Mandating Mediation to Develop a Mediation Culture

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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).”

Findings

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.

Quibbling

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.

Conclusion

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

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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.

Conclusion

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.

A Proactive Mediator Role: “Special Settlement Master”

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Antonio Stradivari of Cremona, Italy — A Special Master (Photo by Marilyn Swanson)

By Donald L. Swanson

Mediators are appointed as “special masters” in the U.S. District Courts.  Such appointments are authorized by Fed. R. Civ. P. 53.

Examples of Mediators as Special Settlement Masters

Mediators appointed as special settlement masters are often given a broad range of authority to act proactively on the court’s behalf.

One example is In re Syngenta case, a multi-district case pending in the U.S. District Court for the District of Kansas, where a mediator is appointed as special settlement master (aka mediator) under Fed.R.Civ.P. 53.  This settlement master (aka mediator) is given a broad grant of authority, under Rule 53, to:

–“Order the parties to meet face-to-face and engage in serious and meaningful negotiations”

–“Make recommendations to the court concerning any issues that may require resolution in order to facilitate settlement or to efficiently manage the litigation”

–“Communicate ex parte with the court at any time.”

Another example is the Argentina debt cases, in the Southern District of New York, in which the Court creates a mediator role, appoints a mediator, and dubs the mediator a “special master” under Rule 53.  This mediator/settlement master functions with a high level of autonomy and in a proactive manner.

“Judicial Adjuncts”

Special masters under Rule 53 are “judicial adjuncts,” which means they are appointed to assume some of the functions of a judge.

The special master’s “Handbook” (created by the Academy of Court Appointed Masters) explains the role of a “settlement master” (i.e., a mediator) as follows:

–Historical Development:  “The use of settlement masters to reach global settlements in large-scale tort litigation dates back at least to the Dalkon Shield litigation and Agent Orange litigation beginning in the late 1980s.”

–Authority:  “Courts have come to realize that the appointment of a neutral third-party who is granted quasi-judicial authority to act as a buffer between the court and the parties can provide a useful approach to reaching a settlement.”

–Complex and Multi-Party Cases:  “This [usefulness] is especially true in complex litigation involving numerous parties, or when the dispute has matured and individual settlements become repetitive and time-consuming.”

Special Masters and Bankruptcy

It’s interesting to note that the Federal Bankruptcy Rules expressly reject the office of “special master.”   Fed. R. Bankr. P. 9031 is titled, “Masters Not Authorized,” and specifies: “Rule 53 F.R.Civ.P. does not apply in cases under the [Bankruptcy] Code.”

Nevertheless, at least 70% of all bankruptcy courts have local rules authorizing the appointment of mediators.  And bankruptcy courts have a recent history of investing mediators with a proactive role and function, similar to that of the settlement masters appointed in the In re Syngenta case and the Argentina debt cases.

–The prime example of such proactivity in bankruptcy is, of course, the City of Detroit case and the broad authority granted to and exercised by the mediators in that case.

The Future?

It will be interesting to watch, as time progresses, whether the proactive mediator authority granted and exercised in the In re Syngenta case, the Argentina debt cases and City of Detroit bankruptcy case, will become the norm in bankruptcy proceedings.

–My sense is that proactive mediation (like that of a settlement master under Fed.R.Civ.P. 53) is on-its-way to becoming standard practice for large bankruptcy cases — and for smaller cases as well.

 

 

 

 

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

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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.

            MANDATORY MEDIATION

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.

EARLY MEDIATION

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.

Structured Dismissal Negotiations are Ripe for Mediation: Until the Supreme Court Upends Precedent (In re Jevic)

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Ripe for eating

By: Donald L. Swanson

We are not final because we are infallible, but we are infallible only because we are final.”

–From concurring opinion of U.S. Supreme Court Justice Robert H. Jackson, in Brown v. Allen, 344 U.S. 443 (1953), on role and function of the U.S. Supreme Court.

Structured dismissals are [correction: were] a rapidly developing field in today’s bankruptcy world.  That all changed on March 22, 2017, when the U.S. Supreme Court puts the kibosh on structured dismissals in its In re Jevic ruling.

