Here’s a scenario where early mediation intervention works:
We’re at the beginning of a Chapter 11 case with lots of competing interests. Everyone is in a fight-every-battle mode—and there are lots of battles to fight. We’re past the initial flurry of motions for use of cash collateral and relief from stay, and it’s clear that debtor will continue in operation. But creditors remain hostile, trying to undermine reorganization efforts. And there is no clear path to a confirmable plan.
Now is the time, in this scenario, for an early mediation intervention. It’s time for the parties to request, or the court to order, an early mediation!
I’ve seen early mediation intervention work in reorganization cases . . . and am surprised it isn’t used more often.
Here’s how it works successfully in a prior case:
The prior case has many creditors, a wide range of constituencies and a chaotic existence. Efforts to bring order and structure to the case fail to gain traction. So, a dozen-or-more parties and their attorneys show up one day for a mediation session in a large conference room.
The mediation session lasts all day. It begins with an around-the-conference-room discussion: each party explains its position and view of the case. Then groups of two and three disputing parties break into closed-door meetings, and not-included parties are wondering what-the-heck is going on. They complain to the mediator, who assures them everything is okay and advises them to keep talking.
The mediator acts as an orchestrator (as opposed to a controller) of the mediation session. As the day wears along, parties continue acting on their own initiative: grabbing a disputing party and holding an impromptu discussion, then adding in another party, and then breaking up and beginning anew with another group of parties. The lines of communication, if diagrammed that day, would resemble movements on a chess board.
As the afternoon wears along, the mediation effort begins to bear fruit. As everyone leaves the session that evening, the sense of chaos and confusion is gone. Few issues are resolved, but an organization and a structure and a direction are beginning to emerge for solving the problems of the case.
Bringing Order Out of Chaos
This prior case shows that an early mediation intervention can bring order out of chaos and begin to provide solutions for a difficult case. Many subsequent negotiations, mediations and court rulings are still needed in that case. But the early mediation session starts the solution process.
Direct Communications With a Solutions Goal
The genius of early mediation intervention [it’s someone else’s idea, not mine] is in placing disputing parties into direct communication, early in the case, to seek solutions.
–I’m often amazed at what happens when one side hears the pros and cons of their own case from someone other than their own attorney: it can be an eye-opening experience. I remember a client exclaiming to me during mediation, “We could lose this case!” (as if this were a new revelation), when I’d been telling them that for months.
–And having eyes opened sooner is better than having them opened later—especially in the fast-moving world of bankruptcy.
Early mediation intervention is a tool for, (i) moving a difficult case in a positive direction, and (ii) helping parties with unrealistic ideas get a better view of the case.