Mediation Confidentiality: Mediator’s Information and Testimony


Mediator Confidentiality is Nearly-Sacred

By Donald L. Swanson

The basic rule is this: the confidentiality of information held by a mediator is nearly-sacred.

The case is In re Anonymous, 283 F.3d 627 (4th Cir. 2002).

The question is whether a mediator may divulge, or be compelled to divulge, information from a mediation session.

An underlying lawsuit is settled in mediation.  And a dispute arises between the plaintiff and plaintiff’s attorney over reimbursement of expenses.

The dispute is referred to an arbitration panel, and one of the parties wants the mediator to provide documents and testify.  The other party objects.

A lengthy opinion on the matter addresses the question of what information a mediator may divulge – or be required to divulge.

The following is a summary of the findings, analysis and conclusion on this question in the opinion.

Practical Problem

If a mediator were to divulge confidential information, that would “encourage perceptions of bias in future mediation sessions involving comparable parties and issues” and might “encourage creative attorneys to attempt to use our court officers and mediation program as a discovery tool.”

If mediators “testify about their activities” or are required to produce their “notes or reports of their activities,” the evidence would undoubtedly favor or seem to favor one side or the other. The “inevitable result” would seriously impair or destroy “the usefulness of the mediation program in the settlement of future disputes.”

The following from a California case is quoted in the opinion:

“Good mediators are deeply committed to being and remaining neutral and nonjudgmental, and to building and preserving relationships with parties. To force them to give evidence that hurts someone from whom they actively solicited trust . . . rips the fabric of their work and can threaten their sense of the center of their professional integrity.”

Legal Standard

The following legal standard is announced in the In re Anonymous opinion for a court’s consent to a mediator’s disclosure of information:

“We will consent for the Circuit Mediator to disclose confidential information only where such disclosure is mandated by manifest injustice, is indispensable to resolution of an important subsequent dispute, and is not going to damage our mediation program.”

Applying the Standard

The In re Anonymous Court applies its legal standard as follows:

–“In this situation, [plaintiff’s former attorney] has failed to establish that the expense dispute is incapable of resolution absent the Circuit Mediator’s involvement.”

–Plaintiff “objects to the Circuit Mediator’s involvement,” contending that the Mediator “will be biased in her responses” to the former attorney’s inquiries.

–The mediation program “may be damaged when a party who has been assured of confidentiality subsequently faces a disclosure of confidential material by a mediator who is perceived, rightly or wrongly, as biased.”

–”This perception of bias is the type of damage against which our confidentiality rule, as applied to the Circuit Mediator, is attempting to protect.”


Accordingly, the Court reaches this final conclusion:

“We decline to consent for the Circuit Mediator to respond to the informal interrogatories . . . or to otherwise disclose confidential information in the expense dispute.”

What do you think about all this?



How a Creative Mediation Program Turns a Problem into Success


By Donald L. Swanson

We, too, sympathize with the plight of the American farmer. Nevertheless, the solution proposed by the Ahlers majority is contrary to the Bankruptcy Code and a long line of case law.”

— U.S. Supreme Court in Norwest Bank Worthingtonb v. Ahlers, 485 U.S. 197, 209 (1988).

The Problem

The 1980s are a financial disaster for farmers. The 1980s Farm Crisis, as it is known in the Midwest, put many farmers out of business.

Many farmers file Chapter 11 back then. But most find little assistance in bankruptcy because of Chapter 11’s absolute priority rule. This rule prohibits confirmation of a debtor’s plan of reorganization unless the unsecured creditors, (i) are paid in full, or (ii) agree to something different. The Supreme Court quotation above is from a ruling that the absolute priority rule applies (and cannot be circumvented) in farm cases.

In 1986, during the heart of the Farm Crisis, Congress enacts a bankruptcy provision expressly for farmers: Chapter 12. This enactment is a godsend for many farmers and solves financial problems for many of them.

Additionally, many state legislatures in the Midwest enact farm mediation laws, which require mediation before a creditor can enforce a delinquent farm loan.

The Mediation Response in Minnesota

In 1986, the Minnesota legislature adopts its “Farmer-Lender Mediation Act,” which is mandatory in character.

