Could Your Cases Profit from Early Neutral Evaluation

Most of us are familiar with the typical forms of alternative dispute resolution (ADR), mediation and arbitration, but how many of us are familiar with a relatively new form of ADR called Early Neutral Evaluation (aka Neutral Evaluation)?

Early Neutral Evaluation (ENE), for certain types of cases, or at certain points in a case, can be more beneficial to a case than mediation or arbitration.  It should be known that ENE is a great precursor to mediation and/or arbitration.  If and when ENE is a good fit for your case, is something only an attorney and the client can decide, but as the legal assistant/paralegal on the case, understanding what ENE is will give you a better idea of when your cases might benefit from its use.

So where does this ENE process come from?  It comes from the idea that there needs to be a way for parties to have a realistic view of the case and the hurdles for both sides before a ton of money is spent in the discovery and litigation process.  All it takes is for one person in the matter, whether it is an attorney or a client, to mis-evaluate or misunderstand the case.  Once that happens, there are then unrealistic ideas about the outcome and possible worth of the case, which leads to stubbornness on someone’s part, which leads to steps to take the case to trial, the trial itself, and sometimes even the appellate process.

ENE used early on in a case, can help drive what discovery is and is not needed, to get the parties to a quick, but informed mediation.  Publicly traded companies have seen value in using ENE in a case before it goes to the Complaint stage.  That they can take a dispute to a neutral, who can determine the parameters and get the parties to a mediation or arbitration, without a public lawsuit being filed, means that the company’s shareholders are not turned off from investing in the company due to pending litigation.

We have all seen or heard about the dreaded situation where a case is within a couple weeks of trial and an attorney is faced with telling the client that even though they have spent over $100,000 on attorneys fees, experts, and other costs of litigation for their matter; that the most they will ever recover is less than 50% of their money, and that 50% is only if they hit a home run with the jury.   This is the kind of situation that everyone, including the Courts, are hoping to avoid by the use of ENE.    Before the real drive for ENE in cases, the reality check that could have avoided this situation for the attorney and the client were judicial arbitrations or mandatory settlement conferences that the parties put off having until the deadline.  Magistrate Wayne Brazil from the Northern District of California has been a key player in pioneering an ENE program which is designed to address this issue.

So how does ENE work?  ENE is exactly what it sounds like, a process of having a third party come in and evaluate the case by examining the evidence in the case to date, listening (or reading) the disputed positions and then giving the parties his or her evaluation of the case.  If you find the right person to evaluate the case, this simple hearing or process can go beyond coming up with a number range that the case may be worth or the likely outcome of the matter.

The Federal Court program pioneered in the Northern District of California works like this:

  • A case is randomly assigned to the ENE program.  Either of the parties may opt out of the process.
  • If both parties agree to remain in the ENE program, then a neutral evaluator is assigned to the case.  While the assignment is random, there is an attempt to match an evaluator’s expertise with the subject matter of the particular type of dispute.
  • The parties then submit written evaluations of their case.  Sometimes attorneys decide to include documents and testimony, but most times, they are just written offers of proof.
  • Then an ENE session is scheduled.  At this session, the attorneys present a summary of the client’s case, and the evaluator’s job is to question the attorneys in an attempt to clarify the issues and identify the possible drivers for settlement and for continuing on with the litigation process.
  • After the evaluator is satisfied that he has identified the issues and has his questions answered, then he writes a written evaluation.  Before presenting the written evaluation to the parties, the evaluator asks the parties if their intention is to use them as a neutral in this matter for either a mediation or arbitration process.  If the parties say no, then the evaluator shares the evaluation with all parties.  These evaluations can be as simple as stating what the evaluator feels the monetary range the case should settle for, or be as complicated as helping the parties formulate discovery plans and schedules and defining what issues might be perfect for determination by the court in a pre-trial motion.
    • You are probably asking, well what if the parties say “yes”, they want to continue to use that person as a neutral in the case, as either a mediator or an arbitrator.  Then the neutral has to decide what can and cannot be shared with the parties regarding the evaluator’s feelings on the sticking issues for a case.  If you ask this person to act as a mediator, then you have to remember that while they are up to speed on the case, they know almost everything, if not everything, about the case from the ENE session.   If you now ask that same person to be an arbitrator, you have to realize that it will be hard for the neutral to put aside all that they learned in the ENE session.
    • All of that being said, ENE can be a great way to get the parties to the table, without the pressure to have to settle, and if the parameters are found for the dispute, psychological and monetary boundaries have not yet formed themselves in concrete, and sometimes, the parties can move from an ENE session, straight into a mediation session and actually get a case settled to everyone’s satisfaction.  Starting the process this way, makes it much harder for people to come to a mediation with a plan to posture themselves to get the best settlement.  In the ENE process, they are there to learn what pluses, and more importantly, what hurdles, they face if they go through with the lawsuit.

While ENE may not work for every case, being a voluntary process from which there can be no decision, judgment or order regarding the outcome of the matter, it can serve in most cases as a way to guide the parties towards a resolution or understanding of the issues in the case.  The true benefits of ENE are getting a good neutral’s feedback on the case before you spend tons of money chasing issues that are ultimately not going to matter in the outcome of the case; and every attorney and every client with an open mind towards resolution of their case can benefit from a true reality check regarding their matter/position – before that reality check comes from a judge or a jury.

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