How Mandatory Mediation Succeeds: Seven Illustrations

Mandatory Mediation is neither dead nor buried: it’s alive and well!

By: Donald L. Swanson

“Mandatory mediation” is a self-explanatory term.  It means this:

–Disputing parties are required by court order or rule of law to participate in a mediation session.

Mandatory mediation is a common tool for resolving disputes.  However, a reticence still exists, in much of the bankruptcy world, toward mandatory mediation.  The sources of this reticence are unclear.

–Perhaps it’s a reflection of the adage that “mediation is a voluntary process.”  But, while mediation is most-definitely “voluntary” in nature, it can still be a required process.

–Or perhaps it’s a remnant of the long-standing reluctance in bankruptcy to embrace mediation: e.g., at least 20 bankruptcy districts are still without a local rule authorizing mediation.

Below are seven illustrations of how mandatory mediation is effectively used in a variety of courts.

Illustration No. One:  Circuit Courts of Appeals

Mandatory mediation in the U.S. dates back to the 1970s: to experimental programs on mediation conducted in the Second Circuit Court of Appeals by Chief Judge Irving R. Kaufman.  In an attempt to deal with exploding court dockets, Judge Kaufman creates mediation experiments that include a random and mandatory assignment of cases to mediation.  Then, Judge Kaufman (and others) follow-up with studies of these experiments.

One of such studies (a 1983 Report of the Federal Judicial Center titled, “A Reevaluation of the Civil Appeals Management Plan”) heralds the success of Judge Kaufman’s mediation experiments, including their mandatory character.  The Report contains these conclusions:

–The random selection and mandatory assignment of cases to mediation can work well.  The “potential benefits” of such mediation efforts “will certainly be encouraging” to others.  “Indeed, the potential is so great that all persons sharing responsibility for the management of appellate caseloads should give these procedures serious consideration.”

As a result, nearly all Circuit Courts of Appeals have now adopted mediation programs that randomly assign cases to mandatory mediation.  The Sixth Circuit explains, for example, that it moved to a random selection of cases for mandatory mediation, upon realizing “that cases that appeared to be amenable to mediation were not actually more likely to settle than any other case.”

Illustration No. Two:  City of Detroit Bankruptcy

The Detroit Bankruptcy is unusual, if not unique, in many respects.  And it’s effective use of a team-of-mediators is one of its many innovations.

The City of Detroit files its voluntary Chapter 9 Petition on July 18, 2013.  Less than a month later (on August 13, 2013), the Detroit Bankruptcy Judge creates a mandatory mediation process and appoints a lead mediator, to whom he delegates broad authority, including the power to identify disputes and order interested parties into mediation over those disputes.

The Court Order making such appointment and delegating such authority includes mandatory elements:

–“After consultation with the parties involved, the Court may order the parties to engage in any mediation that the Court refers in this case”; and

–The lead mediator “may, in his discretion, direct the parties to engage in facilitative mediation, with such other mediators, judicial or non-judicial, as he may designate.”

The lead mediator and his team-of-mediators wield their delegated powers effectively, and hundreds of mediation sessions are the result.  Such sessions are not your ordinary voluntary events:  these sessions are mandated — they are command appearances.  And these mandated sessions lead to superb results.

Illustration No. Three:  Mass tort bankruptcies

Mass tort cases have a long history of using mediation to resolve disputes.  And so, when mass tort cases find their way into the bankruptcy realm, it’s not surprising that mediation comes along too.

Here’s how one mass tort mediator describes the benefits of a court mandated mediation:

“[T]he mediator acts as a type of quasi-judicial official and enjoys the benefit of important leverage associated with such court sponsorship. The parties participate knowing that the entire process has the imprimatur and encouragement of the court. This has advantages . . . court sponsorship instills in the parties the knowledge that a settlement is sought and cooperation expected.”

The diocese bankruptcy cases are an example of how mediation is mandated and used effectively in mass tort cases.

Some diocese debtors-in-bankruptcy fight hard to avoid liability.  And they spend large sums on professional fees in doing so—money that could have been used for paying creditors.  In the Milwaukee Archdiocese Bankruptcy, for example, the bankruptcy estate spent $30 million in pitched legal battles and ended up paying $21 million to 575 mass tort claimants.

Other diocese debtors spend their efforts on making mandated mediation efforts successful — and these have achieved good results for all constituencies.  The Gallup Diocese (N.M.) bankruptcy, by contrast to Milwaukee, spent $3 million in crafting a settlement through court-ordered mediation that paid the bulk of $22 million to 57 clergy-abuse claimants.

Illustration No. Four:  Special Settlement Masters

U.S. District Courts have, for many years, been appointing mediators as “special settlement masters” under Fed.R.Civ.P. 53.  These masters/mediators are, typically, given broad authority under Rule 53 to initiate and control the mediation process, including authority to order parties to the mediation table.

Exemplifying a broad grant of authority under Rule 53 is the pending case of In re Syngenta AG MIR 162 Corn Litigation in the U.S. District Court for the District of Kansas and related cases in other courts.  The “Order Appointing Special Master for Settlement” in the In re Syngenta case empowers the mediator (aka special settlement master) to:

–Order the parties to meet face-to-face and engage in serious and meaningful negotiations.

–Construct an efficient procedure to engage the parties in settlement negotiations.

–Order production of all necessary information.

–Order the appearance of any persons necessary to settle any claims completely.

–Make recommendations to the court concerning any issues that may require resolution in order to facilitate settlement or to efficiently manage the litigation.

