While Freeport resident Paul Kendrick appeals a $14.5 million verdict against him in a complex defamation case, a federal judge held an unusual hearing Friday in which he encouraged the two sides to reach an out-of-court settlement instead.

Kendrick lost at trial in U.S. District Court in Portland last summer, but an appellate court in Boston issued a ruling last month that put the entire case in question by asking whether it ever belonged in federal court at all.

The appellate ruling raised so many new questions that Judge John A. Woodcock Jr., who presided over the trial, ordered all parties in the case to appear before him again on Friday.

Kendrick was accused of defamation after he began a widely broadcast email campaign in January 2011 in which he accused the American founder of an orphanage in Haiti of sexually abusing the boys in his care. Kendrick widened the campaign against the founder, Michael Geilenfeld, to include Hearts with Haiti, the North Carolina charity that raises donations to fund his orphanage.

The Portland jury did not believe the trial testimony by seven former orphans in Haiti about sexual abuse and found that Kendrick was reckless and negligent in making the accusations. It awarded actual damages of $7.5 million to Hearts with Haiti, and $7 million to Geilenfeld.

The 1st U.S. Circuit Court of Appeals is still considering Kendrick’s appeal of the verdict, but it sent the unanswered question of whether federal court was the correct venue back to Woodcock to decide. If Woodcock decides the venue was correct, the appellate court would resume its review of the case.

“If settlement is going to occur in this case, the time is now,” Woodcock said in court Friday. “I’ve never held a hearing like this before.”

Woodcock ordered all the lawyers in the case to appear before him after holding an unsuccessful phone conference with them on Feb. 29.

In the order, he wrote that attorneys for Geilenfeld and Hearts with Haiti were willing to attend a settlement conference but that an attorney for Kendrick’s insurer, Vermont Mutual Insurance Co., refused.

“My thought is once the verdict comes down and the case went on appeal, the case became much harder to resolve. Now this case is back here, the ground under that verdict has been shaken,” said Woodcock, speaking slowly and deliberately as he looked up from notes to each of the lawyers and Kendrick in the courtroom before him.

Woodcock did not reopen the case at Friday’s hearing. Instead, he lectured the people on either side of the case to “take a hard look at themselves” and adjourned without inviting any new arguments.

Woodcock said either his ruling on the venue question or the appellate court’s eventual ruling on the verdict could change the outcome entirely. Kendrick could win on appeal. Geilenfeld and Hearts with Haiti could emerge with their victory intact. Or the federal case could be dismissed, leaving Geilenfeld and Hearts with Haiti with the prospect of trying the case all over again in state court.

“If you choose not to attend a settlement conference, you might live to regret the decision,” Woodcock told attorney John T. Wall III, who represents Vermont Mutual Insurance Co.

After the hearing, Wall said he had no immediate reaction and needed to speak with his client first.

Attorney Russell Pierce, who represents Geilenfeld and Hearts with Haiti, said while he is confident that federal court was the correct venue, he is open to settlement talks.

“I think the judge expressed the same consideration that our side has looked at,” Pierce said.

Kendrick said he might be willing to consider a settlement at some point, but he wants the judge to rule on the question of venue first.

“I want the victims from Haiti to have justice from their case. If that means a new trial, other and new evidence can be presented, including the testimony of seven new witnesses who have brought their allegations before the Haitian authorities,” Kendrick said after the hearing.

Geilenfeld returned to Haiti after the trial, but authorities there have closed his orphanage and brought new child abuse allegations against him based on statements by more former orphans.

Geilenfeld, who did not attend Friday’s hearing, is now living in the United States again, according to his attorneys.