The Caesars Judge is Right on Stay Termination

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Caesars (photo by Marilyn Swanson)

Judge Goldbar is right.

Bankruptcy Judge A. Benjamin Goldbar, of Chicago, received lots of grief in recent days over the resignation of the Caesars mediator.  The resignation letter focuses on “atypical” language on mediation confidentiality that Judge Goldbar used to support his order terminating a stay of legal action against the Caesars parent company.  Here’s an article on the resignation.

But subsequent developments show that Judge Goldbar was right on the merits of the stay termination.

Judge Goldbar found the stay’s continuing existence to be an impediment to settlement–indicating that the stay’s termination would apply pressure toward achieving a settlement.

So, he terminated the stay (and used the offending mediation confidentiality language as part of the rationale for doing so).  Judge Goldbar is now proven to be correct that stay termination would improve settlement possibilities:

–The Wall Street Journal and other news outlets are reporting that Caesars Entertainment Corp. “has reached a deal to resolve the long-running battle over the $18 billion restructuring of the casino company’s main operating unit.”

Judge Goldbar will, undoubtedly, tip-toe around any future discussions or actions relating to mediation.

On the other hand . . .

Still . . . the Caesars mediator deserves kudos for taking a principled stand on an important mediation issue.

The mediation confidentiality flap in Chicago would be less significant, but for the fact that the Bankruptcy Court there recently revoked its local rules on mediation.

–Such revocation took the Bankruptcy Court in Chicago on an excursion back into the jurisprudence of the pre-1980s — before mediation came into existence as a common dispute resolution tool.

–Hopefully, one day, that Court will make its way back into the modern age by re-establishing some mediation rules that include confidentiality requirements.

 

“Mediation Desert” = A Court Without Mediation Rules

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Mediation Desert (photo by Justin Swanson)

By: Donald L. Swanson

“Food deserts” are “places where many residents don’t have access to a full-service grocery store within a mile of home in urban areas or 10 miles in rural ones.”

–Wall Street Journal, 7/12/2015

“Mediation deserts” are courts that don’t (or won’t) provide access, by rule or statute, to mediation as a dispute resolution tool.

It’s hard to imagine that a mediation desert can exist these days in any court, anywhere, in the United States: state court, county court, city court, Federal court – any court.

But to have multiple mediation deserts within the Federal court system is astonishing!

–The last numbers I’ve seen indicate that nearly 50% of all bankruptcy courts operate without a local mediation rule.  Here’s hoping this percentage is grossly incorrect!

And, of course, there is no express provision for mediation in the Federal Rules of Bankruptcy Procedure (other than Rule 8027 regarding appeals).

And, as I’ve attempted to show in a number of articles, bankruptcy courts are probably the only mediation deserts in the entire dispute-resolution system of the entire Federal government.

And, a cursory review of other courts throughout the state and local governments reveals a heavy use and reliance on mediation as a dispute resolution tool.

–One of the reasons for the prominence of mediation and other alternative dispute resolution tools is the burden of heavy caseloads.  Although bankruptcy court caseloads are, currently, on the light end, history shows that such reprieves are short-lived and are bound to evaporate.

And it’s not like the task of adopting a local rule is difficult.  It’s, actually, a relatively simple process.  Heck, there are even Model Mediation Rules available through the American Bankruptcy Institute.

We need to turn these mediation deserts called bankruptcy courts into mediation oases.  We can do so by:

  1. Adding an explicit mediation provision to the Federal Rules of Bankruptcy Procedure, as suggested herehere and here; and
  2. Adopting local mediation rules in each of the mediation desert bankruptcy courts, as suggested here and here.

 

Mediation Confidentiality is the Source of Judicial Bewilderment

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Chicago (photo by Grant Swanson)

   By: Donald L. Swanson

“I found the [Mediator’s resignation] letter to be a little bit bewildering.”            

–A. Benjamin Goldbar, Chicago Bankruptcy Judge, September 21, 2016.

Judge Goldbar is, obviously, an excellent jurist with excellent judgment.
But everyone makes mistakes. And Judge Goldbar’s flap with the Caesars mediator over mediation confidentiality is one of those mistakes.

Mediation Confidentiality

Mediation confidentiality is a nearly-sacred precept today. There is a uniformity of belief, worldwide, that mediation effectiveness is dependent upon a cloak of confidentiality and that privacy of mediation information is a supreme value.

