An Old Mediation Controversy—Based on Misunderstandings & Overreactions? (In re Caesars Entertainment)

In re Caesars Entertainment is one of the major-and-successful bankruptcy cases in the history of these United States.

The Caesars bankruptcy was filed on January 15, 2015, in the Northern Illinois Bankruptcy Court with $18 billion of debt. It achieved a confirmed plan two years later (on January 17, 2017). The bankruptcy case finally closed within the last six months (on December 3, 2025), and its last docket entry [No. 9968] is dated January 12, 2026.

Mediation Controversy—Background

Five months before confirmation of the Caesars plan of reorganization, a mediation controversy arises – out of nowhere. Here’s what happens.

The controversy begins with an adversary proceeding: Caesars Entertainment v. BOKF, N.A., Adv. Pro. 15-A-149.

In the adversary, debtors seek a preliminary injunction under § 105(a) to halt four guaranty actions in other courts against debtors’ non-debtor parent corporation. After an evidentiary hearing, the Bankruptcy Court denies debtors’ motion (decided July 22, 2015; Doc. 158).

On appeal, the U.S. District Court affirms (Case No. 15 C 6504, decided October 6, 2015, Doc. 43). But the Seventh Circuit reverses and declares:

“We don’t say that the stay sought by [debtors] must be granted – that’s an issue for the bankruptcy judge to resolve in the first instance – but only that both he and the district judge erred in thinking that section 105(a) . . . foreclosed such a procedure” (Case No. 15-3259, decided December 23, 2015).

So, the Seventh Circuit remands the § 105(a) injunction dispute back to the Bankruptcy Court for consideration of this question:

whether debtors’ proposed injunction “is likely to enhance the prospects for a successful resolution of the disputes attending its bankruptcy.”

In response, the Bankruptcy Court (i) enters an injunction for 60 days under § 105(a) based on the record previously created, (ii) then extends it again after a remand trial to the end of August 2016, and (iii) schedules a second remand trial for August 24, 2016.

Meanwhile, the debtors and other parties engage a mediator to help resolve “issues surrounding the development of a plan of reorganization.”

On August 16, 2016, (i.e., 8 days before the second remand trial is to begin), the mediator files a “Mediator’s Statement” (Doc. 300) in the adversary proceeding declaring:

“there has been material progress in the mediation,” and the mediation sessions “have been productive”;
“the parties are making progress towards a consensual resolution of the Debtors’ cases and the related litigation,” and “there is a likelihood of continued material progress in the discussions”; and
“based on my experience, there ultimately should be a successful conclusion to the mediation before the conclusion of the confirmation hearing.”

The next day, Debtor includes the “Mediator’s Statement” in its “Exhibit List,” and such Statement is admitted into evidence during the second remand trial—without objection.

The second remand trial lasts three days. On the following day, the Bankruptcy Judge rules from the bench—denying the requested extension of the injunction. The oral ruling is extensive (i.e., the Doc. 354 transcript of the oral ruling covers 22 pages) and addresses many points and issues.

Mediation Controversy—How it Happened

In its oral ruling on the evidence presented, the Bankruptcy Court finds that negotiations with the guaranty plaintiffs “have proceeded at a pace that shows no real urgency on the part of the debtors’ camp.” To support such finding, the Court discusses the weight of information in the Mediator’s Statement.

–Observations on Mediator’s Statement

Debtors argue that the Mediator’s Statement proves progress toward a consensual resolution of disputes.

In responding to such argument, the Bankruptcy Court explains that the Mediator’s Statement, although in evidence, is entitled to little weight. Here’s why:

“the mediator didn’t testify, so there was no opportunity to probe” the mediator’s “material progress” assertion;
the Mediator’s Statement “seems to assume that progress consists primarily of frequent meeting and discussions, since that takes up the majority of his statement,” but “meeting and discussing alone, without more, isn’t progress”;
the Statement “fails to describe the discussions themselves, the dates or locations when they took place, any proposals exchanged, or any distance remaining between the parties”; and
“The only actual progress, in the sense of an agreement, that the mediator cites, is the second lien notes RSA,” and “It’s hard to conclude that the RSA represents much progress toward a settlement here.”

–Mediator’s Resignation Letter

The mediator apparently takes offense to the Court’s observations about the Mediator’s Statement. And in response, the mediator . . . resigns!

