By: Donald L Swanson
“The [Subchapter V] Trustee shall— . . . facilitate the development of a consensual plan of reorganization.” 11 U.S.C. § 1183(b)(7).
Facilitation is a mediator-like tool that can be used by every bankruptcy trustee in every case.
For Subchapter V trustees, however, facilitation is a statutory duty that also creates a tension in every case. The tension is this: every Subchapter V trustee has statutory duties that conflict with each other. Here’s how:
- On the one hand, there is a mediator-like duty—to “facilitate the development of a consensual plan”; and
- On the other hand, there are substantive duties—like appearing and being heard on plan confirmation and, in appropriate circumstances, objecting to claims or discharge.
In other words, every Subchapter V trustee in every case has both, (i) a statutory mediator-like duty, and (ii) by statute, a dog in the hunt on a variety of substantive issues.
The problem is this: under mediation theory, everyone agrees . . . and I mean everyone . . . that a mediator must not have a dog in the hunt.
Let’s stipulate that there is a wide range of alternative dispute resolution processes—commonly referred to as “mediation”—that vary dramatically.
Imagine a spectrum of mediation-like tools, ranging from mediation by a totally-passive mediator on one end and an arbitrator on the other.
On this spectrum, mediation-like tools are separated by the degree of evaluation provided:
- a passive mediator (on one end) merely helps the parties find their own solution—there is no evaluation at all . . . none whatsoever;
- an arbitrator (on the other end) provides a thoroughgoing evaluation and also imposes a resolution upon the parties; and
- every mediator-type person in between provides varying degrees of evaluation to help the parties reach a consensual resolution.
But what all the mediation-like tools on the spectrum have in common is this: the mediator-type person does not have a dog in the hunt.
So how can this Subchapter V trustee thing be: namely, a mediator-like duty, with a dog in the hunt?
Here’s how: because Congress declares it to be so.
- And ours is not to reason why—ours is but to do and . . . to make it work.
So, Subchapter V trustees are faced with a tension—which creates a dilemma, namely:
- How to satisfy the mediator-like facilitation duty; while
- Simultaneously fulfilling various substantive duties—i.e., having a dog in the hunt.
Managing this tension and dilemma is a problem that every Subchapter V trustee must grapple with . . . in every Subchapter V case.
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