Pre-Lawsuit Mediation is Highly Effective Under Farm Mediation Laws

By Donald L. Swanson

Who would guess that pre-lawsuit mediation would work well in resolving credit disputes between creditors and farmers in stressed financial circumstances?  But this is  precisely what has happened in farm states under farm mediation statutes.

Mandatory v. Voluntary Pre-Lawsuit Mediation Statutes

Many farm states have established mediation prerequisites for a creditor to file a lawsuit on a defaulted farm obligation.  Some state statutes require a notice of mediation, but mediation developments thereafter are entirely voluntary.  Other state statutes require much more.

Mandatory Mediation Statutes

Iowa Code § 654A.7(1) provides:

“A creditor . . . desiring to initiate a proceeding to enforce a debt against agricultural property . . . shall file a request for mediation with the farm mediation service.  The creditor shall not begin the proceeding . . . until the creditor receives a mediation release. . . [Such requirements] are jurisdictional prerequisites to a creditor filing a civil action.

Minn. Stat. § 583.26 provides:

“A creditor desiring to start a proceeding to enforce a debt against [a farmer] . . . must serve an applicable mediation notice . . . on the debtor . . .  The creditor may not begin the proceeding until [certain mediation requirements are satisfied].”

Voluntary Statutes

Farm mediation statutes in other states merely require that a creditor provide notice of mediation possibilities to the farm debtor before pursuing collection of a farm debt.

Effectiveness of Farm Mediation

A Tulsa Law Review article from 1993 provides an assessment of the effectiveness of such farm mediation requirements during the 1980s Farm Crisis.  The article refers to a “report prepared by Leonard Riskin for the Administrative Conference of the United States” that evaluates the effectiveness of farm mediation requirements in eight states.  The article says this (at 175-76, emphasis added):

“The Riskin report includes data detailing the number of mediations in eight states. . . . [The study] solicits information on the number of requests for mediation, the number of cases, and the disposition of cases. While all eight states had an agreement rate of higher than 50%, the percentages range from a low of 55.5% in Minnesota to a high of 93% in Montana. One assumes that the differences in agreement rates are due, in part, to whether a state has a mandatory or voluntary mediation program, and to the disparities in the number of cases each state processes.”

It should be noted that U.S. Census data show that Minnesota and Iowa are high-population states with many farms (Iowa has 3.1 million people and 2.1 million farms; Minnesota has 5.5 million people and 74,500 farms), while Montana is a low-population state with fewer farms (1.0 million people and 27,800 farms).

A 2015 Fiscal Year report of mediation effectiveness of Minnesota’s Farmer-Lender Mediation program shows significant improvement from the 1980s experience.  in 2015:

–2,472 mediation notices were sent by creditors

–1097 farm debtors requested mediation, of which 917 completed mediation

–The total amount of debt reported and addressed in the mediation sessions is “approximately $180.6M”

—79% of farm debtors who completed mediation reached a settlement with the creditor

Conclusions 

1. Pre-lawsuit mediation can be highly effective.  A mediation agreement rate between 55.5% and 79% is pretty-darn-good!
2. Again, let’s emphasize that we are talking here about pre-lawsuit mediations.  These aren’t cases where everyone has been fighting in court for a long time, is weary of the fight and is, therefore, highly motivated to get disputes settled.  These are before-the-legal-fight-begins mediations.
3. Whether pre-lawsuit mediation statutes provide for voluntary mediation or mandate mediation, settlement rates are strong.