U.S. Congress and Supreme Court Support ADR — But Some Bankruptcy Courts Remain Nonconformist on Mediation

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Nonconformity

By Donald L. Swanson

There is “a kind of ‘hostility to arbitration’ that led Congress to enact” the Federal Arbitration Act.

Kindred Nursing Centers v. Clark, U.S. Supreme Court Case No. 16-32 (decided May 15, 2017).

Alternative dispute resolution processes (“ADR”) include arbitration and mediation.

Arbitration

Congress passed the Federal Arbitration Act (“Arbitration Act”) to promote the use of arbitration for resolving disputes that would, ordinarily, be filed in state and Federal courts and to eliminate opposition to arbitration. And in the Kindred Nursing Centers v. Clark opinion, the U.S. Supreme Court upheld, last month, the broad reach and effectiveness of the Arbitration Act against challenges under Kentucky’s State Constitution.

Mediation

Similarly, Congress passed the Alternative Dispute Resolution Act of 1998 (“Mediation Act”) to promote the use of mediation in Federal courts and to eliminate opposition to mediation. The U.S Supreme Court has yet to rule upon the effectiveness of the Mediation Act, but the Supreme Court would, undoubtedly, support the Mediation Act’s statutory requirements for mediation in the same manner the Court is supporting statutory requirements for arbitration in Kindred Nursing Centers v. Clark.

The Mediation Act requires U.S. district courts, and their bankruptcy units, to establish local rules for, (i) promoting the use of mediation in their courts, and (ii) providing for mediation confidentiality.

Yet, some bankruptcy judges remain hostile to the use of mediation in their courts, or they are indifferent: seeing little value in mediation. Such hostility and indifference are reflected in the following three examples.

1.  A Bankruptcy Judge in Texas declares in open court that he does not like mediation, believes mediation is a waste of time and money, and is unlikely to approve mediation under any circumstances.

2.  The bankruptcy district in Northern Illinois (Chicago) recently revokes its existing local rules on mediation (including confidentiality provisions) as “unnecessary.”

3.  Approximately 70% of all bankruptcy districts have adopted some type of local rule on mediation. The rest, however, haven’t. And judges in the don’t-have districts often earn a reputation for being indifferent, or even hostile, to mediation.

In light of the requirements of the Mediation Act, each of these three examples seems out-of-place, at a minimum, and in violation of Federal law, when viewed in a less-generous light.

Moreover, the absence of local mediation rules in approximately 30% of all bankruptcy districts is particularly troubling because of the existence of such resources as the Model Local Rules on Mediation and the accompanying Commentary offered by the American Bankruptcy Institute.

How can this be!!

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