Negotiations in this rapidly developing field would be ripe for mediation.  But, alas, that will not happen, because of the In re Jevic ruling.  Now, the rule is simple:  distribute sale proceeds through the Bankruptcy Code’s priority scheme.

Necessity Produces Creativity

Creative processes, like structured dismissals, arise out of a need in bankruptcy to maximize value and distribute proceeds in an efficient and prompt manner.  Plan confirmation processes are, often, inefficient and expensive in the extreme.  So, when an opportunity arises to maximize value and distribute proceeds in a way that is quick, efficient and effective, practitioners gravitate to that opportunity.  Structured dismissals provide one of those opportunities.

Some History

Bankruptcy courts have been struggling for as long as I can remember with how to handle asset sales and the distribution of sale proceeds.  My first recollection of a bankruptcy sale issue relating to today’s structured dismissals is from 1982:

–a bankruptcy judge rules in 1982 that a bankruptcy trustee may not “serve as the handmaiden” of secured creditors in liquidating collateral.  Accordingly, a sale of assets should not occur in a Chapter 7 case, the judge says, when the only persons to benefit are secured creditors.

–The judge in 1982 explains: “Secured creditors by consent and the trustee by acquiescence cannot impose upon the [Bankruptcy] Court the duty to serve as a foreclosure or collection forum.”

The “handmaiden” phrase from 1982 stands the test of time.  It’s still good law today, especially in Chapter 7 liquidation cases: if all debtor’s nonexempt assets are fully encumbered, the Chapter 7 trustee must issue a “no asset” report.

But a bankruptcy sale of fully-encumbered property can still provide benefits to the bankruptcy estate in a business reorganization.  Such benefits might include keeping a business alive under new ownership, which will continue providing jobs and business activity and tax payments in the local community.

Additionally, parties in a bankruptcy often negotiate for ways to create benefits to the bankruptcy estate from a sale of fully-encumbered property.  One way is to carve-out a portion of the funds the secured creditor would receive from a sale and then gift that portion to priority wage claims or to unsecured creditors.

A Long-Standing Precedent

That’s what happened, for example, in the case of  In re SPM Manufacturing Corp., 984 F.2d 1305 (1st Cir. 1993).

–In the In re SPM case, a secured creditor would get all proceeds from the sale of debtor’s assets.  So, the secured creditors enters into a pre-plan settlement agreement for distributing proceeds from a bankruptcy sale.  The agreement would gift to unsecured creditors a portion of sale proceeds the secured creditor would otherwise receive.

–The bankruptcy court rejects this agreement because tax claims have a higher priority, aren’t receiving any of the gift, and remain unpaid.  The District Court affirms, and the case is appealed to the First Circuit Court of Appeals.

–The First Circuit reverses and approves the agreement.  Here is part of the First Circuit’s rationale:

The Bankruptcy Code’s distribution scheme “does not come into play until all valid liens on the property are satisfied.  . . .  Because [the secured creditor’s] claim absorbed all of SPM’s assets, there was nothing left for any other creditor in this case.  . . . creditors are generally free to do whatever they wish with the bankruptcy dividends they receive, including to share them with other creditors.”  [984 F.2d at 1312-13.]

This In re SPM ruling has been the law-of-the-land in the First Circuit for fourteen years.  And the ruling makes sense, as reflected by this fact: an online research tool [Casemaker] says this In re SPM decision, (i) has been cited 183 times, and (ii) has been “criticized” only once on unrelated grounds.

Overruled?

So . . . did the U.S. Supreme Court decide to overrule this long-standing In re SPM rule in its In re Jevic decision . . . without even mentioning it?!  Perhaps not: the In re SPM decision might be distinguishable (arguably, at least).  But In re Jevic’s “simple answer” of “no” suggests otherwise.

This result is unfortunate in the extreme for bankruptcy practitioners and judges striving to maximize and distribute value in an efficient and effective manner!!

Mediator Neutrality: An “I believe . . . ” Test

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No neutrality here — she’s on their side

By Donald L. Swanson

A mediator is, by definition, a “neutral.”

Neutrality seems to be a straight-forward concept: it means not-taking-sides.

But not-taking-sides is, apparently, not all that simple. Check out this excellent article and this fine series of essays on the subject.

