The U.S. Court of Appeals for the Ninth Circuit has ruled that the federal court abused its discretion in ordering a government representative to appear in person for an initial settlement conference in businessman John K. Baldwin's $5-million federal tax refund lawsuit against the United States.
“We acknowledge the district court's intention to create a conducive environment for settlement discussions but, at this stage of this case, where there has been no record of dilatory or evasive tactics by either party, the district court's orders were not justified,” said Circuit Judge Richard R. Clifton in his opinion concurred by judges Mary M. Schroeder and Edward Leavy.
The Ninth Circuit judges directed the U.S. District Court for the NMI to vacate its orders that effectively required a person with full settlement authority attend the settlement conference in Baldwin's lawsuit.
Senior Judge Alex R. Munson had denied the U.S. government's motion to excuse it from the requirement that person with full settlement authority attend the settlement conference in Baldwin's lawsuit. He had said that in 29 years of facilitating settlement negotiations, he has never brought about a settlement agreement without having present on each side a person with full authority to reflect such an agreement.
Deputy assistant attorney general Tamara W. Ashford petitioned the Ninth Circuit to order the district court to vacate its orders.
In the petition, Ashford said the orders raise the issue of whether the District Court has the authority to direct the United States, its agencies, or its officers to appear in their official capacities at routine settlement conferences through a high-level official who has full settlement authority over the claim in dispute.
Ashford said the orders also raise the issue whether, if such authority exists, it has been abused under the circumstances of this case.
In their opinion, the Ninth Circuit judges concluded that the district court has the authority to require a high-level official to participate in a settlement conference in appropriate circumstances, but in the circumstances in this case, the court's order constituted an abuse of discretion.
The Circuit judges said the government reported to them that, as of Jan. 9, 2012, the Tax Division had 549 civil cases pending in which the amount in controversy exceeded $2 million (exclusive of interest)-the current case being one of them.
The government, the Circuit judges said, further reported that the Tax Division receives a new civil case involving more than $2 million, on average, every third business day.
The Circuit judges said the assistant attorney general is the lowest-ranking government official with authority to settle those claims under the DOJ's regulations.
For the assistant attorney general to prepare for and appear at all settlement conferences for all of those cases would be highly impractical, if not physically impossible, said the Circuit judges.
As it was the first conference to be held in the case, the court did not have a basis to conclude that the direct involvement of the critical decision-maker for the federal government was needed to achieve a settlement, they said.
“We do not say the first settlement conference in a case is unimportant and that parties should be free to take it lightly,” the judges said.
The Circuit judges said the government reports that the Tax Division has settled thousands of cases without high-ranking officers personally attending settlement conferences, and that they have no reason to doubt that representation.