Mediation Without Confidentiality Rules: This Needs to Change

Caesars (photo by Marilyn Swanson)

By: Donald L. Swanson

“You don’t need my permission. Just click your heels together three times and say, ‘There is no place like mediation.’”

–U.S. Bankruptcy Judge Benjamin Goldgar, In re Caesars Entertainment hearing on 2/18/2016.

Despite such a statement, the Bankruptcy Court in Chicago had already, prior to February 2016, revoked its local rules on mediation.

Fast-forward to mid-September of 2016. This same Bankruptcy Court in the same In re Caesars case bemoans a mediator’s failure to provide evidence on usually-confidential mediation details.

–In response, the mediator resigns.

What these events reveal is the desperate need for a Federal Bankruptcy Rule on mediation with confidentiality requirements.

The reality, in Chicago’s Bankruptcy Court, is that no mediation rule exists: no local rule, no Federal rule, no statute . . . nothing. So, when a mediation session does occur in such Court, there is no basis for imposing confidentiality requirements on the process.

–The parties might agree to confidentiality. But such an agreement does not bind others or the Court.

Rule 408 of the Federal Rules of Evidence provides confidentiality protection for settlement discussions. But this protection is limited, and it is subject to significant exceptions: e.g., “The court may admit this evidence for another purpose” [Rule 408(b)].

–A state mediation statute might, arguably, be applicable. But the In re Caesars Judge gives no credence, whatsoever [not even a nod], to the Illinois Alternative Dispute Resolution Act, which provides for mediation confidentiality.

So . . . when the Judge in In re Caesars declares his expectation that the mediator should have provided substantive evidence on usually-confidential mediation details, the Judge is acting within existing rules.

–Such judicial expectation may be anathema to those who view mediation confidentiality as nearly-sacred.  But the Judge is, technically, acting appropriately.

–This needs to change!

Similarly, if there are 40 additional bankruptcy courts in the United States without local mediation rules, these 40 additional bankruptcy courts are in the same boat as the Bankruptcy Court in Chicago: they have no mediation rules.

–This also needs to change!

The way to accomplish the needed change is to adopt a Federal Bankruptcy Rule on mediation that imposes mediation confidentiality requirements upon all bankruptcy courts.

–Such a Rule needs to be adopted as quickly as possible.

–With such a Rule in place, the In re Caesars mediator-resignation flap could not have occurred–either in Chicago or in any other bankruptcy court in these United States.

The Caesars Judge is Right on Stay Termination

Caesars (photo by Marilyn Swanson)

Judge Goldgar is right.

Bankruptcy Judge A. Benjamin Goldgar, of Chicago, received lots of grief in recent days over the resignation of the Caesars mediator.  The resignation letter focuses on “atypical” language on mediation confidentiality that Judge Goldgar used to support his order terminating a stay of legal action against the Caesars parent company.  Here’s an article on the resignation.

But subsequent developments show that Judge Goldgar was right on the merits of the stay termination.

Judge Goldgar found the stay’s continuing existence to be an impediment to settlement–indicating that the stay’s termination would apply pressure toward achieving a settlement.

So, he terminated the stay (and used the offending mediation confidentiality language as part of the rationale for doing so).  Judge Goldgar is now proven to be correct that stay termination would improve settlement possibilities:

–The Wall Street Journal and other news outlets are reporting that Caesars Entertainment Corp. “has reached a deal to resolve the long-running battle over the $18 billion restructuring of the casino company’s main operating unit.”

Judge Goldgar will, undoubtedly, tip-toe around any future discussions or actions relating to mediation.

On the other hand . . .

Still . . . the Caesars mediator deserves kudos for taking a principled stand on an important mediation issue.

The mediation confidentiality flap in Chicago would be less significant, but for the fact that the Bankruptcy Court there recently revoked its local rules on mediation.

–Such revocation took the Bankruptcy Court in Chicago on an excursion back into the jurisprudence of the pre-1980s — before mediation came into existence as a common dispute resolution tool.

–Hopefully, one day, that Court will make its way back into the modern age by re-establishing some mediation rules that include confidentiality requirements.


Mediation Confidentiality is the Source of Judicial Bewilderment

Chicago (photo by Grant Swanson)

   By: Donald L. Swanson

“I found the [Mediator’s resignation] letter to be a little bit bewildering.”            

–A. Benjamin Goldgar, Chicago Bankruptcy Judge, September 21, 2016.

Judge Goldgar is, obviously, an excellent jurist with excellent judgment.
But everyone makes mistakes. And Judge Goldgar’s flap with the Caesars mediator over mediation confidentiality is one of those mistakes.

Mediation Confidentiality

Mediation confidentiality is a nearly-sacred precept today. There is a uniformity of belief, worldwide, that mediation effectiveness is dependent upon a cloak of confidentiality and that privacy of mediation information is a supreme value.

Judge Goldgar’s mistake is his failure to recognize this confidentiality precept, both in his initial ruling and in his follow-up “bewildering” explanation.