–Direct, supervise, monitor, and report upon implementation and compliance with the Court’s orders, and make findings and recommendations on remedial action if required.

–Require the parties to appear in person, via video conference, or telephonically.

The parties in this In re Syngenta case reached a settlement last week for a reported $1.5 billion payment.

An example of a concluded matter is the case of Argentina’s debt restructure in the U.S. District Court for the Southern District of New York (“S.D.N.Y.”).

–Many years ago, Argentina faces debt repayment difficulties (similar to what Puerto Rico is experiencing now) and is being sued by creditors in the S.D.N.Y.   The Judge in that case creates a process for managing debt collection efforts:  this process looks something like a private Chapter 9.

–The Judge also appoints a mediator and grants broad authority to the mediator.  Such authority includes the power to mandate mediation.  The mediator persists in requiring and leading mediation efforts over many years and, ultimately, helps bring the parties to a successful conclusion.

Illustration No. Five:  Shaquille O’Neal’s Case

Shaquille O’Neal [yes, the basketball player] is being sued in the U.S. District Court for the Southern District of Florida—back in 2015.  The Plaintiff alleges in his Complaint that Mr. O’Neal mocked Plaintiff’s physical “abnormalities” by “publishing on Instagram and Twitter the plaintiff’s picture and a picture of O’Neal attempting to make a similar face.”

The parties are required by Court rule and order to attend a mediation session.  All required attendees show up for the mediation, except for one: Mr. O’Neal does not personally appear at the session.  Instead, he participates “sporadically by Skype” and sends “a representative to participate on his behalf.”  And he does this on advice of his attorneys.

The Judge finds that such actions by Mr. O’Neal are a violation of mediation requirements and that sanctions should be imposed:

“Here, sanctions are appropriate.  Both this Court’s Local Rule and Judge Seltzer’s mediation order required O’Neal to personally attend the January 27 mediation.  But O’Neal did not.”

But the Judge sanctions Mr. O’Neal’s attorneys – not Mr. O’Neal personally:

“Because O’Neal’s attorneys state in their response that they advised O’Neal that his attendance was not required, the Court will sanction O’Neal’s attorneys rather than O’Neal himself.”

So, the Court requires Mr. O’Neal’s attorneys to pay the plaintiff’s legal fees and costs incurred in “attending the original non-compliant mediation.”  The sanctions amount is $13,058.82.

The Judge also orders the parties to mediate the case again.  And, of course, it settles.

Illustration No. Six:  Local Rules in S.D.N.Y. and Delaware Bankruptcy Courts

Bankruptcy courts for the Southern District of New York and the Delaware District handle many of the largest and most complex bankruptcy cases in the world.  To deal with such cases, along with ordinary and run-of-the-mill cases, both districts have adopted local rules authorizing mandatory mediation.

–S.D.N.Y’s Order on Mediation provides: “The Court may order assignment of a matter to mediation upon its own motion, or upon a motion by any party in interest or the U.S. Trustee.”

–Delaware’s local rules provide: (1) “Notwithstanding any provision of law to the contrary, the Court may refer a dispute pending before it to mediation” [Rule 9019-3]; and (2) “The Court may assign to mediation any dispute arising in an adversary proceeding, contested matter or otherwise in a bankruptcy case” [Rule 9019-5(a)].

Additionally, local rules in both S.D.N.Y. and Delaware mandating mediation in preference cases have been around for a long time: such mandate in Delaware dates back to 2004.

Moreover, in 2013, the Delaware Bankruptcy Court expands its preference mediation mandate to all adversary proceedings in all Chapter 11 cases.  This 2013 addition to Rule 9019-5(a) reads:

“Except as may be otherwise ordered by the Court, all adversary proceedings filed in a chapter 11 case and, in all other cases, all adversaries that include a claim for relief to avoid a preferential transfer (11 U.S.C. § 547 and, if applicable, § 550) shall be referred to mandatory mediation.”  [Emphasis added.]

Illustration No. Seven:  Local Rules in the New Jersey Bankruptcy Court

The New Jersey Bankruptcy Court, and attorneys who practice there, have extensive experience over many years with mediation.  In 2014, the New Jersey Bankruptcy Court expands its mediation program by adding a mandatory mediation component, via local rule, called “presumptive mediation.”  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 S.D.N.Y and Delaware, the trajectory of changes to local mediation rules is toward mandated mediation and away from a totally-voluntary system.  And reports are that attorneys practicing in the New Jersey Bankruptcy Court have embraced presumptive mediation and are utilizing it effectively.


Mandatory mediation is an effective tool for resolving disputes, as illustrated above.  The Circuit Courts of Appeals show a decades-long history of success with mandatory mediation.  The City of Detroit bankruptcy shows how mandatory mediation can be effective in a large and complex case.  Mass tort bankruptcies are merely an extension of how mandatory mediation is effectively utilized outside of bankruptcy.  Special settlement masters under Rule 53 utilize mandatory mediation effectively.  The O’Neal case shows how mandatory mediation works effectively in a smaller case.  And the mandatory mediation experience in S.D.N.Y. and Delaware bankruptcy courts provide compelling evidence of the effectiveness of mandatory mediation in bankruptcy cases.

Accordingly, every bankruptcy court should have the mandatory mediation tool available to be utilized as needed.

What actions might be taken to encourage the greater utilization of mandatory mediation processes throughout the entire bankruptcy system?

**  If you find this article of value, please feel free to share.  If you’d like to discuss, let me know.

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