Covid-19 has closed businesses, moved school instruction online, delayed surgeries and created suffering and health fears throughout the United States. To say the least, the last two months have been very challenging.

With civil trials suspended, Covid-19 also has significantly disrupted civil litigation. It is unclear how civil jury trials will be handled once the stay in place orders are lifted. How will courts address social distancing concerns to safeguard court personnel, attorneys and litigants? Will courts assemble jurors before widespread testing or vaccines are available? Criminal matters, unlawful detainers and preference cases likely will be prioritized. Meanwhile, the backlog of civil cases is growing. Covid-19 related litigation itself is expected to add significantly to the courts’ already heavy caseload. Further continuances of existing court dates are anticipated. More delays and increased litigation costs will follow.

Remote alternative dispute resolution services can help reduce the backlog and ease the burden on courts and litigants.

For example, special masters streamline discovery and overall case management and address problems before they evolve into unnecessarily expensive and time-consuming disputes. Special masters allow parties to preserve their right to trial, while minimizing litigation risks and delays and maximizing settlement opportunities. Just last year the ABA encouraged the accelerated use of special masters to “aid in the ‘just, speedy and inexpensive’ resolution of cases.” ABA Resolution 100. Special masters can advance these goals largely through focused and strategic teleconferences.

Many mediators, referees, attorneys, carrier representatives and litigants started using virtual mediation for the first time during the shelter in place. The popular Zoom video platform is easy to use and a simple way to navigate these sessions. All participants need is a strong and secure Wi-Fi connection, a computer with a camera, the Zoom app and some basic instruction to gain confidence in the process. The mediator guides participants through virtual rooms and advances settlements through confidential negotiations. A brief overview of the tools used by participants in a Zoom mediation follows; the platform also offers short, helpful online tutorials.

Facetime is another option for mediating simple, two party disputes.

State and federal courts are using the Zoom platform for mediations and judicial hearings. The process works equally well for arbitration hearings. Further, court reporting services are offering free technical training to prepare participants, particularly with the introduction and marking of exhibits.

Clearly, virtual sessions are not the perfect substitute for in person negotiations or hearings. In person meetings allow participants to interact informally, read body language, look each other directly in the eye, express empathy with a pat on the back and seal a settlement with a handshake. High emotion cases, such as wrongful death and medical malpractice cases, may be especially challenging to negotiate remotely. Business, commercial and construction cases may be more suitable for remote resolution.

On the other hand, virtual meetings significantly reduce travel costs and time commitments and make it easier to schedule meetings. Participants can simultaneously see each other’s reactions onscreen. As technological advances continue to improve the speed and quality of videoconferences and people become more comfortable with the technology, virtual sessions will continue to grow in popularity. Zoom recently reported 300 million daily users. All businesses are learning to thrive under these new and unique conditions, and this is a great time to master this phenomenal tool.

An Overview of a Zoom Mediation for Participants

• Participate from somewhere comfortable, free from distractions and with a strong, stable and secure internet connection. Do not use public access Wi-Fi, such as those available in public spaces and businesses. Make sure to have light on your face; your primary light source should be behind your camera. Use a headset if you have one.
• From your computer, tap the Zoom link in the email notice. You will be placed in a Waiting Room. The names of waiting participants are visible, but no one in the waiting room can be seen or heard by anyone else in the conference. The Waiting Room is a security feature that prevents uninvited guests from entering the mediation.
• From the Waiting Room, the mediator will move participants into a virtual Main Conference Room. Everyone in the Main Room can see and hear everyone else in the room. Joint sessions are conducted in the Main Conference Room.
• The mediator will assign participants to Breakout Rooms. Here, you can only hear and see other participants in your same room. The mediator announces her arrival into a Breakout Room by broadcasting a message to all rooms (watch for a blue banner at the top of the screen for mediator messages) or by sending a private cell phone text. The mediator can enter the Breakout Room and move participants from one room to another. Also, you may summon the mediator to your room by pushing the Ask For Help button at the bottom of your screen or simply sending a text to the mediator’s mobile phone.
• A screen share button at the bottom of your screen allows you to share documents on your computer screen only with others in your room. You also may use a white board and have chats with others in your room.
• You can mute your audio or stop your video at any time through buttons on the tool bar at the bottom of the screen.
• When the mediator broadcasts that the parties will be returned to the Main Conference for a joint session, a one to two minute count down will appear on all screens.
• Participants can use screen share to edit and finalize a Settlement Agreement. All parties may sign the agreement via DocuSign or Adobe Sign or by personally signing and then scanning/ photographing and emailing the executed document to the group.
• Zoom has responded to recent security concerns primarily with upgrades in the host controls. For more information on Zoom new and old security systems, see https://zoom.us/docs/doc/Exec-Letter.pdf.

The fire started just above the first floor ceiling. Workers renovating the seven-story historic hotel fled the smoke-filled stairway, stumbling and falling on the way. Aerosol paint cans exploded from the heat, and the fire grew to three alarms. Firefighters blasted the 100-year-old building with water and successfully extinguished the flames. Unfortunately, the hotel suffered extensive damage from the fire, smoke and suppression efforts. Rain later doused the interiors through the open roof and windows. Mold grew. Lead paint flaked and peeled off the walls.

The hotel owners performed millions in repairs. They resolved an insurance claim with their carrier and then sued the renovation contractor for remaining fire and breach of contract damages. The general contractor in turn sued the subcontractors suspected of starting the fire and their insurance carriers. Liability was hotly contested. The general placed a lien against the building, served stop notices and sued the hotel group for unpaid contract balances; the subcontractors also sued for sums due. Five actions for personal injuries and subrogation followed. Two years after the initial filing, significant investigation and litigation costs had been incurred. Counsel disagreed on how to address “threshold” legal and factual issues. The parties anticipated taking roughly 70 percipient depositions and filing motions to bifurcate and/or motions for summary adjudication/judgment. The Superior Court consolidated the eight cases, set, and then vacated, a trial date.

The Superior Court subsequently appointed a Special Master. Shortly thereafter, the parties deposited more than 250,000 pages of documents, responded to initial insurance and scope of work interrogatories and deposed twelve key percipient witnesses. Within seven months, and before the trial-setting conference, the Special Master focused the parties on the key issues and successfully brokered a global settlement of the consolidated litigation and a related federal insurance coverage action.

Why a Special Master?

Complex cases involve multiple parties, difficult and time-consuming issues, large volumes of discovery, coordination with other pending actions or extensive post-judgment supervision. They require “exceptional judicial management to avoid placing unnecessary burdens on the court or litigants … .” (Cal. Rules of Court, rule 3.400(a)(b).) Special Masters support the court with the efficient and effective management and resolution of these cases. Special Masters streamline discovery and litigation, reduce delays often associated with complex cases, negotiate settlements and ultimately save the parties and court significant time and expense. The parties may stipulate to a Special Master or the court may appoint the Special Master on its own motion. (Code Civ. Proc., §§ 187, 638, 639.)

Multiparty construction defect cases and Judicial Council Coordination Proceedings provide additional examples of the effective use of Special Masters to successfully resolve complex cases.

Construction defect cases

Construction defect cases typically involve numerous parties, attorneys, insurance companies and experts. Each player has its own goals. The property owner wants maximum funds to repair defects and cover losses. The builder disputes plaintiff ’s repair scope and cost estimates, and seeks to pass plaintiff ’s claims, and often the builder’s legal fees, onto subcontractors. The subcontractors concentrate on minimizing damages and shifting responsibility. The design professionals distinguish between construction errors and design issues. Attorneys challenge pleadings, decipher contracts, pursue claims and assert defenses. Insurers highlight policy language to define covered losses and involve other carriers to share the risk. Experts bring technical insight to all aspects of the discussions. Discovery and litigation costs soar.

In the 1980s, California experienced a population growth that more than doubled the national rate. The resulting high demand for housing ignited the construction industry and eventually caused a dramatic increase in construction defect litigation. With heavy caseloads, the Superior Courts simply could not invest sufficient time to conduct settlement negotiations to resolve these multiparty complex cases. The courts became backlogged. After studying the federal courts’ successful use of Special Masters, the San Francisco and San Mateo Superior Courts worked with local lawyers to create Alternative Dispute Resolution programs to address complex construction defect cases. They drafted a pre-trial order that included the appointment of Special Master to manage discovery under the Court’s supervision. John Griffiths was the first Special Master in California to successfully implement the order. He pioneered a process that streamlined the production of necessary information, narrowed the issues and engaged the parties in meaningful settlement discussions in multiparty construction cases. The process significantly shortened trial preparations at significant cost and time savings to the participants.

The legislature ultimately deemed constructive defect cases involving many parties or structures as provisionally complex. (Cal. Rules of Court, rule 3.400(c)(2).)

The process for resolving complex construction defect cases has evolved over the years. The use of Special Masters continues to be an effective and efficient means of organizing, managing and resolving complex construction defect cases.

As an example, in a recent case a large public university alleged more than $50 million in construction and design defects and economic loss at seven apartment buildings on the university campus. Three dozen defense parties included the builder, subcontractors, sub-subcontractors, product manufacturers and design professionals. The case within the case involved battles between the primary carriers, the excess carriers and the additional insurers. The builder’s prime insurer filed a complaint in intervention and a federal coverage action.

