
  
  It helps immensely for the mediator to have substantive familiarity with the rhythms and restrictions of class actions generally, and specific familiarity with the rights and duties of employers regarding wage and hour matters. That is the environment in which the mediator is applying his or her skills. But the mediator's primary contributions come from the use of more general "process skills" to anticipate, analyze and avert impasse in the negotiation process. Those skills are not unique to wage & hour mediations.
  
  Some taste of the actual process of analyzing and averting impasse may be provided by an actual example of an email I sent to defendant's counsel to overcome an impasse in a wage & hour class action I was mediating. The text - attached as "Attachment 1" - has been left in its raw form, with one exception: all names appearing in the original have been made generic so as to fully protect confidentiality. The case settled shortly after the email was sent.

John (Jay) McCauley is a mediator who also serves as an arbitrator on the Complex Commercial Panel of the American Arbitration Association and an Adjunct Professor at the Straus Institute for Dispute Resolution at Pepperdine University School of Law.  He is also a hearing officer for the ADR firm Judicate West.  

Website: www.mediate.com/mccauley.

E-mail: mailto:info@mccauleylaw.com

Phone number: (800) 848-5591.

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Thanks to Geoff Sharp for leading me to John Day's terrific series of posts on What it Takes to Be a Great Trial Lawyer particularly Part 11, The Courage to Tell the Client the Truth, excerpt below.

As information is learned in a given case, great trial lawyers also tell their client the truth. They give an opinion about whether to make, accept or reject a settlement proposal, or indicate that the proposal is so within the range of reason to make it a toss-up. They give these honest opinions whether the client likes the advice or not, and explain the basis for the opinion.

A great trial lawyer will not hesitate to tell a client that the client is making a mistake by not taking a recommendation of the lawyer, but then will follow the client's wishes so long as the course of action is legal and ethical.

In other words, great trial lawyers understand that client is the boss, and unless the client is demanding illegal or unethical action or the relationship between lawyer and client has become so impaired that the lawyer cannot adequately represent the client, the lawyer yields to the client's wishes.

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From AAA arbitrator and Judicate West mediator Jay McCauley's website:  The Role of Specialized Settlement Counsel

At bottom, virtually all litigation is a tool of negotiation. The numbers say it all: Ninety-five percent of all filed lawsuits in fact settle before trial, and upwards of ninety-nine percent perhaps should. Nonetheless, the specialized and challenging task of negotiation is normally left to the “trial lawyer” – a person whose training and orientation are focused on trial preparation, and whose efforts at negotiation are almost always secondary and often ineffectual.

The problem is not that trial lawyers don’t settle lawsuits; they almost always do. But when the mission of settlement is left to the trial lawyer, opportunities for early and optimal settlements are lost.

The solution for clients is not simply to engage trial lawyers who are sensitive to the task of negotiation and skilled in that art. Regardless of such lawyers’ negotiating skills, the reality is their task cannot be optimally accomplished while they are otherwise burdened with the "role” of being the trial lawyer.

The reason for this is basic: negotiation, by its nature, is driven by an inescapable tension – the tension between cooperation and competition. To display enough cooperation to promote early settlement, a trial lawyer almost inevitably must risk the client’s competitive position in the bargain. When a trial lawyer extends a proposed resolution to the adversary, the adversary will focus not only on the advantages of the proposal, but also on the firmness of the trial lawyers’ resolve. When a proposal is attractive enough to be tempting in itself, the fact that it is offered at all undermines the trial lawyer’s apparent resolve to fight, thereby tempting the adversary to do the wrong thing: defer or avoid serious settlement discussion.

Trial lawyers know this. And a vicious cycle therefore develops – to protect against the risk of appearing to lack resolve, they naturally tend to make their opening bids extreme. As a consequence, their adversary is characteristically left with nothing but two bad options: either to respond in kind (with an equally extreme and polarizing counter-offer) or not respond at all. Further negotiation is thereby sidetracked, while each party spends more time and treasure on “trial preparation” – i.e., extensive and expensive discovery exercises – to show further resolve and thereby bring the other side to its (apparently missing) senses.

Repeated experience tells us this vicious cycle is rampant in litigation. And an extensive body of literature from the fields of game theory and cognitive psychology tells us why: litigants are playing out the consequences of reactive devaluation – the dynamic wherein an otherwise attractive proposal becomes unattractive by virtue of its being presented by the adversary. See Lee Ross, “Reactive Devaluation in Negotiation and Conflict Resolution,” in Barriers to the Negotiated Resolution of Conflict (Kenneth Arrow et al, eds., 1995).

What, then, is the solution? Police departments bargaining for a confession from the suspect really do separate the “good cop” role from the “bad cop” role. Clients exposed to major lawsuits would do well to separate the roles as well – by engaging a specialized settlement counsel in addition to the needed trial lawyer, and commissioning the settlement counsel to bring his or her skills to bear on a single critical objective: early and optimal resolution of the dispute.