–This Act specifies that a secured creditor may not enforce a claim against the farmer until ”a mediation notice . . . is served on the debtor and . . . the debtor and creditor have completed mediation.”

Early-and-Modest Success

A 1993 report on the effectiveness of the mandatory mediation Act in Minnesota says:

–54,828 people participate in mediations under this Act between 1986 and 1992;

–55.5% of mediation sessions result in an agreement between the farmer and the creditor;

–the “mandatory aspect” of the mediation requirement “encouraged many farmers to consider mediation who would not otherwise have done so”;

–there is “an overall high level of participants’ satisfaction with the process and its outcomes”; and

–mediations under this Act have been successful in “improving communications, keeping farmers in the community, and preventing serious personal crisis.”

Later-and-Greater Success

A 2015 Fiscal Year report on the effectiveness of Minnesota’s Farmer-Lender Mediation program shows significant improvement from the late-1980s / early-1990s experience. In 2015:

–2,472 mediation notices were sent by creditors

–1097 farm debtors requested mediation, of which 917 completed mediation

–The total amount of debt reported and addressed in the mediation sessions is “approximately $180.6M”

–97% of farm debtors who completed mediation reached a settlement with the creditor


A critical-and-creative element for the effectiveness of Minnesota’s Farmer-Lender Mediation program is a pre-mediation orientation session in which the debtor meets with a financial analyst. The analyst assists the farmer in assembling, developing and evaluating information on the farmers financial circumstances in preparation for the mediation session. This is, obviously, a valuable service.


The Minnesota Farmer-Lender Mediation Act is a creative use of mediation services. It has served a valuable and successful role for farmers and lenders in Minnesota and is another demonstration of how a mediation process, when tailored to the needs-at-hand, is an effect dispute resolution tool—even in the most-difficult of circumstances.

Accordingly, everyone involved in mediation of all types should continually look for ways to adjust mediation services to address the unique characteristics of each dispute.

And when an entire class of disputants (e.g., farmers and creditors in this Minnesota example) can benefit from a creative mediation approach, then creativity should be pursued!!

Appeals of Bankruptcy (and Other Business) Disputes Take Too Long — Mediation and Other Remedies

This city wall remnant is useless with aging

By: Donald L. Swanson

Advertised Prices:

“Haircuts $10 (we add a 3% surcharge if you pay by credit card)”

“Sundaes $10 (with a $0.30 surcharge for credit card users)”

State Law Violation

The State of New York says these advertised prices violate New York General Business Law § 518, which provides:

“No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.”

Anyone who violates this prohibition “shall be guilty of a misdemeanor punishable” by a fine “not to exceed” $500 or “imprisonment up to one year,” or “both.”

Supreme Court Ruling

In its March 29, 2017 ruling in Expressions Hair Design v. Schneiderman, Case No. 15-1391, the U.S. Supreme Court:

–determines that, “In regulating the communication of prices rather than prices themselves, § 518 regulates speech”; and

— remands the case to the Second Circuit Court of Appeals “to analyze § 518 as a speech regulation.”

A two-Justice concurring opinion adds that the true meaning of § 518 is unclear and should be certified to New York’s state appellate court for clarification: “§ 518 evades easy interpretation” and the Second Circuit “erred by not asking” the New York state appellate court “for a definitive interpretation of § 518.”

Case Timeline

Here’s a timeline of the progression of this case:

–June 4, 2013 – A Complaint is filed in the U.S. District Court.

–November 4, 2013 – Final Judgment is entered by the U.S. District Court, declaring that § 518 “violates the First Amendment.”

–December 2, 2013 – Final Judgment is appealed to the Second Circuit Court of Appeals.

–March 5, 2015 – Court of Appeals reverses the District Court, declaring that “§ 518 does not violate the First Amendment.”

–April 1, 2016 – First filing (a request for extension) is made with the U.S. Supreme Court.

–September 29, 2016 – Supreme Court grants Petition for a Writ of Certiorari.

–March 29, 2017 – Supreme Court issues its ruling and remands the case to the Second Circuit “for further proceedings consistent with this opinion.”

–June 6, 2016 – Second Circuit establishes July 13, 2017, as the “time for all parties to file their simultaneous letter briefs.”

