Avoidance defendants from fly-over country believe they get a raw deal in mega-case mediations. An example is In re VeraSun Energy Corporation, et al, Case No. 08-12606 in Delaware. The VeraSun case involves eighteen ethanol production plants located throughout the corn producing areas of the United States. After § 363 sales of Debtors’ assets, 156 transfer avoidance actions are filed and prosecuted to resolution by settlements—not one is actually tried. Of those 156 actions, 106 (68%) are filed against defendants in the following states, none of which is anywhere near Delaware:
25 from Minnesota
17 from Iowa
14 from Nebraska
13 from South Dakota
12 from Illinois
7 from Indiana
5 from North Dakota
5 from Kansas
4 from Missouri
4 from Michigan
4 from Wisconsin
Imagine the total cost of sending all defendants in the 156 VeraSun actions, with attorneys, to Delaware for mediations. It has to be a staggering number. And the individual cost for many of the defendants must be prohibitive, especially for defendants in 79 of those actions (51%) who face claim amounts of less than $100,000. Get this:
–With less than $100,000 at stake, mediation sessions occurred in 7 of 79 adversaries—that’s 9%.
–With more than $100,000 at stake, mediation sessions occurred in 28 of 77 adversaries—that’s 36%.
Granted, Delaware provides a mediation accommodation for cases of $75,000 or less: a representative must appear in person for defendant, while others may appear electronically. See Del. Bankr. L.R. 9019-5(j), parts (i) & (xiii)(B). Such provision, however, (i) does not help my client because of the $80,000 claim amount, and (ii) did not increase the number of cases actually mediated in VeraSun or in the West Coast example discussed in the next part.
Action Item. Why not offer a Regional Mediation Hubs alternative to these VeraSun defendants? Why not let them opt to mediate their disputes in one of three locations—Omaha, Minneapolis or Chicago—instead of Wilmington? The extra cost of Regional Mediation Hubs to the bankruptcy estate should consist of some plane tickets and overnight lodgings for a handful of professionals. And, if a local mediator is involved, surely that mediator could provide office and conference room space at no, or limited, additional charge. Ok…it’s probably a little more complicated than that, but you get the picture.
Note: The third part in this series will discuss an illustration from the West Coast.
Also: An expanded version of this article was originally published here: in the March 2016 edition of the ABI Business Reorganization Committee Newsletter (Vol. 15, Num 1).
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