With multiple attorneys and experts representing each party, joint and defense only expert meetings involved well over a hundred participants. It was standing room only for Case Management Conferences. The judge cautioned that the courthouse was physically too small to host the trial. However, offsite trial locations raised security issues and complications for the judge who had other cases that had to be conducted at the court during any construction trial. In short, the case was a logistical nightmare.

The Special Master worked with the Superior Court and all parties to streamline case management, resolve discovery disputes and address disagreements that arose during ongoing dormitory repairs and student move-outs. All parties’ input was solicited for pre-trial orders. Focused and structured communications provided real-time updates. Without service of formal individual discovery requests, the parties successfully produced voluminous project documents, shared document expenses, conducted site inspections and destructive testing, arranged biweekly site visits, exchanged confidential expert reports, generated a discoverable statement of claims, attended substantive expert meetings, disclosed and produced percipient and expert witnesses, and coordinated approximately 200 days of deposition testimony. The Special Master also partnered with the mediator to negotiate scores of settlements, winnowing the number of parties and issues until the case globally settled before trial.

Judicial council coordination proceedings and multi-district litigation

The California Judicial Council Coordination Proceeding (JCCP) Courts are recognized for their ability to manage national litigations in cooperation with other coordinated proceedings. Federal Multi-district Litigations (MDLs), which are the federal equivalent to the JCCP, often overlap with coordinated proceedings in various state courts, including California. There are natural tensions between separate and independent jurisdictions, and Special Masters have successfully served to ease those tensions. More recent MDL/JCCP cases have served as cooperation models on issues that have been historically difficult to resolve, such as the conduct of liability discovery, document production, the sharing of work product, the use of a centralized case specific database, the coordination between counsel across many jurisdictions, trial setting, and consensual resolution.

In larger multi-venue complex cases, that perhaps include both state and federal jurisdictions outside of California, the use of Special Masters to foster communication between the parties and the JCCP court is now generally accepted. The Special Master assignments vary across litigations but have included all of the issues identified above. Currently, the federal courts are using Special Masters to oversee issues such as discovery, coordination with state courts, the selection of bellwethers, global settlement negotiations, etc.

In the early 2000s, in California Special Masters were granted JCCP assignments for aggregate settlement allocations. (Code Civ. Proc., § 638.) Because of the growing recognition of the success of JCCPs to resolve national cases on the merits, and the need for Special Masters to assist in that resolution, the role of Special Masters has increased.

In one recent JCCP, plaintiffs sought compensation for personal injuries and damages stemming from a prescription drug that was associated with a serious medical condition. The proceedings involved well over 5,000 plaintiffs and 18 different manufacturing defendants, with cases located in 16 different state and federal venues across the country and three coordinating jurisdictions. The role of the court-appointed Special Masters, in cooperation with coordinating courts and the parties, led to the successful resolution of this complex case. The Special Master created protocols and set a compensatory structure, along with case-specific criteria that was consensually adopted by the parties and the coordinating courts. These efforts resulted in both closure for the manufacturing defendants and participation for over 99 percent of the plaintiffs.

Special Masters working with the JCCP court are an integral part in resolving complex MDLs. There are certain limitations on a JCCP court and its ability to assign specific cases to a specific private mediator. However, in coordination with the federal MDL, Special Masters have had an increased role in the California system because of the complex state federal issues that are addressed in MDLs.

The Special Master created protocols and set a compensatory structure, along with case-specific criteria that was consensually adopted by the parties and the coordinating courts. These efforts resulted in both closure for the manufacturing defendants and participation for over 99 percent of the plaintiffs. Special Masters working with the JCCP court are an integral part in resolving complex MDLs. There are certain limitations on a JCCP court and its ability to assign specific cases to a specific private mediator. However, in coordination with the federal MDL, Special Masters have had an increased role in the California system because of the complex state federal issues that are addressed in MDLs.

A clear and purposeful approach

Successful case management of complex litigation by Special Masters requires a clear and purposeful approach to effectively and efficiently streamline the entire dispute resolution.

As a first step, the Special Master convenes all counsel and leverages their significant talent and experience to establish common objectives. The group uses straightforward case goals to generate a clear and cost-efficient resolution strategy. The parties participate in setting realistic deadlines to bring the case at issue, conduct discovery, explore potential motions and recommend a trial date. At the same time, the Special Master identifies opportunities for meaningful settlement discussions and calendars productive mediations and settlement conferences.

The Special Master streamlines data-gathering to allow analyses of necessary information without voluminous written discovery demands. Generally, a central depository or database is established where the parties deposit all relevant documents, insurance information and factual information regarding the parties’ roles in the dispute. The parties may agree to prepare factual declarations or limited interrogatories regarding claims or defenses. This minimizes expense and delay and prioritizes information needed for meaningful negotiations.

The Special Master encourages expert dialogue to simplify complex and technical issues, clarify defenses and risks, explore creative solutions and expand settlement options. Fairly candid expert exchanges frequently occur under the mediation privilege and before any formal expert disclosures and depositions.

With the parties’ consent, the Special Master enhances individual settlement strategies through one-on-one calls with decision makers to discuss goals, address obstacles and explore available resources in advance of mediation. Will plaintiff only consider a global settlement? Will lead parties allow peripheral party settlements? Who will or must attend the settlement discussions? Are there insurance coverage issues or other obstacles that may impede the negotiations? The Special Master advances the framework for meaningful negotiations, with settlements ultimately brokered by the Special Master and/or a mediator.

Importantly, throughout the resolution process, the Special Master conducts focused, ongoing regular group teleconferences to continuously provide real-time updates on outstanding issues and opportunities and promote effective communication and timely execution of action plans. Detailed summaries follow each conference. Counsel preview all status reports and proposed orders before their submission to the court.

In short, a Special Master supports the court’s efficient and effective management and resolution of all types of complex cases. Through a clear and purposeful approach to the entire dispute resolution process, she streamlines discovery and litigation, minimizes delays and creates meaningful opportunities for productive settlement negotiations. The use of Special Masters optimizes resolution outcomes, while minimizing the significant risks, delays and costs of complex litigation.

Passing the buck is the usual defense strategy, and a Special Master may be needed to steer these cases towards settlement.

Construction-defect cases typically involve large numbers of parties, attorneys, insurance companies and experts. Each player has its own goals. The property owner wants maximum funds to repair defects and cover losses. The builder disputes both plaintiff’s repair scope and associated costs and seeks to pass plaintiff’s claims onto subcontractors. The subcontractors concentrate on minimizing alleged damages and shifting responsibility. The design professionals distinguish between construction errors and design issues. Attorneys challenge pleadings, decipher contracts, pursue claims and assert defenses. Insurers highlight policy language to define covered losses and involve other carriers to share the risk. Experts bring technical insight to all aspects of the discussion.

Special Master/Mediator

A special Master/Mediator can steer these players towards resolution by designing and implementing strategies that allow for meaningful settlement discussions in advance of mediation.

First, discuss with the participants the necessary parties and their roles at the project. If a contract exists, does it accurately reflect the client’s work? Did the client perform additional work? If the client is uncertain, will a site inspection or meeting with other defense parties refresh his memory? Also, determine whether the contract includes any attorney fee, duty to defend, indemnity or limitation of liability provision.

Second, assist the parties in sorting through any coverage issues. If there is an insurance issue that may impede settlement discussions, who are the decision makers and what information do they need to address the issue? Is additional carrier participation needed? Have the carriers reached a time on risk agreement? Are there additional insured issues? Many times, insurance-related issues can be resolved through a conference call between the neutral and carrier representatives; at a minimum, these calls identify decision makers and facilitate carrier analyses before mediation.

Third, work with the parties’ experts to define potential problems, develop repair proposals and explore creative solutions. Expert information plays a significant role in preparing a complex case and defense. How will the parties use this information in settlement discussions? Will experts explain areas of agreement and disagreement? Will they share possible solutions?

Finally, encourage the participants to develop a settlement strategy. Will plaintiff only consider a global settlement? Will the lead parties allow peripheral party settlements? Can players with additional insured endorsements settle early? Will the parties consider settling around a “problem” player? Who will attend the settlement conference with authority to finalize any settlement agreement? When will lead parties serve settlement demands? In addition to a settlement plan, the participants privately should define the outcome that they hope to achieve and plan how they will move from offer to offer or demand to demand before the mediation.

Moving players towards settlement in a construction-defect case is not easy. The process involves multiple players with variable and changing goals. Factual disputes, conflicting legal theories, late claims, missing parties and recalcitrant carriers create additional challenges. Nonetheless, a special Master/Mediator can steer these players towards resolution by implementing strategies that prepare parties for meaningful settlement negotiations.

This article was originally published in Plaintiff Magazine in July 2016.

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Santa Clara County is the most populated county in the San Francisco Bay Area with close to 1.9 million people. The county is home to cutting edge Silicon Valley and boasts a median household income of $93,854. Santa Clara County Superior Court had 24,576 civil filings in 2013-2014 with roughly 250 complex civil cases. The court’s 2015-2016 fiscal year budget is just over $103 million.

In comparison, Santa Cruz County has an estimated population of 272,000. The county is known for beautiful beaches and agriculture and has a median household income of $66,923. In 2013-14, Santa Cruz had 3,562 civil filings, including three dozen complex civil cases. The court has budgeted $15.2 million for the upcoming fiscal year (2016). How do these neighboring counties handle complex cases?