So . . . this case has been wending its way through the Federal Courts for four years.  Three-and-a-half of those four years have been on appeal.  And the dispute is now back with the Circuit Court for another appellate round.  All this appellate activity is over a seemingly-minor question of how a merchant can post its prices.  Heck, by the time a final ruling is actually made on this dispute, we’ll probably have progressed to a cashless society – and the ruling won’t matter.

A Major Problem

This case illustrates a major problem for appeals of commercial disputes in general and of business bankruptcy disputes in particular.  They take too long!!

Every business bankruptcy case has two functions:  (1) maximizing the value of the business and its assets, and (2) deciding who gets the money.  Unless the maximizing value function is performed well in a particular case, you can forget about the distribution function.  And there is, typically, an overwhelming need for speed in efforts to maximize value.

And so, in an appeal of a business bankruptcy dispute, it’s a bad thing to hold up distributions while a dispute languishes on appeal.  But it’s a much worse thing when the issue languishing on appeal impairs or impedes the maximizing value function.

Moreover, bankruptcy cases, despite their need for speed, have an extra layer of appeals.  In a U.S. district court case, the appeal is a two-step process: appeal is taken, first, to the circuit court of appeals and goes from there to the U.S. Supreme Court.  A bankruptcy court appeal, however, must first go to the U.S. district court (or to the bankruptcy appellate panel), and then to the circuit court of appeals, and from there to the U.S. Supreme Court.  Accordingly, the appellate delays in bankruptcy cases (where the need for speed is paramount) can be maddeningly long.

Potential Remedies

It’s difficult to come up with appropriate remedies for this problem.  But here are a couple ideas:

–Expand the doctrine of equitable mootness, whenever value maximization would be impaired by delays on appeal; and

–Mandate mediation for every appeal of a bankruptcy dispute, with mediation to occur within 30 days after the notice of appeal is filed and while the briefing schedule progresses.  Circuit courts of appeals are already doing some mandatory mediation like this (and are achieving excellent results); such efforts should extend, for bankruptcy appeals, to the district courts and bankruptcy appellate panels as well.

Each of these two remedies would help address the delays-on-appeal problem.  Additional remedies need to be explored and pursued as well.          

Mediation “Dream Team” Appointed in Puerto Rico — But With a “Voluntary” Limitation and Impediment

Puerto Rico’s location on the map

By Donald L. Swanson

On May 21, 2017, the Financial Oversight and Management Board for Puerto Rico files its “Petition” initiating a proceeding under the Puerto Rico Oversight, Management, and Economic Stability Act. This proceeding is described as a pseudo-bankruptcy and is pending in the U.S. Bankruptcy Court for the District of Puerto Rico (Case No. 17 BK 3566).

Mediation Order Appointing “Dream Team”

On June 14, 2017, the presiding Judge in the Puerto Rico case enters an “Order and Notice of Preliminary Designation of Mediation Team” (Doc. 74). This Order appoints a five-member team of mediators that’s widely recognized as a mediation “Dream Team.”

This Dream Team “is led by Chief Judge Barbara Houser” of the U.S. Bankruptcy Court for the Northern District of Texas. The other four members are:

–Judge Thomas L. Ambro of the U.S. Court of Appeals for the Third Circuit;
–Judge Nancy Friedman Atlas of the U.S. District Court for the Southern District of Texas;
–Judge Christopher Klein of the U.S. Bankruptcy Court for the Eastern District of California; and
–Judge Victor Marrero of the U.S. District Court for the Southern District of New York.

The mediation Order appears to follow the approach, made famous by the City of Detroit bankruptcy, of appointing a mediator team to help shepherd along the bankruptcy proceeding of a governmental entity. The mediation Order appears to be a very good step!

“Voluntary” Limitation

To quibble on one point, however, the mediation Order contains this limiting provision:

–“Participation in mediation sessions will be voluntary.”

Why would a presiding Judge appoint a five-person mediation Dream Team but permit them to mediate only when disputing parties volunteer to do so?

Detroit Bankruptcy – A Contrasting Example

Participation in mediation efforts, back in the City of Detroit bankruptcy, are anything but “voluntary.” Consider these earliest mediation steps in the Detroit bankruptcy (Case No. 13-53846 in the U.S. Bankruptcy Court for the Eastern District of Michigan):

July 18, 2013 — Detroit files its Petition under Chapter 9 of the Bankruptcy Code.

