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Dispute Resolution GuideJune 1995 Previous | Table of Contents | Next
NEUTRAL EVALUATIONDispute Resolution Series Practice Module 5 TABLE OF CONTENTS
I. WHAT IS A Neutral Evaluation? II. CHARACTERISTICS OF A Neutral Evaluation III. HOW TO USE Neutral Evaluation
C. THE ROLE OF THE NEUTRAL EVALUATOR IV. ADVANTAGES OF thE Neutral Evaluation V. DISADVANTAGES OF THE Neutral Evaluation Appendix a: Checklist for Neutral Evaluation Appendix b: sample Neutral Evaluation agreement I. What is a Neutral Evaluation?Neutral Evaluation[1] is a dispute resolution technique - at mid-point between mediation and binding adjudication - that can stand on its own or be integrated with other dispute resolution processes such as mediation.[2] Neutral Evaluation is a process in which the parties or their counsel present their cases to a neutral third party (usually an experienced and respected lawyer[3] with expertise in the substantive area of the dispute) who renders a non-binding reasoned evaluation on the merit of the case. This process combines features of both a decision-making and a non-decision-making process. During the process, the neutral may be invited to serve as mediator or facilitator. The overriding purpose of Neutral Evaluation is to make litigation less expensive for parties by reducing pre-trial costs and enhancing pre-trial practice. Neutral Evaluation attempts to avoid some of the pitfalls of litigation, such as the failure of lawyers and clients to assess their cases early, the uncommunicative pleadings and unnecessary or unfocused discovery, which lead to unnecessary costs and delays.[4] While Neutral Evaluation may include settlement discussions, its broader purpose is to contribute to both the case development and the settlement process. Neutral Evaluation was originally conceived as a case management tool. It was designed to provide the parties with an early, efficient and meaningful opportunity to communicate about their dispute; to move them and counsel to meet early to clarify issues and identify areas of agreement; and to assess realistically the relative strengths and weaknesses of their positions, thus encouraging, early settlements.[5] Parties to a dispute are generally naturally biased towards their own position, and often unable to objectively assess the legitimacy of the other party's position: the Neutral Evaluation provides the parties with an early, reliable and impartial assessment of their situation.[6] Neutral Evaluation may be court-connected or be undertaken in a private setting through voluntary arrangements between the parties. In Canada, Neutral Evaluation is being used, on a limited basis, as a private process , although it is sometimes used in conjunction with court dispute resolution programs. Neutral Evaluation may be initiated at any time in the life of the dispute although an assessment of the case early in the process is often preferable. In principle, when it is court-annexed, Neutral Evaluation does not begin until a lawsuit is filed, while in a private context, it may be triggered as soon as a deadlock arises in connection with the dispute. At that stage, if the applicable agreement provides it, the parties may start the Neutral Evaluation process. Even if Neutral Evaluation was not specifically provided for in an agreement, the parties may still be able to agree to commence the process.[7] The central feature of Neutral Evaluation involves an informal, confidential, impartial and brief evaluation session of a dispute that may take place at any time, but preferably as early in the dispute as possible. The evaluation session is divided into four major segments: case presentations, focusing, assessment/valuation, and settlement exploration, all of which are detailed further in the following pages. II. Characteristics of a Neutral EvaluationNeutral Evaluation is:Voluntary: It is non-binding on the parties: they are free to accept or reject the outcome of the Neutral Evaluation. They must expressly agree to attempt settlement through the Neutral Evaluation process and may withdraw from the process at any given time. Informal: There are no fixed evidentiary or procedural rules governing the process. Rather, the parties decide on the governing rules that may be set out in writing in the Neutral Evaluation agreement. This is a flexible process as its scope can be shaped by the neutral evaluator and/or the parties according, for example, to the type of dispute, complexity of the case and number of parties involved. Confidential: Neutral Evaluation is generally a confidential process, unless the parties agree otherwise. The parties should jointly establish the extent of confidentiality in a confidentiality agreement or via a clause in the Neutral Evaluation agreement. Notwithstanding a confidentiality clause or agreement, when the federal government is a party, the Access to Information Act and Privacy Act must be examined to determine the extent to which they restrict disclosure and withholding of information. For further information about the application of these Acts, please refer to the document entitled "Confidentiality: Access to Information Act and Privacy Act" contained in this Reference Guide. Assisted: The neutral evaluator's role is that of an impartial third party who helps the parties identify the main issues in dispute, discusses the strengths and weaknesses of the parties' arguments, assesses the merits of the claims and renders an opinion on the likely outcome of the case in court. Whenever possible, the neutral evaluator helps the parties explore the possibility of a mutually acceptable settlement and may be invited to serve as mediator or facilitator. III. How to use Neutral EvaluationA. Objective of a Neutral Evaluation Neutral Evaluation is designed to enhance pre-trial practice by[9]:
When the parties are reluctant to engage in anything but traditional means of dispute resolution such as litigation, Neutral Evaluation can be used to help move them towards settlement or other alternatives. Indeed, Neutral Evaluation provides a neutral setting where parties who might not otherwise be amenable to DR can ponder the various possibilities. Clearly, the objective assessment made by the neutral evaluator forces all counsel and parties to confront their respective position at an early stage. The evaluation is most effective if undertaken before adversarialattitudes become entrenched, which blind the parties to the opportunities of settlement. It may also refocus the parties when other strategies were unsuccessful.[10] Neutral Evaluation provides the parties with a clearer idea of the core issues in dispute; from there they can concentrate on serious negotiations without wasting time and money on peripheral issues.[11] While this rights-based process is suitable for many different types of litigation,[12] experience has shown the process to be best suited to straightforward disputes where obvious, clear-cut differences exist between the parties.[13] Neutral Evaluation will be a valuable aid to settlement for parties having substantially differing expectations of the outcome of the litigation. For cases involving simple legal principles, Neutral Evaluation may be useful by providing dollar valuations of a claim whereas in complex cases, the benefit may result in narrowing issues or the suggestion of creative strategies. Neutral Evaluation is especially effective when the parties have reached an impasse on technical or scientific issues where the neutral evaluator has such expertise.[14] The following questions could be important to consider in determining the suitability of Neutral Evaluation:[15]
i) Choosing the Neutral Evaluator There is no set rule for choosing a neutral evaluator. In Canada, the flexible nature of the Neutral Evaluation process enables the parties to creatively select a neutral according to the nature of their case, its complexity and the parties goals.[16] In choosing a neutral evaluator, the parties should apply the following basic criteria: impartiality, a reputation for good judgement and fairness, experience in litigation, and to the greatest extent possible, expertise in the subject area of the dispute. Nothing is more critical to the success of a Neutral Evaluation than the overall quality of the neutral evaluator. That is to say that the choice of a neutral evaluator should not be made on the basis of subject expertise alone.[17] The actual practice is to choose an experienced and respected lawyer who is knowledgeable in the subject area of dispute. However, the neutral evaluator does not have to be a lawyer: depending on the circumstances of the case, the parties may, instead, appoint an expert in a technical area who would be able to quickly grasp the issues and craft practical solutions.[18] The flexibility of the process offers an opportunity to choose more than a single neutral evaluator, if needed in specific circumstances. If settlement is considered and is to be included in the process, it is also important that the neutral evaluator be familiar and skilled with a number of DR techniques, in order to efficiently direct the parties to further settlement negotiations. For any assistance concerning the selection of a neutral evaluator, the Research and Statistics Section of the Department of Justice has prepared a directory called the Directory of Dispute Resolution Neutrals (the Directory). The Directory has been prepared to assist the Department and other federal departments and agencies in selecting DR neutrals such as mediators, arbitrators or neutral experts. The individuals listed in the Directory are not in any way related to or affiliated with the federal government of Canada or the Department of Justice. The Directory is available electronically through the Text Workbench. ii) Preparation for Neutral Evaluation There is no rigid format to be followed at this stage. Generally, at a reasonable time before the date of the evaluation session scheduled by the neutral and/or the parties, each party provides to the neutral evaluator and the other party(ies), a concise written Evaluation Statement of the issue, outlining the facts, expert reports, the relevant law and argument on which each party relies as well as excerpts of the pertinent cases.