Who are settlement counsel? They are, by background, experienced trial lawyers capable quickly to become intimately familiar with the subject matter of the dispute at hand. They are also more than this: specialists in the methodology of risk-based claims valuation analysis and in the science and art of interest-based negotiation. Ideally, they are also experienced in the techniques of mediation advocacy, and familiar enough with the mediators in their community to advise and represent the client in achieving mediated resolutions in cases that warrant that treatment.

But they are not the trial lawyers for the case. By design, their mission is a short one. If they do not achieve a settlement quickly, they pass the baton to the trial lawyer, along with the full benefit of their early analysis. Their role is revealed to the adversary from the outset. It is because they are nothing more and nothing less than settlement counsel that they can afford to use some needed cooperative techniques to foster early resolution. No lack of resolve is conveyed by that effort. They can demand and measure a response in kind from the adversary, and exact a unique penalty if that response is not forthcoming: their own departure. The adversary knows from the outset that if, through recalcitrance, the mission of early settlement is not achieved, a new lawyer will appear – one who is single-mindedly focused on an entirely different mission: victory at trial.

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UPDATE:  FOR THE LAW.COM AMERICAN LAWYER ARTICLE ON THE NEGOTIATION OF THIS SETTLEMENT, FAMILIAR FACES CENTRAL TO SETTLEMENT (ETC.) CLICK HERE; EXCERPT BELOW:

When you're negotiating a multibillion-dollar settlement, it helps if you've already made similar deals with the lawyers on the other side of the table.

The veteran dealmakers who put together W.R. Grace & Co.'s settlement of asbestos claims, which was announced Tuesday, "know each other well and know the process well," says David Bernick, the Kirkland & Ellis partner who led the talks for Grace. The lawyers representing asbestos plaintiffs in the negotiations were Perry Weitz of Weitz & Luxenberg, Joseph Rice of Motley Rice, Steve Baron of Baron and Budd, and John Cooney of Cooney & Conway.

"These are the same folks I've done business with for many years," adds Bernick. "That makes it much, much easier."

For remainder of article, click here.

The Baltimore Business Journal announced today the W.R. Grace & Co. tentative $2B settlement on asbestos claims here. 

W.R. Grace & Co. Inc. has reached a proposed settlement of all current and future asbestos-related personal injury claims against the company -- a huge step toward Grace's goal of emerging from bankruptcy reorganization.

Columbia-based chemicals giant Grace (NYSE: GRA) filed Chapter 11 bankruptcy in 2001, facing huge liabilities related to asbestos. The company said Monday that it has reached the tentative settlement with a committee of asbestos personal injury claimants, a representative handling future claims and a committee of Grace stockholders.

The complex settlement would total more than $2 billion and would include:

• $250 million in cash;
• Deferred payments of $110 million per year for five years beginning in 2019, and $100 million per year for 10 years beginning in 2024. The deferred payments would be backed by just over half of Grace's common stock;
• Warrants to buy 10 million shares of Grace common stock at an exercise price of $17 per share. The warrants would expire a year after Grace's reorganization plan takes effect. Grace shares were trading at $26.78 late Monday morning, up 8 percent;
• Rights to proceeds of Grace's asbestos-related insurance coverage;
• The value of cash and stock under settlements of litigation with Sealed Air Corp. and Fresenius Medical Care Holdings.

For the complete article, click here.

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HERE IS THE LINK TO THE ALLSTATE MCKINSEY DOCUMENTS; YOU MUST AGREE TO VIEW THE DOCUMENTS FOR NEWS OR INFORMATIONAL PURPOSES:  CLICK "ACCEPT" AND YOU WILL BE DIRECTED TO A PAGE CONTAINING ALL OF THE DOCUMENTS MENTIONED HERE

See also Tort Burger's Post on the Zero Sum Game Aspect of this Controversy here.

I have had a lot of traffic to this post and comments here and elsewhere on the internet about it and the Slabbed post it excerpts.

Because I never meant to "take sides" on a matter I know next to nothing about, I'm now including along with the Slabbed excerpt originally posted, an excerpt of a recent article from Bloomberg.com - Allstate Releases McKinsey Records (etc.) below.        

This post was originally meant to highlight Allstate's (or its consultant's) unfortunate use of the term "Zero Sum Game," when discussing claims handling procedures.  My original comment was that "those who continue to play it often get their  . . . uh . . . soft parts caught in a wringer."

The Slabbed post highlights the damage done to an admitted "Zero Sum Game Player" who is engaged in a human-harm-cost-benefit analysis.  The Pinto punitive damages award came readily to mind because the case was decided while I was in law school learning about negligence.      

For my non-attorney readers, I need to stress that it's not wrong to engage in a cost-benefit analysis for the compensation of injury under a negligence system.  In fact, this is what the law itself (and injured Plaintiff's attorneys) do, i.e., "calculate" the risk of harm + the potential severity of the injury against the cost of avoiding that harm.

People react badly when they see that type of calculation being applied to human injury or the loss of human life because those losses are considered to be "incommensurable," i.e., no amount of money can recompense someone for, say, the loss of a child. For an excerpt from my own article discussing the concept of incommensurability -- The Cost of a Thing is Your Life, click here.

