This section contains the nature of the case and procedural background.

Three weeks prior to trial, Judge Sweet held a pretrial conference and directed that settlement negotiations be held. The judge recommended that the case be settled between $20,000 and $30,000 and warned the parties that if they settled for a comparable figure after the trial had begun, he would award sanctions against the dilatory party. Smith (D) offered $5,000 on the day before trial, but that was rejected. Kothe's (P) attorney indicated to the judge that his client would settle for $20,000 but requested that that figure not be disclosed to D; the lowest settlement communicated was for $50,000. The case was settled for $20,000 after one day of trial. The district court penalized D alone. D appealed.

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