[19] The parties are permitted to include any document that might help them in achieving the ends of the Neutral Evaluation session. The Statement should indicate who will be attending the evaluation session, so as to facilitate the notification of all parties if a problem is to arise[20]. Since Neutral Evaluations in Canada are not covered by court rules, an agreement between the parties concerning confidentiality would be strongly recommended, unless the parties agree otherwise. Thorough preparation before the evaluation session is key to a favourable outcome: parties must be prepared to provide the neutral evaluator and the other party(ies) with all the necessary information in order to ensure that an accurate evaluation can be made.[21] Upon receiving the parties' Evaluation Statements, the neutral evaluator will have to review them and carry out any legal or technical research necessary to provide an accurate preliminary analysis of each party's contentions. The neutral evaluator, and/or the parties, taking into account the particular circumstances of the case (readiness to settle, sufficient exchange of information or differing interests between parties and counsel, etc.), will have scheduled a convenient time and place for the Neutral Evaluation session, with the parties and their lawyers. The session would preferably take place on neutral territory. iii) The Neutral Evaluation Session The Neutral Evaluation session generally begins with opening remarks from the neutral evaluator, explaining the purposes of the session and his or her role, outlining the basic ground rules to be followed, and describing and emphasizing on the important characteristics of the process such as its informality, confidentiality or privacy, etc. The neutral evaluator will have read the Statements and will be familiar with the dealings between the parties up to this point.[22] The major components of the session consist in:
C. The Role of the Neutral Evaluator The neutral evaluator will[32]:
D. The Role of the Counsel [33] Since cases referred to Neutral Evaluation often involve significant legal issues, lawyers play an important role (similar to the role they would play in more structured processes) in the process.[34] The presence of lawyers is advisable as they:
In short, the lawyer is the one who summarizes the factual issues and legal arguments supporting his or her client's case and who ideally uses the resulting evaluation to move the parties further into negotiation and toward settlement. IV. Advantages of the Neutral Evaluation
V. Disadvantages of the Neutral Evaluation
Appendix A: Checklist for Neutral Evaluation1. Have the concerned parties agreed to resolve the matter through Neutral Evaluation? 2. Is the Neutral Evaluation process appropriate for this particular dispute according to the circumstances of the case? 3. Are the parties represented by counsel or are they confronting the dispute themselves? If represented by counsel, what will be the counsel's role ? 4. Are all directly interested parties (to the extent possible) at the table? 5. Are the parties attending the evaluation session vested with settlement authority? 6. Have the concerned parties selected a (or more than one) neutral evaluator? In the negative, does the agreement provide a default selection mechanism? 7. Have all essential elements of the Neutral Evaluation agreement been considered, including:
8. Has any time limit been set for the duration of the procedure, if needed? 9. Have any special requirements been met (for example, translation or wheelchair accessibility)? 10. Has disclosure been adequately provided for? 11. Are there any other alternatives (ex: mediation, arbitration) provided by the agreement in the case of a failure to settle by Neutral Evaluation ? APPENDIX B: SAMPLE NEUTRAL EVALUATIONAGREEMENT[45]
BETWEEN __________________
and
__________________
1) The parties to the present agreement, agree to refer the following matter(s) __________ to a neutral evaluator, namely: ________________, jointly selected for the present matter(s). If the parties cannot agree on the choice of a neutral evaluator within ______ days from the date of this agreement, a neutral evaluator will be chosen by ___________. 2) [Option] The selected neutral evaluator shall: i) be impartial; ii) have experience in litigation and iii) have expertise in the subject area of the dispute. Subject to the terms of this agreement or any agreement of the parties, the neutral evaluator will be conducting the evaluation procedure in a just and appropriate manner, according to the circumstances.
5) [Option] If the dispute has not been resolved within ______________ days of their initial meeting, the parties agree that they will attempt to resolve it through (for example, mediation), no later than ______________ days from the written evaluation by the selected neutral evaluator. 6) All information exchanged during the entire procedure(s) and associated with the Neutral Evaluation and (e.g. mediation) processes shall be regarded as "without prejudice" communications for the purpose of settlement negotiations and shall be treated as confidential by the parties and their representatives, unless otherwise required by law. However, evidence that is independently admissible or discoverable shall not be rendered inadmissible or non-discoverable by virtue of its use during the ________________________ procedure(s).