I'm hoping my non-attorney readers will understand that these formal monetary calculations are routinely made by businesses and governments when making decisions about how much risk to human life is worth taking when they engage in potentially dangerous activities for the purpose of creating a significant benefit for many. 

That said, I give you again this excerpt from Slabbed's post on the McKinsey Allstate document furor -- The Herald Tribune Takes the Allstate Challenge --

In a previous post that received a notice in the Silicon Investor BB I spoke of insurers and their lawyers using the court system as instruments of institutionalized bad faith. Indeed Allstate has taken much criticism for ignoring lawful subpoenas over these documents as well as substantial fines as noted by Ms St John. This brings me to the beginning of the main story.

For more than a decade, Allstate Insurance Co. kept a secret from its auto policyholders — a national strategy to force customers to accept reduced cash payouts or face years in court.

Thousands of pages of Allstate documents reviewed by the Herald-Tribune detail how the nation’s second-largest insurer systematically cut payments to customers as a way to boost profits.

The documents describe a two-pronged strategy.

First, the company evaluates claims with a computer program designed to reduce payouts by as much as 20 percent of what the company once paid for the same injuries.

Second, Allstate pushes policyholders to accept quick settlements without the help of lawyers. Policyholders who try to fight for more money face Allstate attorneys coached to refuse to negotiate and to drag out litigation.

The approach often forces car accident victims to take what Allstate offers right away or spend years in court while their bills go unpaid — a strategy Allstate spelled out in guidelines for claims adjusters that “forces the claimant and attorney to think about the obstacles they must overcome …”

Indeed it appears we have a road map of how tort reform is being used against us. Limits on damages only make it easier for these large insurers to get away with outrageous behavior. The story continues:

It was a “Zero Sum Economic Game. Allstate gains … others must lose,” declared a consultant’s PowerPoint slide from a 1994 presentation to executives.

During the next five years of Allstate’s claims overhaul, the same consultant, New York-based McKinsey & Co., chose confrontational words to describe the new system. In PowerPoint presentations and discussion papers drawn up for Allstate executives, McKinsey used “boxing gloves” to characterize how Allstate should treat policyholders who balk at settlements. For customers who hired lawyers, McKinsey urged, “align alligators,” adding these instructions: “sit and wait.”

The documents also show:

Allstate removed much of the discretion of local claims agents to set payouts, requiring them to base their recommendations on a computer program called Colossus. Under that program, average payouts for bodily injuries dropped more than 20 percent in the first few years, internal documents show, a big step toward reaching McKinsey’s goal of “establishing a new fair market value” of such injuries.

Allstate recognized that when an injured driver hired a lawyer, the insurer lost money. In repeated presentations to Allstate executives, McKinsey coached tougher and increased legal action. By 1996, Allstate had doubled its legal force, hiring 225 more lawyers. “The bottom line is that Allstate is trying more cases than ever before,” a corporate newsletter said . . .

For full post from Slabbed click here.

Bloomberg.com's article, Allstate Releases McKinsey Records (etc.) Update No. 2 is here.

Excerpt from Bloomberg.com article below:

Allstate Corp., the second-biggest U.S. home and auto insurer, released 150,000 pages of documents sought by opposition lawyers and company critics related to McKinsey & Co.'s review of claims-handling practices.

McKinsey suggested strategies for the company to become more profitable by paying less in claims, according to videotaped evidence presented in Fayette Circuit Court in Lexington, Kentucky, in a civil case involving a 1997 car accident. Lawyers for policyholders said Allstate's previous refusal to release the documents showed the company wasn't treating its customers fairly. The insurer has said the documents include trade secrets.

``Public criticisms by people with a vested interest in creating an inaccurate picture of the company's claim practices have been based unfairly on only snippets from the documents taken out of context,'' the Northbrook, Illinois-based insurer said in a statement today. ``Because of the need to address misunderstandings resulting from the growing misplaced focus by our critics on very small pieces of the whole, we have decided to make the documents public.''

One slide the consultant prepared for Allstate was entitled ``Good Hands or Boxing Gloves,'' and recommended the insurer put on ``boxing gloves'' to deter about 10 percent of claims deemed to be exaggerated, padded, or fraudulent, according to portions of the report shown to the Kentucky jury. For more than 50 years, Allstate has advertised its employees as the ``Good Hands People,'' telling customers they will be well cared for in times of need.

Rising Claims

The strategy proposed by McKinsey would ``send a message to the attorneys of our proactive defense stance'' in cases dealing with minor impact soft tissue injuries, the consultant said in the document. Lawyers would have to ``think about the obstacles they must overcome to recover significant settlement or the benefits of a smaller, walk-away settlement.''

Allstate implemented the plan in the 1990s because studies showed more people were submitting claims even though accident rates were declining and cars were safer, Allstate lawyer Floyd Bienstock told the Kentucky jury. The McKinsey report found Allstate was overpaying bodily injury claims by 16 percent, Bienstock said.

