“Don’t Trust your Soul to no Backwoods Southern Lawyer🎶” — or Your Business to the Bankruptcy Court in Chicago

Bankruptcy Court in Chicago Deletes its Local Mediation Rules

By Donald L. Swanson

Here is my memory from a decade ago in a far-away jurisdiction where I occasionally practiced: the bankruptcy judge’s procedural rules have a backwoods feel.

–The rules are cumbersome.

–The rules are strictly and rigidly enforced.

–The judge’s attitude comes across like this:

You want flexibility to address immediate needs?! –Forget it.

You need innovation . . . imagination . . . creativity?!  –No.

As a practical matter, these backwoods rules undermine, impede and impair reorganization efforts in that court.

In pondering the “What’s he thinking?” question, back then, I invariably reach this conclusion:

“He doesn’t want hard cases filed in his court.”

This conclusion is undoubtedly wrong.  But if it were true: it worked.  Attorneys file cases elsewhere (if we have a choice back then), or don’t file at all, or dismiss cases in frustration.

Recently, the Bankruptcy Court in Chicago takes a procedural step that has a backwoods feel: they “delete” their local court rules on mediation.

What are they thinking?!  Who knows.  But here is what they say:

The mediation rules are deleted “as unnecessary” because,

(1) lawyers don’t use the rules,

2) judges agree to mediate cases for each other, and

(3) each judge can handle mediation “as he or she deems appropriate.”

Say what?!

     –The first time a Bankruptcy Judge in Chicago faces an actual request for proactive mediation, he says he doesn’t have authority to order such a thing — because the mediation rules are deleted.  So much for reasons number (1) and (3) above.

     –What about section 105 of the Bankruptcy Code [which authorizes “any order” to enhance bankruptcy processes]?  The Chicago judge who denies the Caesars mediation motion apparently “deems” the denial of such motion to be “appropriate” [see reason number (3) above], even though his ruling is couched in “no authority” language.

Caesars Entertainment’s request for a proactive mediation order, and it’s denial by the Chicago Bankruptcy Court, occur in a broader context of mediation innovation.  Proactive mediation innovations–and related successes–are occurring throughout the bankruptcy system.

Such successes are particularly notable in achieving confirmed plans of reorganization: see, e.g., the Detroit bankruptcy, the Diocese bankruptcies, and the business cases cited in Caesars’ mediation motion.  So, it’s particularly troubling that the rejected mediation motion focuses on plan confirmation issues.

Another troubling point is this:  the Chicago developments are reminiscent of the backwoods judge described above who holds rigidly to procedural rules and rejects innovative ways.

Why would a bankruptcy court in a major city reject innovations that are succeeding elsewhere?  Who knows.  But if they are saying, “We don’t want hard cases filed in our court,” they are likely to get their wish.  Attorneys who have a choice are likely to file elsewhere.

Come to think of it:  the bankruptcy court in Chicago isn’t known as a filing destination for mega bankruptcy cases.  Such distinction goes to the likes of bankruptcy courts in Delaware and S.D.N.Y. — that use mediation extensively.

Follow Don on Twitter here:  https://twitter.com/mediatbankry


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