Mediation as a Condition for Confirmation of a Disputed Chapter 11 Plan

By Donald L. Swanson

Here’s a proposal:

Mediation among disputing parties should be a condition precedent for a final confirmation hearing on a contested Chapter 11 plan.

The short history of bankruptcy mediation bears out the value of this proposal.

–Songs of praise have been sung everywhere (in a bankruptcy / professional sort of way) about the value of mediation in the Detroit bankruptcy for resolving plan confirmation issues.

–The value of mediation in resolving plan confirmation issues has been discussed at length in prior articles on this blog.

–Experienced bankruptcy mediators everywhere can testify to such value from their own experiences.

When bankruptcy professionals know in advance that a mediation is required, they can incorporate the requirement into their case strategy: they can plan for satisfying the mediation requirement and make their case progression plans around it.

Timing:

An essential part of the proposal is this:

The initial mediation session should occur early in the confirmation process to allow for follow-up activity and additional sessions.

In Chapter 11 plan confirmation contexts:

–Multiple disputing parties are often involved.

–Litigation weariness, typically, has not yet fully arrived.

–An initial mediation session is often needed to create an organization and structure for identifying, narrowing and resolving issues that remain.

There is no greater or more crucial event in a Chapter 11 case than a final decision on confirmation of a plan. Accordingly, the bankruptcy system ought to provide the best possible opportunity for disputing parties to resolve their confirmation differences before the Court issues a final ruling on the matter.

A mediation requirement would help to provide such an opportunity.