Efforts to define or explain “neutrality” often get bogged down. Sometimes, new explanations of what “neutral” means create more ambiguity or uncertainty than already exist.

Non-Neutral Behavior

Here are some examples of behavior that run afoul of the neutrality standard.

–Mediator: “My law partner is an expert in this area. So I’ve asked him to critique your expert’s report. Here’s how he says your expert’s opinion is faulty.”

–Mediator: “Here’s a list of terms that everyone else has agreed upon. This is a great deal, and you must accept these terms.”

–Mediator: “Your legal position is way off base on this issue, and you are going to lose at trial.”

Each of these examples is from an actual anecdote from attorneys talking about bad experiences in mediation.  In each of these examples, the mediator is viewed as taking the other party’s side.

An “I believe …” Test for Mediator Neutrality

Whenever a mediator says something like the following quote, the mediator’s neutrality is compromised:

“Here’s what I believe about the merits of your case: [___fill in blank____].”

An expression of personal opinion on the merits of the dispute is “taking-sides.”

There are probably a million-or-so ways a mediator can convey the same type of message, while still maintaining position of neutrality: i.e., without giving a personal opinion on the merits.

For example, a mediator could say:

–“The other side’s position is . . . [then fully and faithfully explain that position].”

–“The other side says this about your expert’s opinion: . . . ”

–“Here’s one of the risks you run–that the judge will accept the other side’s version of the facts. And here is the evidence they’ve identified . . . ”

–“If you lose on that issue, here are the range of results that have been identified . . .”

–“I know you are confident in your case at trial. But your opponent is also confident. And here’s why . . .

–“Here is a risk that each side runs: that the judge will get it wrong, from your perspective. And ‘getting it wrong’ happens, as reflected by reversals that commonly occur on appeal.”

All of these examples are neutral responses that don’t take sides.

A mediator might even say to a party in caucus something like: “My experience is that judges rarely . . . ”

–Such a statement can be a neutral observation that helps the parties but doesn’t take sides: it’s talking about objective experiences, and not about the mediator’s opinion.

Such responses can be used by a mediator to clearly and effectively convey hard truths, without the mediator injecting his/her own opinion on the merits of the dispute.

Analogies

The following are some analogies that illustrate neutrality (good analogies) or provide a contrast with neutrality (bad analogies).

Good Analogies

The best analogies for what mediator “neutrality” means are from informal contexts. For example:

–a parent handling a squabble between siblings, when the parent avoids taking sides in the spat, is a good neutrality analogy.

–a friend trying to help solve a misunderstanding between two buddies, without taking sides, is also a good analogy.

Bad Analogies

Judges, referees and umpires, however, are bad analogies for mediator neutrality.  Here’s why:

–because the job of every judge, referee and umpire is to make decisions on the merits of disputes, and every decision on the merits favors one side over the other

Hopefully, every judge, over the course of a bench trial, will leave an impression of impartiality, even-handedness, and good judicial temperament.  But it won’t be an impression of neutrality.

–At the end of trial, the judge will make a decision that is anything but neutral.  A judge’s judgment will almost always favor one side over the other.

Similarly, every basketball referee will make decisions on who fouled whom.  None of such calls is neutral.

–Some of the decisions will be close calls: e.g., when a violent collision occurs during a drive to the rim.  Is that a charge on the offense, a foul on the defender, or a no-call?

–Hopefully, over the course of a game, the cumulative effect of a referee’s calls will leave an impression of impartiality and consistency, but every call favors one side over the other.

Likewise, every strike / ball call by an umpire favors one team over the other.  It’s not a neutral call.

–But consistency on the location of the strike zone will leave an impression of impartiality and fairness.

Mediator Neutrality

A mediator makes many decision and many communications over the course of a mediation. Most of such decisions and communications are about handling the mediation process and managing the parties, their conflict, and their negotiations.  And some decisions and communications will convey hard truths to the parties.

But a neutral mediator must not convey an impression of taking-sides by offering an “I believe . . . ” opinion on the merits of the dispute.

An  often-perceived exception occurs when a party asks, in caucus, for the mediator’s candid opinion on the merits of the dispute. But even in this context, the mediator who weighs-in with such an opinion is on dangerous ground.  See, e.g., this article.

