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The Pros and Cons of a Very Public Settlement

By: Jan Schau, IAM Distinguished Fellow
Email: JFSchau@adrservices.org  
                                                 Posted: November 30, 2016

For the past fifteen years, I have been a strong advocate for mediation. Through some mix of optimism and arrogance, I have maintained the belief that all conflict can and should be resolved through a skillfully-managed mediation process. So it is with some introspection and humility that I admit to reacting so adversely to the recent settlement of the Trump University fraud cases.

In the days since the U.S. election, I have mediated two cases arising out of what might be seen by some as “flirtatious” comments made in the workplace, both by co-workers and both with subsequent terminations of the claimants after allegations of impropriety were made to management. Facing claims for sexual harassment and retaliation by wrongful termination, the owners of each of the companies asserted that they most wanted to avoid setting a precedent that any complaint, whether justified or not, has a significant monetary value if the worker goes on to engage a lawyer and sue the company. Although both cases did settle, there is some small part of me that regrets that in America it is simply too expensive and risky to take this type of case to trial in order to set those precedents, or to even find out who is actually liable and for how much. The settlements were both confidential, so no precedent will be set there either. Unlike the Trump University settlement, which was made public, in the ordinary course of mediation most of the settlements that I negotiate remain strictly confidential.

In mid-November, U.S. District Judge Gonzalo Curiel of San Diego, California, who had been publicly goaded during the Trump campaign as being “unfair and biased” because of his Mexican heritage, urged President-elect Trump to settle his fraud cases before the scheduled November 28 trial (and before his Inauguration). Judge Curiel denied Trump’s motion to continue the trial and urged him to engage in settlement talks with the assistance of another federal judge. The Trump team obliged and ultimately agreed to a reported $25 million settlement of fraud claims in two class actions and a third case brought by the New York state attorney general, without admitting liability.

The problem, in my view, is that by settling Trump is expressly not being held liable and could simply declare that he does not admit liability. I’m quite sure this is unprecedented in our history, and no case law establishes that a President or President-elect who pays damages for fraud is actually guilty of fraud. By settling the lawsuit, he might well argue that he avoided being held “accountable” for his actions in any meaningful way. In fact, by public tweet, he proclaimed that this was but a small fraction of the value of the cases – as though $25 million represented mere nuisance value to the President-elect billionaire.

Perhaps some good that can be seen from our corner of the universe is that this settlement may promote the use of mediation in high profile, high stakes matters. If the plaintiffs in these cases can get a $25 million settlement from a defendant who publicly vowed “never to settle” and proclaimed that there was no basis for their claims, your ever optimistic blogger certainly can hope for more robust use of mediation to resolve lesser claims throughout the land.

© 2016 Jan Schau


Please note that each IAM Blog posting represents the view of its individual author, but not necessarily others associated with IAM. IAM Blog Editor Keith L. Seat may be contacted at kseat@keithseat.com.


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