Munson: Nothing routine about settlements involving millions of dollars

Senior District Judge Alex R. Munson issued yesterday an order setting a new date for a settlement conference in businessman John K. Baldwin’s $5.6 million federal tax refund lawsuit against the United States.

He also denied the U.S. government’s motion to stay the U.S. District Court for the NMI’s order for a person with full settlement authority to attend the conference.

Munson set the settlement conference on Feb. 29, 2012, at 9am in Coeur d’ Alene, Idaho, at the Northern Division of the U.S. District Court of Idaho. He ordered the parties in the lawsuit to have representatives with full settlement authority attend the conference.

“For [the] United States of America, attendance by a person with authority to recommend any settlement reached by the parties to the Congressional Joint Committee on Taxation shall be deemed to comply with this order,” Munson said.

The U.S. government is objecting that the district court is requiring it to send a fairly high ranking official to attend a “routine settlement conference.”

Munson pointed out, though, that there is nothing routine about settlements involving millions of dollars.

“If this tax refund case were routine-that is, if a more modest amount were in controversy-government regulations would give lower-level officials the authority to settle it and the case would not be in its current posture,” the judge said.

The settlement conference in Baldwin’s lawsuit was originally set for Oct. 17, 2011, in Idaho before Munson.

On Sept. 9, 2011, Munson denied the U.S. government’s emergency motion to excuse the government from the requirement that a person with full settlement authority should attend the settlement conference.

In the Sept. 9 order, Munson said that in 29 years of facilitating settlement negotiations, he has never brought about a settlement agreement without having present on each side a person with full authority to reflect such an agreement.

Under the requirement, the Principal Deputy Assistant Attorney General for the Tax Division in consultation with the Congressional Joint Committee on Taxation has final settlement authority for a refund of this amount.

The U.S. government twice asked the district court to reconsider. The federal court denied both motions. This prompted the U.S. government to bring the settlement authority issue to the U.S. Court of Appeals for the Ninth Circuit.

The U.S. government, through deputy assistant attorney general Tamara W. Ashford, filed an emergency petition asking the Ninth Circuit to order the district court to vacate its orders.

U.S. Department of Justice Tax Division’s trial attorney Lauren M. Castaldi asked the district court to allow him and trial counsel for the U.S. Jeremy Hendon to personally appear at the settlement conference, and Deborah Meland, the chief of the Tax Division’s Office of Review, will be available by phone.

The appeal prompted Munson on Oct. 7, 2011, to cancel the scheduled Oct. 17 settlement conference.

The Ninth Circuit has yet to rule on the U.S. government’s petition. The lawsuit is set for trial on Saipan on May 14, 2012.

In his Thursday’s order setting a new date for the settlement conference, Munson said the postponement of the Oct. 17 conference relieved the U.S. government’s motion of its emergency nature.

Now that the settlement conference is back on calendar, and the requirement of attendance by representatives with full settlement authority has not abated, the motion to stay is ripe for decision.

Munson reiterated his previous position that in his experience, settlement conferences lead to settlement agreements only when each party is represented by a person with full settlement authority.

“To have a settlement conference without that requirement in place is pointless. The need is especially great when the stakes are as high as they are in this case, where millions of dollars in tax concessions are on the table,” Munson said.

The judge said the litigation costs to both parties if negotiations fail and the matter proceeds to trial will be substantial.

“The settlement conference must be given every opportunity to succeed, and that means face-to-face negotiation with persons empowered to effect a settlement,” Munson said.

The judge said he has considered the particular circumstances of this case and rejects the U.S. government’s suggestion that it would be enough if an official with the authority to make a recommendation is available only by telephone.

“If the claim is large enough to require the official’s signoff, it is large enough to require the official’s presence at the settlement conference,” Munson stressed.