Conclusion

Neutrality is an essential quality of a mediation. A mediator can be active and forceful and convey hard truths– and still remain neutral. It’s the “I believe…” input on the merits of the dispute that compromises neutrality.

What do you think about this “I believe . . . ” test?

 

Is Offering Opinions and Solutions a Bad Idea for Mediators?

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When conflict management gets out of control (photo by Marilyn Swanson)

By: Donald L. Swanson

“Leadership is a perpetual exercise in managing conflict.”

–Morris Shechtman, 2003

A 2016 report on a mediation study evaluates and compares the effects on conflict of:

(i) mediators who elicit solutions from parties in conflict, and

(ii) mediators who offer opinions and solutions to the parties in conflict.

Mediator Eliciting Solutions from Parties in Conflict

This “eliciting” characterization refers to mediators who:

–ask parties what solutions they would suggest
–summarize the solutions being considered
–check in with parties to see how they think these ideas might work for their conflict circumstances

Parties in conflict who work with an “eliciting” mediator tend to give positive reports on:

–listening and understanding each other in the mediation
–jointly controlling the outcome
–the other side taking responsibility and apologizing
–changing their own approach to conflict
–the mediator acting properly by not,

–controlling the outcome
–pressuring them into a solution
–preventing issues from coming out

The study finds that an “eliciting” strategy works better than other strategies in,

–achieving settlement agreements between parties in conflict
–avoiding a return to court for agreement enforcement.

Mediator Offering Opinions and Solutions

This characterization refers to mediators who,

–offer their own opinions
–offer their own legal analysis
–advocate for their own solutions

Parties in conflict who work with an “offering” mediator tend to give negative reports, that:

–the agreement does not work well
–they are not satisfied with the outcome
–they would not recommend mediation to others
–they have not changed their own approach to conflict.

A Study Conclusion

Accordingly, the study offers this conclusion:

–Mediators who offer their own opinions and advocate for their own solutions run counter to the goals of self-determination and better understanding between parties in conflict.

Consistent With Experience

As I reflect back upon my own experience as counsel for mediating parties, this finding seems well-founded.

I remember, for example, many years ago when a mediator begins a multi-party mediation with a declaration of how a certain issue should be handled and how an agreement on that issue should be structured.

–The other parties agree.  But my client and I do not agree — we view the mediator’s suggestion as a bad idea.

–However, the mediator dismisses our view out-of-hand, ignores our expressions of concern, and pressures us at-the-end to go along with his approach.

I am still irritated — to this day [I’m pressing harder on the keys as I type right now!] — with the memory of that experience. I view the mediator as out-of-line in presenting and pushing his solution without any concern or regard for what we thought [not that I’m bitter about it or anything . . . ].

What do you think about these findings and conclusion of the study?

 

A Mediator–ish Role: “Settlement Counsel”

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Trevi Fountain — Bringing People Together (Photo by Marilyn Swanson)

By: Donald L. Swanson

Here’s an experience that’s common to all trial attorneys.

We’re working in our litigation War Room.  Trial is scheduled to begin in ten days.  Our focus on trial preparations is intense.

But then the phone rings.  It’s an attorney on the other side with a settlement offer.  The offer is a pretty good one – much better than their final offer at mediation.

So, now we have a problem:

–Our clients wants to settle the case, if possible, and wants us to focus our attentions on negotiations.

–But, if we focus on negotiations to settle the case — and the negotiations fail — we’ll then be scrambling with trial preparations.

The Settlement Counsel Solution – Bringing People Together

Here’s a solution to the problem:  “Settlement Counsel.”

–A disputing party hires “Settlement Counsel” to take the initiative, beginning in the earliest stages of the case, toward bringing parties together, identifying disputes that can be resolved, and focusing on settling those disputes.

–The same party also hires separate “Litigation Counsel” to fight the legal battles and to focus on winning the case.

So . . . when that call with a settlement offer arrives shortly before trial, Settlement Counsel steps in to handle the settlement negotiations, while Litigation Counsel continues preparing for trial.