Case Management

Complex cases filed in Santa Clara are assigned to Complex Civil Litigation Department Presiding Judge Peter Kirwan for all purposes. In Santa Cruz, most complex civil cases are assigned to Department 4 or 5 solely for pre-trial management, but a complex case also may be assigned to another available department at master calendar. Both counties often appoint special masters to assist with management and settlement of complex disputes.

In each jurisdiction, a case management conference generally is scheduled within six months of filing. Standard CMC forms are discouraged, and counsel are instructed to file substantive joint CMC statements. As Judge Kirwan explains, “The theory is to get the parties to talk, define important issues early and not be as polarized.” Counsel may appear at CMCs by telephone, but personal appearance is recommended if the parties plan to discuss significant issues.

E-Filing

Santa Clara County Superior Court mandated e-filing and e-service for complex civil cases through a stand-alone website (www.scefiling.org) in September 2006. Users may view all pleadings, including orders and minutes, at no charge. Litigants also may log in with a username and passcode to view restricted documents.

Last month, Santa Clara began transitioning to Odyssey online case management for civil and family law cases; criminal matters will follow in Spring 2016. These cases eventually will accept e-filing through Odyssey. Internally, the complex department will use Odyssey for data entry and case management, but attorneys will continue to use the existing complex department website.

In October 2015, Santa Cruz Superior began scanning documents and making them readily available online to all court personnel through Odyssey. Attorneys may apply for online access to documents in their cases; otherwise, users can just view the date and title of filed documents. E-filing in all civil cases is slated for March 2016.

Santa Cruz Superior Court Judge Rebecca Connolly notes that online access “allows the judge to save relevant files for easy access without being hampered by voluminous paper files and can facilitate the judge’s understanding of the legal issues being presented.” The judge suggests that counsel offer to provide judges or court staff with free access to any online service utilized by the parties in jurisdictions without electronic filing.

Mandatory Settlement Conferences

Mandatory settlement conferences in the Santa Clara courthouse usually occur one to two weeks before Trial. Judge Kirwan meets with any special master prior the MSC to assist negotiations. MSCs are not conducted on the first day of trial.

Santa Cruz generally sets an MSC four weeks prior to trial, but will work with counsel to set other dates, including the first day of trial. Settlement conferences in complex cases utilizing a special master preferably are conducted off site, as large multi party conferences tend to tax court facilities.

Representatives with full settlement authority musta attend MSCs. As Judge Kirwan succinctly explains “Full settlement authority means no one needs to make a phone call.”

Trial

Judge Kirwan sets complex civil trials approximately one year in advance. Trial dates are firm. With the consent of all counsel and good cause shown, parties may submit a written request for a continuance to a pre-approved trial date provided by Complex Case Administrator Rowena Walker.

The Santa Cruz presiding judge assigns complex trials to any available judge in the civil or criminal departments. Complex cases currently are being scheduled for trial about eight months out. While trial dates are firm, the court generally grants one continuance upon a finding of good cause and the consent of counsel.

In both courts, parties are strongly encouraged to streamline the trial process by preparing joint witness lists, exhibit lists, jury questionnaires and motions in limine. A tabbed binder of joint trial exhibits with proposed exhibit numbers and a computer disk of important documents should be lodged for the judge’s use. Hard copy binders and documents are due prior to trial calendar call.

In the Santa Clara complex courtroom, two 70″ television screens display evidence to the jury and gallery; smaller screens are directed to the judge, clerk and witness. A projector is available upon request. To date, requests to give jurors individual tablets have been denied out of concern that the tablets will be disruptive. In Santa Cruz, counsel use a projector and video screen mounted directly across from the jury box to display evidence.

In both jurisdictions, connections for laptops and media players allow counsel to display evidence electronically with their own computers. The courts provide a digital document camera, and witnesses can access a touch screen to illustrate and modify documents that in turn may be printed and entered as exhibits. Attorneys in Santa Clara also may connect the court reporter’s computer to receive Live Note on their laptops or tablets.

Counsel should contact the technology department at each court before trial to discuss any technology concerns and arrive early to arrange their equipment.

Judge Kirwan recommends that counsel set up Wi-Fi hotspots to maintain a consistent Internet connection during trial. In Santa Cruz, counsel also may obtain wireless Internet access for a small fee through the local bar association.

Both courts advise counsel to asses the physical limitations of the courtroom when analyzing the costs and risks of trial. Judge Kirwan has brought in extra tables and handled large capacity trials, but anticipates that ever larger, multiple party cases inevitably will be conducted off site. Judge Connolly discourages relocating trials due to substantial security and administrative issues and the impact on the judge’s work on other files. Both agree that offsite trials will significantly increase costs.

Conclusion

Santa Clara County is almost seven times as large as Santa Cruz County in terms of general population, civil case filings and court budgets. While there are differences as to how each jurisdiction handles complex civil cases, there are also many similarities. For example, Santa Clara has a single department devoted to handling complex civil cases from filing through trial; the department adopted e-filing and e-service through its website solely for complex civil cases more than nine years ago. In contrast, most complex cases in Santa Cruz are assigned to one department for pre-trial management and another for trial. Following a recent system wide upgrade, filings now can be accessed online and e-filing is just months away. Both jurisdictions assign firm trial dates, urge the parties to cooperate with joint status reports and trial submissions and provide technical support at trial.

This article was originally published in the Los Angeles Daily Journal on Friday, January 22, 2016.

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No one starts a war, or rather,
no one in his senses ought to do so,
without first being clear in his mind
what he intends to achieve by
that war and how he intends to conduct it.
The enemy of a good plan is the dream of a perfect plan.

– Karl von Clausewitz (1780-1831)

Construction defect cases typically involve large numbers of parties, attorneys, insurance companies and experts. Each player has its own goals. The property owner wants maximum funds to repair defects and cover losses. The builder disputes both plaintiff’s repair scope and associated costs and seeks to pass plaintiff’s claims onto subcontractors.

The subcontractors concentrate on minimizing alleged damages and shifting responsibility. The design professionals distinguish between construction errors and design issues. Attorneys challenge pleadings, decipher contracts, pursue claims, and assert defenses. Insurers highlight policy language to define covered losses and involve other carriers to share the risk. Experts bring technical insight to all aspects of the discussion. Discovery and litigation costs soar. It is no wonder the resolution of construction defect cases has been compared to herding cars.

Planning for the fray

The independent players can be steered towards efficient case resolution. First, it is important to bring the participants together at the outset of the case to articulate their goals and tailor a case schedule accordingly. Second, the parties should use the productions of insurance, scope of work and project documents to identify and address potential impediments to settlement. Third, the parties should develop an overall settlement plan and negotiation strategy before the settlement conference. While those preparations may not remove all obstacles, they will guide the parties toward meaningful settlement negotiations and, ultimately, efficient case resolution.

From the inception of the case, the parties should discuss with the mediator the overall case schedule and duration, including triggers for conduction a settlement conference, lifting the discovery stay and requesting a trial date. Importantly, the parties should agree on the total number of anticipated settlement conferences. The parties also should use their best efforts to articulate all claims and involve all potentially responsible parties and their carriers early in the litigation; failure to do so most likely will impact the parties’ ability to achieve their case goals.

As an example, the parties may craft a case management schedule that anticipates a trial date within two years of case filing. The mediator may calendar teleconferences, site inspections, expert meetings, homeowner board meetings and/or defense meetings. Once these tasks are completed, the parties may agree to participate in the first of a target maximum of three settlement conferences with trial counsel, insurance representatives and principals with settlement authority personally in attendance.

The case management plan ideally should be implemented in a series of customized pre-trial orders. With the exception of scheduling a trial date, each order should establish deadlines over roughly a 90-day period and notice teleconferences between the neutral and all counsel after the completion of specific tasks. This approach allows the parties and the neutral promptly to address any missed deadlines and minimize any resultant delay. It also avoids the perception of “fake deadlines,” particularly by decision makers who grow weary of last minute scheduling changes that directly impact their calendars.

Identify settlement obstacles early

The first pre-trial order in a construction defect case typically delineates a process for producing basic information – insurance, scope of work and project documents. Rather than treating these productions as part of a rote process, the parties should use the productions to identify and resolve potential settlement problems.

For example, is there an insurance issue that may impede settlement discussions? If so, who are the decision makers and what information do they need to address the issue? Is additional carrier participation needed? Have the carriers reached a time on risk agreement? Are there any outstanding Additional Insured issues? Many times, insurance related issues can be resolved through a conference call between the mediator and carrier representatives at a minimum, these calls identify decision makers and facilitate carrier analyses before the settlement conference.

Scope of work statement wins Clausewitz approval

The preparation of the scope of work statement is an opportunity for counsel to confirm an accurate picture of his client’s work. If a contract exists, does it accurately reflect the client’s work at the project? Did the client perform additional work? If the client is uncertain, will a site inspection refresh his memory? If there is a disagreement regarding the work a party performed at the project, the parties may use the statement as a springboard for an informal discussion between principals, an expert exchange at a defense allocation meeting or service of narrowly tailored formal discovery. This approach may be especially helpful for small parties who wish to exit the case early. Even if a scope of work issue is not conclusively resolved, addressing the matter early allows the parties to incorporate the issue into their case evaluations.

Don’t overlook client’s contract

In producing project documents, counsel should review his client’s contract and note if there is any attorney fee, duty to defend, indemnity or limitation of liability provision. No attorney should attend a settlement conference without first reading his client’s contract. Counsel should bring a copy of the contract, and any revisions, to all settlement conferences. Counsel also should educate himself regarding the overall project by visiting the document depository prior to any settlement conference.

