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Several attorneys familiar with the negotiations said settlement talks had intensified in recent weeks.
A representative for Ms. Sherrod said settlement negotiations were continuing despite Mr. Breitbart's death.
Justice McKeon, who started the approach when handling cases against public hospitals in the Bronx, said settlement became more difficult the longer a case lingered.
A city lawyer said settlement discussions took place over many months in the case, but the two sides were too far apart and could not reach a resolution.
Barbier set out a three-month timetable for the trial, although legal experts in court said settlement talks are continuing.
He repeated American opposition to such building and said "settlement activity must stop" consistent with the Mitchell report, an outline for a return to negotiations.
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Ambassador Meron Reuben of Israel said settlements had to be negotiated directly between the Israelis and the Palestinians.
The agreements are confidential, but people with direct knowledge of the terms said settlements averaged about $500,000.
Mr. Cardozo, speaking generally, said settlements were appropriate in cases where the police had erred and someone was harmed.
But, he said, settlements were just an excuse for Palestinian violence.
Chicago law department officials said settlements before lawsuits have even been filed are not unprecedented.
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