In this article, Aravind Prasanna discusses about the detailed analysis of  Early Neutral Evaluation.

Introduction

Early neutral evaluation is a preliminary assessment of facts, evidence, or legal merits.[1] Early neutral evaluation is a non-binding Dispute Resolution Method. Most individuals resort to including ENE clause in their contractual agreements along with the arbitration clause to get their case valued pre-trial.[2] “Neutral evaluation” (also known as “early neutral evaluation”, or “ENE”, and sometimes simply called “case evaluation”) can actually be many different things. Just as there are many different ‘styles’ of mediation (directive or non-directive; caucus or non-caucus; evaluative or facilitative; etc.), and just as there are many forms of arbitration (binding or non-binding; high/low; baseball; and so on), so too there are many different things that happen under the general rubric of “neutral evaluation”.[3] Its purpose is to facilitate further negotiations or to give the parties an idea of what to expect upon litigation of the dispute. In this form of ADR, a neutral third party hears a summary of both parties’ positions and then renders an opinion.[4]

Origin and Development

Since 1985, the federal court for the Northern District of California has operated an experimental program in the expedited dispute resolution, Early Neutral Evaluation (ENE).[5] It is similar to the state court’s judicial arbitration program in that the neutrals are pro bono volunteers, the process is free to the litigants, and the process usually only takes a few hours.[6] But it has significant differences too. The most prominent difference is that it is done early on in the litigation before much discovery is done.[7] The developers of ENE were motivated by the desire of the judges of the Northern District to make litigation less expensive and burdensome for clients. They thought that this could best be accomplished by getting a neutral party to intervene in the early stages of the litigation process and to inject a dose of “intellectual discipline, common sense, and more direct communication.”[8] Courts use ENE for a wide variety of civil disputes, “including contract, product liability, labor and employment, and personal injury cases”.[9] ENE has been used in divorce cases in a number of states. The application of ENE to child custody and parenting time cases–has proven successful in helping parties to reach agreements early in the marriage dissolution process.[10] The first ENE in a children case reportedly took place in July 2014[11], and so important prior to the launch of the Arbitration Children Scheme. That ENE was apparently very similar to arbitration in terms of the process, although outside the framework of any formal scheme rules. It took place by agreement between the parties during the course of court proceedings that were adjourned in order for that purpose. It addressed issues about the division of the children’s school holidays, information about third party carers of the children and the arrangements for handovers between periods of time spent with each parent.

ENE – How it works?

It is a confidential process in which a neutral third party, who is an expert in the subject matter of the dispute, hears abbreviated arguments on the claims, defenses and expected court outcomes from each party.[12] The neutral then issue a non-binding opinion of the likely outcome of disputed issues or the likely court resolution.[13] An ENE session is intended to occur relatively early in the pretrial period-so litigants can use it to reduce the disproportion between litigation transaction costs and case value and to craft the most critically focused and efficient case development plan possible.[14] It usually involves the parties agreeing to employ a senior lawyer or appropriate expert to evaluate the case and to provide an opinion in relation to a specific question or on the outcome generally, which may be after considering oral or written arguments, evidence and submissions.[15] Sometimes neutrals state their views by means of written opinions or recommendations.[16] The parties may agree to be bound by the evaluation and so for it to be determinative. Participation typically is voluntary,[17] although in many jurisdictions parties can be ordered to take part.[18] The term “ENE” has been used to describe the process of giving an expert (non-determinative) opinion, whilst “expert determination” has been the description used for a process that may be identical but which produces an outcome that the parties agree will be determinative and binding upon them.[19] Evaluation sessions are confidential.[20] In order for an evaluation to be enforceable, it needs to be recorded in a consent order and approved by the court. There is no mechanism in place to appeal an evaluation, nor is it clear what a court will do if one party considers the decision to be wrong.[21] As may be seen, courts use early neutral evaluation to correct counsel’s mistaken evaluations of their cases and to find ways of getting to the decisive issues quickly.[22]