But . . . better yet, Settlement Counsel would have been working since the earliest stages of the case to achieve a settlement long before trial is about to begin;

Settlement Counsel Information

“Settlement Counsel” is an actual thing.  There are lots of articles on the Settlement Counsel subject, such as:

–“Why Should Businesses Hire Settlement Counsel?” in the Journal of Dispute Resolution

–“In Their Own Words,” a publication of the Section of Litigation, American Bar Association, in the series called “50 Shades of Settlement Counsel—What Role is Best for Your Client?”

Settlement Counsel in Bankruptcy

The Settlement Counsel role seems to be perfectly-suited for bankruptcy cases, and especially those cases with multiple parties and high levels of complexity.

Here is an example of a division of labor in bankruptcy that makes perfect sense:

–-Debtor’s litigation team fights the legal battles:  prosecutes first day motions, defends motions for relief from stay, presents a plan and disclosure statement, etc.

–-Meanwhile, Debtor’s settlement team identifies disputes to be addressed and takes initiative to resolve as many disputes as quickly and efficiently as possible.

My guess is that nearly every attorney who’s made a career of representing bankruptcy debtors or committees or trustees is really-good at the “Settlement Counsel” function.  They’ve been doing “Settlement Counsel” types of things their entire career, while functioning as “Litigation Counsel” at the same time.

Mediator Role and Settlement Counsel Role are Similar

A two-part article (appearing here and here) connecting the mediator role with the Settlement Counsel role is by Mitchell Rose, a mediator and Settlement Counsel in Toronto, Ontario.  He writes:

–“In addition to practicing as a mediator, I regularly attend mediations of civil disputes as settlement counsel.”

–“As Settlement Counsel I approach mediation differently than when I was a conventional litigator. This is best reflected in how I participate in joint sessions and make opening statements at mediation –- two things that I used to loathe as a litigator, but have now (dare I say it) grown to love — or at least like on most days.”

A Basketball Analogy

Differences between a Mediator and a Settlement Counsel are like differences between a point guard and a shooting guard in basketball.

–A “point guard” must be really good at bringing the ball up the court, initiating and directing the offense, and assisting others to score.

–A “shooting guard” must be able to score off the drive and from mid- and long-range and must be able to create his/her own shot against defensive pressure.

–A “combo guard” performs equally well at both the point guard and the shooting guard functions.

A mediator is retained by all sides collectively, must be able to perform as a neutral, tries to help all sides find common ground, and usually performs in a passive manner (i.e., others bring disputes to him/her for mediation).

A Settlement Counsel is retained by one side, makes no pretense at neutrality, tries to help all sides find common ground, and usually performs in a proactive manner (i.e., identifies disputes to be resolved and initiates negotiation action).

I’m sure that many successful mediators, like Mr. Rose identified above, would also serve well as Settlement Counsel.  We might call them “combo” professionals.

Applications

  1.  Many experienced mediators should be a perfect fit for the Settlement Counsel role.  Those two roles, it seems, go together like peas-and-carrots and are easily embodied in a single person.
  2. Settlement Counsel seems particularly helpful in disputes among multiple parties and with high complexity.  And since bankruptcy often has multiple disputing parties with complex disputes, bankruptcy is a perfect context for utilizing the Settlement Counsel role.

What do you think?

 

 

People in Conflict Avoid Spending Time Together: A Bad Idea in Mediation?

“Nothing will lower your credibility faster than avoiding conflict.”

–Morris Shechtman, 2003

By Donald L. Swanson

Conflict is difficult.  And conflict is uncomfortable.  So, the easiest and most comfortable way to handle conflict . . . is to avoid it.

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Caucus Room No. 3

That’s why caucus-only mediation has become standard practice in many mediations of business disputes.

In a caucus mediation, the disputing parties sit in separate rooms, and the mediator shuttles back and forth between them conveying negotiating messages.  In a caucus model, the disputing parties rarely talk to each other, rarely have to be in the same room together — heck, they don’t even have to see each other!

Some caucus mediation sessions begin with everyone in a single room, where the mediator explains what will happen and why the parties should get their disputes settled.  But this joint session appears to be trending out-of-fashion in business mediations—because the parties want to avoid spending time together.

In such beginning joint sessions, a representative of each party can give an opening statement.  But such opening statements have been out-of-favor for quite some time—because it’s uncomfortable.

Obviously, caucus-only mediation puts a heavy burden on the mediator to listen carefully and communicate faithfully between the disputing parties.