August 13, 2013 – Presiding Bankruptcy Judge Steven Rhodes enters a “Mediation Order” (Doc. 322), which provides:

“After consultation with the parties involved, the Court may order the parties to engage in any mediation that the Court refers in this case”; and

The Judicial Mediator “is authorized to enter any order necessary for the facilitation of mediation proceedings” and “may, in his discretion, direct the parties to engage in facilitative mediation on substantive, process and discovery issues.”

August 16, 2013 – The Judicial Mediator, Chief Judge Gerald Rosen of the U.S. District Court for Eastern District of Michigan, issues his “Order to Certain Parties to Appear for First Mediation Session” (Doc. 334), which identifies 12 parties and says:

“IT IS HEREBY ORDERED the above-named parties shall appear for an initial mediation session before the Honorable Gerald E. Rosen, Chief Judge of the United States District Court for the Eastern District of Michigan, in his Courtroom, . . . on Tuesday, September 17, 2013 at 11:00 a.m.

The mediator team in the City of Detroit bankruptcy, led by Judge Rosen, aggressively and effectively exercises the broad authority granted to them. And their efforts prove to be successful.

Mandated Mediation – A Common Tool

Moreover, mandated mediation is a commonly-used tool in many courts, both state and Federal, throughout these United States. In the U.S. circuit courts of appeals, for example, every circuit but one has a mandatory mediation provision. And studies show these mandatory provisions to be highly successful in achieving settlements.

Empirical Studies – And Puerto Rico’s Experience

Furthermore, empirical studies show that “voluntary” mediation programs commonly suffer from limited use.  Such study results are consistent with Puerto Rico’s pre-filing experience: “voluntary” mediation initiatives made little-to-no headway.  So, the “voluntary” limitation in this case might even leave the Dream Team with little-to-do beyond imploring parties to mediate their disputes.


The presiding Judge in the Puerto Rico case takes a major step by establishing a mediation system and appointing a mediation Dream Team. But the Judge limits mediation efforts, at the outset, to “voluntary” participation. This “voluntary” limitation on the Dream Team’s efforts is likely to impede and impair the effectiveness of the Dream Team’s mediation efforts.

How a Judge Makes Mediation Work: Supporting Mediation with Timely Orders

Making it work: Shoulder-to-the-wheel support

By Donald L. Swanson

“We in bankruptcy impair contracts all day, every day . . . That is what we do.”

–Judge Steven Rhodes, as quoted by Nathan Bomey in “Detroit Resurrected: To Bankruptcy and Back.”

Michigan’s State Constitution provides that public pension rights cannot be impaired.  So, pensioners take the position, in Detroit’s bankruptcy, that pension rights are sacrosanct and cannot be touched.  Their positions in mediation are, therefore, inflexible.

An Initial Supporting Order

Judge Rhodes wrestles with the question of whether contract rights of pensioners can be impaired in bankruptcy.  And he issues an early order on that question.  He rules:

–The U.S. Bankruptcy Code takes precedence over pension provisions in Michigan’s Constitution; and

–Therefore, the contract rights of public pensioners can be modified and impaired in bankruptcy.

Bomey reports in Detroit Resurrected that this ruling, “delivered a blow to unions” and exposed “a serious crack in a financial foundation” previously believed “to be indestructible.”  This ruling brings unions and pensioners to the mediation bargaining table to negotiate the best deal possible–and they negotiate a very good deal.

Without this ruling, Detroit’s bankruptcy might still be slogging along in bankruptcy.  Instead, it creates an incentive for unions and pensioners to bargain for settlement.  And the ultimate results are invaluable for the pensioners—their decision to bargain, instead of fighting in court, proves to be well-taken.

Another Example of Supporting Mediation with a Timely Order

Similarly, Judge Rhodes supports the mediation effort in another context by expressing his opinion on a contentious issue.  Bomey reports:

–Detroit is in a dispute with outlying counties over regionalization of Detroit’s water system, and the mediation is at impasse.

–Judge Rhodes addresses the dispute by declaring his “sense” that “a regional water authority” is “in the best interest” of the City and all its customers.