``It was never a plan to intimidate people,'' he said.

To continue reading, click here.

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Lawyers ask me this question more often than any other.  This week's Blawg Review Host -- TechnoLawyer -- reminded me that I once wrote a very short article on the topic -- contained in the TechnoLawyer Problem Solution Guide available again at the Blawg Review No. 152 here.

Using Your Case Management Order or ADR Panel to Convene Your Mediation

There are many reasons you may not wish to initiate mediation. Many lawyers justifiably do not wish to appear overly desirous of settlement. Others are discouraged because their opponents

• long ago indicated their client would not consider paying/accepting anything less/or more than $X, which is a non-starter;
• say they won’t consider settlement until after some key event; or,
• insist their client will “pay millions for defense but not a penny in tribute.”

The best way to encourage settlement discussions without any loss of face is to agree upon a mediator (or mediation services provider such as Southern California’s Judicate West) at the commencement of the case, authorizing the neutral to suggest mediation at any time without prompting by the parties. This is the general practice in most multi-party construction defect cases and there's no good reason to limit the benefits of this practice to complex litigators.

This strategy permits one party to suggest mediation to the neutral who can then initiate a negotiation session without divulging who, if anyone, sought the mediator’s assistance.
Any mediator worth her salt will be trained in and skilled at convening mediations without party pressure.

Some, but not all, mediation service providers also possess these skills. Judicate West’s case managers, for instance, are all skilled professionals with a minimum of five-year’s experience convening mediations for the parties.

At the commencement of your action, ascertain whether a neutral or ADR service provider in your locale specializes in the art of convening. A service provider like Judicate West will often know more about your opposition than you do, particularly in large legal markets like Southern California where you may well not “do business” with your opponent on more than one occasion.

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Check out California appellate attorney Greg May's post today -- A Dilemma for Some Defendants Who Seek to Arbitrate here.  Excerpt below.  

It’s a long-held rule in California that a defendant sued on a contract may recover attorney fees pursuant to a provision in the contract even if the defendant prevails on a theory that he was not a party to the contract or that the contract is nonexistent, inapplicable, invalid or unenforceable. The rule exists in order to further the purpose of Civil Code section 1717, which is to make unilateral fee provisions reciprocal. . . . . 

Consider now whether a similar rule should apply to arbitration provisions. . . . . Should a defendant be able to compel arbitration pursuant to a contractual arbitration provision in a contract alleged by plaintiff even if the defendant denies the existence of that contract?

The court of appeal says “no” in Brodke v. Alphatec Spine Inc., case no G038591 (4th Dist. Mar. 20, 2008). .......................

For the full post, click here.

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The prestigious Straus Institute for Dispute Resolution has a new web site -- HERE!!! -- and a few videos that the beginning mediation or settlement advocate shouldn't miss.

Here's Judge Williams, who sits in the downtown Los Angeles Superior Court as a full-time settlement judge.  In the first part of his video, Judge Williams talks about the differences between settlement and mediation as well as a few of his favorite topics -- CHOICE, RESPECT, JUDICIAL ECONOMY ACCESS TO JUSTICE and EFFICIENT CASE MANAGEMENT. 

In part 3 of the video, Judge Williams discusses basic mediation concepts such as interest-based and distributive bargaining; impasse-breakers; trust-building; shuttle negotiation diplomacy; mediators' proposals and the like. 

If I missed Judge Williams saying "you have to hang the meat low enough for the dog to smell it," I'll apologize to him for inattention the next time I see him.  If he didn't say it, I'll be looking for the next part of the video, where gems like that may be found. 

If you wonder "why the orange?" -- listen to part 3.

Judge Helen Bendix, the Chair of the Los Angeles Superior Court ADR Committee, talks about the contribution of the Court's ADR program to the administration of Justice.  That program has not only settled thousands of cases, but has served as the training ground for thousands of mediators in assisting litigants in negotiating the resolution of their lawsuits. 

Co-Directors of the Straus Institute, Tom Stipanowich and Peter Robinson address mediation issues for the first part of this video.  If you want to go directly to Judge Bendix's discussion, move the slide bar to the middle of part 1.  

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Sometimes reading my statistics page is the best way I have of taking the pulse of my readers and diagnosing the current actual rather than the aspirational state of settlement and mediation practice.

Listen.  Only the squeakiest client or party wheel will tell you that he is feeling coerced into settling the litigation that has become a millstone around your neck.