The initial document production is also a time to assess whether all potentially responsible parties are in the case. A delay in involving a party and its carriers can have a significant impact on the case schedule and duration.

Develop an overall settlement strategy (Terms of Surrender) early on

It is important to develop an overall settlement strategy as far in advance of a settlement conference as possible. The discussion should address the potential structure of the parties’ settlement, the use of expert information and the timing of settlement demands.

As far as structure, will plaintiff only consider a global settlement? Will the lead parties allow peripheral party settlements? Can players with additional insured endorsements settle early? Will the lead parties consider settling around an unprepared or “problem” player?

Who will attend the settlement conference with authority to finalize any settlement agreement?

Experts are the big guns

The use of expert information plays a significant role in preparing an overall settlement plan. The experts generally focus on plaintiff’s biggest ticket item: the cost of future repairs. Alternatively, if the project is an income producing property, such as an apartment building, hotel or professional business, the experts may concentrate on repair scopes that minimize move out or business interruptions. Expert discussions throughout site inspections, testing, joint expert meetings and the preparation of a defense response assist the parties in defining potential problems and developing repair proposals and pricing. In developing a case settlement strategy, the parties should determine how they will use expert evaluations.

One option is the preparation of a joint scope of repair. The parties’ experts negotiate a compromise repair scope for the project, and a cost estimator bids the cost of implementing the scope, the estimator also bids areas of disagreement. Having quantified the difference between each side’s view of a reasonable repair, the joint scope allows the parties to evaluate a reasonable settlement range for the case. It also enables the parties to articulate solutions that may be unavailable at trial. Another option may be to price out the other side’s repair scope with the party’s own cost estimator. Regardless of how the parties decide to utilize expert information, they should address the issue in advance of the settlement conference.

Service of settlement plans (Terms of Surrender)

Service of timely settlement demands is another factor to be considered in a settlement plan. Sufficient time is needed after service of the demands to allow counsel to complete their evaluations and submit reports to principals and carriers. At least four weeks before the conference, plaintiff should serve its settlement demand with a breakdown of its claims (e.g. future repair costs, move out expenses, out of pocket expenditures, Stearman costs, attorneys fees.) At least three weeks before the conference, lead defense should serve settlement allocations on cross-defendants and, at the same time, circulate a draft settlement agreement, with key financial terms omitted, for all parties’ review and comment before the conference. During down time at the conference, the parties can negotiate settlement language; if the parties reach a settlement, they can execute the agreement at the conference and prepare to close their files.

In addition to a settlement plan, the participants privately should discuss and define the outcome that they hope to achieve through settlement before the conference. Based on an evaluation of a realistic cost of repair, Stearman fees, contract obligations, factual and legal issues, what is a reasonable opening number? What are the risks and costs associated with proceeding to trial? If successful at trial, will the party be able to collect on any judgement or recoup any costs from a viable party? What is the client’s tentative bottom line? At what level does trial become a better alternative to a negotiation agreement? With this information in mind, the participants should plan how they will move from offer to offer or demand to demand prior to the start of the settlement conference.

[Expenses associated with investigating defects and determining costs of repair are often recoverable as damages. These are often referred to as “Stearman costs” or “Stearman fees.” See Stearman v. Centex Homes (2000) 78 C.A. (4) 611.

The recover of investigation costs has been codified in Civil Code sec. 944.

The construction contract itself may contain a provision regarding attorneys fees, costs of suit and investigation expenses.]

Moving players towards settlement in a complex construction defect case is not easy. The process involves multiple players with variable and changing goals. Factual disputes, conflicting legal theories, late claims, missing parties and recalcitrant carriers create additional challenges. The early identification of case goals and settlement roadblocks and the creation of a general settlement plan and basic negotiation strategy may not remove all of these obstacles. Nonetheless, these preparations will open the door to meaningful settlement negotiations, and, ultimately, steer the participants to efficient case resolution.

This article was originally published in The Docket, Vol. 49, No. 1 (2013).

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Complex construction defect cases often require a neutral to work with parties during the pretrial phase

Litigationa

Multiparty construction defect cases often require exceptional judicial management because they involve complex factual and legal issues and include large numbers of parties, attorneys, insurance companies and experts. Litigants frequently retain a referee or special master to work with the complex litigation judge by providing case management, addressing discovery disputes and/or facilitating settlements of these cases. This article is the fifth in a series that analyzes how different Bay Area courts utilize special masters in complex construction defect cases.

Santa Clara County Superior Court has approximately 180 cases pending in its complex litigation department. This total does not include multiple cases under single case numbers, such as Judicial Council-coordinated proceedings and consolidated cases. Approximately 18 percent are active complex construction defect cases. Almost all of the construction defect cases utilize the services of a special master under the supervision of the complex civil litigation Presiding Judge James Kleinberg.

When filing a construction defect case, plaintiff may apply for a court order designating the case complex by checking the complex designation boxes on the civil case cover sheet. If the case is not initially designated complex, a case management judge, a records supervisor or a party may recommend or request a complex litigation designation. Kleinberg will render a decision on the recommendation or request based on his review of the complaint; no supplemental papers are required. Cases are assigned to the complex department for all purposes, including trial; complex fees are due after case designation. Unless exempted by court order, all complex actions are subject to the Court’s Electronic Filing and Service Standing Order. See www.scefiling.org.

Generally, if a construction defect case involves only two parties or a single home, the judge will leave the case with the assigned case manager, Judges Peter Kirwan, Patricia Lucas, Mark Pierce or Kevin McKenney; each of these judges manages approximately 1,400 cases. A party may file a formal motion if a complex designation application is denied.

Developer attorney David Stumbos explains that the lead parties generally select a special master before the first case management conference. “I literally start talking about the appointment during my first telephone call with plaintiff homeowners’ attorney.” Subcontractor attorney Cynthia Shambaugh notes that subcontractors usually go along with the lead parties’ recommendation. However, subcontractors are “questioning whether there should be a process to re-examine the lead parties’ candidate after the majority of subcontractors appear in the case.” If one or two smaller parties object to a special master, Stumbos will try to work with them to reach a consensus or secure a settlement. Otherwise, Kleinberg may exercise his discretion and appoint the special master over objections, as “on balance, it is more efficient to do so.”

Case management

Standard form case management conference statements are inappropriate for complex construction defect cases. Rather, Kleinberg directs the parties to file a joint case management statement at least 15 calendar days before a CMC; this statement may be incorporated into a special master status report. The statement or report must be in pleading format and include a case summary, description of anticipated problems, proposed time line and any information needed to prepare an efficient case management schedule. A special master report may be mailed or emailed to Kleinberg’s clerk, Rowena Walker. A statement or report in letter format will be disregarded. Special master email and phone updates are discouraged.

Kleinberg generally grants a special master CMC request. At any CMC, counsel should be prepared to give “an elevator speech” about his client’s case.

On the one hand, Kleinberg sees that it is “great to have a special master who is familiar with a complex construction defect case with its multiple layers of parties, insurers and related legal and factual issues. These types of cases would bog down the calendar tremendously.” However, Kleinberg emphasizes that he has a nondelegable duty to “keep cases current and move them along. I worry about cases that are around too long. Evidence gets stale. Witnesses pass on. Justice delayed is justice denied.” The special master should report case progress to Kleinberg in a written status report every 60 days. He will generally grant timely special master proposals if the special master has conferred with counsel and submitted a case management schedule.

Shambaugh expects the special master to “keep the ball rolling, and the schedule moving.” Stumbos sees the special master as a substitute for the court’s active management of a case. They both note that bankruptcies, insurance coverage issues and missing or uncooperative parties can prolong the resolution of a case beyond the 18 to 24 month goal set by Santa Clara’s complex department.

In moving a case forward, a special master should update all counsel. Shambaugh emphasizes: “Communications have to flow to all parties, not just the lead parties. Subcontractors and their adjustors want to be informed of reasons why dates come off and dates come on calendar.” Stumbos agrees. “There is no reason to not have open communications about the case schedule.” Both expect increased communications from the special master as a case nears trial.

Discovery disputes

In cases riddled with big discovery disputes, Shambaugh suggests hiring a special master to handle the disputes and a mediator to facilitate settlement discussions. “This avoids a conflict situation where a special master rules against a party in a discovery dispute and then has to deal with baggage at mediation.” Stumbos believes, “there is no clear answer for every case. When a neutral is not involved in discovery issues, she has less understanding of the case. That impacts the efficiency of mediation. Moreover, if someone has a discovery dispute decided against him and then has an issue with the special master, how is that different from a single assignment?”

A special master generally stays discovery and instructs the parties to produce project documents, scope of work statements and insurance disclosures and initially authorizes limited depositions. Plaintiffs also prepare a statement of claims and damages, and the defense analyzes and responds to the statement.

Stumbos and Shambaugh are frustrated by vague statements that do not provide sufficient information to allow the attorneys to evaluate claims, make recommendations to carriers and obtain appropriate settlement authority. Shambaugh further criticizes developers who simply pass on plaintiff numbers and refuse to prepare early defense bids to assist settlement discussions. “This keeps the game wide open and forces subs to prepare their own defense bids” or base their evaluation on settlements in other similar cases. Stumbos explains that a developer’s counsel is playing three dimensional chess, protecting his client’s interests, defending against the overall homeowners’ suit and prosecuting individual claims against subcontractors.