–Judge Rhodes adds that, “if we do not take advantage of this unique opportunity,” it will, in all likelihood, “be lost forever.”

–The result: “the counties caved” and reached a settlement, “rather than risk having one imposed” upon them by Judge Rhodes.


Such supportive-rulings work!

And they provide a model for other courts to follow.

–Judicial action addressing the merits of contentious issues can be useful, if not essential, in creating incentives for settlement.

Mandating Mediation to Develop a Mediation Culture

A glaring contradiction? (Photo by Marilyn Swanson)

By:  Donald L. Swanson

[T]he full benefits of mediation are not reaped when parties are left to participate in it voluntarily.

D. Quek, Mandatory Mediation: An Oxymoron? Examining the Feasibility of Implementing a Court-Mandated Mediation Program, Cardozo Journal of Conflict Resolution, Vol 11:479, at 483 (Spring 2010).

The article linked above is written by Dorcas Quek, whose resume includes this:

“L.L.B. (National University of Singapore); L.L.M. (Harvard Law School); Visiting Researcher at Harvard Law School (2008-2009); Assistant Registrar and Magistrate in the Singapore High Court (2005-2007) and District Judge in the Primary Dispute Resolution Centre in the Singapore Subordinate Courts (June 2009 onwards).”


Ms. Quek’s article examines “the current debate in the United States concerning court-mandated mediation.” Here are some of her findings:

Mediation “may well be under-utilized in certain jurisdictions” because parties and attorneys “are still accustomed to treating litigation as the default mode of dispute resolution” and because “initiating mediation” may be “perceived as a sign of weakness.”

“In many jurisdictions, the rates of voluntary usage of mediation have been low.”

Where the “reticence towards mediation is due to unfamiliarity with or ignorance of the process,” court-mandated mediation “may be instrumental” in overcoming “prejudices or lack of understanding.”

“Studies show that parties who have entered mediation reluctantly still benefited from the process even though their participation was not voluntary.”

Observation / Recommendation

Ms. Quek draws this interesting observation / recommendation:

The “most compelling reason” for a court to mandate mediation is “to increase awareness and the usage of mediation services.” So, court-mandated mediation:

–should be utilized “only” as “a short-term measure” in courts where mediation “is relatively less well developed”; and

–is an expediency that “should be lifted as soon as” the awareness and utilization of mediation “has reached a satisfactory level.”

Value Judgment

And she bases such conclusion, in part, on this value judgment:

The term “mandatory mediation” is “a glaring contradiction.” Mediation emphasizes “self-determination, collaboration and creative ways” of resolving disputes and concerns, and “attempts to impose” a mediation process may “undermine the raison d’ˆetre” of mediation. Accordingly, “there must be compelling reasons to introduce mandatory mediation.”

While we can quibble with the idea of limiting mandated mediation, her point on using it to jump-start mediation where it’s struggling to get traction is sound.


In most state and Federal trial courts these days, mediation is firmly entrenched. In such courts, mandatory mediation isn’t improper: it’s, simply, not needed. Here’s why:

If you listen to litigators (who practice in such courts) talking about their cases, about what they have coming-up-next, and about their successes and disappointments, mediation will be a focal point of those discussions. No one needs to suggest mediation to these litigators or to encourage its use: they’ve already factored mediation into their case strategies – and mediation will always play a role. So, discussions of “mandating” mediation, for these litigators, is more of a redundancy than anything else.

Changing the Culture

But for many bankruptcy courts, mediation is still an unfamiliar and little-used process. In these courts, efforts to mandate mediation would be helpful in changing the culture.

Studies show that practitioners with little-or-no experience in mediation are reluctant to use it—and are uncertain on how it can be used effectively. And it shouldn’t be a surprise that mediation is a seldom-used process among these practitioners.

And my experience is that, (i) the adoption of local mediation rules will not, in and of itself, create a demand for mediation: “build it and they will come” does not work for mediation rules; but (ii) a local judge can change things by ordering cases into mediation. Once the judge starts requiring mediation, either by direct order in specific disputes or by local rule, the culture starts to change: practitioners start to become comfortable with mediation and start using it.