Judge Goldbar’s mistake is his failure to recognize this confidentiality precept, both in his initial ruling and in his follow-up “bewildering” explanation.

Mediation is Well-Used

Mediation is a well-used dispute resolution tool, these days, throughout the U.S.and around the world. It is commonly used for resolving conflicts at all levels–from workplace disputes to lawsuit disputes to international disputes.

The entire U.S. judicial system, both state and Federal, has a heavy mediation utilization. The only courts where mediation is yet to fully-take-hold, it seems, are many of the U.S. bankruptcy courts. The Bankruptcy Court in Chicago is today’s most-notable and adamant mediation-holdout.

Follow-Up Explanations

Judge Goldbar’s bewilderment is explained by the total absence, in his explanations, of mediation confidentiality concerns.

Here are his follow-up explanatins–note the absence of any reference to mediation-confidentiality:

–“This was a private mediation.”

–“When the debtor moved to have a mediator appointed, I made it very clear I had no ability to do that.”

–“As I recall, I told you that you’ve always had the ability to mediate, and you could do so or not as you saw fit, but that was not something that I should be getting involved with.”

–“So [I’m] not a supervising court.”

–“They weren’t standard reports. There was no requirement that the mediator ever report to the court in any fashion because, again, this was not a court-supervised mediation. This was purely private. These reports were filed for reasons I can’t explain.”

–“Compare the process with the examiner. The examiner was court-appointed. The examiner made reports to the court because he was ordered to. Nothing required the mediator here to do anything. Nothing from the court in any event.”

[Editorial comment: I understand the Judge’s point on examiner reporting. But an examiner is a bad analogy here because expectations of confidentiality, between an examiner and a mediator, are worlds apart.]

–The injunction motion, not the mediator’s report, “was the focus of my observations.”

–The mediator’s report “didn’t include any details,” so the mediator’s “mere conclusion was not entitled to very much weight.”

A Telling Remark

But the most telling comment from Judge Goldbar in his bewilderment explanation is this:

–“I don’t recall expressing any views on mediation, typical or atypical. As it happens, I have almost no views on mediation.”

Conclusion

Perhaps Judge Goldbar could educate himself on mediation, as a dispute resolution tool, and thereby avoid future mistakes on the subject.

Bankruptcy Mediation Rules are Lagging Behind All Other Federal Courts and Agencies (Part 3)

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Lagging Behind

By: Donald L. Swanson

Bankruptcy courts have drawn the short mediation straw and are lagging behind:

–they don’t have a Federal rule of procedure for mediation.

Every other court in the bankruptcy-related court system has such a rule:

–The U.S. district courts have Fed.R.Civ.P. 16(c)(2) & 53 [as discussed in this article].

–The U.S. courts of appeals have Fed.R.App.P. 33 [as discussed in this article].

Appeals to BAP and District Court

Moreover, the U.S. district courts (in their bankruptcy-appeal capacity) and the bankruptcy appellate panels also have a Federal rule of procedure for mediation.  And this Federal rule is contained in the Federal Rules of Bankruptcy Procedure, no less!

Part VIII of the Federal Rules of Bankruptcy Procedure govern appeals from bankruptcy court rulings.  Fed.R.Bankr.P. 8027 contains this explicit provision for mediation of bankruptcy disputes on appeal:

“Rule 8027. Notice of a Mediation Procedure

If the district court or BAP has a mediation procedure applicable to bankruptcy appeals, the clerk must notify the parties promptly after docketing the appeal of:

(a) the requirements of the mediation procedure; and

(b) any effect the mediation procedure has on the time to file briefs.”

Here are some observations about this Fed.R.Bankr.P. 8027:

–This Rule 8027 is relatively new: adopted in 2014.

–Every U.S. district court must have a “mediation procedure,” because every district court  is subject to 28 U.S.C. § 651(b), which provides: “Each United States district court shall authorize, by local rule . . . , the use of alternative dispute resolution processes in all civil actions.”

–Each bankruptcy appellate panel has a “mediation procedure,” because it has either, (i) adopted a Local Rule 8027 on mediation, or (ii) adopted Fed.R.App.P. 33 and the circuit court’s local mediation rules by reference.

So . . . why are the bankruptcy courts left out and lagging behind?

And it’s even worse!

The bankruptcy courts are about the only dispute-resolving organ of the entire Federal government without a Federal mediation rule:

–The U.S. Tax Court has a Federal mediation rule [Rule 124(b), Tax Court Rules of Practice and Procedure].

