Can a small addition to a subsection of the Commercial Division rules help nudge parties closer to an earlier settlement and ultimately save on the costs of litigation? An advisory group tasked with recommending ways to improve practices in New York’s business court thinks so, for reasons that stem from the alternative dispute resolution context.
The proposed amendment relates to the list of items litigants are required to discuss prior to the preliminary conference. Rule 8(a) states parties shall make a “good faith effort to reach agreement” on matters like resolution of the case, discovery to be discussed at the conference including timing and scope of expert disclosure, and use of ADR.
The advisory panel recommends adding settlement-related limited disclosure to that list—namely, informal and voluntary exchange of documents, interrogatories or partial depositions of a few key witnesses. The proposed amendment was released by the Office of Court Administration Friday and is up for public comment through May 28.
“The purpose of this proposal is, while giving autonomy to parties, to require them to at least consider whether an informal and voluntary exchange of something might move things along,” said Paul Sarkozi, council member and partner at Tannenbaum Helpern Syracuse & Hirschtritt.
Requiring such disclosure to be “informal and voluntary” is crucial to avoid disputes or attempts by parties to “change the leverage and negotiating dynamics by forcing early disclosure of particularly sensitive documents or costly document production,” the proposal states.
Indeed, the addition was considered in the “vein of mediation,” where voluntary document exchange is a common feature to facilitate resolution, according to Sarkozi.
“It works in mediation. Maybe there should be application beyond that,” he said. “That’s how [the proposal] grew out. It came from that world, and the council thought, will it apply well in a broader litigation world? Is there learning that comes from the ADR context that can be beneficial to the overall resolution of cases?
Sarkozi noted that some Commercial Division cases, such as large-scale financial crisis-related litigation or reinsurance cases featuring a trove of documents impossible to narrow down so early on, may not lend themselves to this pre-PC discussion.
“Sometimes it will make sense, sometimes it won’t, he said. “But have the discussion, see if it makes sense. If it makes sense, maybe it will make us a court that promotes faster settlement.”
The proposed amendment, the latest in a series of recommendations submitted to OCA in recent months to raise the profile of the Commercial Division, incorporates what Chief Judge Jonathan Lippman’s Task Force Report on Commercial Litigation in the 21st Century suggested to facilitate early settlement—with a slight change. Unlike the report, the proposal does not recommend that parties or a judge be required to address limited disclosure at the actual preliminary conference.
According to Sarkozi, there was concern expressed within the council—a group comprised of commercial litigators, judges and in-house counsel—that the subject of limited disclosure could wind up as just another issue to be argued at the conference. Plus, the judges thought they should be in the position of encouraging settlement, not finding themselves in the middle of one.
“The view was that the risk of [that requirement] would trump what the initial goal was,” Sarkozi said. “The view was by limiting [document disclosure talks] to a conversation beforehand, you’d reach that good goal and be less likely to wind up on the road of unintended consequences.”
In the last week alone, OCA has released several back-to-back proposed amendments or new rules for practice in the Commercial Division, including modification of privilege log practice, earlier case assignment upon service of a complaint and new guidelines for seeking electronically stored information from nonparties.
“The Commercial Division Advisory Council believes that these proposals will enhance the Commercial Division’s ability to resolve business disputes efficiently and effectively by reducing delay, eliminating unnecessary costs, and maximizing the value of scarce resources,” said Robert Haig, chair of the council and partner at Kelley Drye & Warren.