Applying a U.S. District Court’s Local Mediation Rule in Bankruptcy Court: Iowa & Minnesota Examples

By: Donald L Swanson

Historically, bankruptcy courts and bankruptcy professionals have been lagging adopters of mediation. They’ve been slow to utilize mediation for resolving bankruptcy disputes, and they’ve been slow to adopt local rules on mediation.

Today, however, 76 (80.85%) of all 94 bankruptcy court districts have a local mediation rule of some type (see this link), and mediation is a significant tool in many bankruptcy courts.  That’s because of a simple reality: bankruptcy mediation works!

Bankruptcy mediation is useful, for example, in dealing with heavy caseloads and high-emotion cases, in minimizing litigation costs and maximizing personal relationships (especially with early mediation), in providing creative solutions to interrelated disputes, and in protecting confidentiality.

Of those 80.85%, however, a dozen or so must rely on the local mediation rules of their District Court. Three examples from the Midwest are the two Iowa Districts and the District of Minnesota.

Two Iowa Districts

Bankruptcy Courts for the Northern District and the Southern District of Iowa do not have local mediation rules of their own. But U.S. District Courts for both the Northern and Southern Districts do.  They have Local Rule 78B, which addresses mediation and includes bankruptcy cases.

Here is mediation authorization language in subpart (a) of Rule 78B (emphasis added):

“Pursuant to 28 U.S.C. § 651(b), the court authorizes the use of ADR in civil cases, including adversary proceedings in bankruptcy. The court’s primary ADR procedure is private mediation.”

Local District Court Rule 78B also provides for mediation confidentiality.

District of Minnesota

The Bankruptcy Court for the District of Minnesota has a one-sentence local mediation rule (Rule 9019-2) that reads:

“The court may refer any adversary proceeding or contested matter for mediation by any other federal judge or any mediator chosen by the parties.”

This Local Bankruptcy Rule does not address confidentiality or any other mediation concern. But the U.S. District Court for the District of Minnesota addresses mediation in its Local Rule 16.5, which authorizes mediation “in all civil actions” as follows (emphasis added):

“(2) Authorization. The court authorizes the use of alternative dispute resolution processes in all civil actions, including adversary proceedings in bankruptcy.

Local District Court Rule 16.5 also authorizes mandated mediation and provides for confidentiality.

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A Multi-Use Tool

Applying District Court’s Local Mediation Rule in Bankruptcy Court

The obvious question is this: “Can a district court’s local mediation rule be utilized in bankruptcy court too?”

The answer is, actually, “Yes, it can.”  It’s a multi-use tool.  Here’s how.

–For Starters . . .

Fed.R.Bankr.P. 9029(b) makes a district court’s local rules available to the bankruptcy court, at the bankruptcy judge’s discretion:

“A [bankruptcy] judge may regulate practice in any manner consistent with . . . local rules of the district.”

–Furthermore . . .

1. Fed.R.Bankr.P. 9029(a)(1) authorizes a district court to adopt local rules on matters within its bankruptcy jurisdiction:

“Each district court . . . may make and amend rules governing practice and procedure in all cases and proceedings within the district court’s bankruptcy jurisdiction.”

2. 28 U.S.C. § 1334 grants jurisdiction over bankruptcy cases to district courts. Sec. 1334(a)&(b) provide:

“(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11”; and

“(b) . . . notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11 . . . or related to cases under title 11.”

3. 28 U.S.C. § 151 designates bankruptcy judges and bankruptcy courts as “a unit” of the district courts:

“In each judicial district, the bankruptcy judges in regular active service shall constitute a unit of the district court to be known as the bankruptcy court for that district.”

Model Local Rules

A number of years ago, the Mediation Committee of the American Bankruptcy Institute developed a resource in this area: a set of Model Local Rules for Mediation. And they added a Commentary thereon.  These resources have been helpful in many bankruptcy districts as they’ve evaluated, adopted and amended their own local mediation rules.

Conclusion

A U.S. District Court’s local mediation rule can be utilized in that District’s Bankruptcy Court, when the Bankruptcy Court does not have a local mediation rule of its own—Iowa’s Northern and Southern Districts are two examples.

A U.S. District Court’s local rule on mediation confidentiality and mandated mediation can be utilized in that District’s Bankruptcy Court, when the Bankruptcy Court’s local mediation rule is silent on such matters—Minnesota’s District is an example.

And the ABI’s Model Local Rules for Mediation and Commentary are a resource for developing and improving local mediation rules.

** 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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