How Mediation Developed in Bankruptcy Court — A Local Example (Part 4)

Front Door, Federal Courthouse in Omaha, Nebraska

By Donald L. Swanson

We’ve just finished adopting new local rules on mediation in Nebraska’s Bankruptcy Court, back in 1911.  And we are expecting that attorneys will promptly start utilizing these rules.  We are wrong.

An alleged Ponzi scheme case is going on when our rules are adopted, and the chapter 11 trustee files 117 transfer-avoidance actions. He agrees that a mandatory mediation system would be appropriate for those actions, so the system is established. All 117 actions settle. None are tried. But mediation sessions occur in only five of them.

Other than the Ponzi case, we see no mediation activity — nothing — for five months after adopting the rules. Meanwhile, the Mediation Committee is working hard at promoting bankruptcy mediation: writing articles, speaking at bankruptcy CLE events, chatting up mediations with colleagues, etc. Additionally, I’m watching activity in pending cases like a hawk. Every time a significant event occurs (e.g., a motion for summary judgment is denied), I shoot an email to the disputing attorneys suggesting, as chair of the Mediation Committee, that the dispute is ripe for mediation.

But nothing seems to work. On occasion, there is even a sense of hostility to a mediation suggestion. I do not understand the hostility, but here is a guess: Bankruptcy attorneys are good at settling disputes — that’s a huge part of being a successful bankruptcy attorney. So “We don’t need no stinking mediations” is how some of that initial hostility seemed.

Aside from the Ponzi case, the first mediation motion is filed five months after adoption of the rules. One party wants to mediate. The other doesn’t. The court denies the mediation motion and then appoints a trustee.

Aside from the Ponzi case, the first mediation session occurs seven months after adoption of the rules. The session does not succeed, and the case goes on through trial and appeal.

But, somewhere along the way, attitudes begin to change. I don’t know what it is, and I can’t put a finger on it. Perhaps it’s a result of promotional persistence over time. Or maybe a change is occurring in the legal community. But whatever its source, openness to mediation begins to appear. There is a dawning of a new day — the Age of Mediation Aquarius (or something like that). One of the initially hostile naysayers even suggests that a bankruptcy dispute be mediated. I declare victory (to myself).

Then, as luck would have it, the economy improves.

*** Note 1: this article was originally published by the American Bankruptcy Institute in its June 2015 edition of the Mediation Committee Newsletter (Vol. 2, Num 2). And it can also be found via web***

Note 2:  This article is the fourth of a four-part series on the history of mediation development in Omaha, Nebraska.  The first two parts discuss mediation developments in non-bankruptcy courts, and the last two parts discuss mediation developments in the Bankruptcy Court.

Click below to view the different Parts.

Part 1 , Part 2, Part 3.

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