Mediation is Well-Used

Mediation is a well-used dispute resolution tool, these days, throughout the U.S.and around the world. It is commonly used for resolving conflicts at all levels–from workplace disputes to lawsuit disputes to international disputes.

The entire U.S. judicial system, both state and Federal, has a heavy mediation utilization. The only courts where mediation is yet to fully-take-hold, it seems, are many of the U.S. bankruptcy courts. The Bankruptcy Court in Chicago is today’s most-notable and adamant mediation-holdout.

Follow-Up Explanations

Judge Goldgar’s bewilderment is explained by the total absence, in his explanations, of mediation confidentiality concerns.

Here are his follow-up explanatins–note the absence of any reference to mediation-confidentiality:

–“This was a private mediation.”

–“When the debtor moved to have a mediator appointed, I made it very clear I had no ability to do that.”

–“As I recall, I told you that you’ve always had the ability to mediate, and you could do so or not as you saw fit, but that was not something that I should be getting involved with.”

–“So [I’m] not a supervising court.”

–“They weren’t standard reports. There was no requirement that the mediator ever report to the court in any fashion because, again, this was not a court-supervised mediation. This was purely private. These reports were filed for reasons I can’t explain.”

–“Compare the process with the examiner. The examiner was court-appointed. The examiner made reports to the court because he was ordered to. Nothing required the mediator here to do anything. Nothing from the court in any event.”

[Editorial comment: I understand the Judge’s point on examiner reporting. But an examiner is a bad analogy here because expectations of confidentiality, between an examiner and a mediator, are worlds apart.]

–The injunction motion, not the mediator’s report, “was the focus of my observations.”

–The mediator’s report “didn’t include any details,” so the mediator’s “mere conclusion was not entitled to very much weight.”

A Telling Remark

But the most telling comment from Judge Goldgar in his bewilderment explanation is this:

–“I don’t recall expressing any views on mediation, typical or atypical. As it happens, I have almost no views on mediation.”


Perhaps Judge Goldgar could educate himself on mediation, as a dispute resolution tool, and thereby avoid future mistakes on the subject.

Chicago Bankruptcy Court v. Mediation: Making News . . . Again!

Chicago    (photo by Grant Swanson)

By Donald L. Swanson

Back in February, 2016, we learn that the Bankruptcy Court in Chicago has revoked its local rules on mediation, while still encouraging parties to mediate their disputes.

This development seems a bit . . . well . . . bizarre. After all, for example, such an approach appears to violate Federal statutes and raises concerns over mediation confidentiality.

The latest news-heavy mediation item in this Chicago Court is the mediator’s resignation (dated September 9, 2016) in the Caesars Entertainment bankruptcy case (Doc. 4885, in Case No. 15-01145). A photo of the mediator’s resignation letter is here.

“Atypical” views on mediation confidentiality . . .

This Chicago Court makes statements in a Caesars bankruptcy hearing that the resigning mediator describes as:

–“atypical views of a mediation process” that would require the mediator to “breach the confidentiality of the mediation.”

Here are some of those judicial statements that ignore or disregard mediation confidentiality concerns:

“The debtors [point to] the mediator’s assertion in a written statement that the parties have made ‘material progress.’ Again, however, the mediator didn’t testify, so there was no opportunity to probe that assertion. His written statement seems to assume that progress consists primarily of frequent meetings and discussions, since that takes up the majority of his statement. . . . but meeting and discussing alone, without more, isn’t progress. His 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.”

[Quotation taken from page 10 of the “Transcript of Proceedings” dated August 26, 2016.]

The mediator takes umbrage at such mediation-confidentiality statements and responds, in his resignation letter, with this:

“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. Apparently 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.”

[Quotation taken from the mediator’s resignation letter dated September 9, 2016.]

Moreover, the mediator takes pains in his resignation letter to note that his mediation-confidentiality views are based on experience in complex Chapter 11 cases as both a bankruptcy judge and a mediator – he’s no neophyte:

“in my experience presiding over many complex Chapter 11 cases and mediating high profile Chapter 11 matters to successful conclusions, I believe . . . “

On the other hand . . .

There’s gotta’ be some empathy for the Judge on this:

–The Judge is making an important ruling; but he makes a mistake in using the mediation-related words quoted above as part of the rationale for his ruling.

The important ruling is a denial of the request by Caesars for an extension of the soon-to-expire injunction that had “halted civil actions” against its parent company.  The mediation-confidentiality words are only a portion of the Judge’s ruling:

–The ruling is made orally from-the-bench, and the mediation-confidentiality words are contained in 2 transcript pages of a ruling that covers 20 transcript pages.

–The mediation-confidentiality words are one of multiple grounds for denying the injunction.

The essence of the Court’s rationale in denying the extension is this: the injunction is, actually, an impediment to settlement efforts. The Court explains the impediment like this:

“The pace of discussions does not show that the current injunction is helping or that its expiration gives the parties much cause for concern. Given this history, in fact, it appears that it isn’t injunctive relief that promotes settlement here but rather its absence. The deadlines in the underlying guaranty litigation are what prompt the parties to act.”

