Here is a common experience in the bankruptcy courts (and other courts) where mediation is a new or little-used tool:
Attorneys have been practicing for years in this court without using mediation. And mediation is slow to catch on. Here’s why:
–Attorneys who practice in this court aren’t accustomed to using mediation, aren’t comfortable with inserting mediation into their case planning habits, and rarely even think of mediation as a possibility; and
–Judges in this court aren’t comfortable with the idea of mandating mediation by local rule or by order in a particular case.
The Voluntary Mediation Problem
The problem with voluntary mediation, in a new or little-used mediation program, is explained by these two conclusions from a study of empirical data:
–When the goal is to achieve a “regular and significant use” of mediation to resolve court cases, “[v]oluntary mediation programs rarely meet this goal because they suffer from consistently small caseloads.”
–By contrast, “judicial activism in ordering parties into mediation triggers increased voluntary use of the process.”
Moreover, according to the study, “settlement rates” and a litigant’s perceptions of “procedural justice” are about the same in mandatory mediation as in voluntary mediation.
Three Examples of Mandatory Mediation Rules
Example No. 1. Circuit Courts of Appeals. All but one of the U.S. Circuit Courts of Appeals have a mandatory mediation program. Data from these mandatory programs show them to be highly successful in achieving mediated settlements across all types of cases and regardless of levels of animosity or distrust between the parties.
Example No. 2. Delaware Bankruptcy Court. The Delaware Bankruptcy Court, and attorneys who practice there, have extensive experience over many years with using mediation to resolve bankruptcy disputes. In 2013, the Delaware Bankruptcy Court intensifies its mediation program by adding this mandatory provision to its Local Rule 9019-5(a):
“all adversary proceedings filed in a chapter 11 case . . . shall be referred to mandatory mediation.”
It must be noted that the trajectory of changes to local mediation rules in the Delaware Bankruptcy Court is toward mandated mediation – and away from a voluntary system.
Example No. 3. New Jersey Bankruptcy Court. The New Jersey Bankruptcy Court, and attorneys who practice there, also have extensive experience over many years with mediation. In 2014, the New Jersey Bankruptcy Court expands its mediation program by adding a “presumptive mediation” local rule. This new rule 9019-2(a) provides:
“Every adversary proceeding will be referred to mediation after the filing of the initial answer to the adversary complaint, except [when a specified exception applies]”; and
“A contested matter . . . may also be referred to mediation . . . by the court at a status conference or hearing.”
In New Jersey, like Delaware, the trajectory of changes to local mediation rules is toward mandated mediation and away from a voluntary system.
The Early Mediation Need – Generally
The study of empirical data referenced and linked above observes that mediation “tends to occur late in the life of a case.” And it issues these findings about mediation timing:
“Holding mediation sessions sooner after cases are filed, however, yields several benefits,” including:
–“Cases are more likely to settle”;
–“Fewer motions are filed and decided”; and
–“Case disposition time is shorter, even for cases that do not settle.”
An Intensified Need for Early Mediation – In Business Bankruptcy
Superimposed over many disputes in a business bankruptcy is an urgent need to maximize value from a debtor’s operations or liquidation. And this urgency often takes precedence over standard litigation processes like formal discovery and pretrial wrangling. Accordingly, the need in a business bankruptcy for early and extensive mediation efforts can be particularly intense.
The role of mediation in the early stages of a business bankruptcy case needs to be different from the typical role of mediation that occurs at the end of a lawsuit:
–The role and goal of an early-mediation in a business bankruptcy is to set-the-stage and narrow-the-issues and create-a-direction and a focus for further progression of the case.
–That’s a much different role than a shortly-before-trial mediation in a one-and-done session at the end of a lawsuit, where the goal is to resolve all remaining disputes.
Here’s a link to an example of how mediation can be effectively utilized at the beginning of a Chapter 11 case.
An Example of an Early Mediation Rule
The Delaware Bankruptcy Court recently adopted a provision in its Local Rule 9019-5(j) that allows a defendant to opt for an early mediation of a preference case with less than $75,000 at stake.
Within 30 days after a response to the preference Complaint is due, the defendant in such cases may elect an early mediation of all claims raised in the lawsuit. In cases where more than $75,000 is at stake, the parties may agree to participate in the early mediation process.
I am passionate about encouraging:
–Bankruptcy courts to adopt local rules on mediation and to expand the role and reach of mediation through mandatory and early mediation requirements; and
–Attorneys who practice is such courts to utilize mediation for resolving their disputes.
And I’d be delighted to discuss such matters with anyone interested in expanding the role and reach of mediation in a local court.