So . . . a major initiative in courts where mediation is little-used would be to start ordering specific cases into mediation and to mandate mediation by local rule.

How a Judge Makes Mediation Work: Minimizing Risks in Close-Call and Winner-Take-All Disputes

Mediterranean Cruise 6-12 425
Minimizing Risks (Photo by Marilyn Swanson)

By Donald L. Swanson

“The decision here is most likely all or nothing.  One side is going to win and the other side is going to lose—and that’s going to be very happy on one side and very tough on the other side.”

–Judge Steven Rhodes, encouraging parties to reach a settlement, as quoted in “Detroit Resurrected: To Bankruptcy and Back,” by Nathan Bomey.

This statement from Judge Rhodes is a powerful argument for insisting that parties mediate their disputes in close-call / winner-take-all circumstances.  Such circumstances create a moment, if ever one exists, for judicial activism in moving the parties into a mediation process.

Actions, like the quotation above from Judge Rhodes, meet an essential need:

–Imagine you are a party in a lawsuit.  Mediation has not occurred and is not being considered.  Trial day is approaching.  And imagine the judge believes this:

–the decision-after-trial is likely to be a close call; and

–the result is likely to be all-or-nothing for both sides.

–Wouldn’t you want to know this?  And, armed with such information, wouldn’t you appreciate one-last-chance to consider settlement possibilities?

A Duty

I suggest, in such circumstances, that the judge has a duty and obligation to communicate such beliefs to the parties and to direct them into mediation.

A Reason Why

Attorneys who’ve been working a case for an extended period of time often start to believe their arguments!

This is neither cynicism nor a joke.  Here’s how it works in the day-to-day grind of managing a case:

–Upon learning about a case from the client, the attorney’s first impression is of a weak case; but the client is in a difficult position and desperately needs to win.

–The attorney’s research identifies several legal theories, each of which, on its own, seems a bit of a stretch; but the attorney keeps developing the theories—which, collectively, begin after a while to seem plausible.

–After extensive work on the case, the attorney now has a carefully-crafted set of arguments that have an aura, in the attorney’s mind, of weightiness.

–The attorney and the party are beginning to believe they can actually win this case and need to forge ahead.

–They now believe their arguments.

This is one of the reasons why statements, like Judge Rhodes’s quotation above, need to be made to the parties in a close-call / winner-take-all situation.  And this is why the parties must, armed with such knowledge, have one last chance to mediate their case.


In such circumstances, every effort must be made by the judge to fully-inform the parties of the risks and to move the parties into mediation.  Then the parties can:

–take and receive a fresh-look at their arguments and assess anew the risks of their position; and

–take the resolution of their dispute into their own hands – rather than letting a stranger tell them what the resolution is going to be.

Because of Judge Rhodes’s efforts, like his quotation above, mediation worked well in the City of Detroit bankruptcy.

In re SunEdison: Mandatory Mediation to the Rescue?

A Rescue

By:  Donald L. Swanson

Whereas, mediation may provide an opportunity to consensually resolve the Mediation Issues . . . It Is Therefore, Ordered” that “Representatives of the following parties and their counsel are directed to attend the Mediation in person: (i) the Debtors, (ii) the Committee, . . . [etc.] . . .

Stuart M. Bernstein, U.S. Bankruptcy Judge (In re SunEdison, Doc. 2795, Case No. 16-10992, S.D.N.Y., 04/18/17).

SunEdison has been in Chapter 11 bankruptcy for a year (since April 21, 2016). One of the major issues in the case involves preference, fraudulent transfer and related avoidance claims against a group of businesses with insider-type connections to SunEdison.

The Official Committee of Unsecured Creditors in the SunEdison case explains the avoidance claims and issues like this (in Doc. 2666):

“It is undisputed that recoveries on account of the Avoidance Actions inure to the benefit of – and may be one of only a very few sources of recovery for – unsecured creditors.”

The avoidance claims are based on this information: “while Debtors were insolvent,” the insider-type entities received valuable assets from SunEdison, consisting of “completed energy projects, services and payments worth hundreds of millions, if not billions, of dollars, for which the Debtors did not receive reasonably equivalent value in exchange.” [Emphasis added.]