Despite these issues, Stumbos believes that the special master’s stay on discovery is better than open discovery under the Code of Civil Procedure. “Parties complain that there is not enough information, but lets go back 30 years. There was no early disclosure. The parties conducted the full pallet of written and oral discovery to obtain information. Cases became more numerous and expensive. Parties who were paying transactional costs looked for ways to manage expenses. The most cost-efficient solution was to stop discovery. Now the parties only get into full-blown discovery when they are looking down the double barrel shotgun of a trial date.”

Shambaugh believes that joint expert meetings provide an effective means of analyzing issues, determining areas of agreement and disagreement and highlighting issues deserving of further analysis. Stumbos adds, “Generally after a joint analysis, the delta between high and low is not that great.”

Kleinberg will review de novo any disputed special master discovery ruling. Prior to filing any motion, counsel must participate in an in person conference with the judge. Walker notes that since implementing the discovery conference requirement, the number of discovery hearings has significantly decreased.

Settlement

Most special master settlement conferences are conducted at private offices. The special master also may conduct a settlement conference at the complex court by submitting a scheduling request to Walker. Absent any objection to the trial judge’s participation, Kleinberg will work with the special master at the conference.

Kleinberg may waive the personal appearance of a principal or an insurance representative at a settlement conference upon a written showing of good cause made to and approved by the court in advance of the conference. A principal or carrier who has not been excused from attendance may be sanctioned for failure to attend.

Shambaugh prefers settlement conferences where all of the subcontractors arrive at the same time. “All subs in a room ends the developer’s divide and conquer approach to settlement and allows the parties to compare their settlement demands.” Stumbos believes that a staggered agenda of starting times is more effective. “It is reasonable to set aside individual time with individual parties to talk about specifics. This is not effective in a group setting. There is some logic in having interfaced trades appear at same time of the day, so that the parties may talk separately and then together as a group.” Both counsel agree that parties should not leave a mandatory settlement conference before the parties have reached a resolution.

Kleinberg sees a “meaningful trial date as one of the best ways to get cases resolved. There is nothing like a trial date to focus the parties.” Accordingly, trial continuances are discouraged. However, if all parties agree, the special master may obtain available trial dates from Walker and thereafter submit a written request for a trial continuance to the pre-approved trial date. Any recommendation for a trial continuance must be supported by good cause. Jury selection begins on the first day of trial.

In summary, Judge Kleinberg supervises complex construction defect cases in Santa Clara County. The parties stipulate to the appointment of a special master in the majority of these cases very early in the litigation. A special master should report to the court every two months and work to keep the case current and moving forward. The court favors special master and joint status reports in pleading format and generally will grant special master proposals if the special master has conferred with counsel and submitted a timely case management schedule. Absent any objection to the trial court’s participation, Kleinberg will work with the special master in conducting a mandatory settlement conference in Santa Clara’s complex department. If the parties do not reach a settlement, counsel should be ready to select a jury on the first day of trial.

This article was originally published in The Recorder, Vol. 136, No. 30, on July 23, 2012.

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Complex construction defect cases often require a neutral to work with parties during the pretrial phase

Litigation

Fourth article in a series that analyzes how different Bay Area courts utilize special masters in complex construction defect cases.

Contra Costa County Superior Court has approximately 180 cases pending in its complex litigation department. Class actions and cases involving eight or more parties are generally referred to the complex department. Counsel may also apply for a court order designating the case complex by checking the boxes on the civil case cover sheet. If there is a question as to whether a case belongs in the complex department, Judge Barry Goode screens the case and addresses the issue at the first case management conference.

Goode estimates construction defect cases make up approximately 25 percent of the complex department cases. More than 75 percent of these cases utilize the services of a special master.

Counsel often arrive at the initial CMC with a proposed order appointing a special master in construction defect cases. Plaintiff attorney Michael Cochrane of Hughes Gill Cochrane explains: “Lead lawyers sit down and decide which special master to use on a case. Good defense attorneys work with plaintiff’s counsel. We have to do it before the subcontractors get in the case. Otherwise, the appointment process becomes unmanageable.” Defense attorney Mary Kay Glaspy of Glaspy & Glaspy agrees: “Its hard to get 25 attorneys to agree on a special master. It is less likely that they will usurp the process if lead counsel select a special master up front. Generally, the parties go along with lead counsel’s selection.” Goode recalls only a couple of cases in which subcontractors contested the appointment of a special master approved by the lead parties. If the parties have difficulty finalizing a proposed case management order, Goode will schedule a special hearing to hammer out the issues.

Case Management

Goode wants a status report from plaintiff and lead defense counsel in construction defect cases at least 10 days before a CMC. Any other party that wants to add something may file its own CMC statement at least five days in advance. (“I do not need 42 CMC statements saying this is a construction defect case. They are just chaff.”) Counsel may append a page at the back of the form CMC statement or submit a brief. Statements are e-filed. Orders should be submitted in word format at cxlit@contracosta.courts.ca.gov; any signed stipulations should also be submitted in PDF format. See online guide at www.cc-courts.org/_data/n_0003/resources/live/handyGuideToDept17.pdf.

Status conferences help the parties establish and maintain viable deadlines. They also allow the parties to resolve issues without filing motions. Glaspy expects the special master to confer with counsel every 60 days.

Plaintiff attorney Cochrane believes that good special masters have “the skill and knowledge to accurately assess what a case needs to settle or try and then to report that without bias to the court. Special master communications with the court help identify logjams and avoid wasting time. I want to hit the ground running, so I can bring energy to a case.” In lieu of formal CMCs, defense lawyer Glaspy anticipates a limited number of special master updates to the court during the first six months of a case, followed by updates every 30 to 60 days as significant tasks are completed.

Status reports to the court should identify key issues and a timeline for resolution. According to Judge Goode, “in construction defect cases, there is a myriad of picky factual stuff that parties have to work through to understand the strengths and weaknesses of their case. The parties have to review defect lists, cost estimates, scopes of work, insurance issues and more. Often, these issues do not lend themselves to linchpin resolution.”

The court generally adopts the special master’s recommendations. Any proposed orders should be e-filed by the special master in Microsoft Word format.

In Glaspy’s experience, the judge listens to objections before executing any proposed order. “In Contra Costa’s complex litigation department, everyone feels he has a voice. Starting with Judge David Flinn who set up the department, if there is an objection, the court listens. An objecting party does not incur a judge’s wrath; there is great fairness. People are more reasonable if they have an opportunity to be heard.”

As to trial continuance requests, Goode emphasizes that trial dates are firm. “There has to be good cause shown for moving a trial date. People need to understand that when I set a trial, I am setting their trial and many others. When people ask to slip a case for two months, the continuance impacts other cases. If a trial date is continued, there is a good chance that the trial will slip many, many, many months. I am reluctant to slip a trial date.” Goode does not require that parties file a formal trial continuance request. Rather, the special master may request a conference call with Goode and all counsel to discuss the matter. “I value special master input, but a trial date is a sacred thing to me and I do not move it around lightly.”

Discovery Disputes

Goode sees complex construction defect cases as “much more open and cooperative than other types of litigation. Most defense lawyers in other fields say that a plaintiff’s job is to hide the ball and keep defense guessing until close to trial. This is the one place where the plaintiff and defense put their cards on the table and call in the experts. It’s a different species. In my experience as a litigator and a judge, this is really an extraordinarily cooperative way of dealing with cases.”

As part of this process, Cochrane believes that the special master should actively assist the parties in developing a case to the point where the parties have sufficient information to settle the case or to “get it ready for trial in an efficient way over an 18 to 24 month time period.”

If a discovery dispute arises, Glaspy notes that the special master can work with the parties to reach an efficient resolution without a formal hearing. In this regard, the parties “do not have to educate the special master as to the complexities of the case. It’s a good start.” Cochrane urges the special master to act as a decision maker. “Splitting the baby is not good enough. If I am entitled to a win, I don’t want half a win.” Any party may request de novo review of a special master’s discovery ruling.

Goode cautions that the special master and counsel should “be alert as to when a case is not settling and it is time to turn it onto a litigation path.” A discovery stay should be lifted with sufficient time to allow the parties to complete necessary discovery and avoid a “flurry of frantic ex parte activity” shortly before trial.

Settlement

The special master generally conducts most mandatory settlement conferences at private offices. Both Cochrane and Glaspy support having an agenda of start times to reduce the waiting time for counsel and their clients. If parties have not reached a settlement after two MSCs, Glaspy believes that all parties should be present for the duration of the conference.

Construction defect cases generally settle without a court MSC. In fact, Goode has not conducted an MSC in his courtroom in a construction defect case with a special master. If counsel and the special master agree on the process, Goode will allow a special master to conduct a court MSC. In some cases, Judge Flinn is available to conduct a judicially supervised MSC.

There are no settlement conferences on the first day of trial. Goode’s rule is “when you are set for trial, we order up the right number of jurors, you come in, and that morning we call up a jury.”

In summary, Judge Goode is the complex litigation judge in Contra Costa County Superior Court. In the majority of complex construction defect cases, the special master works with the parties to move the case toward resolution through settlement or trial. The court generally adopts the special master’s recommendations. If counsel agree, a special master may conduct an MSC in Goode’s department. Trial dates are firm. A special master may propose a conference call with Goode and all counsel to request a trial continuance, but even with good cause shown, a continuance may not be granted. There are no settlement conferences on the first day of trial; counsel should arrive ready to try their case.