I'm talking to attorneys here -- but settlement officers, judges and mediators should pay attention as well.  Whether you're representing the CEO of a Fortune 500 Company or the 60-year old man who slipped on the iconic darkened bananna peel in the produce section of the local Ralphs, at some point during settlement negotiations your clients are going to suspect one or more of the following:

1. you're tired of his case and want to get rid of him
2. you're in cahoots with opposing counsel, with whom, frankly, you have a far more enduring if not affectionate relationship than with your client
3. you and your old buddy the mediator or settlement judge/officer have joined forces to to compel him to give up his legal rights in exchange for less money than you, his attorney, told him he was likely to recover two years ago
4. despite his protests, you, the mediator and opposing counsel keep saying the fact most important to his case  is "irrelevant" to his chances of recovery
5. when you talk to opposing counsel or the mediator about the case, he doesn't even recognize what you're talking about -- this is not the same case he brought to you to try two years ago
6. he feels extorted and no one is paying any attention to that
7. he feels like he's being sold down the river and no one is paying any attention to that
8. he paid his you and your law firm tens of thousands, hundreds of thousands, millions or tens of millions of dollars in attorneys fees and he thinks he could have settled the case for the sum that's being offered/demanded now before he paid you to litigate this case to the settlement conference.
9. he's really really irritated now -- angry even -- though he doesn't get angry; he gets even, and he'll have no trouble spending another few million on attorneys fees so show that lying, cheating so and so in the other caucus room a thing or two
10. he's a successful business man and he's never been treated with so little respect before.

Now let me tell you something else.  If these thoughts are some of those which race through your clients' minds during settlement conferences, your mediator should be sufficiently alert to the changing temperatures in the room to address them. 

Why?

Because the mediator's job is not to settle the case.

What??????????????????????????

The mediator's job is to:

1. assist you in helping your client understand the options available to him
2. assist you in delivering bad news to your client in a way your client can hear it
3. assist you in negotiating as good a settlement as possible for your client without making your client feel as if he has no other options
4. assist you in resolving for your client the justice issues that your client originally brought to you to resolve
5. assist you in helping your client recognize and set aside the emotional experience of the settlement conference for the purpose of doing a sober cost-benefit analysis
6. assist you in helping your client recognize that legal cases change over time; sometimes getting better and sometimes getting worse, usually both in the discovery process -- this is not the case your client originally brought to you -- untarnished by the harsh adversarial systems but puts "facts" to a more exacting test than any other process in business, political or social life
7. assist you in helping your client recognize his own fallibility, potential for error, and accountability for his part of the harm for which he is seeking recompense
8. assist you in helping your client recognize that the other side -- evil, destructive and hateful as it may well be -- also has a few items of "truth" and "justice" on its side of the balance sheet
9. assist you in helping your client make an informed decision without pressure from anyone whether he wishes to accept less than he wants to or would like to take his chances at trial
10. assist you in walking away from the mediation or settlement conference with your client clapping you on the back and saying, "great work, John.  If I'm ever in need of a litigator again, rest assured it's to you I will come.  I'll tell my friends on the block or on the Board of Directors that you're the man.

How do we accomplish these ten aspirational goals together -- attorney and mediator and client?  Stay tuned.

The Jerry McGuire video above is for our clients -- with whom we do not share just how hard we are working and what a toll it takes upon us because that's what they've paid us to do -- and paid us handsomely I might add.

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But if you are still practicing law,

download this

great practice guide from

Merrill-Legal

Maintaining the Chain of Custody in Civil Litigation.

 

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Thanks to Tulane Law School Professor Alan Childress over at the Legal Profession Blog for alerting us to this item No Bias on Encouraging Settlement about a Rhode Island Supreme Court ruling that a Judge needn't recuse himself for bias if he encourages the parties to settle. 

As Georgetown Adjunct and Legal Profession Blogger Michael Frisch reports,

the plaintiff [in that case] argued that the judge's encouragement of settlement talks demonstrated bias; the court strongly disagreed. It is entirely appropriate for a judge to suggest that parties resolve their claims through mediation. . . "No less renowned a figure than Abraham Lincoln recognized the desirability of settlement when possible...it borders on the offensive for a party to claim that a justice should be recused for adhering to this policy [of encouraging settlement]."

As "amusing" as this might first be to lawyers, I don't want to let it pass us by without pausing a moment to consider the possible communication gap between Judges and lawyers -- on the one hand -- and people seeking justice -- our clients -- on the other.

People Seek the Services of Lawyers to Solve a Justice Problem

Having recently earned my LL.M and taught a semester of ADR theory and practice to law students, I can report back from the law school trenches that cynicism about justice is not limited to old dogs like me.  By their second year in law school, most aspiring attorneys have narrowed their view of justice/injustice to those wrongs the law will remedy.  See Writing on a Piece of Rice in a World of Injustice.  More troubling, they've narrowed to a vanishing point their former hopes, if any, to be part of a system that delivers justice.

When I ask defense attorneys in settlement conferences why they think their opponent filed the lawsuit against their client they answer with a single voice:  MONEY! 

"But why do you think they hired a lawyer," I persist. 

"Money," they respond again, as if I'd suddenly lost all reason.

"But why did Mr. X even think of seeking resolution in Court . . . under the law . . . why did he turn to the justice system?"

"For justice?"

Losses the Law Will Redress

People suffer losses every day of the week.  They lose their luggage in Madrid.  They don't get a raise or a year-end bonus.  They slice off the tip of their finger while chopping onions for Sunday dinner.  If they are lawyers of my generation, they got a 610, instead of a 700 on their LSAT -- thereby losing any hope of attending an Ivy League law school.  