SunEdison proposes to resolve the avoidance claims by a settlement with its insider-type businesses and allocating $16.1 million from the settlement funds to unsecured creditors. The Committee objects to this “mere $16.1 million” amount, contending that, (i) additional discovery is needed to fully evaluate the settlement, and (ii) the Committee should be allowed to pursue such claims, rather than allowing SunEdison to dictate the terms of a settlement with its insiders.

Last week, Judge Bernstein orders this set of disputes into mediation.

–Time will tell how this mandated mediation plays out: can it provide a rescue?

–The stakes are high: back on March 7, 2017, during a hearing in open Court, the Judge says, “if there isn’t some resolution of the allocation issue by whatever the deadline is, it may be that’s the end of the case.”

It will be interesting to see whether the mediator, the parties and their counsel are up to the rescue challenge.

Next Steps for a Court with Basic Mediation Rules: Mandated and Early Mediation

The next steps

By: Donald L. Swanson

Here is a common experience in the bankruptcy courts (and other courts) where mediation is a new or little-used tool:

Attorneys have been practicing for years in this court without using mediation.  And mediation is slow to catch on.  Here’s why:

–Attorneys who practice in this court aren’t accustomed to using mediation, aren’t comfortable with inserting mediation into their case planning habits, and rarely even think of mediation as a possibility; and

–Judges in this court aren’t comfortable with the idea of mandating mediation by local rule or by order in a particular case.


The Voluntary Mediation Problem

The problem with voluntary mediation, in a new or little-used mediation program, is explained by these two conclusions from a study of empirical data:

–When the goal is to achieve a “regular and significant use” of mediation to resolve court cases, “[v]oluntary mediation programs rarely meet this goal because they suffer from consistently small caseloads.”

–By contrast, “judicial activism in ordering parties into mediation triggers increased voluntary use of the process.”

Moreover, according to the study,  “settlement rates” and a litigant’s perceptions of “procedural justice” are about the same in mandatory mediation as in voluntary mediation.

Three Examples of Mandatory Mediation Rules

Example No. 1.  Circuit Courts of Appeals.  All but one of the U.S. Circuit Courts of Appeals have a mandatory mediation program.  Data from these mandatory programs show them to be highly successful in achieving mediated settlements across all types of cases and regardless of levels of animosity or distrust between the parties.

Example No. 2.  Delaware Bankruptcy Court.  The Delaware Bankruptcy Court, and attorneys who practice there, have extensive experience over many years with using mediation to resolve bankruptcy disputes.  In 2013, the Delaware Bankruptcy Court intensifies its mediation program by adding this mandatory provision to its Local Rule 9019-5(a):

“all adversary proceedings filed in a chapter 11 case . . . shall be referred to mandatory mediation.”

It must be noted that the trajectory of changes to local mediation rules in the Delaware Bankruptcy Court is toward mandated mediation – and away from a voluntary system.

Example No. 3.  New Jersey Bankruptcy Court.  The New Jersey Bankruptcy Court, and attorneys who practice there, also have extensive experience over many years with mediation.  In 2014, the New Jersey Bankruptcy Court expands its mediation program by adding a “presumptive mediation” local rule.  This new rule 9019-2(a) provides:

“Every adversary proceeding will be referred to mediation after the filing of the initial answer to the adversary complaint, except [when a specified exception applies]”; and

“A contested matter . . . may also be referred to mediation . . . by the court at a status conference or hearing.”

In New Jersey, like Delaware, the trajectory of changes to local mediation rules is toward mandated mediation and away from a voluntary system.


The Early Mediation Need – Generally

The study of empirical data referenced and linked above observes that mediation “tends to occur late in the life of a case.”  And it issues these findings about mediation timing:

“Holding mediation sessions sooner after cases are filed, however, yields several benefits,” including:

–“Cases are more likely to settle”;

–“Fewer motions are filed and decided”; and

–“Case disposition time is shorter, even for cases that do not settle.”

An Intensified Need for Early Mediation – In Business Bankruptcy

Superimposed over many disputes in a business bankruptcy is an urgent need to maximize value from a debtor’s operations or liquidation.  And this urgency often takes precedence over standard litigation processes like formal discovery and pretrial wrangling.  Accordingly, the need in a business bankruptcy for early and extensive mediation efforts can be particularly intense.