8) Either party may terminate the Neutral Evaluation at any given time. 9) Negotiations towards settlement will be undertaken by party representatives who have the authority to settle or who have a mutually acceptable and rapid means of obtaining the requisite authorization. 10) It is agreed that the neutral evaluator will neither represent nor testify on behalf of any of the parties in any subsequent proceeding between the parties. It is further agreed that the personal notes and written opinions of the neutral evaluator made in relation to this Neutral Evaluation may not be used in any subsequent proceeding between the parties. 11) During the course of the Neutral Evaluation, the parties agree to take no new steps in any legal action between them which concerns the same matter as is the subject of this Neutral Evaluation. Dated:________________________
_____________________________ _____________________________ Counsel(s)[46] for (the Plaintiff(s)) Counsel(s) for (the Defendant(s))
_____________________________ _____________________________ Witness to: Witness to:
I, consent to act as a neutral evaluator in accordance with the foregoing agreement. -------------------------------------------------------------------------------- [1]The literature refers both to Neutral Evaluationand Early Neutral Evaluation without distinction. For the purpose of this document, the expression Neutral Evaluation will be used since this process may be initiated at any time during the life of a dispute. [2]Genevieve A. Chornenki; Christine E. Hart, Bypass Court: a dispute resolution handbook, Toronto and Vancouver: Butterworths Canada Ltd., 1996, p. 131; at the Toronto ADR Centre, only a small percentage of cases employ this technique as a distinct phase. Evaluation becomes rather blurred with the mediation process unless a specific evaluation is jointly requested by the parties: Hon. J. George W. Adams; Christine E. Hart, Alternative Dispute Resolution Practice Manual, North York: CCH Canadian Ltd., 1996, p. 4498. [3]Judges can be considered to be experts in the law generally, but some disputes require specific legal expertise (e.g. Securities law); also, some courts (e.g. San Francisco Superior Court) utilize two attorneys in lieu of one only: Jay Folberg; Joshua Rosenberg; Robert Barrett, "Use of ADR in California Courts: Findings & Proposals", San Francisco: University of San Francisco Law Review, 1992, v. 26, p. 362. In circumstances where technical knowledge is key, the evaluator may preferably be a well regarded expert in the subject matter of the dispute. [4]Erika S. Fine; Elizabeth S. Plapinger, ADR and the Courts: A manual for Judges and Lawyers, (CPR Legal Program), New York: Butterworth Legal Publishers, 1987, (Summary) p. 163. [5]See Genevieve A. Chornenki; Christine E. Hart, supra, note 1, p. 132; and also, Lee Axon; Robert G. Hann, "Court Dispute Resolution Processes: The Application of ADR in the Courts", Working document, Robert Hann & Associates Ltd., 1994, p. 24. [6]Richard H. McLaren; John P. Sanderson, Innovative Dispute Resolution - The Alternative, Toronto: Carswell (Thomson Canada Ltd.), 1994, p. 3-1. [7]Theodore H. Hellmuth, "Commentary - Using Neutral Evaluation As a Gatekeeper Dispute Resolution Process", in Alternatives to the High Costs of Litigation, New York: CPR Institute for Dispute Resolution, Vol. 13, No8, (August) 1995, p. 99. [8]See Richard H. McLaren; John P. Sanderson, supra, note 6, p. 3-2. [9]Elizabeth S. Plapinger; Margaret L. Shaw; Donna Stienstra, Judge's deskbook on court ADR (National ADR Institute for Federal Judges), New York: CPR Judicial Project, 1993, pp. 13-14; see also, Erika S. Fine; Elizabeth S. Plapinger, supra, note 4, pp. 166-167. [10]See Richard H. McLaren; John P. Sanderson, supra, note 6, p. 3-2. [12]For example, disputes involving varying types of cases such as contract, product liability, securities, labor and employment, personal injury, fraud, antitrust, banking, environmental, copyright, patent, trademark, etc.: see Elizabeth S. Plapinger; Margaret L. Shaw; Donna Stienstra, supra, note 9, p. 15. [13]See Richard H. McLaren; John P. Sanderson, supra, note 6, p.3-2. [14]Guidance on the use of ADR for litigation in the federal courts, Washington: The Department of Justice (Civil Division), 