–The U.S. Court of Claims has a Federal mediation rule [Appendix H, Rules of the United States Court of Federal Claims].

–The U.S. Court of International Trade has a Federal rule on mediation [Rule 16.1 USCIT Rules, Forms, Guidelines and Administrative Orders].

–And the entire Federal system is subject to a broad policy favoring mediation and other alternative dispute resolution processes.  Such policy is established by a variety of Federal mediation statutes and by an extensive range of rules and regulations throughout the entire Federal system.

Question and Answer

So . . . , again, why are the bankruptcy courts the only ones omitted from all of this focus on mediation?

Here’s the answer:  It’s an oversight.  The omission is wrong; and it needs to change.  A Federal bankruptcy rule on mediation needs to be adopted at once.

 

10 Practical Lessons for Cities Facing Bankruptcy – From a New Ninth Circuit Ruling

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Pointing the way

By: Donald L. Swanson

The Ninth Circuit Court of Appeals, in a new ruling, helps point-the-way for cities facing the complexities of Chapter 9 bankruptcy.

The Facts

On March 28, 2003, three citizens of Vallejo, California, have a violent encounter with two of Vallejo’s police officers.  A lawsuit ensues.

Then, the City of Vallejo files Chapter 9 bankruptcy and achieves a confirmed bankruptcy plan.

Then, the lawsuit results in a judgement for one of the plaintiffs.

The New Ninth Circuit Ruling

Legal wranglings about the judgment result in a September 8, 2016, ruling by the Ninth Circuit Court of Appeals in a case captioned Deocampo v. Potts (Case No. 14-16192).

The Ninth Circuit’s Deocampo v. Potts ruling addresses a narrow issue.  Yet, practical lessons for cities facing Chapter 9 bankruptcy can be gleaned from it.

10 Practical Lessons

Here are ten of such practical lessons.

Lesson # 1.  Mediation is an essential tool for resolving Chapter 9 cases.  As in other Chapter 9 cases, mediation plays a central role in achieving a confirmed plan in the City of Vallejo’s bankruptcy.

Lesson # 2.  There is no such thing as an “involuntary” Chapter 9 bankruptcy.  A Chapter 9 case can begin only by the municipality filing a voluntarily Chapter 9 petition, with authorization from the state and with a desire “to effect a plan to adjust” its debts (11 U.S.C. §§ 109(c)(4), 301 & 921).

Lesson # 3.  A city in bankruptcy, unlike a business debtor, cannot resolve its financial problems by liquidating its assets and terminating operations.  A city must continue operating and meeting the needs of its citizens.

Lesson # 4.  A city in bankruptcy can confirm it’s Chapter 9 plan without the consent of its creditors (11 U.S.C. §§ 109(c)(5) & 943).

Lesson # 5.  The primary plan confirmation standard in Chapter 9 is this: the plan must be, (i) “in the best interests of creditors,” and (ii) “feasible” (11 U.S.C. § 943(b)(7)).  This standard provides neither precision nor clarity.   The Ninth Circuit explains such imprecision and lack of clarity like this in Deocampo v. Potts:

“Our case law construing Chapter 9 is scant, and this appeal confronts us with a novel legal issue, of the kind that often surfaces when changing social and economic conditions awaken dormant statutes. But Chapter 9 has awakened, and we do not presume further disputes over its interpretive and practical complexities will remain long at rest.”

Lesson # 6.  When a Chapter 9 plan is confirmed, the City is discharged from debts that aren’t “excepted from discharge”  by the confirmed plan (11 U.S.C. § 944(b), (c)(1)).

Lesson # 7.  At least two large municipalities, Detroit and San Bernardino, have expressly discharged  the claims of citizens against their police officers for misconduct.

Lesson # 8.  If a city wants to make an attempt at discharging its police officers from misconduct liability, the city must make explicit provision for such a discharge in its Chapter 9 plan.

Lesson# 9.  An ambiguity in a bankruptcy plan drafted by the city is construed against the city.

Lesson # 10.  A city’s commitment, made after confirmation of its Chapter 9 plan, to defend and indemnify a police officer is unimpaired by the terms of its confirmed plan.

Conclusion.

Thanks to the Ninth Circuit for pointing-the-way on various complexities of the newly-awakened Chapter 9 statutes.