The mediator’s resignation letter includes the following (emphasis added):

“I have decided to resign as the mediator for the Caesar’s Chapter 11 bankruptcy case effective immediately”;
“recent events have convinced me that I am unable to continue the mediation process in accordance with standard mediation procedures I adhere to”;
“I believe Caesar’s effort at mediation is and has been affected by atypical views of a mediation process”;
“as I read the recent hearing transcripts and the Court’s August 26 bench ruling, I was struck by the extent my Mediation Statement regarding the progress of the mediation – a standard report to a supervising Court – was the focus of the hearing and the Court’s observations”;
“the Court did not find my progress report helpful because I didn’t breach the confidentiality of the mediation and testify in open court or describe the discussions and proposals exchanged, and detail the status of the differences among the parties”;
“I believe the Court either misspoke or doesn’t understand how such disclosures would be viewed by participants and the markets”; and
“I am convinced that I can’t continue and possibly a new mediator will able able to establish a workable process.”

Retrospection & Retraction

I remember the mediation controversy resulting, back then, from the ruling and resignation described above. And I was among those critical of the Bankruptcy Court’s ruling, back then.

So, on the occasion of the recent closing of the Caesars Entertainment bankruptcy case, I thought some retrospection on the matter might be helpful.

After such retrospection, I’m retracting my former criticism as based on incomplete information and unwarranted. Here’s why:

the oral ruling that provoked the controversy did not represent “atypical views” of mediation—instead, the oral ruling contains an explanation of how information in the Mediator’s Statement fails to provide the evidentiary weight that debtors argued it should have;
the oral ruling is not “the focus of the hearing and the Court’s observations”—instead, the Court’s observations on the Mediator’s Statement are but a small part of the Court’s complete rationale for its ruling (see a summary below of the broader issues and findings); and
within five months after the mediator’s resignation, debtors’ plan of reorganization is confirmed.

Broader Issues and Findings

The Bankruptcy Court’s rationale for denial of the injunction extension, as expressed in the Court’s oral ruling, includes a much broader range of issues and findings beyond information in the Mediator’s Statement. Such broader issues and findings including the following:

the evidence shows “that the debtors do have a likelihood of reorganizing successfully” because the debtors “have a strong business that has done well since these cases were filed”;
“I’m no longer convinced . . . that an injunction is likely to enhance the success of a reorganization or that its denial will endanger that success”;
“Most of the deal-making that has happened here has occurred when no injunction was in effect”;
“Negotiations with the guaranty plaintiffs . . . have also proceeded at a pace that shows no real urgency on the part of the debtor’s camp,” and “it isn’t injunctive relief that promotes settlement here but rather its absence”;
“Particularly disturbing is that none of the targets of the estates’ claims . . . are making any financial contribution to the reorganization,” despite the fact that “the proposed plan would release all the claims against them”;
“Gaining time to reach a settlement was the goal the debtors advance at the first injunction hearing” and “in the court of appeals,” and it has “always been the point of the debtors’ requests for injunctive relief”;
“An injunction through a decision on confirmation is a non-starter . . . because these sorts of injunctions are, as I said, drastic remedies and also almost always temporary, rarely more than a few months”;
“The two decisions – only two – that the debtors cite . . . involved plans under which the creditors enjoined would be paid 100%, not the situation here”;
“I’m no longer convinced that the denial of an injunction will endanger the reorganization” because:
- “a reorganization can in fact be accomplished without a contribution”; and
- in the event of “an adverse judgment in the guaranty litigation,” alternatives to bankruptcy would exist, “including the possibility of a forbearance agreement and even a stay pending appeal”;
“The public interest doesn’t favor an extension of the injunction, either” because:
- “a successful reorganization is possible here even if the injunction is not extended”; and
- “past experience in this case has shown that settlements result when no injunction is in place”;
on “balancing the equities”:
- the risks of frustrating the reorganization efforts are “Not so great,” and “allowing the injunction to expire now appears more likely to produce a resolution than extending the injunction”; and
- by contrast, extending the injunction would harm the other parties—they “will be stymied in their ability” to enforce the guarantees, and “the debtors have already been the beneficiaries of 5 months of injunctions”;
“The § 105 injunction should not provide non-debtors with a comfortable ‘free ride’ on the coattails of the debtor,” and “the non-debtors should continue to feel pressure to expedite the reorganization process”; and
“Although the call is a close one, the balance of the equities tips in favor of the defendants here.”

Conclusion

In retrospect, the mediation controversy described above is an unfortunate result of misunderstandings and overreactions—including my own criticism back then.

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