This explanation appears to be well-founded and astute. So, it’s unfortunate that the Judge chose to use the mediation-confidentiality rationale to support his ruling.

Editorial Comments:

This Bankruptcy Judge would probably [or should] acknowledge, in retrospect, that his mediation-confidentiality words quoted above are a mistake.

If that happened, the mediator would probably retract his resignation. Existing settlement discussions could then go forward under the additional pressure provided by the injunction’s expiration.

The bigger problem, however, is that this Bankruptcy Court in Chicago is already on-record as antagonistic to mediation:

E.g., revocation of its local mediation rules is perceived as a highly-demonstrative show of contempt for that process; and

–The Judge’s above-quoted words on mediation-confidentiality are precisely-consistent with this perception of antagonism and contempt.

It’s all unfortunate.


Here is a link to the transcript of the Court hearing.  Mediation-related comments are on pages 9 and 10.

Follow-Up Article:

The Judge’s follow-up response to the mediator’s resignation is discussed here.

Mediator in Caesars Entertainment Resigns — With an Interesting Explanation

By Donald L. Swanson

Here is a photo of the resignation letter from the mediator in the Caesars Entertainment bankruptcy proceeding.

Mediator’s Resignation Letter in Caesars Bankruptcy [with highlighting]
Wow!!  That’s an interesting take.

And kudos to the mediator.  It’s always refreshing to see a principled stance.

This Caesars case is pending in the Bankruptcy Court for the Northern District of Illinois, located in Chicago.

Here’s a link to a follow-up article, which includes the Judge’s comments.

They’re in a bit of a pickle–Part One: Mediation Confidentiality in Chicago’s Bankruptcy Court


By Donald L. Swanson

Pickle Jar

Reuters reports that, Caesars Entertainment signs a “non-disclosure agreement” with various parties “as part of mediation process.”

Here’s saying that the parties to any such “non-disclosure agreement” are in a bit of a pickle. Here’s why.

The Bankruptcy Court in Chicago recently deleted its Local Rules on mediation.

So, the question is this: To what extent is a “non-disclosure agreement” in support of a mediation-without-court-authorization enforceable in Chicago’s Bankruptcy Court against others who don’t sign it? Continue reading “They’re in a bit of a pickle–Part One: Mediation Confidentiality in Chicago’s Bankruptcy Court”

“Don’t Trust your Soul to no Backwoods Southern Lawyer🎶” — or Your Business to the Bankruptcy Court in Chicago

Bankruptcy Court in Chicago Deletes its Local Mediation Rules

By Donald L. Swanson

Here is my memory from a decade ago in a far-away jurisdiction where I occasionally practiced: the bankruptcy judge’s procedural rules have a backwoods feel. Continue reading ““Don’t Trust your Soul to no Backwoods Southern Lawyer🎶” — or Your Business to the Bankruptcy Court in Chicago”

Local Mediation Rules Revoked in Chicago Bankruptcy Court?! Insights From a Chicago Mediator (Updated 3/24/2016 with Responses)

Co-chair of Bankruptcy, Reorganization and Creditors Rights Practice at Shaw Fishmen Glantz & Towbin LLC


Robert M. Fishman mediates bankruptcy disputes across the entire U.S.A.

Mr. Fishman hails from Chicago and provides the following article on a recent revocation of Local Bankruptcy Rules on mediation in the Northern District of Illinois.


  By Robert M. Fishman

What makes mediation the “go to” approach to dispute resolution in some jurisdictions and an afterthought in others? Continue reading “Local Mediation Rules Revoked in Chicago Bankruptcy Court?! Insights From a Chicago Mediator (Updated 3/24/2016 with Responses)”

What’s the Fascination With Requesting an Unnamed “Sitting Bankruptcy Judge” as Bankruptcy Mediator? (Updated on 3/3/16 with Responses)


By Donald L. Swanson

The Motion to appoint a mediator in the Caesars Entertainment bankruptcy suggests that an unnamed “sitting bankruptcy judge” be appointed. And filings by others in support of the Motion agree.

The unnamed “sitting bankruptcy judge” suggestion seems to be common in many cases. But there is a better approach.

Let’s begin by stipulating as follows: Continue reading “What’s the Fascination With Requesting an Unnamed “Sitting Bankruptcy Judge” as Bankruptcy Mediator? (Updated on 3/3/16 with Responses)”

Local Bankruptcy Rules Without Mandatory Mediation Authority Are Like A Toolbox Without A Vise-Grip


By Donald L. Swanson

Fix-it folks have tool boxes full of screw drivers, pliers, box-end and open-end wrenches, crescent and socket wrenches, etc., for handling nuts, bolts and screws. But when fix-it folks need a tool that grabs-and-holds and won’t-let-go, they pull a vise-grip from the toolbox.  Continue reading “Local Bankruptcy Rules Without Mandatory Mediation Authority Are Like A Toolbox Without A Vise-Grip”