The cynical persist.  "People have been known to sue for those losses too," they say.  

True, but they are among the very very very few.  Most people who undertake the considerable effort to find an attorney willing to take their case do so because they believe they have been treated unfairly.  They believe themselves to be victims of an injustice.  

And attorneys, not clients, are the first ones who monetize injustice for their clients.  Still, years after that injustice has been monetized, right before trial when most mediations and settlement conferences take place, the clients continue to long for justice. 

A Monetary Solution to a Justice Problem

So we should pause before we give in to the temptation to make light of the client who must have urged his lawyer to recuse the Judge for even suggesting that he not immediately be given access to justice -- a jury trial.  A client who likely feared he'd be strong-armed into accepting injustice in a Court suggested mediation.    

Our clients are speaking and we are not listening.  We are in danger of processing monetary claims rather than helping our clients come to terms with the justice issues they brought to us to resolve. 

As a mediator, I can tell you that most clients need to have monetary resolutions framed as "fair" or "just" results.  And if that is impossible, they need -- at a minimum -- to have the injustice they are suffering acknowledged by the mediator.  

As to those Judges who "encourage" mediation, I suggest that the directive be framed as an attempt to achieve, through settlement, that which it may not be possible to achieve in Court.  I would, in all events, assure the people seeking justice who appear before me, that I will be there, ready and able to try their case -- happy to serve their justice needs -- if the mediation I suggest they pursue fails to deliver the fair result they are seeking.

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I was a commercial, antitrust, IP and securities litigator long before I devoted nearly a decade of my practice to environmental coverage litigation.  In the process, I learned enough about Comprehensive General Liability ("CGL") coverage to make me worry about how well I'd served my commercial clients in regard to the insurance coverage potentially available to them.  

If you are a commercial litigator -- or any type of litigator who defends your clients against claims for damages or for injunctive or other equitable relief -- you must

1. ask your clients for all of their insurance policies, even those that seem unlikely to provide coverage; 
2. carefully review the precise wording of the insuring agreements and research the case law in the relevant jurisdiction to determine how the courts have interpreted those insuring agreements under facts similar to those your client's case presents;
3. except for some narrow additional protections provided to insureds, be aware that there is no such thing as "the law" of coverage under any particular type of policy -- all coverage flows directly from the precise language of the insuring agreement
   1. in most jurisdictions, that language -- if ambiguous -- is interpreted in favor of the insured's objectively reasonable expectations; and, 
   2. in most jurisdictions the rule of contra proferendum will require a court to construe any ambiguity in an insurance policy against the insurance carrier
4. carefully review the exclusions contained in those policies and research the relevant state's case law (as well as federal cases applying state laws) interpreting those exclusions; 
5. before concluding that there is no coverage, read available treatises as well as recent law review articles that may well suggest creative ways of distinguishing adverse authority or extending existing principles to bring your client's claims within the terms of the policy or outside of pertinent exclusions;
6. if you have any doubt whatsoever about the existence of coverage, tender the claim to your client's carrier and let the carrier do the analysis;
7. if the carrier denies coverage, read the reasons for denial critically and respond with any reasonable interpretation of the policy that will support a claim of coverage;
8. if the carrier continues to deny coverage, keep the carrier informed of the progress of the litigation and invite the carrier to respond to all settlement demands and to attend all mediations and settlement conferences.

If the cost of the lawsuit is beyond your client's means or will deprive it of capital necessary to meet its business goals for the next few years, retain coverage counsel for a second opinion. 

Have I mentioned that my beloved husband is one of the best coverage attorneys in the country -- having litigated the World Trade Center coverage action on behalf of Larry Silverstein's lender GMAC?  And that I formed my opinion about his brilliance while I was representing the London Market Insurance Carriers and he was representing the policy holder?  Even if your case does not justify hiring someone like my husband to give you a second opinion, there are lots of good coverage attorneys out there who can so that you can complete your coverage "due diligence" for your client.

At last, to the 2007 Fifty State Environment Coverage Analysis

I ran across this great resource while doing a little online research.  It's a comprehensive review of the law pertaining to the interpretation and application of insurance policies to potential or actual environmental liabilities entitled Environmental Insurance Litigation 2007   --  A State by State Case Law Survey by Michael F. Aylward, Esq. of Morrison Mahoney LLP.

If your clients have been hit with demands to clean up toxic waste, this is an invaluable resource.  A specialist in the field, however, should be consulted to maximize the chances that coverage will be provided.

Have I mentioned that I'm on the Insurance Coverage Mediation Panel of Neutrals with the  International Institute of Conflict Prevention and Resolution ("CPR")?  And since I'm a former defense coverage attorney currently married to policy holder counsel, you're unlikely to find many other mediators who are both extremely knowledgeable about the law of coverage and deeply neutral!

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Because a reader recently suggested that "facilitative" mediators "tell the parties what to do," I decided it was time to revisit our terminology.   

Mediators!  Litigators!  Please feel free to weigh in!

