SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Alternative Dispute Resolution and 
Settlement Encouragement Act''.

SEC. 2. ARBITRATION IN DISTRICT COURTS.

    (a) Authorization of Appropriations.--Section 905 of the Judicial 
Improvements and Access to Justice Act (28 U.S.C. 651 note) is amended 
in the first sentence by striking ``for each of the fiscal years 1994 
through 1997''.
    (b) Arbitration To Be Ordered in All District Courts.--
            (1) Authorization of arbitration.--Section 651(a) of title 
        28, United States Code, is amended to read as follows:
    ``(a) Authority.--Each United States district court shall authorize 
by local rule the use of arbitration in civil actions, including 
adversary proceedings in bankruptcy, in accordance with this 
chapter.''.
            (2) Actions referred to arbitration.--Section 652(a) of 
        title 28, United States Code, is amended--
                    (A) in paragraph (1)--
                            (i) in the matter preceding subparagraph 
                        (A) by striking ``and section 901(c)'' and all 
                        that follows through ``651'' and inserting ``a 
                        district court''; and
                            (ii) in subparagraph (B) by striking 
                        ``$100,000'' and inserting ``$150,000''; and
                    (B) in paragraph (2) by striking ``$100,000'' and 
                inserting ``$150,000''.
            (3) Certification of arbitrators.--Section 656(a) of title 
        28, United States Code, is amended by striking ``listed in 
        section 658''.
            (4) Removal of limitation.--Section 658 of title 28, United 
        States Code, and the item relating to such section in the table 
        of sections at the beginning of chapter 44 of title 28, United 
        States Code, are repealed.
    (c) Conforming Amendment.--Section 901 of the Judicial Improvements 
and Access to Justice Act (28 U.S.C. 652 note) is amended by striking 
subsection (c).

SEC. 3. AWARD OF REASONABLE COSTS AND ATTORNEY'S FEES IN FEDERAL CIVIL 
              DIVERSITY LITIGATION AFTER AN OFFER OF SETTLEMENT.

    Section 1332 of title 28, United States Code, is amended by adding 
at the end the following:
    ``(e)(1) In any action over which the court has jurisdiction under 
this section, any party may, at any time not less than 10 days before 
trial, serve upon any adverse party a written offer to settle a claim 
or claims for money or property or to the effect specified in the 
offer, including a motion to dismiss all claims, and to enter into a 
stipulation dismissing the claim or claims or allowing judgment to be 
entered according to the terms of the offer. Any such offer, together 
with proof of service thereof, shall be filed with the clerk of the 
court.
    ``(2) If the party receiving an offer under paragraph (1) serves 
written notice on the offeror that the offer is accepted, either party 
may then file with the clerk of the court the notice of acceptance, 
together with proof of service thereof.
    ``(3) The fact that an offer under paragraph (1) is made but not 
accepted does not preclude a subsequent offer under paragraph (1). 
Evidence of an offer is not admissible for any purpose except in 
proceedings to enforce a settlement, or to determine costs and expenses 
under this subsection.
    ``(4) At any time before judgment is entered, the court, upon its 
own motion or upon the motion of any party, may exempt from this 
subsection any claim that the court finds presents a question of law or 
fact that is novel and important and that substantially affects 
nonparties. If a claim is exempted from this subsection, all offers 
made by any party under paragraph (1) with respect to that claim shall 
be void and have no effect.
    ``(5) If all offers made by a party under paragraph (1) with 
respect to a claim or claims, including any motion to dismiss all 
claims, are not accepted and the judgment, verdict, or order finally 
issued (exclusive of costs, expenses, and attorneys' fees incurred 
after judgment or trial) in the action under this section is not more 
favorable to the offeree with respect to the claim or claims than the 
last such offer, the offeror may file with the court, within 10 days 
after the final judgment, verdict, or order is issued, a petition for 
payment of costs and expenses, including attorneys' fees, incurred with 
respect to the claim or claims from the date the last such offer was 
made or, if the offeree made an offer under this subsection, from the 
date the last such offer by the offeree was made.
    ``(6) If the court finds, pursuant to a petition filed under 
paragraph (5) with respect to a claim or claims, that the judgment, 
verdict, or order finally obtained is not more favorable to the offeree 
with respect to the claim or claims than the last offer, the court 
shall order the offeree to pay the offeror's costs and expenses, 
including attorneys' fees, incurred with respect to the claim or claims 
from the date the last offer was made or, if the offeree made an offer 
under this subsection, from the date the last such offer by the offeree 
was made, unless the court finds that requiring the payment of such 
costs and expenses would be manifestly unjust.
    ``(7) Attorney's fees under paragraph (6) shall be a reasonable 
attorney's fee attributable to the claim or claims involved, calculated 
on the basis of an hourly rate which may not exceed that which the 
court considers acceptable in the community in which the attorney 
practices law, taking into account the attorney's qualifications and 
experience and the complexity of the case, except that the attorney's 
fees under paragraph (6) may not exceed--
            ``(A) the actual cost incurred by the offeree for an 
        attorney's fee payable to an attorney for services in 
        connection with the claim or claims; or
            ``(B) if no such cost was incurred by the offeree due to a 
        contingency fee agreement, a reasonable cost that would have 
        been incurred by the offeree for an attorney's noncontingent 
        fee payable to an attorney for services in connection with the 
        claim or claims.
    ``(8) This subsection does not apply to any claim seeking an 
equitable remedy.''.

SEC. 4. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

    (a) Section 2.--The amendments made by section 2 shall take effect 
on the date of the enactment of this Act.
    (b) Section 3.--
            (1) In general.--Subject to paragraph (2), the amendment 
        made by section 3 shall take effect on the first day of the 
        first month beginning more than 180 days after the date of the 
        enactment of this Act.
            (2) Application of amendment.--The amendment made by 
        section 3 shall apply only with respect to civil actions 
        commenced after the effective date set forth in paragraph (1).
Alternative Dispute Resolution and Settlement Encouragement Act - Amends the Judicial Improvements and Access to Justice Act with respect to Federal district court arbitration programs to:  (1) authorize permanent appropriations; (2) require all district courts to establish by local rule such programs for civil and bankruptcy actions; and (3) increase the monetary ceiling of actions that courts may require to be arbitrated. 
Amends the Federal judicial code to set forth an offer of settlement procedure in Federal civil diversity litigation.
Alternative Dispute Resolution and Settlement Encouragement Act