The role of mediation in the early stages of a business bankruptcy case needs to be different from the typical role of mediation that occurs at the end of a lawsuit:

–The role and goal of an early-mediation in a business bankruptcy is to set-the-stage and narrow-the-issues and create-a-direction and a focus for further progression of the case.

–That’s a much different role than a shortly-before-trial mediation in a one-and-done session at the end of a lawsuit, where the goal is to resolve all remaining disputes.

Here’s a link to an example of how mediation can be effectively utilized at the beginning of a Chapter 11 case.

An Example of an Early Mediation Rule

The Delaware Bankruptcy Court recently adopted a provision in its Local Rule 9019-5(j) that allows a defendant to opt for an early mediation of a preference case with less than $75,000 at stake.

Within 30 days after a response to the preference Complaint is due, the defendant in such cases may elect an early mediation of all claims raised in the lawsuit.  In cases where more than $75,000 is at stake, the parties may agree to participate in the early mediation process.

Action Item:

I am passionate about encouraging:

–Bankruptcy courts to adopt local rules on mediation and to expand the role and reach of mediation through mandatory and early mediation requirements; and

–Attorneys who practice is such courts to utilize mediation for resolving their disputes.

And I’d be delighted to discuss such matters with anyone interested in expanding the role and reach of mediation in a local court.

🎶 “This is the dawning of the Age of Aquarius [for Bankruptcy Mediation]”🎶 — A New Jersey Example

A Dawning

By Donald L. Swanson

🎶Harmony and understanding,  Sympathy and trust abounding, . . . Aquarious🎶

                —The Fifth Dimension

The year is 1968.  The musical “Hair” debuts on Broadway, with the self-assurance of those who have thrown off the norms of prior generations.  Aquarius is now here, we are assured.

I’m not sure what happened.  Perhaps Jupiter didn’t align quite-right with Mars.   Or maybe the moon couldn’t figure out where the “seventh house” might be.  

Whatever the explanation, the peace-love idealism of 1968 is confronted by five decades of reality.  The Age of Aquarius still seems far away.   

The Dawning of Mediation

But if, back in 1968, the “dawning” song had been talking about mediation, it would have been accurate–both as to, (1) creating harmony and sympathy, and (2) the beginning of extensive use. 

–As the 1970s and 1980s progress, mediation is beginning to be a common tool for resolving civil lawsuits. 

–Since then, mediation has become a primary means of resolving suits in a most courts.

Bankruptcy Mediation Catching Up

Bankruptcy is an exception to the history of mediation progression.  For the final two decades of the last century / millennium, bankruptcy courts had little use for mediation.

–But, since then, that has been changing.

–Mediation of bankruptcy disputes is starting to catch up with mediation in other civil courts.

A New Jersey Example

An example of this catch-up is in the New Jersey Bankruptcy Court.

For many years, non-bankruptcy courts in New Jersey have had “presumptive mediation” rules.  Here’s what that means: 

–rules of procedure require that mediation occur before a case is tried, unless an exception applies. 

–It’s presumed that mediation will occur in every case.

New Jersey attorneys, in courts other than bankruptcy, are accustomed to presumptive mediation rules, and they plan their case strategies around the mediation requirement.

So, in 2014, the New Jersey Bankruptcy Court decides to catch up with other courts and adopts “presumptive mediation” rules for adversary proceedings.       

 Here is the operative rule language:

“Every adversary proceeding will be referred to mediation,” unless an exception applies.

Specified exceptions are for cases involving pro se litigants, requesting a TRO or preliminary injunction, being initiated by the US Trustee, or involving requests to be excused.

In July of 2016, a New Jersey bankruptcy attorney / former bankruptcy judge (Raymond Lyons) reports that the New Jersey bankruptcy bar “has accepted” presumptive mediation, “after some initial grumbling,” and that “both the bench and bar are happy with” presumptive mediation.

What we see in New Jersey is an example of bankruptcy courts catching up, on use of mediation, with other courts that have, for many years, been using mediation as a primary case-resolution tool.


The Age of Mediation Aquarius has been around for decades in many non-bankruptcy courts.  The Age of Aquarius for bankruptcy mediation is dawning, as well.