Links to prior articles on this Chapter 9 city-bankruptcy subject are:

Part 1:  Police Abuse Claims and Municipal Bankruptcy — A New Report

Part 2:  Will Police Misconduct Liability Allow a City to File Bankruptcy? — “Insolvent” Eligibility Standard

Part 3:  Can a City File Bankruptcy to Deal With Police Misconduct Liability? — “Good Faith” Requirement

 

U.S. Circuit Courts of Appeals: Above-and-Beyond Examples of How a Federal Mediation Rule Works (Part 2)

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Above and Beyond

By: Donald L. Swanson

How can this be?!

Federal rules of procedure contain mediation provisions for every bankruptcy-related court, except for the bankruptcy courts themselves.

Why this discrimination against bankruptcy courts??!!

[By bankruptcy-related courts, I’m referring to:

–the bankruptcy courts themselves;

–the U.S. district courts, in both their trial and bankruptcy-appeal capacities;

–the bankruptcy appellate panels; and

–the U.S. courts of appeals.]

Federal Rule of Appellate Procedure 33

The U.S. circuit courts of appeals are governed by Federal Rules of Appellate Procedure.  Fed.R.App.P. 33 provides, in part, as follows (emphasis added):

The court may direct the attorneys—and, when appropriate, the parties—to participate in one or more conferences to address any matter that may aid in disposing of the proceedings, including simplifying the issues and discussing settlement. . . . Before a settlement conference, the attorneys must consult with their clients and obtain as much authority as feasible to settle the case.

Local Rules

In response to this Rule 33, the circuit courts have each adopted a local Rule 33 on settlement discussions and conferences (i.e., mediation).

Mandatory Mediation

Surprisingly [to me, at least], a large majority of the U.S. courts of appeals have gone above-and-beyond by adopting local rules for mandatory mediation!

The Sixth Circuit Court of Appeals, for example, has its own local mediation rules and processes for mandatory mediation.  A blog article describes the Sixth Circuit’s mandatory mediation program like this:

–“The four mediation attorneys in the Sixth Circuit (and their staff) select about 1000 appeals each year for mediation.”

–“Cases are usually chosen at random”:

“[T]he mediators moved to random selection when they found that cases that appeared to be amenable to mediation were not actually more likely to settle than any other case.”

–“The Sixth Circuit’s mediation program has an impressive success rate”:

–“[T]he program settles about 40% of appeals that participate in mediation.”

–“In 2011, the . . . 400 cases resolved by the circuit mediators . . . represent about a third of all of the civil cases resolved on the merits.”

Overall Success

An article examining mediation programs operating in the U.S. courts of appeals, under Fed.R.App.P. 33, reaches this conclusion (emphasis added):

“The mediation programs established in the vast majority of the circuit courts of appeals work well to reduce the caseload burdens on their respective courts and to resolve litigants’ cases.”

–“This appears to be due in large measure to the mandatory aspects of those programs.”

Conclusion

So . . . why should all the courts in the bankruptcy-related system have a Federal rule on mediation, except for the bankruptcy courts?  This is wrong!!

Note:

  1. The Federal Rules of Civil Procedure provide for mediation in U.S. district court trial proceedings, as noted in this article [the first article of this three-part series].
  2. The third article in this three-part series will focus on how the U.S. district courts (in their appellate capacity) and the bankruptcy appellate panels operate under federal rules of procedure on mediation; as do other courts and agencies throughout the entire Federal system.

 

Can a City File Bankruptcy to Deal With Police Misconduct Liability? — “Good Faith” Requirement (Part 3 of 3)

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11 U.S.C. Sec. 921(c) — “Good Faith” Requirement for Municipal Debtors

By Donald L. Swanson

“[I]t is unlikely that a city could file for bankruptcy solely for the purpose of shedding liability associated with unconstitutional police practices.”

–Conclusion in a Report, dated 8/21/2016 and titled: “Who Pays for Police Misconduct in Bankruptcy Cities?

This conclusion is undoubtedly accurate when a City is capable of paying the judgment. In such a context, a City’s bankruptcy filing would violate the “good faith” requirement of 11 U.S.C. § 921(c).

But this conclusion seems unlikely to prevail in the context of an exceedingly-large judgment amount against a City that can’t be paid.