FIRST, LET'S JUST GO AHEAD AND ADMIT UP FRONT THAT NEGOTIATION IS A COMPETITIVE SPORT -- the goal of which is to take the largest part of the delta between the two parties' real bottom lines.

EVALUATIVE MEDIATION

Evaluative mediators provide the parties with an evaluation of the strength and weaknesses of their legal positions, usually in separate caucus. If asked, the evaluative mediator will give his/her opinion about what verdict a jury would likely deliver.  Though I've co-mediated with sitting Judges quite a lot (the paradigm of evaluative settlement officers or mediators) I rarely see them tell the parties what to do -- see DIRECTIVE MEDIATION below.

Evaluative mediators often end a session with a mediator's proposal, i.e., the mediator chooses a number he/she believes would be acceptable to all parties (not necessarily what he/she believes the case is "worth") and tells the parties. If both parties accept, the deal is done. If either rejects, neither will know if the other party accepted.

I rarely make a mediator's proposal -- preferring to help the parties move toward resolution so long as no one is walking out.  They really do feel better making their own decisions.  That's why they've come to mediation and not arbitration.  So long as I believe the parties' differing "bottom lines" might overlap, I encourage continued discussion even when the parties are feeling exhausted and cranky. Persistence and optimism about resolution in equal measure. Sometimes the process just needs a cheerleader.

FACILIATIVE MEDIATION OR FACILITATED NEGOTIATION

Faciliatative mediators assist the parties, again often in separate caucus, to decide how the bargaining session will proceed, i.e., how high a first offer or demand should be; which party might benefit the most from making the initial offer; how many concessions the parties should consider making during the course of the negotiation; and, what reasoning might spur their opponent to make another concession.  Once again, I rarely see the mediator, settlement officer or Judge tell the parties what to do. But see DIRECTIVE MEDIATION.

TRANSFORMATIVE MEDIATION

Transformative mediators strive to empower the parties to express their true needs and desires; to shift from self-concern to understanding of the other and to move from entitlement and blame to accountability.  Transformative mediators do not direct the process of the mediation, which is always held in joint session.

Transformative mediators encourage the parties to set their own ground rules; state what their own desires and interests are; and, express themselves as fully as they wish, even if that includes persisting through angry outbursts, tears, recriminations, and the like.  

In its pure form, the mediator acts something like a therapist. Uh, huh, uh huh, anything else? Have you said everything to Jim or Julie that you want to say? Uh, huh, uh huh? Jim/Julie, what do you want to say back to Julie/Jim about that?  The purpose of transformational mediation is to resolve the conflict completely to the parties' mutual satisfaction even if that does not settle the actual dispute. See Bush and Folger, The Promise of Mediation.

DIRECTIVE MEDIATION -- Once again, I've never see Judge or mediator tell the parties to do anything other than to bring all the stakeholders and their insurance carrier representatives. I have, however, seen and done the following:  

I need $X from you to settle the case -- $Y is not going to do it. Please talk to you client/carrier and bring me back that number if you want to settle the case today.

This directive usually occurs very late in the proceeding and most often in a multi-party mediation in which a dozen or more defendants are contributing to the settlement. I also call this type of mediation FUND RAISING MEDIATION. I've never seen anyone do this better than Judge Victoria Chaney in the Complex Court in Central Civil West, Los Angeles.

My own "directive" suggestions to the parties generally concern the need for at least one party to step up to the line of impasse. If I believe the parties are bargaining in the nano-and stratospheres and are not getting within a hundred yards of where they'd really settle the case, I'll generally tell them so -- i.e.,

someone needs to step up to the line of impasse for this case to settle. If you don't do it, you'll likely lose your opportunity to resolve the matter today.

That's about as "directive" as I get, although I have been known to say I need $5,000 or $500,000 or $1 million more NOW. Or, I need you to drop your demand by $10K or $500K or $50 million NOW.

You can only do this if you have established a strong relationship of trust and confidence with both sides. Each side needs to know that you are not simply carrying the other side's bluff to them with your extra weight behind it. So directive and evaluative techniques -- I don't know their bottom line but I believe we're getting pretty close to it -- go hand-in-glove.  

INTEREST-BASED OR INTEGRATIVE MEDIATION

Ideologies aside, here's the real reason to probe party interests -- i.e., their genuine desires, expectations, fears, business needs, financial situation, lines of authority, reserves, reporting relationships, etc. -- it's the only way you can offer, with any credibility, your opinion about the "temperature" in the "other room" and the likelihood that party A might settle the case somewhere in the range of $X and party B somewhere in the range of $Y.

But as I tell my litigants -- "You only truly know what their bottom line is by negotiating in its direction."   I am often as shocked as the other side when the case settles for a number that one side said they would not accept. "As long as they are not walking out," I say, "they are willing to continue moving in your direction. Let's see where that takes us, shall we?"

DESPERATION MEDIATION:  ANYTHING THAT WORKS!!! 