This article was originally published in The Recorder the on September 12, 2011.

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Complex construction defect cases often require a neutral to work with parties during the pretrial phase

Third article in a series that analyzes how different Bay Area courts utilize special masters in complex construction defect cases.

San Francisco Superior Court has approximately 300 to 400 cases pending in its two complex litigation departments; many of these line items are Judicial Council Coordinated Proceedings that involve multiple cases.

When filing a construction defect case, plaintiff may apply for a court order designating the case complex by checking the complex designation boxes on the civil case cover sheet and filing an application for approval of complex litigation designation. If a case is not initially designated complex, any party may move for a complex designation; counsel must deliver a copy of the application directly to department 304. Complex department Judges Richard Kramer and John Munter review the applications together, and if the criteria of CRC §3.400 are met, the judges assign a case to the complex litigation department without a hearing. The judges take a holistic approach and divide the cases between them based on the totality of circumstances, including their existing caseloads and subject matter experience.

Munter estimates construction defect cases make up approximately 15 percent of the complex department cases. Roughly 75 percent of these cases utilize the services of a special master.

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The judges generally adopt the special master’s recommendations. Judge John Munter views the ‘special master as the choice of the litigants. If they uniformly accept a proposal, I will not get in the way of the process.’

California Civil Code §§895-945.5, 1375-1375.1 instruct parties to gather basic information, appoint a neutral and commence settlement discussions prior to filing many construction defect cases. Kramer believes these are “good laws that tee up complex construction defect cases early.” If the parties have not retained a neutral under these rules, Kramer and Munter observe that lawyers who practice in the complex department are very knowledgeable and “able to recommend a qualified special master early in the case.”

Plaintiff attorney Ann Rankin works with lead defense counsel to appoint a special master at the start of a complex construction defect case. Defense counsel Sandy Kaplan of Gordon & Rees explains that it is important to obtain an appointment before the subcontractors appear: “Quite frankly, getting consensus from multiple parties with multiple agendas and multiple carriers makes coming to an agreement very difficult. Generally, all counsel agree to the lead counsel’s selection.” Where one party objects to an appointment, Rankin and Kaplan invite the party to address its concerns directly with the court. This situation is rare. Kramer has appointed a special master over a party’s objection, but Munter does not recall this issue in any of his cases.

Case Management

The judges agree that standard case management conference statements are inappropriate for complex construction defect cases. Both Kramer and Munter require a single, joint status report in pleading format from lead counsel. In addition, they welcome a special master’s status report. At least three court days before a CMC, two hard copies of the status report should be hand-delivered directly to the complex department. Munter uses the report as the CMC agenda, and he encourages the special master to participate in the conference by phone.

A special master may submit additional written status reports after key events in the case.

Rankin supports frequent special master teleconferences with counsel. “If you don’t keep bugging people they will not get work done — deadlines pass and the case stops moving forward. The conferences push counsel to complete tasks.” Conferences also force the parties to communicate regularly with each other. Kaplan agrees: “As to case management, it is important for the special master to stay periodically in touch with lead lawyers to address issues, remind parties of deadlines and move the case forward.”

Status reports should include a summary of significant occurrences, upcoming events, anticipated court activity and, according to Munter, the lawyers’ comments on “how to best move this case to some merciful conclusion. We want to be forward-looking — always looking at the next step. The goal is getting the case resolved — settled or whatever resolves the case.” The judges encourage the parties to identify issues for early resolution that will simplify the case. Munter explains that “with the agreement of the lawyers, there is a lot a complex department judge can do. There are many processes that the parties can devise to address key issues — for example, court trials, mini-trials and bifurcation of issues. Without an agreement, I am a law and motion judge. Counsel should take advantage of opportunities that are not always available outside of the complex department.”

Kaplan observes that San Francisco’scomplex judges “work with attorneys as long as the attorneys are prepared and know what they are doing. It is refreshing to be able to pick up a phone and call a clerk in the complex department directly to request a CMC continuance. This is one of the intended benefits of having a case in the San Francisco complex litigation department.” Moreover, while a special master does not address substantive legal issues, the special master can assist the parties in working with the court to set briefing schedules and dates for good faith settlement hearings and other substantive matters.

The judges generally adopt the special master’s recommendations. Munter views the “special master as the choice of the litigants. If they uniformly accept a proposal, I will not get in the way of the process.” Upon a showing of good cause, the judges typically grant unopposed trial continuances recommended by the special master; they take into consideration any objections to a recommendation.

Jury trials of construction defect cases are not common in San Francisco’s complex department. Kramer assists with the selection of a jury trial judge who will hear a case from Kramer’s department, but he does not conduct jury trials. Munter has not had a construction defect jury trial since he joined the department in 2007.

Discovery Disputes

Rankin believes that “the special master can do a lot of things to prevent discovery abuse.” For example, the special master may set up streamlined procedures for producing email discovery, conducting inspections, organizing depositions and resolving discovery disputes. Rankin observes that “discovery abuse makes a case so expensive. San Francisco’s complex judges are hardworking and willing to assist the parties. However, especially in light of California’s budget woes, they simply do not have the time, budget or resources to deal with ongoing discovery abuses.”

The complex departments will review de novo any disputed special master discovery ruling. Before filing any discovery motion, however, the parties must meet with the court informally to attempt a resolution.

Settlement

The special master conducts most mandatory settlement conferences at private offices. Upon request, the San Francisco complex judges will allow the special master to conduct settlement conferences in their departments. Often, Kramer and Munter will do MSCs for each other, alone or in tandem with the special master or settlement judge. But courthouse MSCs are rare in complex construction defect cases.

Kaplan believes MSCs at the courthouse are needed when there are parties “who have not properly evaluated the case or show up without authority and need the imposition of the court to take the case seriously. If everyone is smart and doing their job, the parties don’t need the courthouse.”

Kramer echoes Kaplan’s sentiment: “People we deal with in the complex litigation department do not need to be told when to settle their cases. As to construction disputes, people who can build have common sense. They will figure out how to settle these things. I don’t need to tell anybody about the invisible hand or the rational resolution to a business problem.”

Munter notices order to show cause hearings for any party who fails to appear with a carrier or decision maker with settlement authority at a court-ordered settlement conference. To date, he has issued no sanctions.

In summary, Judges Kramer and Munter supervise multiparty complex construction defect cases in San Francisco. Lead counsel frequently stipulate to the appointment of a special master very early in these cases; later-appearing parties seldom object to the stipulation. With the parties’ consent, complex judges work with the special master and counsel to streamline the resolution process and simplify the case. The court typically adopts special master recommendations, including unopposed trial continuance requests supported by good cause. Special masters may conduct settlement conferences at the courthouse, but courthouse settlement conferences are not common in complex construction defect cases. Jury trials of construction defect cases in San Francisco’s complex departments are rare.

This article was originally published in The Recorder, Vol. 134, No. 20, on Monday, June 6, 2011.

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Multiparty construction defect cases often require exceptional judicial management because they involve complex factual and legal issues and include large numbers of parties, attorneys, insurance companies and experts. Litigants frequently retain a referee or special master to work with the complex litigation judge by providing case management, addressing discovery disputes and/or facilitating settlements of these cases. This article is the second in a series that analyzes how different Bay Area courts utilize special masters in complex construction defect cases.

San Mateo County Superior Court currently has approximately 25 complex construction defect cases. More than 85 percent of these cases utilize the services of a special master under the supervision of Presiding Judge Beth Freeman.

When filing a multiparty construction defect case, plaintiff’s counsel may request a complex case designation by filing a civil case cover sheet with the appropriate boxes checked and a certificate regarding complex case designation. If a case is not initially designated complex, any party may move for a complex designation. The complex case designation fee is an additional $550 per party (capped at $10,000 per side). Alternatively, the parties may submit a stipulation with a proposed complex designation order. Ex parte hearings concerning complex designation requests are discouraged. The clerk of the court will set a status conference before Freeman to address a complex designation request. The presiding judge may decide the matter with or without hearing.

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In addition to court status reports, homeowner counsel Frederick believes that “the special master should focus on party communications. Something should be happening every 30 days” to keep the case moving toward resolution.

At the first case conference, Freeman will ask counsel if they agree to the appointment of a special master. Homeowner’s counsel Kevin Frederick generally addresses this issue with lead defense counsel very early in the litigation — often before filing the complaint. “The very first conversation is who are we going to get to be our special master,” he says. “The key is get the special master appointed before the subcontractors come in, because once three parties are in the case, the parties will have difficulty reaching an agreement. No subcontractor has ever objected to a previously agreed-upon special master in any of my cases.”

Defense attorney Lisa Cappelluti of Lorber, Greenfield & Polito, adds that the parties generally stipulate to the lead parties’ special master proposal. If one or two parties object, lead defense counsel works with the parties to negotiate a consensus. Counsel can be creative. Cappelluti has negotiated agreements whereby minor parties opted out of the special master process in exchange for informal document exchanges, a stay on formal discovery and one-on-one settlement discussions with lead defense counsel.