Hypothetical

Imagine this hypothetical:

A City and its police officers are sued by a group of plaintiffs for violating the plaintiffs’ civil rights.
Jury verdicts are for many-millions of dollars—amounts that are multiple times the City’s annual budget.
Plaintiffs start executing on the judgements: garnishing the City’s checking accounts, attaching and selling the City’s office furniture, computers, police cars and fire trucks, etc.
The City has been trying for many months to pay the judgments:  seeking loans, seeking buyers for non-essential assets, raising taxes — but nothing works. The City, simply, cannot find enough money to pay the judgments.
So . . . in addition to the judgments remaining unpaid, the City is now unable to provide the basic services its citizens require.

In this hypothetical, it’s difficult to imagine how any court could find the City’s bankruptcy filing to lack “good faith.”

“Good Faith” in Chapter 11

The “good faith” standard is well-worn in the Chapter 11 context. Like Chapter 9, a Chapter 11 case can be dismissed because of the debtor’s lack of “good faith.”

In re Mense and Cottonsmith, LLC

For illustration and analogy, the 2014 Chapter 11 case of In re Mense and Cottonsmith, LLC,  seems helpful. In Mense and Cottonsmith, a business and its owner filed Chapter 11 bankruptcies to stop execution on a $3 million judgment. The debtors had appealed the judgment but couldn’t post a supersedeas bond to stop collection efforts during appeal.

The Bankruptcy Court’s discussion of “good faith” in Mense and Cottonsmith includes the following:

The “Good Faith” Standard:

–“The majority of bankruptcy courts tackling this issue have held that the filing of a chapter 11 petition as a litigation tactic to circumvent the requirement of an appeal bond in state court litigation is in bad faith.”

–“When a debtor files chapter 11 to dodge the requirement for an appeal bond, a court’s determination of good faith typically hinges on the following factors:

1. Whether the debtor is a viable business which would suffer severe disruption if enforcement of the judgment was not stayed; and the chapter 11 petition was filed to preserve its status as an ongoing concern and to protect its employees and creditors;
2. Whether the debtor had financial problems on the petition date, other than the adverse judgment;
3. Whether the debtor has relatively few unsecured creditors, other than the holder of the adverse judgment;
4. Whether the debtor has sufficient assets to post a bond to stay the judgment pending appeal;
5. Whether the debtor acted in good faith to exhaust all efforts to obtain a bond to stay the judgment pending appeal;
6. Whether the debtor intends to pursue an effective reorganization within a reasonable period of time, or whether the debtor is unwilling or unable to propose a meaningful plan until the conclusion of the litigation; and
7. Whether assets of the estate are being diminished by the combined ongoing expenses of the debtor, the chapter 11 proceedings, and prosecution of the appeal.”

Applying the “Good Faith” Standard:

The Court rules that neither Mense nor Commonsmith, LLC, filed bankruptcy in “good faith” and dismisses their bankruptcy cases. The Mense and Cottonsmith court explains its dismissal decision like this:

“Cottonsmith is not an operating business . . . has no employees, no cash flow, and no sources of income . . . no reasonable prospects for the conduct of business in the future . . . only 1 unsecured creditor besides Kayne . . . [T]he balance in the [bank] account has decreased from $1,400,000 to $1,118,082.70 . . . Cottonsmith’s bankruptcy was filed for the purpose of preventing Kayne . . . from seizing Cottonsmith’s cash which Mense is now using to pay his personal expenses and to fund the appeal.

“Mense does not operate [or manage] a business . . . He did not list any gross receipts or business expenses . . . and he admits that he has no employees. Mense invests in real estate projects and businesses while collecting social security. . . . It is undisputed that Mense is solvent. His schedules reveal a net worth in excess of $13.4 million. Other than Kayne’s judgment, Mense had no financial problems.

In re Ford

The 1987 case of In re Ford  provides a helpful contrast. Richard Ford files Chapter 11 bankruptcy after a $165,000 judgment is entered against him. He also files an appeal of the judgment but can’t post a supersedeas bond.

The Ford Court concludes that “the debtor did not lack good faith when he filed this petition under Chapter 11.” And the Court provides the following explanations:

–“[T]he debtor has several tracts of land which can be liquidated over a period of time to pay the Canton judgment should such payment become necessary. . . . the plan filed by the debtor proposes to pay the Canton judgment in full in an orderly manner.

–“This Court is impressed that the debtor has filed a Plan of Reorganization . . . offering to pay his creditors in full with an orderly liquidation of assets. . . . Ford’s assets are not immediately liquid, but liquidation of a portion of these assets is possible given a reasonable period of time.”