• get the Plaintiff to concretize his monetary expectations, i.e., what he might do with the money to take the Court-as-Gambling-Casino element out of the process;
• ask the Plaintiff to imagine the offered sum sitting on the table before him -- to see it as a stack of cash or a thing or services or an improved quality of life he might purchase with it -- this makes the money real and more difficult to literally "leave on the table;"
• assist the defendant to:
  • subtract "sunk costs" from his/her/its calculations when considering the "body blow"  that paying money to their opponent will be;
  • brain-storm about business interests that could be satisfied by using the litigation as an opportunity to make a business deal;
  • come to grips with the loss that settling the litigation will inevitably entail, dealing directly and honestly about the issues of unfairness and injustice that must often be accepted to justify paying even a reasonable sum.
• don't let the parties leave until they've had principal-to-principal discussions -- the parties are often able to resolve a matter that their lawyers cannot because their lawyers are acting on instruction (I don't have the authority to settle for that) whereas the principals have more flexibility on often arbitrary "bottom lines" -- this also helps humanize the opponent who has been thoroughly demonized by the process of adversarial litigation (see autistic hostility)
• LISTEN, ELICIT, EMPATHIZE, REFRAME, HARMONIZE, and  APPEAL TO MUTUALLY SHARED HIGHER PRINCIPLES

Questions?

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Thanks to Drug & Device Law for pointing us to the CSPAN video of a recent forum on the VIOXX settlement here.

This American Enterprise Institute forum will not be beneficial to plaintiffs who are searching for advice on whether to accept the settlement themselves. I refer those people back to their attorneys. 

Here's a link to a Yahoo discussion group for Plaintiffs making the decision whether to accept the offer.

For reporters who are following this story at depth, the video includes a sophisticated presentation by Jones Day attorney Mark Herrmann about settlement strategy from Merck's point of view; a provocative presentation by Professor George M. Cohen -- who calls the settlement proposal an illegal antitrust conspiracy -- and a scholarly presentation by Professor Nagareda on the public policy issues raised by the settlement of mass tort claims.  

For attorneys who have been retained to provide their clients with a second opinion, Professor Cohen's presentation will be a useful addition to their own research and independent conclusions.  Attorney Andy Birchfield -- the only forum speaker with first hand knowledge of the negotiations leading to the settlement proposal -- may be of the greatest interest as he walks counsel for Plaintiffs through the structure, purpose and effect of the proposed settlement program.  

Speakers in this forum include:

The incredibly well-spoken Mark Herrmann of Jones Day and the Drug & Device Law Blog. 

Mark modestly fails to mention in his Blog post concerning this video that he is one of the speakers on this panel. 

Herrmann discusses the following questions:

1. did Merck's settlement strategy make sense; and,
2. will this settlement buy Merck peace.

 

 

George M. Cohen, University of Virginia Law School Professor who discusses ethical issues pertaining to the "settlement program proposal."  

Professor Cohen not only concludes that attorneys recommending this proposal to their clients are violating professional ethics, but asserts that it constitutes an illegal antitrust "conspiracy" as well. 

 

 

 

Vanderbilt Law School Professor Richard Nagareda, author of the book Mass Torts in a World of Settlement. 

Professor Nagareda discusses the settlement from a dispute resolution public policy standpoint. 

As a contract between Merck on the one hand and the "lawyers who have a large market share" on the other, Professor Nagareda suggests that the settlement proposal is more an artifact of the law flowing from the Supreme Court's AmChem opinion than of any legal "connivance" among the Plaintiffs' attorneys or between them and Merck.

This settlement proposal, he says, is a valuable and creative peace-making transaction for mass claims.   

Andrew Birchfield, an attorney at Beasley Allen and co-lead counsel on the Plaintiffs’ Steering Committee for the federal Vioxx litigation addresses the negotiations themselves and the structure of the settlement.

Andy says that in approaching settlement Merck required global peace -- that there couldn't be a "second round" because Merck had seen how disastrous open-ended liabilities could be for a corporation.

The plaintiffs' attorneys, says Birchfield, negotiated a settlement agreement designed to serve the best interests of each individual client no matter how strong or weak each of their cases might be.

Attorney Ted Frank of the American Enterprise Institute who once represented Merck in the Vioxx litgation. 

Frank talks about the law and economics of the settlement proposal, focusing on the weakest link of Plaintiffs' cases -- causation.

 

See also the Blog of the Legal Times coverage of this forum here.

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(right:  '94 quake damage)

Though I've participated (as co-mediator) in the settlement of some of these Northridge Earthquake cases, I'm going to let the insurance bloggers address the wisdom of this decision -- just sent down by the California Court of Appeal in Village Northridge Homeowners Association v. State Farm Fire and Casualty Co.

As the Court itself acknowledged, under its holding,   

a plaintiff could settle a disputed insurance claim, keep the money paid, and then sue for fraud (rather than on the released claim) if it was fraudulently induced to settle the claim by a misrepresentation of policy limits.

We must say we're surprised by this holding and imagine the insurance carriers are as well.  The "parade of horribles" raised by State Farm, however, was d