Remarks of Peter Steenland, Section Chair and Senior Counsel for ADR at the Department of Justice:

Mr. Steenland welcomed the participants to the meeting and set forth the agenda.

Remarks of Jeff Senger, Deputy Senior Counsel for ADR at the Department of Justice:

Mr. Senger described the scope of the Claims Against the Government Section. He said the Section will cover cases meeting the following criteria:

1. Monetary cases. While some agencies have non-monetary claims filed against them, the focus of the group will be on monetary claims.

2. Administrative cases. The Administrative Dispute Resolution Act, our founding document, covers administrative claims, not federal court litigation, so this will be what the Section will cover.

3. Cases that do not involve the workplace or contracting, which have their own Sections.

He noted that he had talked with many agencies in preparation for the meeting and found that most agencies have settlement authority up to $25,000, after which DOJ must approve the settlement. (There is some variation in this amount -- the FBI has authority up to $50,000, and the military agencies, the Veterans Administration, and the Postal Service have up to $200,000.) Generally settlements for less than $2,500 come from the agencies' own funds, amounts between $2,500 and $25,000 come from the Judgment Fund at the agencies' discretion, and amounts more than $25,000 come from the Judgment Fund and must be approved by the Justice Department. (However, the Postal Service pays its own judgments, and bank regulatory agencies pay judgments against banks under receivership from bank funds.)

He gave examples of claims against the government that would fit under this Section. The Department of Agriculture has cases where a claimant appeals the denial of a loan or a farm subsidy. The FDIC has cases where a claimant files against a bank that is in receivership. The Department of Interior has cases where a claimant files a Fifth Amendment takings claim in a Fish and Wildlife Service matter. The Department of Health and Human Services has cases where a claimant sues the Provider Reimbursement Review Board, claiming the reimbursement rate is too low. Other agencies have similar programs as well.

He then led a discussion on the barriers agencies face in negotiating settlements at the administrative level. He first stated that a number of agencies had told him that the six-month time limit on settlement can be a barrier, as six months is not always enough time to get a case from the field to headquarters, conduct a reasonable investigation, and formulate a settlement. Some agencies at the meeting, however, said this was not always a problem, noting that some plaintiffs' attorneys will agree to an extension of time as long as the case is moving forward.

Mr. Senger described another barrier he had heard while surveying the agencies before the meeting: the disincentive to expend scarce agency resources investigating and settling a claim when the agency could instead wait six months, at which time the Department of Justice will take over the case. Some agencies at the meeting agreed with this statement and others disagreed with it.

Remarks of Agency Representatives Participating in the Meeting

Agency representatives stated they would benefit from subpoena power at the investigative stage. This would allow them to develop the case to the point that they could formulate an intelligent settlement strategy.

A number of representatives at the meeting believed that increasing their settlement authority would facilitate reaching settlements at the administrative stage. Some stated that the Department of Justice does not always approve settlements the agencies negotiate, which is a disincentive to expending resources negotiating a settlement. This is not typical, but it does happen on occasion.

Several agency representatives indicated that getting higher level management to support greater use of dispute resolution programs to resolve these types of claims would require a clear demonstration of the cost savings that could be achieved if these programs were implemented.

Agencies described other barriers to settlement, including the following:

• Lack of ADR procedures in an agency.
• A litigation mentality that discourages compromise.
• Lack of funding to conduct investigations or hire experts from outside that agency.
• Lack of funding to hire mediators.
• Lack of support from middle managers.
• Lack of training and experience in ADR by staff.
• Plaintiffs' attorneys get paid five percent more for settlements at the court stage than the administrative stage.
• Plaintiffs perceive that AUSAs settle cases for more money than agency counsel.

One agency representative from the Tennessee Valley Authority described that organization's dispute resolution program, which offers both mediation and (for certain claims) arbitration.

Remarks of Douglas Bradshaw, Office of General Counsel, U.S. Department of Veterans' Affairs

Mr. Bradshaw described the claims against the government program at the Veterans' Affairs Department, which receives 1200 claims per year. They settle 2/3 to 3/4 of these cases. Cases that reached federal court numbered 172 last year, and 2/3 of those settled. Of those that did not settle, the government won 2/3. Some of the trials that were lost, however, were for large amounts of money. The average administrative settlement was $80,000. The average litigation settlement was $267,000. The average judgment was $525,000.

He described a particular case involving a medical malpractice claim that went to mediation. The case did not settle at the mediation, but it did settle one month later for the amount the government had offered during the mediation.

Remarks of Peter Steenland, Section Chair and Senior Counsel for ADR at the Department of Justice:

Mr. Steenland said that settling cases with ADR can result in quicker and cheaper settlements, because the process can create non-dollar value for plaintiffs. He said that ADR could assist agencies with the discovery process if a mediation took place in a two-stage process. In the first stage, the mediator could require that plaintiff bring documentation for the claim to the meeting. The second stage could take place a month later, after the agency has had an opportunity to review the material. Agencies could use a shared neutrals program to pool their resources.

He described another possible ADR program in this area: a pilot binding arbitration project for claims against the government. This could be valuable for cases where the amount in dispute is less than the costs of litigation involved. The arbitral award could be capped at the limit of the agency's settlement authority. A plaintiff's incentive to use the program could be that the case will be resolved quickly, getting the money to the claimant sooner.

Mr. Steenland closed the meeting by asking all those in attendance to discuss the proposed arbitration pilot with their supervisors and be prepared to report on agency reactions to this proposal at the next meeting of the Section.