The first of my three articles on In re Smith, 524 B.R. 689 (Bkrtcy.S.D.Tex. 2015), quotes the Judge’s arguments for opposing mediation. Some of those arguments seem off-base, as I noted in Part 1.
Mediator as Professional
However, the Judge addresses another issue in that case on which his ruling is more main-steam. He rules that a mediator is a “professional person” under § 327(a) and Rule 2014(a), whose employment must be approved by the Court before being paid by the bankruptcy estate.
Here’s what the Judge says on this mediator-as-a-professional issue:
–This Court prohibited the parties from going forward with their scheduled mediation because the Trustee failed to obtain prior approval to retain ex-Judge Clark as a mediator pursuant to 11 U.S.C. § 327(a).
–Commentators are divided on whether mediators are “professional persons” governed by § 327(a) and Rule 2014(a).
–[T]his Court concludes that mediators should be governed by the provisions of the Code and Rules regulating employment of professional persons. Mediators dealing with disputes in bankruptcy are professionals in the ordinary sense of the word, as they are usually attorneys with a highly specialized skill set.
Such statements are well-within the mainstream of judicial reasoning.
Mediation is Bad
But then, the Judge gets back on his mediation-is-bad kick and goes overboard on the “professional” issue as follows:
The primary purpose of § 327(a) is to ” contain the estate’s expenses and avoid intervention by unnecessary participants.” . . .
The attorneys of record in this dispute–Hoeffner, Lemmon, and Wentworth–are seasoned trial lawyers with substantial experience in bankruptcy, each of whom has been practicing for more than 25 years.
They are also first-rate counselors at law who have the courage and temperament to look their respective clients in the eye and tell them the risks of losing at trial, the risks of losing on appeal, and whether settlement offers on the table fall within the range of reasonableness given the risks of continuing to litigate. They are equally capable of devising and recommending settlement and counter-settlement offers to their clients.
Finally, Hoeffner, Lemmon, and Wentworth are consummate professionals who have been on excellent speaking terms with one another as lawyers. Indeed, throughout this Chapter 7 case, they have been models of how to be warriors in the courtroom zealously representing their clients, but nevertheless being polite and professional.
Under these circumstances, this Court sees no reason why the Trustee should use estate funds to pay a mediator–as well as his counsel to participate in that mediation–when the lawyers involved in this dispute have the negotiating skills, brainpower, and demeanor that Hoeffner, Lemmon, and Wentworth in fact possess.
Rather, it makes more economic sense for these three lawyers to continue communicating with each other without any mediator.
Over the past four decades, mediation has become a primary tool for resolving civil cases in state and federal courts throughout the land. The use of mediation expanded rapidly and dramatically in recent times for one reason: because mediation works.
Somewhere and somehow, this judge got an anti-mediation burr under his saddle. He’s trying to keep the bankruptcy world safe from mediation. And he won’t let it go.