Advantages and Difficulties

The primary benefit of the ENE process is that it is relatively quick and, if successful, can avoid extensive litigation. A neutral assessment of the parties’ claims can spur a resolution–by leading the parties to re-evaluate their own cases and revise their settlement proposals–or can narrow the dispute.[23] Generally, ENE works best early in a dispute when neutral guidance about the strengths and weaknesses of a position may facilitate a resolution. In some cases, however, ENE may be more productive after there has been some discovery to develop the issues more fully. Commercial disputes are appropriate for ENE if the parties respect the views of a well-regarded neutral. ENE is also appropriate in disputes involving a specialized field of law or complex or technical issues. Parties can benefit from ENE when they cannot afford delay or when they want to promote a continuing.[24] This process lends itself well to an application in patent litigation and misappropriation of trade secret cases. Generally, this process would work in any dispute involving complex or proprietary technology and having counts based on multiple principles of law. The neutral expert may assist in reducing the number of counts, thus enabling the parties to focus on the few key issues. In this manner, discovery and resources may be concentrated on the critical issues, and the parties can work through to a meaningful settlement.[25]

Nevertheless, difficulties can result if one of the parties lacks confidence in the neutral or does not accept the evaluation. Even if the parties accept the evaluation, they are sometimes left to negotiate a resolution based on that evaluation without assistance from a facilitator. Furthermore, it may be difficult to maintain the confidentiality of the process or the evaluation in particular.[26] ENE may not be appropriate in cases involving serious credibility disputes, cases where the parties have not yet exchanged critical evidence, and cases raising issues with no legal precedent or unresolved public policy questions.[27]

Difference from other ADR methods

In case of ENE, the evaluator acts as a neutral person to assess the strengths and weaknesses of each of the parties and discusses the same with the parties jointly or in caucuses, so that the parties are aware of the independent evaluation of the merits of their case. ENE is, thus, distinct from-mediation being explicitly evaluative in nature and normally requires the expertise in the subject matter. It also focuses on the procedure of law as opposed to the interest of parties and it is not a process of discussion towards a negotiated settlement.[28] The process of ENE is, however, distinct from arbitration as there is no testimony or oath or examination and such neutral evaluation is not recorded. The process is confidential and cannot be used by any of the parties against the other. There is no award or result filed. It is really a judgment by the neutral evaluator on the basis of material on record -without the judgment is binding and in a Case of non-acceptance, the matter is referred back to the Court without disclosure of reasons as in the case of a mediation.[29]

Position in United Kingdom

It has, however, been relatively under-developed and under-utilized in England and Wales, outside of proceedings in the Technology and Construction Court and the Commercial Court. The former makes provision for it in paras 7.5.1-7.5.4 of the Technology and Construction Court Guide, which notes that it may be carried out by the court with the consent of the parties[30]. The Admiralty and Commercial Court Guide, paras G2.1-G2.5, contains similar provisions.[31] There are three plausible reasons for this lack of use. First, there is a general assumption that its use depends upon party consent. Secondly, the lack of clarity regarding the basis on which a court could, either with or without party consent, direct an ENE hearing to take place. Thirdly, an under-appreciation, outside the TCC and Commercial Court, by the judiciary and legal profession of its merits, and particular its utility as a means to promote settlement.

In terms of the first and second issue, neither the TCC Guide nor the Admiralty and Commercial Court Guide assists. Both support the view that party consent is necessary. Neither provides any jurisprudential basis for the court’s power to carry it out. They are, as explained by the Court of Appeal in Bovale v Secretary of State for Communities and Local Government[32] simply descriptive. They are neither rules nor practice directions. Previous editions of the, then, Commercial Court Guide could, however, arguably have provided a basis for the power to carry out ENE in commercial claims. The Guide’s provisions were to be followed except where they were in conflict with Rules of the Supreme Court. (It is notable that neither Practice Direction has been revoked.)[33] The Practice Directions could thus have been the source of the Commercial Court’s jurisdiction to order ENE.

In Seals v Williams[34]., Norris J considered the question of the court’s power to order ENE. At paras 4 – 6 he, rightly, concluded that the wide jurisdiction provided by r.3.1(2)(m), which specifies that the court can make any order, in addition to those particularised in r.3.1, to manage cases and further the overriding objective, provided such power. He further stated that the question of the Civil Procedure Rules’ vires in this area arose from the court’s inherent jurisdiction. One consequence of this was, as an aspect of the court’s inherent jurisdiction, the power to order ENE and for a judge to conduct it was part of the judicial function and did not depend upon party consent. The first two issues were thus put at rest.  In terms of the third issue, Briggs L.J.,[35] tackled it in respect of Chancery proceedings[36]. The Review recommended the development of judge-led ENE as an option to be available in Chancery proceedings.[37] Wider consideration of its utility and applicable to other proceedings had however continued to be absent until the most recent CPR amendments. The Civil Procedure (Amendment No.4) Rules 2015, from 1 October 2015, codifies Norris J.’s statement from Seal. It amends r.3.1(2)(m) to make explicit reference to the power to order an ENE. The power to do so is not constrained by the need to secure party consent.