–“There is little to be gained by allowing a forced liquidation of the debtor’s one-third undivided interest in real property which this Court believes would result in chaotic dismemberment of the debtor’s assets with resulting damage to the debtor, his co-owners and creditors alike.”

–”Ford did not and does not now have sufficient cash presently available to him to pay the judgment or to post a supersedeas bond. . . . The Chapter 11 petition was not filed solely to avoid posting a supersedeas bond, but only to give the debtor time to liquidate his assets.”

Editorial Comments:

In the hypothetical above, a City might file a Chapter 9 bankruptcy Petition in “good faith.” Or it might not. The “good faith” of a City’s filing depends on all the circumstances.

I suggest that a City, whose circumstances are much like those of the In re Ford case, is likely to stay in bankruptcy. However, the closer the facts of a city’s bankruptcy get to those of Mense and Cottonsmith, the likelihood of a dismissal for lack of “good faith” becomes greater.

Note:  The first article in this series reviews the new study report linked above and explains the mediation connection.  The second article in this series considers the “insolvency” element for Chapter 9 eligibility.  A fourth article is “10 Practical Lessons for Cities Facing Bankruptcy.”

Chicago Bankruptcy Court v. Mediation: Making News . . . Again!

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Chicago    (photo by Grant Swanson)

By Donald L. Swanson

Back in February, 2016, we learn that the Bankruptcy Court in Chicago has revoked its local rules on mediation, while still encouraging parties to mediate their disputes.

This development seems a bit . . . well . . . bizarre. After all, for example, such an approach appears to violate Federal statutes and raises concerns over mediation confidentiality.

The latest news-heavy mediation item in this Chicago Court is the mediator’s resignation (dated September 9, 2016) in the Caesars Entertainment bankruptcy case (Doc. 4885, in Case No. 15-01145). A photo of the mediator’s resignation letter is here.

“Atypical” views on mediation confidentiality . . .

This Chicago Court makes statements in a Caesars bankruptcy hearing that the resigning mediator describes as:

–“atypical views of a mediation process” that would require the mediator to “breach the confidentiality of the mediation.”

Here are some of those judicial statements that ignore or disregard mediation confidentiality concerns:

“The debtors [point to] the mediator’s assertion in a written statement that the parties have made ‘material progress.’ Again, however, the mediator didn’t testify, so there was no opportunity to probe that assertion. His written statement seems to assume that progress consists primarily of frequent meetings and discussions, since that takes up the majority of his statement. . . . but meeting and discussing alone, without more, isn’t progress. His statement fails to describe the discussions themselves, the dates or locations when they took place, any proposals exchanged, or any distance remaining between the parties.”

[Quotation taken from page 10 of the “Transcript of Proceedings” dated August 26, 2016.]

The mediator takes umbrage at such mediation-confidentiality statements and responds, in his resignation letter, with this:

“as I read the recent hearing transcripts and the Court’s August 26 bench ruling, I was struck by the extent my Mediation Statement regarding the progress of the mediation – a standard report to a supervising Court – was the focus of the hearing and the Court’s observations. Apparently the Court did not find my progress report helpful because I didn’t breach the confidentiality of the mediation and testify in open court or describe the discussions and proposals exchanged, and detail the status of the differences among the parties.”

[Quotation taken from the mediator’s resignation letter dated September 9, 2016.]

Moreover, the mediator takes pains in his resignation letter to note that his mediation-confidentiality views are based on experience in complex Chapter 11 cases as both a bankruptcy judge and a mediator – he’s no neophyte:

“in my experience presiding over many complex Chapter 11 cases and mediating high profile Chapter 11 matters to successful conclusions, I believe . . . “

On the other hand . . .

There’s gotta’ be some empathy for the Judge on this:

–The Judge is making an important ruling; but he makes a mistake in using the mediation-related words quoted above as part of the rationale for his ruling.

The important ruling is a denial of the request by Caesars for an extension of the soon-to-expire injunction that had “halted civil actions” against its parent company.  The mediation-confidentiality words are only a portion of the Judge’s ruling:

–The ruling is made orally from-the-bench, and the mediation-confidentiality words are contained in 2 transcript pages of a ruling that covers 20 transcript pages.

–The mediation-confidentiality words are one of multiple grounds for denying the injunction.

