Court Opinion

ID: 9478877
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:01:24.543185+00
Date Added: 2024-06-11T17:46:40.622316
License: Public Domain

EASTERBROOK, Circuit Judge,
with whom POSNER, COFFEY and MANION, Circuit Judges, join,
dissenting.
Our case has three logically separate issues. First, whether a district court may demand the attendance of someone other than the party’s counsel of record. Second, whether the court may insist that this additional person be an employee rather than an agent selected for the occasion. Third, whether the court may insist that the representative have “full settlement authority” — meaning the authority to agree to pay cash in settlement (maybe authority without cap, although that was not clear). Even if one resolves the first issue as the majority does, it does not follow that district courts have the second or third powers, or that their exercise here was prudent.
The proposition that a magistrate may require a firm to send an employee rather than a representative is puzzling. Corporate “employees” are simply agents of the firm. Corporations choose their agents and decide what powers to give them. Which agents have which powers is a matter of internal corporate affairs. Joseph Oat Corp. sent to the conference not only its counsel of record but also John Fitzpatrick, who had authority to speak for Oat. Now Mr. Fitzpatrick is an attorney, which raised the magistrate’s hackles, but why should this count against him? Because Fitzpatrick is a part-time rather than a full-time agent of the corporation? Why can’t the corporation make its own decision about how much of the agent’s time to hire? Is Oat being held in contempt because it is too small to have a cadre of legal employees — because its general counsel practices with a law firm rather than being “in house”?
At all events, the use of outside attorneys as negotiators is common. Many a firm sends its labor lawyer to the bargaining table when a collective bargaining agreement is about to expire, there to dicker with the union (or with labor’s lawyer). Each side has a statutory right to choose its representatives. 29 U.S.C. § 158(b)(1)(B). Many a firm sends its corporate counsel to the bargaining table when a merger is under discussion. See Ronald J. Gilson, Value Creation by Business Lawyers: Legal Skills and Asset Pricing, 94 Yale L.J. 239 (1984). Oat did the same thing to explore settlement of litigation. A lawyer is no less suited to this task than to negotiating the terms of collective bargaining or merger agreements. Firms prefer to send skilled negotiators to negotiating sessions (lawyers are especially useful when the value of a claim depends on the resolution of legal questions) while reserving the time of executives for business. Oat understandably wanted its management team to conduct its construction business.
As for the third subject, whether the representative must have “settlement authority”: the magistrate’s only reason for ordering a corporate representative to come was to facilitate settlement then and there. As I understand Magistrate Groh’s opinion, and Judge Crabb’s, the directive was to send a person with “full settlement authority”. Fitzpatrick was deemed inade*664quate only because he was under instructions not to pay money. E.g.: “While Mr. Fitzpatrick claimed authority to speak for Oat, he stated that he had no authority to make a [monetary] offer. Thus, no representative of Oat or National having authority to settle the case was present at the conference as the order directed” (magistrate’s opinion, emphasis added). On learning that Fitzpatrick did not command Oat’s treasury, the magistrate ejected him from the conference and never listened to what he had to say on Oat’s behalf, never learned whether Fitzpatrick might be receptive to others’ proposals. (We know that Oat ultimately did settle the case for money, after it took part in and “prevailed” at a summary jury trial — participation and payment each demonstrating Oat’s willingness to consider settlement.) The magistrate’s approach implies that if the Chairman and CEO of Oat had arrived with instructions from the Board to settle the case without paying cash, and to negotiate and bring back for the Board’s consideration any financial proposals, Oat still would have been in contempt.
Both magistrate and judge demanded the presence not of a “corporate representative” in the sense of a full-time employee but of a representative with “full authority to settle”. Most corporations reserve power to agree (as opposed to power to discuss) to senior managers or to their boards of directors — the difference depending on the amounts involved. Heileman wanted $4 million, a sum within the province of the board rather than a single executive even for firms much larger than Oat. Fitzpatrick came with power to discuss and recommend; he could settle the case on terms other than cash; he lacked only power to sign a check. The magistrate’s order therefore must have required either (a) changing the allocation of responsibility within the corporation, or (b) sending a quorum of Oat’s Board.