1992, p. 8. [15]All questions are approximate excerpts mainly taken out of Genevieve A. Chornenki; Christine E. Hart, supra, note 2, p. 134. [16]As an example, if the parties are used to dealing with the court system and feel uncomfortable with DR processes, they could still select a retired judge or a well-known lawyer to act as a neutral evaluator: see Richard H. McLaren; John P. Sanderson, supra, note 6, p. 3-9. [17]See Erika S. Fine; Elizabeth S. Plapinger, supra, note 4, p. 177; also: Genevieve Chornenki; Christine E. Hart, supra, note 2, p. 141; and, Richard H. McLaren; John P. Sanderson, supra, note 6, p. 3-10. [18] Advisory Opinion is another informative, non-binding DR process that could be used for cases where a value, quantum or price has to be determined by an expert in a technical area or where a specific legal issue needs to be clarified by a lawyer or a judge. [19]See Genevieve Chornenki; Christine E. Hart, supra, note 2, p. 142. [20]Evaluation Statements required by private evaluators usually follow the same format as the courts. [21]Example: (1) identify any legal or factual issues whose early resolution might narrow the scope of the dispute or contribute to the productivity of settlement discussions; and (2) suggest which discovery will contribute most effectively to expediting case preparation: see Erika S. Fine; Elizabeth S. Plapinger, supra, note 4, p. 170. [22]See Erika S. Fine; Elizabeth S. Plapinger, supra, note 4, p. 171; Elizabeth S. Plapinger; Margaret L. Shaw; Donna Stienstra, supra, note 9, p. 14; and also, Richard H. McLaren; John P.Sanderson, supra, note 6, p. 3-5. [23]Parties with settlement authority must be present at the evaluation session, accompanied or not by the lawyer primarily responsible for handling the case: see Erika S. Fine; Elizabeth S. Plapinger, supra, note 4, p. 171. [24]The parties or their lawyers could make the case presentation: see Richard H. McLaren; John P. Sanderson, supra, note 6, p. 3-6. [25]Hilary Astor; Christine M. Chinkin, Dispute Resolution in Australia, Butterworths (Australia) Ltd., 1992, p. 170. [26]See Richard H. McLaren; John P. Sanderson, supra, note 6, p. 3-7. [27]See Erika S. Fine; Elizabeth S. Plapinger, supra, note 4, p. 172; the convened session typically lasts about two hours, but duration varies according to various factors, such as the complexity of the case, etc. [28]See Elizabeth S. Plapinger; Margaret L. Shaw; Donna Stienstra, supra, note 9, p. 15. [29]The assessment is often clear for the lawyers, but not for the parties: see Richard H. McLaren; John P. Sanderson, supra, note 6, p. 3-7. [30]For example, it seems that Neutral Evaluation combines naturally with mediation: Ibid [32]Excerpts are partly taken from: Edward J. Dauber, "Submission of Executive Assistant Attorney General Edward J. Dauber and the New Jersey Attorney General's Office for the CPR Legal Program Award", Trenton (NJ): Office of the Attorney General, 1992, pp. 14-15. [33]In a private setting, parties themselves may play a major role in their dispute, according to the type of case at stake, etc. And since they might often design the Neutral Evaluation procedure themselves, they may also well decide what their role in it will be: see Genevieve A. Chornenki; Christine E. Hart, supra, note 2, p. 137. [34]See Richard H. McLaren; John P. Sanderson, supra, note 6, p. 3-9. [35]See Genevieve A. Chornenki; Christine E. Hart, supra, note 2, p. 137; note that the lawyers' role also includes drafting and reviewing settlement agreements. [36]See Erika S. Fine; Elizabeth S. Plapinger, supra, note 4, p. 175. [37]See Richard H. McLaren; John P. Sanderson, supra, note 6, p. 3-3. [39]See Genevieve A. Chornenki; Christine E. Hart, supra, note 2, p. 135. [40]See Erika S. Fine; Elizabeth S. Plapinger, supra, note 4, p. 175. [41]See Theodore H. Hellmuth, supra, note 7, pp. 99-100. [42]See Lee Axon; Robert G. Hann, supra, note 5, p. 25. [43]Alternatives to litigation: a critical guide, (source unknown), 1990, chap. 3, sub-sec. 3.21, figures 3-1 and 3-2, (pp. 55 to 96). [45]See the models found in Richard H. McLaren; John P. Sanderson, Innovative Dispute Resolution - The Alternative, supra, note 6, pp. 3-20 and 3-21. Previous | Table of Contents | Next
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