Detroit Bankruptcy’s “Proactive Mediators”: A New Mediation Model (Updated 4/1/16 with Responses)

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Definition is from vocabulary.com

By Donald L. Swanson

“Mediator” and “proactive” are, usually, oxymoronic terms. A mediator’s role is usually passive: to help parties deal with disputes they bring to the mediator.

Detroit bankruptcy mediation rejects mediator passivity.

One of the early—and monumental—judicial actions in the Detroit bankruptcy is this: the referral of a sweeping array of issues to mediation, along with a grant of initiating authority to the mediator team.

Bankruptcy Judge Steven Rhodes later describes the uniqueness and breadth of such referral and grant of authority this way:

“Never before have bankruptcy mediators proactively sought to marshal the community’s financial resources to solve a community problem.”

Such referral and grant include the appointment of a Judicial Mediator (Chief Judge Gerald Rosen of the U.S. District Court for Eastern Michigan).

The Judicial Mediator immediately demonstrates his mediation authority with his first act: the entry of an “Order to Certain Parties to Appear for First Mediation Session” (Doc. 334). Such Order identifies twelve parties and directs them like this:

“It is hereby ordered the above-named parties shall appear for an initial mediation session before [the Judicial Mediator] in his Courtroom [address] on [date/time].

In further demonstration of his mediator authority, the Judicial Mediator appoints a team of five deputy mediators and delegates broad authority to them.

The team of proactive mediators then, on their own initiative, identify and categorize the disputes to be mediated and designate the mediator-in-charge of each category. Deputy Mediator Eugene Driker describes such proactive process like this:

–The Judicial Mediator “orchestrates” the process and demonstrates, throughout the process, “an aptitude and a real genius” for handling such responsibilities.

[Editorial note: Such “aptitude” and “genius” assessments are not surprising, because orchestrating dispute resolutions is precisely what Judge Rosen has been doing since his appointment to the Federal Bench in 1990 and since his elevation to Chief Judge on January 1, 2009.]

–Mediator team members “talk among themselves” and place disputes into various categories, and each category is then allocated to a Deputy Mediator with experience in that category who “can add value” to it. For example:

–Pension plan disputes are allocated to Mr. Driker because actuarial issues are at the heart of the disputes, Mr. Driker holds a Bachelor of Science Degree in Mathematics, and Mr. Driker has many professional experiences with actuarial issues and disputes.

–Financial creditor disputes are allocated to Judge Elizabeth Perris of the Oregon Bankruptcy Court because she previously served as judicial mediator in the municipal bankruptcies of Vallejo, Stockton and Mammoth Lakes, California, and is widely recognized for her mediation skills.

–Each Deputy Mediator then contacts representatives of the parties involved in his/her category and makes arrangements for an initial mediation session; thereafter, each Deputy Mediator determines, initiates and administers each next-step in the mediation process.

The results ultimately achieved in the Detroit bankruptcy are attributed (by Bankruptcy Judge Steven Rhodes in his plan confirmation opinion—Doc. 8257) to the proactive mediators.

Judge Rhodes begins the attribution with “deeply felt thanks” to the Judicial Mediator and “to each of the mediators” on the team. He adds that such words “cannot begin to express the depth of gratitude” that he and all “parties and attorneys in this case” hold.

Judge Rhodes cites “the work, the time, the creativity, the commitment, the nights, the weekends, the holidays” that the mediators gave.

Judge Rhodes then adds that settlements assembled by the proactive mediator team “are extraordinary and unprecedented.” These settlements happened, he says, because the mediator team “knew that their work was not simply about resolving a bankruptcy case, it was about fixing a broken city.”

Judge Rhodes then asks, rhetorically, “Where would this case be” without the mediator team?

Judge Rhodes concludes that, (i) “the smartest thing I did in this case was to ask Judge Rosen” to be the Judicial Mediator, and (ii) the smartest thing Judge Rosen did “was to assemble” this mediator team.

I’d add that Judge Rhodes’ decision to create a “proactive mediator” team to handle a sweeping array of disputes is pretty-darn-smart too.

Footnote: This is the third in a series of five articles about the Detroit mediation process, based on interviews with Eugene Driker, a Deputy Mediator in the Detroit Bankruptcy.

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RESPONSES RECEIVED — as of 4/1/16 at 1:43 p.m. (central)

“Will the Detroit mediation model work in other cases?”  Yes, of course, in the right set of circumstances.  Settlements were reached and the outcome was successful.  But calling the delegation of bankruptcy court  authority to the Chief Judge of the District Court and his deputies a “mediation model” may be less than accurate.  Mediation, as a process does not entail a delegation of judicial authority.  What occurred in Detroit was extraordinary. Yet one may view it as an enhanced version of the involuntary lateral dispositions employed by many courts across the country.  This form of judicial resolution is favored by some judges and some lawyers because negotiations will take place under the direction of another judge.  It is also cheap and quick.  But often parties do not want a directed result.  They may wish to have their negotiations facilitated by a someone who is not in the shadow of the court.  Free choice is the key.  Even parties who are ordered into mediation should be able to choose their own mediator from a list of qualified candidates including judges, retired judges and other skilled professionals.”

Louis H. Kornreich, Of Counsel Attorney, Bernstein Shur

 

 

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