Magistrate Groh exercised a power unknown even in labor law, where there is a duty to bargain in good faith. 29 U.S.C. § 158(d). Labor and management commonly negotiate through persons with the authority to discuss but not agree. The negotiators report back to management and the union, each of which reserves power to reject or approve the position of its agent. We know from Fed.R.Civ.P. 16 — and especially from the Advisory Committee’s comment to Rule 16(c) that the Rule’s “reference to ‘authority’ is not intended to insist upon the ability to settle the litigation”— that the parties cannot be compelled to negotiate “in good faith”. A defendant convinced it did no wrong may insist on total vindication. See Hess v. New Jersey Transit Rail Operations, Inc., 846 F.2d 114 (2d Cir.1988), and Kothe v. Smith, 771 F.2d 667 (2d Cir.1985), holding that a judge may not compel a party to make a settlement offer, let alone to accept one. Rule 68, which requires a party who turns down a settlement proposal to bear costs only if that party does worse at trial, implies the same thing. Yet if parties are not obliged to negotiate in good faith, on what ground can they be obliged to come with authority to settle on the spot — an authority agents need not carry even when the law requires negotiation? The order we affirm today compels persons who have committed no wrong, who pass every requirement of Rules 11 and 68, who want only the opportunity to receive a decision on the merits, to come to court with open checkbooks on pain of being held in contempt.
Settling litigation is valuable, and courts should promote it. Is settlement of litigation more valuable than settlement of labor disputes, so that courts may do what the NLRB may not? The statutory framework —bona fide negotiations required in labor law but not in litigation — suggests the opposite. Does the desirability of settlement imply that rules of state law allocating authority within a corporation must yield? We have held in other cases that settlements must be negotiated within the framework of existing rules; the desire to get a case over and done with does not justify modifying generally applicable norms. E.g., Dunn v. Carey, 808 F.2d 555, 560 (7th Cir.1986) (consent decrees, and hence settlement, may be more attractive if parties may agree not to follow state law, but the value of settlement does not autho*665rize that); Kasper v. Board of Election Commissioners, 814 F.2d 332, 340-42 (7th Cir.1987) (same); In re Memorial Hospital of Iowa County, Inc., 862 F.2d 1299 (7th Cir.1988) (parties’ desire to settle does not justify vacating a judicial opinion that may be valuable to other persons). See also, e.g., Tiedel v. Northwestern Michigan College, 865 F.2d 88 (6th Cir.1988) (a district court lacks the power to promote settlement by requiring a party who rejects a mediator’s proposal to pay the prevailing side’s attorneys’ fees).
The majority does not discuss these problems. Its approach implies, however, that trial courts may insist that representatives have greater authority than labor negotiators bring to the table. And to create this greater authority, Oat Corp. might have to rearrange its internal structure — perhaps delegating to an agent a power state law reserves to the board of directors. Problems concerning the reallocation of authority are ubiquitous. For example, only the Assistant Attorney General for the Civil Division has authority to approve settlements of civil cases, and his authority reaches only to $750,000; above that the Deputy Attorney General must approve. 28 C.F.R. §§ 0.160(a)(2), 0.161. An attorney for the government, like Fitzpatrick, lacks the authority to commit his client but may negotiate and recommend. Does it follow that, in every federal civil case, a magistrate may require the presence of the Assistant or Deputy Attorney General or insist that they redelegate their authority? If such a demand would be improper for the Department of Justice, is it more proper when made of Joseph Oat Corporation?
These issues will not go away. The magistrate’s order was to send a representative with the authority to bind Oat to pay money. What is the point of insisting on such authority if not to require the making of offers and the acceptance of “reasonable” counteroffers — that is, to require good faith negotiations and agreements on the spot? Fitzpatrick had the authority to report back to Oat on any suggestions; he had the authority to participate in negotiations. The only thing he lacked — the only reason Oat was held in contempt of court— was the ability to sign Oat Corp.’s check in the magistrate’s presence. What the magistrate found unacceptable was that Fitzpatrick might say something like “I’ll relay that suggestion to the Board of Directors”, which might say no. Oat’s CEO could have done no more. We close our eyes to reality in pretending that Oat was required only to be present while others “voluntarily” discussed settlement.