Multi-Party Mediation: How it Can Work Well — Detroit and Archdiocese Examples

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How to manage lots of people

By Donald L. Swanson

Multi-party mediation can work effectively in bankruptcy, especially on plan confirmation issues.  Such effectiveness is apparent in the City of Detroit and the Archdiocese of Milwaukee bankruptcy cases.

Keep in mind that these Detroit and Archdiocese mediation efforts aren’t merely multi-party in the sense of five or six parties.  These mediation efforts involve many, many parties.

The following are a listing of some similarities and a primary difference in these two mediation efforts.  Presumably, such information can be helpful and instructive for future mediation efforts in other cases.

Some Similarities

Both have large numbers of people involved in the mediation.  For example:

–Detroit has 40 people in the conference room at the initial mediation session on pension issues.

–The Archdiocese of Milwaukee has 23 parties and their professionals in the conference room at the initial mediation session [“It was like the Paris Peace talks,” says James Stang, legal counsel to the Official Creditors Committee].

Both hold many mediation sessions over long periods of time.

Both utilize every conceivable type of mediation session: joint sessions for all or many parties; caucus sessions for one or a few parties; shuttle diplomacy by the mediator; direct communications between the parties; sessions by email and other electronic means; sessions by telephone or video conference; etc.

The mediators in both cases are proactive and manage the mediation process.  For example:

–Mediators decide which parties to meet with next and when.

–Mediators decide which issues to prioritize and which to defer.

–Mediators decide when to recess a session and when to call a new one.

–Mediators decide which parties are invited (or not invited) to a particular session.

The mediations in both cases are prodded toward settlement by critical judicial rulings:

–The Bankruptcy Judge in the Detroit case rules that “state law cannot reorder the distribution priorities of the bankruptcy code” and that the City’s bankruptcy filing “does not violate the pension clause of the Michigan Constitution” (Doc. 1945, at 93).  This ruling prompts pension claimants to focus on negotiating the best possible deal in mediation.

–The Seventh Circuit Court of Appeals in the Archdiocese of Milwaukee case rules that neither the Religious Freedom Restoration Act nor the First Amendment to the U.S. Constitution makes the Cemetery Trust funds off-limits to claims of sex abuse claims.  This ruling prompts the Archdiocese to focus on providing substantial benefits to sex abuse claims in mediation negotiations.

The total amount of professional fees incurred in both cases is incredibly high.

The Primary Difference

A critical judicial ruling in the Detroit case occurs early — within five months after the bankruptcy filing.

–Although an appeal is taken from this ruling, the parties seem to accept the validity of this ruling (or, at least, the possibility that it might be upheld on appeal) for mediation purposes.

–Accordingly, the mediation process moves forward with dispatch.

The critical judicial ruling in the Archdiocese case occurs on appeal to the Seventh Circuit — more than four years after the bankruptcy filing.

–Rulings on the matter by lower courts reach conflicting decisions (the Bankruptcy Court rules in favor of the Official Creditors Committee; while the U.S. District Court rules in favor of the Archdiocese).

–And it appears that neither party held much respect for (or gave much credence to) a lower-court’s decision in favor of the other party.  And their positions in the case reflect that fact for more than four years.

–Accordingly, the Archdiocese mediation process languishes until the Seventh Circuit issues it’s ruling.

***Note:  Much of the foregoing information comes from interviews with two people:  (1) Eugene Driker, a mediator in the City of Detroit bankruptcy, and (2) James I. Stang, legal counsel to the Official Creditors Committee in the Archdiocese of Milwaukee bankruptcy.

 

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