The essence of the Court’s rationale in denying the extension is this: the injunction is, actually, an impediment to settlement efforts. The Court explains the impediment like this:

“The pace of discussions does not show that the current injunction is helping or that its expiration gives the parties much cause for concern. Given this history, in fact, it appears that it isn’t injunctive relief that promotes settlement here but rather its absence. The deadlines in the underlying guaranty litigation are what prompt the parties to act.”

This explanation appears to be well-founded and astute. So, it’s unfortunate that the Judge chose to use the mediation-confidentiality rationale to support his ruling.

Editorial Comments:

This Bankruptcy Judge would probably [or should] acknowledge, in retrospect, that his mediation-confidentiality words quoted above are a mistake.

If that happened, the mediator would probably retract his resignation. Existing settlement discussions could then go forward under the additional pressure provided by the injunction’s expiration.

The bigger problem, however, is that this Bankruptcy Court in Chicago is already on-record as antagonistic to mediation:

E.g., revocation of its local mediation rules is perceived as a highly-demonstrative show of contempt for that process; and

–The Judge’s above-quoted words on mediation-confidentiality are precisely-consistent with this perception of antagonism and contempt.

It’s all unfortunate.

Transcript:

Here is a link to the transcript of the Court hearing.  Mediation-related comments are on pages 9 and 10.

Follow-Up Article:

The Judge’s follow-up response to the mediator’s resignation is discussed here.

Mediator in Caesars Entertainment Resigns — With an Interesting Explanation

By Donald L. Swanson

Here is a photo of the resignation letter from the mediator in the Caesars Entertainment bankruptcy proceeding.

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Mediator’s Resignation Letter in Caesars Bankruptcy [with highlighting]
Wow!!  That’s an interesting take.

And kudos to the mediator.  It’s always refreshing to see a principled stance.

This Caesars case is pending in the Bankruptcy Court for the Northern District of Illinois, located in Chicago.

Here’s a link to a follow-up article, which includes the Judge’s comments.

BANKRUPTCY MEDIATION TRAINING COURSE – DECEMBER 2016

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9/11 Memorial

By Donald L. Swanson

The American Bankruptcy Institute and St. John’s University School of Law do an annual forty-hour [yes, that’s 40-hour] “Bankruptcy Mediation Training” course.  The next course is coming soon — it’s scheduled for December 11 – 15, 2016.

I took this course two years ago – and loved it!  Here are some reasons why.

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Course Site

First of all, this is not a vacation.  These are long, hard days of study and work and thought, complete with working-lunches, no less!  But being from Omaha, I get up early and walk around lower Manhattan to see the City each morning before showing up – on time – for the course.

The course turns out to be what I expected:  high-quality instruction and training from highly-skilled experts, with students who’ve already excelled in their bankruptcy professions.

What I didn’t expect is how high the expertise would actually be.  To illustrate, here’s an opening part of an article I wrote about a regional mediation hubs proposal:

The proposal comes about like this.  I walk into a lunch-time session of the ABI’s Mediation training course at St. John’s University, sit by a distinguished-looking gentleman and start chatting—as if he is one of my peers.  Turns out, he’s the lunch-time speaker.  He is the Bankruptcy Judge for many of the mega-cases we’ve all read and heard about.  [Oops.  Didn’t know that…sit up straighter in my chair…try to adopt a more dignified air…].  During the presentation, he talks about difficulties in mediating cases on the East Coast for far-away defendants.  “Like those from Nebraska,” he says with a nod to me [a nice and much-appreciated touch].  And he expresses openness to suggestions for addressing those difficulties.  Unfortunately, I have no suggestion at the time, other than allowing defendants to participate in mediation sessions by Skype.  That’s “not acceptable,” the Judge says.

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Little Italy

Another surprise is the broad application of the training.  Much of my bankruptcy experience is as counsel for committees and trustees.  These roles are often mediation-ish: working with multiple parties to resolve disputes.  Many times during the course, I find myself muttering, “Wish I’d learned this two decades ago.”

A third surprise is the burst of creativity among students in the course.  For example, I had been writing for publication (to a limited extent) throughout my career.  But it was from this course that I decided to redouble such efforts – and, specifically, to write about bankruptcy mediation.  Such efforts led to starting this blog:  https://mediatbankry.com/ .

And back to meeting expectations:  I expected to develop new relationships with great people that would continue beyond the course.  Expectation is accomplished.

And a huge “thank you” to Prof. Elayne Greenberg of St. John’s for making all this happen!

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Coffee Shop