By: Donald L Swanson
Many years ago, back when mediation is a rarity in bankruptcy disputes, I asked an old-timer this question:
Why is the bankruptcy system a lagging adopter of mediation?”
A Surprising Answer
The old-timer gave this surprising answer:
“At the time of the Bankruptcy Code’s enactment, the bankruptcy judge was viewed as a mediator in the judge’s own court.”
The old-timer added this. When the Bankruptcy Code was enacted:
- Bankruptcy judges were never intended to be Article III judges;
- Instead, bankruptcy judges were intended to be more like:
- a magistrate judge (authorized by 28 U.S.C. Sec. 631 et seq.); or
- a special master (authorized in U.S. district courts by Fed.R.Civ.P. 53 but rejected in bankruptcy courts by Fed.R.Bankr.P. 9031).
An Obvious Illustration
An obvious-and-common illustration of a judge acting like a mediator is this story:
- before starting a trial, a judge meets with disputing attorneys in chambers to explore settlement possibilities, and
- settlement often occurs as a result, which eliminates the need for the trial.
A Less-Than-Obvious Illustration
A most interesting mediator-type role I’ve seen a Bankruptcy Judge fill, in the Judge’s own Court, occurred back in the 1980s.
Here’s what happened back then:
- An economic recession engulfs our area, and bankruptcy filings explode;
- The local Bankruptcy Court consists of a single Bankruptcy Judge, a single assistant for the Judge, and a handful of employees in the Clerk’s Office;
- The Court has no electronics—a land-line telephone with long-distance pricing for nearby towns and an electronic typewriter are as high-tech as the Court’s systems gets; and
- The Court’s processing is entirely by paper—reviewing documents in a court file means a trip to the Courthouse, and getting copies of those documents is challenging.
—Dealing With an Overwhelming Caseload
As the Bankruptcy Judge’s caseload became overwhelming, he dealt with it like this:
- He schedules a motion day for once or twice a week, with eight to a dozen items listed for hearing every hour, all day, with an hour break for lunch;
- Attendance by an attorney at a hearing is mandatory—failure to appear = you lose;
- Every hearing runs long, it seems, and a hearing scheduled for 11:00 a.m. might actually occur at 2:20 p.m.;
- Each hearing is held on affidavit evidence;
- The Judge rules from the bench at the end of every hearing and makes a short Journal Entry to document the ruling (e.g., “Motion granted” or “Motion denied”);
- As a result, attorneys hang together in the hallways for a long time and discuss their disputes scheduled to go before the Court;
- In this context, many disputes settle—attorneys notify the Clerk’s office of the settlement and then leave the Courthouse;
- The Clerk’s Office notifies the Court that a settlement has occurred;
- Then, the Court announces, when the hearing time for that dispute finally arrives, that the matter “settled” and expresses gratitude for that result—then moves on to the next scheduled item; and
- The vast majority of all disputes before this Bankruptcy Court settle in this way.
I’ve always found this Bankruptcy Judge’s practice to be one of the more-effective mediation systems I’ve experienced [note: I’m not endorsing this system . . . merely noting it’s effectiveness].
In this context, the Bankruptcy Judge was the mediator. The Judge:
- brings the parties together—for clients who do not appear in person, pay phones are in the hallways for their attorneys to call and obtain settlement authority;
- provides an incentive to settle—no one wants to wait hours for an actual hearing, and a ruling from the bench on a complicated matter can seem risky; and
- establishes a system that attorneys come to expect and rely upon in preparing and executing case strategies.
—Bemoaning It’s Demise
In fact, many attorneys bemoaned the demise of this mediation-type system when it went away.
And it was the demise of this mediation-type system that created a later-perceived need for formal mediation rules that now exist in this Bankruptcy Court.
The bankruptcy judge as mediator in the judge’s own court is an old and meritorious idea.
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