Once a consensus is reached, the parties submit to Freeman a completed stipulated order appointing a special master; the court generally designates the case to be complex and executes the proposed order. See Local Form CV-67, Local Rule 8. If a consensus is not reached, Freeman may designate a case complex and entertain a motion to appoint a special master “if the parties can work out a special master fee arrangement.” Freeman views the amount of court time needed on special master cases as “very manageable” and therefore complex construction defect cases remain in the presiding judge’s department for case management. The presiding judge refers complex construction defect cases without special masters to San Mateo’s complex litigation department.

Case Management

Form case management conference statements are not helpful in construction defect cases. Freeman explains that “the form itself is not designed to give the kind of information that is needed in complex construction defect cases.” Freeman prefers that the special master confer with counsel and submit a single status report via facsimile, mail or hand delivery one week before a case management conference. Otherwise, “the submission of quarterly reports is a good rule of thumb.”

In addition to court status reports, homeowner counsel Frederick believes that “the special master should focus on party communications. Something should be happening every 30 days” to keep the case moving toward resolution. Cappelluti suggests that the special master “create a vehicle to communicate with the parties and update the entire group regarding case progress at least every two months.” As a case approaches trial, the special master should increase communications with all counsel and the court.

Substantive status reports to the court include a summary of occurrences in the case and a schedule of upcoming events — including anticipated dispositive motions that the court will be asked to handle. When appropriate, the reports should include a recommended trial date. A special master status report may include a request for a trial date continuance if the request is unopposed and supported by good cause. The special master should circulate a status report to all counsel for review before forwarding it and any proposed order to the court. The report should confirm that all parties agree with, or explain any objections to, the proposed order. The court generally adopts the special master’s recommendations.

Discovery Disputes

Freeman encourages special masters to “actively engage in resolving disputes between parties. It is far more useful to the case if the special master develops his/her role as a decision maker. Whether it be discovery disputes, expert issues, [or] inspection questions, the special master should not just try to find the middle ground where parties can compromise.”

Settlement

Most special master mandatory settlement conferences are conducted at private offices. If it will assist the settlement process, the special master may submit a request to Judge Steven Dylina to conduct an MSC at the San Mateo courthouse. Dylina welcomes the collaboration of the special master in resolving disputes. He is a “strong believer in the special master process. San Mateo has 26 superior court judges and a huge number of criminal cases that take statutory priority over civil cases. It is critical that the court keep the special master system going.”

Prior to a courthouse MSC, Dylina welcomes a confidential settlement status report from the special master. He also encourages all counsel to hand deliver or fax to his department settlement conference statements one week in advance of the conference. “I read everything,” he says.

Any requests for carrier representatives or principals to attend a courthouse MSC by phone should be submitted to the special master who in turn will address the issue with Dylina. The judge emphasizes that “participants need court permission to attend by phone.” While it is not his preference, Dylina has sanctioned parties for not attending MSCs in person without prior court approval.

Dylina strategizes with the special master to design an effective approach toward settlement discussions. He and the special master “divide and conquer to the extent that they can to assist all parties.” He acknowledges that the special master “knows the case far better than the judge does and can identify claims, defenses, insurance coverage issues, additional insured matters, scopeof-work issues, critical timing issues and other key settlement factors. That is something that the trial judge doesn’t really have a chance to do.” In some cases, Dylina actively participates in the negotiations; in others, he serves as a background player.

Cappelluti believes that “San Mateo judges have an interactive relationship with the special masters. They seem to coordinate with them on an active and ongoing basis. This is very useful. The parties get more accomplished when they are able to utilize the courthouse and the judges cooperate. There is a cohesion between the bench and the special master.”

If a case does not resolve at a settlement conference, Dylina’s clerk will call counsel before trial and ask if there is anything that the judge can do to facilitate settlement. If any settlement dynamic changes, the judge invites the parties back for more settlement negotiations.

On the first day of trial, counsel should be prepared to participate in a settlement conference with Dylina or another judge. The parties will receive their trial assignment after the conference.

In summary, Presiding Judge Freeman supervises the management of complex construction defect cases with special master appointments; the complex litigation department handles the remaining complex construction defect cases. Once appointed, the special master is charged with communicating with the court at least once a quarter to assist with efficient case management and resolution. The court favors special master status reports over the standard form CMC statements. Freeman generally will grant special master proposals if the special master has conferred with counsel and submitted a timely case management schedule. The judge also may grant special master trial continuance proposals that are unopposed and supported by good cause. A special master may conduct courthouse MSCs with Judge Dylina. In San Mateo, counsel should be ready to engage in meaningful settlement discussions on the first day of trial.

This article was originally published in The Recorder Vol. 134, No. 20, on Monday, April 21, 2011.

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Multiparty construction defect cases often require exceptional judicial management because they involve complex factual and legal issues and include large numbers of parties, attorneys, insurance companies and experts. Litigants frequently retain a referee or special master to work with the complex litigation judge by providing case management, addressing discovery disputes and/or facilitating settlements of these cases. This article is the first in a series that analyzes how different Bay Area courts utilize special masters in complex construction defect cases.

Alameda County Superior Court has approximately 280 cases pending in its two complex litigation departments. This total does not include multiple cases under single case numbers, such as judicial council coordinated proceedings (JCCP) and consolidated cases. Judge Steven Brick handles the even-numbered cases, and Judge Robert Freedman the odd-numbered ones. Due to potential conflicts, Freedman recuses himself from many construction defect cases. Brick, therefore, handles the lion’s share of these files: He currently has about 20 active construction defect cases, while Freedman has approximately 10, excluding a substantial number of construction cases that are more in the nature of contract disputes than traditional construction defect claims. More than 80 percent of the complex construction defect cases in Alameda County Superior Court utilize the services of a special master.

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The complex judges encourage the special master to work with the litigants to resolve discovery disputes informally, through case management efforts and informal discussions with counsel.

When filing a construction defect case, plaintiff’s counsel may forward a case to a complex department simply by checking the complex designation boxes on the civil case cover sheet and paying an additional $550 fee for complex designation. (Defendants pay an additional $550 complex designation fee per party ($10,000 cap).) If a case is not initially designated complex, any party may move for a complex designation; these motions are usually uncontested. If no party requests a complex designation, a construction defect case will be assigned to one of Alameda’s 14 direct calendaring departments. Freedman or Brick may transfer the case to a complex department upon the request of a direct calendar judge if the criteria under CRC §3.400(b) are met.

Plaintiff and lead defense counsel generally select a special master and submit a stipulation and proposal to the court. Homeowners’ counsel Randolph Paul of Berding & Weil explains that it is simply more efficient to select a special master before all the parties are in the case. “If we wait until 30 cooks are in the kitchen, it’s too hard to cook,” Paul says. Any newly served party may object to the appointment order within 30 days of being served. If there is no objection, the party is bound by the order. Customarily, all parties agree to the appointment.

According to defense attorney William Staples of Archer Norris, if one or two parties object, lead defense counsel tries to work with the parties to negotiate consensus. If an agreement cannot be reached, the court instructs the consenting parties to file a motion to appoint the special master. For the most part, these motions are granted. According to Brick, “all parties [in a case] are either in the special master process or not. Otherwise, the purpose of the process is defeated.”

Case Management

The complex judges disfavor standardform case management conference statements in construction defect cases. Brick prefers that the special master meet and confer with counsel for all parties and submit a status report 15 days before each complex CMC; one week thereafter, counsel may supplement the report. In contrast, Freedman welcomes a special master’s update, but requires a joint narrative report (“not utilizing Judicial Counsel Form CM-110”) from counsel for plaintiff and lead defense at least five court days prior to the CMC. Freedman wants “to ensure that both sides are talking to each other.” In Alameda, counsel efile status reports via EDelivery@alameda.courts.ca.gov.

Staples believes that periodic special master status reports move a case towards resolution. Similarly, Paul recommends conferences every month or so. “Status teleconferences keep the special master’s finger on the pulse of the case and determine where pressure points are before they become pressure points. They keep the case moving. The more the special master can take off the court’s plate by dealing with things before they become issues, the better off everyone is.”

Brick agrees. He encourages special master emails and phone calls. The judge reviews saved emails in preparation for CMCs. Moreover, he frequently emails the special master within hours of a formally noticed status teleconference to assess if there is any development that may impact case progress. “Communications are the whole key,” according to Brick. “Because of email, its all very seamless.”

Substantive status reports to the court include a summary of occurrences in the case, a 90-day schedule of upcoming events and, when appropriate, a recommended trial date. The special master should circulate the report and any proposed order to all counsel for review before faxing them to the court. Brick may request an email version of the proposed order. The status report should confirm that all counsel agree with, or explain any objections to, a proposed order. The court usually accepts the special master’s recommendation.

Discovery Disputes

The complex judges encourage the special master to work with the litigants to resolve discovery disputes informally, through case management efforts and informal discussions with counsel. In cases without a special master, Freedman offers “real time dispute resolution” during depositions whenever possible, and he expects special masters to provide this type of service to parties in complex construction defect cases.

Settlement

Most special master mandatory settlement conferences are conducted at private offices. Staples notes that “if the special master is getting frustrated with parties not participating, he or she will conduct an MSC at court.” Paul estimates that close to 50 percent of his cases end up with an MSC at the courthouse. “More and more, it seems as if we are getting closer and closer to trial before cases settle.”

The complex judges in Alameda allow a special master to conduct MSCs at the courthouse. The judges remain available throughout the proceeding and offer their assistance if needed. They advise counsel to take the special master process seriously. If a principal or carrier representative with settlement authority is absent from any MSC, the judges may notice an order to show cause hearing where sanctions may be issued.

