Was the Mediator Blind to Collusion During Mediation, Or Part of It?

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Lurking in the shadows

By Donald L. Swanson

objectors essentially suggest that [the mediator] was too blind to see collusion at the tip of his nose during the mediation, or that [he] was part of the collusion. The court rejects these insulting, baseless arguments.”

Speaks v. U.S. Tobacco Cooperative, Inc., 324 F.R.D. 112, 140 (E.D.N.C. 2018).

The Facts

On October 31, 2012, various tobacco farmers filed a class action lawsuit in Federal Court against U.S. Tobacco Cooperative, Inc. As members of the Cooperative, they allege that it’s purpose ended and that the Cooperative should dissolve and distribute its reserves to its members.

–Competing Lawsuits & Delay

Meanwhile, a competing class action was pending in State Court. So, the Federal Court parties moved to stay their own case, pending the outcome of the State Court action. The Federal Court granted the stay.

But years of delays ensued.

–Moving Forward in Mediation

So, in early 2017, the Federal Court parties began discussing how to proceed. Since the Federal Court’s local rules mandate mediation, they decided to mediate. The mediation resulted in a “hard-fought two-day mediation” with a distinguished, retired United States District Judge as mediator.

As a result of the mediation, the Federal Court parties reached a $24 million class action settlement.  So they sought, from the Federal Court, (i) certification of a settlement class, and (ii) preliminary approval of the settlement.

Objections were filed to the proposed Federal Court settlement. Objectors included some of the plaintiffs in the State Court action.

–Mediated Settlement Approved

On September 13, 2017, the Federal Court granted preliminarily approval of the settlement and scheduled a final fairness hearing for January 19, 2018.

Meanwhile, the State Court action continued but did not achieve a judgment.

On January 19, 2018, the Federal Court held a final fairness hearing and granted final approval of the class action settlement.

Collusion Objection

A variety of objections were raised to the mediated settlement. One objection arose from the mediation itself:

–Objectors contend that “collusion” occurred between opposing parties in the mediation.

The Federal Court rejected the collusion argument—and did so emphatically. The Federal Judge reasoned that:

The mediation occurred “pursuant to this court’s local rules”;

The mediator is a retired Judge and experienced mediator, “who served with honor and distinction as a United States District Judge . . . for 24 years”;

Objectors are suggesting that the mediator Judge was either, (i) “too blind to see collusion at the tip of his nose during the mediation,” or (ii) “part of the collusion”; and

Such suggestions are “insulting” and “baseless,” because this Judge “is as smart and honorable as the universe is large” and because he “would not and did not participate in a collusive mediation or permit one to take place in front of him.”

Appeal

The Federal Court’s ruling is on appeal, of course: see Case No. 18-1316 in the U.S. Fourth Circuit Court of Appeals.

The appeal is progressing, with oral arguments heard on Halloween Day (October 31) of 2018.

–The Collusion Argument: Lurking in the Shadows

Objectors continue, on appeal, asserting their collusion argument. But they are arguing that collusion was lurking in the shadows — it wasn’t in the open for the mediator to see.

Here’s how that argument appears in Objectors’ Reply Brief (Doc. 72) on appeal:

Characterizations of the collusion allegation as “baseless” and “unsupported” and “insulting to the mediator” are a “hyperbolic response”—Objectors never argued that collusion took place “in front of” the mediator or that it “would have been obvious to him.”

Objectors are contending that the mediator “did not know about” the collusion:

–The mediator could not have known about such State Court findings as “attorney shopping” or collusion over representation issues or collusion to mislead class members;

–The Federal Court viewed such State Court findings as “interlocutory” and “did not inquire further”; and

—The Federal Court should have given “closer scrutiny” to such findings “and the presence of other warning signs.”

Case law discussing a presumption of non-collusion in mediation involves actual evidence—the mediators actually testified in those cases:

–No such evidence is provided in this case.

The Federal Court merely:

“assumed the mediator knew all the facts that might disclose collusion”;

focused on the mediator participating in or being aware of collusion; and

jumped to the insulting idea that the mediator was either “too blind to see collusion” or a “part of” it.

Such a hyperbolic response “infers everything but offers no evidence.”

Conclusion

One problem with getting into the middle of a dispute is becoming a target. That’s an occupational hazard for mediators.

The case described above is one example of that hazard—although it looks like the collusion argument is not actually focused on the mediator, himself.

And it’s good to see the trial Judge standing up for the mediator, his capabilities and his integrity!

** 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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