Position in India

Section 89 of the Civil Procedure Code, 1908 includes provisions for referring the parties to ENE. It reads:

(1) Where it appears to the court that there exist elements of a settlement which may be acceptable to the parties, the court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the court may reformulate the terms of a possible settlement and refer the same for— (a) arbitration; (b) conciliation; (c) judicial settlement including settlement through Lok Adalat; or (d) mediation.

In Bawa Masala Company v Bawa Masala Pvt Ltd[38] the Delhi High Court referred the parties to early neutral evaluation, thus introducing the concept to India. It forms a part of the recent trend in the Delhi High Court of encouraging ADR in intellectual property disputes forward by leap and bounds. The matter had earlier been referred for mediation as there were a number of interlinked disputes pending before the trial court.[39] Although the two officials of the Delhi High Court Mediation and Conciliation Centre who had been appointed as mediators in the matter had successfully resolved all the other disputes, the instant suit had not been settled. In view of this, the counsel for both parties suggested that another attempt for amicable resolution through the ADR mechanism be made and instead of mediation, the endeavor should now be through the process of Early Neutral Evaluation (ENE).[40] Hon’ble Mr. Justice Sanjay Kishan Kaul describes ENE in the words of Robert A. Goodin as “Early neutral evaluation is a technique used in American litigation to provide early focus to complex commercial litigation, and based on that focus, to provide a basis for sensible case management or offer resolution of the entire case, in the very early stages”.[41] While referring the parties to ENE, he observed:

“ENE is, thus, a different form of alternative dispute resolution and I see no reason why this process cannot be resorted to towards the object of a negotiated settlement in pursuance to Section 89 of the Code of Civil Procedure, 1908 especially when the parties volunteer for the same. The provisions of the said section inter alia provide for Alternative Dispute Resolution Mechanism, which inter alia includes mediation. ENE also broadly follows the same process as a mediation, though the concept is not a negotiated settlement, but a neutral assessment.”

Conclusion

Neutral Evaluation may assist in de-personalizing an issue by giving clients an opportunity for catharsis, thus removing a sometime major obstacle to productive settlement discussions. It can also assist in tempering unrealistic expectations of the outcome.[42] The neutral evaluator’s objective and impartial assessment serves as a “reality check” for the parties and their lawyers, bringing frivolous matters to an end or fundamentally altering their expectations. It brings to the negotiation table serious and realistic offers (or dismissal of claims) that may eventually result in an early settlement.[43]Used as a gatekeeper for other dispute resolution processes, Neutral Evaluation can diminish the risk of not choosing the DR process that is best suited for a particular dispute. Neutral Evaluation provides the parties with the possibility of exploring all the appropriate DR options after the dispute has arisen without restricting any party in advance to any inappropriate option. It is a safe harbour within which parties who might not otherwise be amenable to DR can ponder the possibilities.[44] To that extent, the Indian judiciary should incline themselves to adopt ENE to resolve the disputes at the early stage, given the gradual emergence of ADR within the country.

[1] Defining alternative dispute resolution—Early neutral evaluation, Corporate Counsel’s Guide to Alternative Dispute Resolution in the Employment Context, (December 2017)

[2] Early Neutral Evaluation, India-International Law Firm Available at :http://iilf.co.in/lawfirm/ (Last accessed on 12.01.18)

[3] Neutral Evaluation: An ADR Technique Whose Time Has Come, FindLaw, Available at: http://corporate.findlaw.com/litigation-disputes/neutral-evaluation-an-adr-technique-whose-time-has-come.html (Last accessed on 12.01.18)

[4] Supra note 1

[5] David I. Levine, Northern District Of California Adopts Early Neutral Evaluation To Expedite Dispute Resolution, 72 Judicature 235

[6] Supra note 3

[7] Id

[8] Brazil, Kahn, Newman & Gold, Early neutral evaluation, 69 Judicature 279 (1986)

[9] Yvonne Pearson et. al., Early Neutral Evaluations: Applications To Custody And Parenting Time Cases Program Development And Implementation In Hennepin County, Minnesota, 44 Fam. Ct. Rev. 672

[10] Id.