Alameda’s complex judges rarely double-book their cases. Therefore, trial continuances complicate their schedules. With good cause shown, however, the court may grant an uncontested 30- to 40-day trial continuance request. Good cause may exist if the special master recommends a continuance to allow parties on the verge of settlement to complete their negotiations without incurring significant trial preparation costs. That said, the court most likely will deny any request that threatens a “domino effect” of delays on the court calendar.

Brick views a firm trial date as “the most effective means of resolving a case.” Paul observes that Brick makes his position very clear throughout the case.

“Brick in particular works closely with the parties and the special master to make sure discovery is completed prior to trial, so that he does not have to continue the trial to allow discovery and other activities to take place. When you get a trial date in his department, you’d better recognize that it’s a real trial date. Counsel give opening statements on the first day of trial. All pretrial motions and jury selection are completed before that time. Brick is very careful to stick to his schedule.”

There are no settlement conferences on the first day of trial.

In summary, Judges Brick and Freedman supervise complex construction defect litigation in Alameda County. In the majority of these cases, the parties stipulate to the use of a special master. Once appointed, the special master is charged with communicating regularly with the court and counsel and assisting with efficient case management and resolution. The court favors special master and joint status reports over the standard form CMC statements. The judges generally will grant special master proposals if the special master has conferred with counsel and submitted a timely case management schedule. A special master may conduct MSCs in the Alameda complex departments. For good cause shown, a trial continuance recommended by the special master will likely be granted, unless it will delay other trials on the court’s calendar. In Alameda County’s complex litigation departments, if the parties have not reached a settlement, counsel must be ready to deliver opening statements on the first day of trial.

This article was originally published in The Recorder Vol. 134, No. 20, on Monday, March 24, 2011.

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Construction defect cases typically involve large numbers of parties, attorneys, insurance companies and experts. Each player has its own goals. The property owner wants maximum funds to repair defects and cover losses. The builder disputes both plaintiff’s repair scope and associated costs and seeks to pass plaintiff’s claims onto subcontractors. The subcontractors concentrate on minimizing alleged damages and shifting responsibility. The design professionals distinguish between construction errors and design issues. Attorneys challenge pleadings, decipher contracts, pursue claims, and assert defenses. Insurers highlight policy language to define covered losses and involve other carriers to share the risk. Experts bring technical insight to all aspects of the discussion. Discovery and litigation costs soar. It is no wonder that the resolution of construction defect cases has been compared to herding cats.

These independent players can be steered towards efficient case resolution. First, it is important to bring the participants together at the onset of the case to articulate their goals and tailor a case schedule that addresses such goals. Second, the parties should use the productions of insurance, scope of work and project documents to identify and address potential impediments to settlement. Finally, the parties should develop an overall settlement plan and a negotiation strategy before the settlement conference. While these preparations may not remove all obstacles, they will guide the parties toward meaningful settlement negotiations and, ultimately, efficient case resolution.

Developing a Case Management Schedule and Plan

From the inception of the case, the parties should discuss with the case neutral the overall case schedule and duration, including triggers for conducting a settlement conference, lifting the discovery stay and requesting a trial date. Importantly, the parties should agree on the total number of anticipated settlement conferences. The parties also should use their best efforts to articulate all claims and involve all potentially responsible parties and their carriers early in the litigation; failure to do so most likely will impact the parties’ ability to achieve their case goals.

As an example, the parties may craft a case management schedule that anticipates a trial date within two years of case filing. The neutral may calendar teleconferences, site inspections, expert meetings, homeowner board meeting and/or defense meeting. Once these tasks are completed, the parties may agree to participate in the first of a target maximum of three settlement conferences with trial counsel, insurance representatives and principals with settlement authority personally in attendance.

Customizing Pre-Trial Orders

The case management plan ideally should be implemented in a series of customized pre-trial orders. With the exception of scheduling a trial date, each order should establish deadlines over roughly a 90 day period and notice teleconferences between the neutral and all counsel after the completion of specific tasks. This approach allows the parties and the neutral promptly to address any missed deadlines and minimize any resultant delay. It also avoids the perception of “fake deadlines,” particularly by decision makers who grow weary of last minute scheduling changes that directly impact their calendars.

The first pre-trial order in a construction defect case typically delineates a process for producing basic information – insurance, scope of work and project documents. Rather than treating these productions as part of a rote process, the parties should use the productions to identify and resolve potential settlement problems.

For example, is there an insurance issue that may impede settlement discussions? If so, who are the decision makers and what information do they need to address the issue? Is additional carrier participation needed? Have the carriers reached a time on risk agreement? Are there any outstanding Additional Insured issues? Many times, insurance-related issues can be resolved through a conference call between the case neutral and carrier representatives; at a minimum, these calls identify decision makers and facilitate carrier analyses before the settlement conference.

Preparation of the Scope of Work Statement

The preparation of the scope of work statement is an opportunity for counsel to confirm an accurate picture of his client’s work. If a contract exists, does it accurately reflect the client’s work at the project? Did the client perform additional work? If the client is uncertain, will a site inspection refresh his memory? If there is a disagreement regarding the work a party performed at the project, the parties may use the statement as a springboard for an informal discussion between principals, an expert exchange at a defense allocation meeting or service of narrowly tailored formal discovery. This approach may be especially helpful for small parties who wish to exit the case early. Even if a scope of work issue is not conclusively resolved, addressing the matter early allows the parties to incorporate the issue into their case evaluations.

Production and Review of Project Documents

In producing project documents, counsel should review his client’s contract and note if there is any attorney fee, duty to defend, indemnity or limitation of liability provision. No attorney should attend a settlement conference without first reading his client’s contract. Counsel should bring a copy of the contract, and any revisions, to all settlement conferences. Counsel also should educate himself regarding the overall project by visiting the document depository prior to any settlement conference.

The initial document production is also a time to assess whether all potentially responsible parties are in the case. A delay in involving a party and its carriers can have a significant impact on the case schedule and duration.

Developing a Settlement Strategy

It is important to develop an overall settlement strategy as far in advance of a settlement conference as possible. The discussion should address the potential structure of the parties’ settlement, the use of expert information and the timing of settlement demands.

As far as structure, will plaintiff only consider a global settlement? Will the lead parties allow peripheral party settlements? Can players with additional insured endorsements settle early? Will the lead parties consider settling around an unprepared or “problem” player? Who will attend the settlement conference with authority to finalize any settlement agreement?

Use of Experts

The use of expert information plays a significant role in preparing an overall settlement plan. The experts generally focus on plaintiff’s biggest ticket item: the cost of future repairs. Alternatively, if the project is an income producing property, such as an apartment building, hotel or professional business, the experts may concentrate on repair scopes that minimize move out or business interruptions. Expert discussions throughout site inspections, testing, joint expert meetings and the preparation of a defense response assist the parties in defining potential problems and developing repair proposals and pricing. In developing a case settlement strategy, the parties should determine how they will use the expert evaluations.

One option is the preparation of a joint scope of repair. The parties’ experts negotiate a compromise repair scope for the project, and a cost estimator bids the cost of implementing the scope; the estimator also bids areas of disagreement. Having quantified the difference between each side’s view of a reasonable repair, the joint scope allows the parties to evaluate a reasonable settlement range for the case. It also enables the parties to articulate solutions that may be unavailable at trial. Another option may be to price out the other side’s repair scope with the party’s own cost estimator. Regardless of how the parties decide to utilize the expert information, they should address the issue in advance of the settlement conference.

Making and Timing of Settlement Demands

Service of timely settlement demands is another factor to be considered in a settlement plan. Sufficient time is needed after service of the demands to allow counsel to complete their evaluations and submit reports to principals and carriers. At least four weeks before the conference, plaintiff should serve its settlement demand with a breakdown of its claims (e.g. future repair costs, move out expenses, out-of-pocket expenditures, Stearman costs, attorneys fees.) At least three weeks before the conference, lead defense should serve settlement allocations on cross-defendants and, at the same time, circulate a draft settlement agreement, with key financial terms omitted, for all parties’ review and comment before the conference. During down time at the conference, the parties can negotiate settlement language; if the parties reach a settlement, they can execute the agreement at the conference and prepare to close their files.

In addition to a settlement plan, the participants privately should discuss and define the outcome that they hope to achieve through settlement before the conference. Based on an evaluation of a realistic cost of repair, Stearman fees, contract obligations, factual and legal issues, what is a reasonable opening number? What are the risks and costs associated with proceeding to trial? If successful at trial, will the party be able to collect on any judgment or recoup any costs from a viable party? What is the client’s tentative bottom line? At what level does trial become a better alternative to a negotiated agreement? With this information in mind, the participants should give some thought as to how they will move from offer to offer or demand to demand prior to the start of the settlement conference.

Conclusion

Moving players towards settlement in a complex construction defect case is not easy. The process involves multiple players with variable and changing goals. Factual disputes, conflicting legal theories, late claims, missing parties and recalcitrant carriers create additional challenges. The early identification of case goals and settlement roadblocks and the creation of a general settlement plan and basic negotiation strategy may not remove all of these obstacles. Nonetheless, these preparations will open the door to meaningful settlement negotiations, and, ultimately, steer the participants to efficient case resolution.

This article was originally published in ADC Defense Comment, Vol. 26, No. 1 (2011).

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