We Need a Federal Bankruptcy Rule on Mediation (Part 1)

By: Donald L. Swanson

The time is here. We need a new mediation tool!

We need to include mediation — explicitly and by name — in the Federal Rules of Bankruptcy Procedure.

Mediation is already included in the Federal Rules of Civil Procedure for U.S. District Courts. And mediation has become a important tool for resolving civil lawsuits in U.S. District Courts throughout the land.

–Why should the Federal Rules of Bankruptcy Procedure be different?

U.S. District Court Rules

Mediation appears in Fed.R.Civ.P. 16(c)(2), for example, which provides:

–“At any pretrial conference, the court may consider and take appropriate action on . . . (I) settling the case and using special procedures to assist in resolving the dispute when authorized by statute or local rule.”

–And every U.S. District Court must have local mediation rules, due to the requirements of 28 U.S.C. Sec. 651.

Mediation also appears in Fed.R.Civ.P. 53, which authorizes the appointment of a mediator by U.S. District Courts as a “settlement master.” But Fed.R.Bankr.P. 9031 rejects Rule 53 special masters in bankruptcy.

So, it’s time to provide the U.S Bankruptcy Courts with the same type of Federal Rule authorization for mediation that Federal Rules already provide to the U.S. District Courts.

Preliminary Draft

Below is a preliminary draft (for discussion purposes only) of such a Rule. This draft provides for mediation authority, confidentiality and privilege. And it uses language from the model mediation rules prepared by the American Bankruptcy Institute.

Here’s the draft of a revised Fed.R.Bankr.P. 7016:

(a) Rule 16 Fed.R.Civ.P. applies in adversary proceedings.

(b) Mediation. Regarding sub-part (c)(2)(i) of Rule 16:

(1) The court may assign to mediation any dispute in a bankruptcy case; and the parties to any dispute may stipulate to mediation, subject to court approval.
(2) The mediator and the mediation participants are prohibited from divulging, outside of the mediation, any oral or written information disclosed by the mediation participants or by witnesses in the course of the mediation.
(3) The mediator shall not testify or be compelled to testify in regard to the mediation or the mediation communications in connection with any arbitral, judicial or other proceeding.

This Rule 7016(b) would need to be added to the Fed.R.Bankr.P. 9014(c) list of adversary proceeding rules that apply in contested matters.

There are probably a million better ways to write such a mediation rule. But the foregoing draft provides something to think about.

Adopting Local Mediation Rules

Then, each Bankruptcy Court can flesh-out details with its own local mediation rules. The ABI’s model mediation rules are available for this purpose.

–Including mediation in the Federal Rules of Bankruptcy Procedure will undoubtedly create a sense of urgency for all bankruptcy courts to adopt their own local mediation rules.

 

What do you think?

Here is a link to Part 2 of this series.