[11] Alex Verdan QC, Harry Nosworthy, Deborah Eaton QC and Katherine Kelsey, “Early Neutral Interventions in private law children disputes: the way forward?”, Family Law, http://www.familylaw.co.uk/news_and_comment/early-neutral-evaluations-in-private-law-children-disputes-the-way-forward#.WACNZSRVe-c (Last accessed on 12.01.18)

[12] Supra note 1

[13] Id.

[14] In re Prohibition Against Disclosing ENE Communications to Settlement Judges, 494 F. Supp.2d 1097 (N.D. Cal. 2007).

[15] Alison Bull, Putting your children first, P.C.B. 2016, 6, 253-259

[16] Supra note 12

[17] D. Me. Local R. 83.11; W.D. Mich. Local R. (ENE); D. Mont. Local R. 16.6.

[18] Lewis-Miller v. Ross, 710 N.W.2d 565 (Minn. 2006); United States v. $57,790.00 in U.S. Currency, 263 F. Supp.2d 1239 (S.D. Cal. 2003);

[19] Id.

[20] In re Prohibition Against Disclosing ENE Communications to Settlement Judges, 494 F. Supp. 2d 1097 (N.D. Cal. 2007); W.D. Mich. Local R. (ENE); D. Mont. Local R. 16.6; Ga. Alt. Dispute Res. Rule VII.

[21] Supra note 1

[22] ADR strategies—Early neutral evaluation, Chapter 9. Steering Cases Toward Early Resolution, Litigation Management Handbook § 9:25

[23] Richard A. Rosen, EARLY NEUTRAL EVALUATION, Settlement Agreements in Commercial Disputes: Negotiating, Drafting and Enforcement, 2018-1 Supplement

[24] Id.

[25] Howard C. Anawalt, Dispute resolution methods—Negotiation and other generally applicable techniques—Early neutral evaluation, IP Strategy: Complete Intell. Prop. Planning § 5:33 92017)

[26] See EEOC v. Sears Roebuck & Co., No. C-89-0928, 1989 U.S. Dist. LEXIS 14298, at *9-10 (N.D. Cal. Aug. 21, 1989)

[27] Supra note 9

[28] Bawa Masala Company v Bawa Masalaa Pvt Ltd  AIR 2007 Delhi 284

[29] Id.

[30] Civil Procedure 2015 Vol.2 para.2C-42

[31] Civil Procedure 2015 Vol.2 para.2A-102

[32] Bovale v Secretary of State for Communities and Local Government [2009] EWCA Civ 171, [2009] 1 W.L.R. 2774

[33] Practice Direction (Commercial Court: Practice Guide) [1994] 1 W.L.R. 1270; ractice Direction (Guide to Commercial Court Practice: Fourth Edition ) [1997] C.L.C. 1538

[34] Seals v Williams [2015] EWHC 1829 (Ch), 15 May 2015, ChD, unrep

[35] Chancery Modernisation Review: Final Report (2013)

[36] Id. see paras 5.23-5.30

[37] Id. see para.16.19

[38] Bawa Masala Company v Bawa Masalaa Pvt Ltd  AIR 2007 Delhi 284

[39] Shwetasree Majumder, Delhi High Court ruling on Early Neutral Evaluation, De-Coding Indian Intellectual Property Law, SpicyIp (September 6, 2007) Available at: https://spicyip.com/2007/09/delhi-high-court-ruling-on-early.html (Last accessed on 14.01.18)

[40] Id.

[41] Supra note 35

[42] Christine E. Hart, Alternative Dispute Resolution Practice Manual, North York: CCH Canadian Ltd., 1996, p. 4498

[43] Erika S. Fine; Elizabeth S. Plapinger, ADR and the Courts: A manual for Judges and Lawyers, (CPR Legal Program), New York: Butterworth Legal Publishers, 1987, (Summary) p. 163.

[44] Theodore H. Hellmuth, “Commentary – Using Neutral Evaluation As a Gatekeeper Dispute Resolution Process”, in Alternatives to the High Costs of Litigation, New York: CPR Institute for Dispute Resolution, Vol. 13, No8, (August) 1995, p. 99.