Subchapter V Trustee’s Facilitation Role (Part 2)—NOT MEDIATION

Facilitating safety and relaxation (Photo by Marilyn Swanson)

“(b) Duties.—The [Subchapter V] trustee shall— . . . (7)facilitate the development of a consensual plan of reorganization.”

From 11 U.S.C § 1183(b)(7)(emphasis added).

Facilitation is, by statute, a duty of every Subchapter V trustee—something a Subchapter V trustee must do. But the nature and boundaries of the facilitation role have always been fuzzy and, therefore, misunderstood.

My purpose in this multi-part series is to provide observations on the facilitation role.

Mediate v. Facilitate

One of the biggest misunderstandings about facilitation comes from a confusion of facilitation with mediation:

while the facilitation role may be like mediation;
the two roles are not the same—they are, in reality, dramatically different.

Notably, Congress recognizes and confirms such differences by designating the Subchapter V trustee’s duty as “facilitate,” not “mediate.”

Similarities

Both a mediator and the Subchapter V facilitator are third parties who help disputing parties reach an agreed resolution.

Differences

But the differences, which may seem small at first glance, are actually dramatic. Mediation theory is narrow and dogmatic . . . and safe; while the rules for Subchapter V facilitation are more relaxed . . . and can create discomfort.

Consider, for example, these differences:

a mediator cannot take a position before the court on issues being mediated; whereas, a Subchapter V facilitator has a statutory duty to do just that;
a mediator cannot have an interest in the outcome—i.e., cannot have a dog in the hunt; whereas, a Subchapter V facilitator has a dog in the hunt on a variety of issues (e.g., may oppose creditor claims or debtor’s discharge);
a mediator cannot do an independent investigation and issue a public report on findings; whereas a Subchapter V facilitator can be directed by the court to do that very thing;
a mediator must keep mediation information confidential; whereas, a Subchapter V facilitator has no such duty and may use information provided by the parties against them (subject to Fed.R.Ev. 408 limitations); and
a mediator’s involvement in a Subchapter V case generally requires specific court authorization; whereas, the Subchapter V trustee’s involvement is required by statute.

Mediator-ish Role

One helpful quality for serving as a Subchapter V trustee is mediation experience and expertise.

That’s because the facilitation role has a mediator-ish function: i.e., helping disputing parties reach an agreed resolution. And having the bringing-them-together skills of a mediator is helpful for a Subchapter V trustee.

But that’s where the “–ish” ends. Under traditional mediation theory:

self-determination of the disputing parties is an end-of-it-all necessity; and
a mediator must not take sides.

None of that is even relevant for a Subchapter V trustee, who is required by statute to take sides on the merits of a variety of issues and to reject what one or more disputing parties may want.

Mediation Moving Toward Facilitation?

It is interesting, moreover, that mediation theory and practice may be evolving to become more Subchapter V facilitation-ish.

Consider, for example, the following two examples that:

vary from traditional mediation theory in significant respects; and
are similar to some aspects of the Subchapter V trustee’s facilitation role—are facilitation-ish..

–Med-Arb

The term “Med-Arb” is a contraction of the words “mediation” and “arbitration.”

A Harvard Law publication of May 11, 2023, is titled, “What is Med-Arb? The pros and cons of med-arb, a little known alternative dispute resolution process.”

It provides this explanation of “Med-Arb”:

In a med-arb process, parties first reach agreement on the terms of the process itself, including that the outcome will be binding;
Next, they engage in a typical mediation session that may include the mediator caucusing with each party individually; but
If the mediation ends in an impasse, the mediator assumes the role of arbitrator and renders a binding decision.

This is a departure from traditional mediation theory and practice. And it appears to move toward the Subchapter V trustee’s facilitation role—i.e., becoming facilitation-ish.

–Power Imbalance

Traditional mediation theory says that a mediator must be entirely neutral between the mediating parties.

A variation from that theory says a mediator should be a counter-weight to power imbalances between mediating parties.

Such variation is explained in this linked article that reviews literature on the subject of mediator neutrality:

“Mediator neutrality is particularly called into question where there is a clear power imbalance between parties in a dispute. Moore (2003) refers to this as ‘asymmetrical power.’ He notes that ‘mediators can work with both weaker and stronger parties to minimise the negative effects of unequal power.’”
“Hansen (1999), speaking on power imbalance . . . states: …unless I can help balance that, and empower each party to effectively participate at the mediation table, we’re not going to have an effective, successful mediation.”
“In contrast to the more static neutral mediator, who has no responsibility to protect either party, a balanced mediator has the responsibility to protect both parties. In being balanced, the mediator has permission to question both parties about their negotiating perspectives and inquire about any circumstance or matter germane to an effective, resilient agreement.”

This is a departure from traditional mediation theory and practice. And it is is facilitation-ish like this:

the Subchapter V trustee has a duty to take positions consistent with the law and the facts—regardless of power distinctions between the disputing parties; and
it’s hard to imagine a greater power imbalance than what exists between a well-funded creditor and a penniless debtor.

Conclusion

Mediation and Subchapter V trustee facilitation have a basic similarity: both involve a third party helping others achieve an agreed resolution to their disputes.

And it’s helpful for a Subchapter V trustee to have mediator skills and experience in performing the facilitation duty.

But that’s where the similarities end—that’s the end of the mediation-ish character of the facilitation duty.

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