But there are, apparently, negative consequences from avoiding conflict via caucus-only mediation.

A Mediation Study

A 2016 report on a mediation study is published, in January of 2016, on the effectiveness of various mediation strategies.

Here are some of the findings and a recommendation from the study on the caucus mediation model.

Short-term effects

According to this study, the greater the percentage of time participants spend in caucus, the more likely the participants are to report that:

–the mediator “controlled the outcome”

–the mediator “pressured them into solutions”

–the mediator “prevented issues from coming out”

–they are dissatisfied “with the process and outcome”

–they do not believe “the issues were resolved” with a “fair” outcome

–they do not believe “the issues were resolved” with an “implemenable”               outcome

–they have a “sense of powerlessness”

–they have a belief that “conflict is negative”

–they have a residual desire to “better understand the other participant”

Long-term effects

According to this study, the greater the percentage of time participants spend in caucus, the more likely the participants are to report:

–a decrease in “consideration of the other person”

–a decrease in “one’s ability to talk and make a difference”

–a decrease in the sense that “the court cares about resolving conflict”

–an increase in “the likelihood of returning to court . . . for an enforcement action.”

Study Recommendation

Accordingly, the recommendations of the study include this:

to “discourage strategies that are heavily focused on caucus.”

Consistent With Experience

This recommendation seems to be well-taken, based on my experience.

As I look back over decades of mediation practice, on all sides of the table, items of regret from mediation often center on caucus-only situations.  Examples of such regret include these:

–a personal injury plaintiff wants to tell his story directly to the other side, but doesn’t get the chance.

–a fact dispute might be resolved in a face-to-face discussion of fact issues between the parties in a joint session, but the joint session doesn’t happen

–a credibility issue might be resolved in face-to-face discussions, but that possibility doesn’t get a chance.

What do you think?

 

 

How Mediation at the End of a Case is Wasteful

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A Wasteland

By: Donald L. Swanson

When mediation occurs early-in-a-case, instead of late, “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.”

–B. McAdoo, N. Welsh & R. Wissler, “What Do Empirical Studies Tell Us About Court Mediation?” (2004)

A lawsuit consists of these overlapping phases: (i) pleadings, (ii) discovery, (iii) dispositive motions, (iv) pretrial steps, and (v) trial with final verdict or judgment.

The study linked above concludes, obviously, that an early-in-the-case mediation is more effective than a late-in-the-case mediation.

Wasteful

Nevertheless, the customary time for mediation is late-in-the-case: as discovery winds down, pretrial steps are in process, and trial is in the offing. Unfortunately, this late-in-the-case time (without an early mediation effort first) is about as wasteful as can be imagined. Consider this:

–A huge amount of time, effort, energy and fees are spent before a late-in-the-case mediation begins, and avoiding many of such costs can be a powerful incentive to settle in an early-mediation; and

–If the optimum time for mediating is early-in-the-case, then all the time, effort, energy and fees spent between an unused early/optimum time and the late/customary time is a pure and unmitigated waste!

A Faulty Rationale: More Time is Needed

One faulty rationale for end-of-the-case mediation is that the parties need more time to, (i) recognize the risks of their legal position, and (ii) come to grips with the reality of what it takes to resolve the case. Here are two examples of how this rationale is faulty.

1. A lack of opportunity. I remember representing a business defendant who gives ten reasons why they are not responsible for the bad things that happened. The months-long discovery process turns into a ten-step effort that proves each and every one of the reasons wrong. No early-settlement overtures occur in the case from either side, and my client appears ready to engage in meaningful settlement discussions only after all ten reasons are refuted. In retrospect, however, I’m pretty sure that, (i) they knew or suspected, all along, that they were in the wrong, and (ii) would have jumped at the end-of-case settlement terms, had those terms been available early in the case.

2. A lack of imagination. I remember representing a plaintiff against a business defendant that had clearly breached standards of care. But defense counsel refuses, in numerous different contexts, all early settlement overtures (he blames his client for the refusals). We settle at the end with defendant paying much more than defendant would ever have had to pay in an early-stage settlement. The early-refusals cost defendant dearly! I’ve often wondered why all early olive branches were rebuffed . . . and attribute it to a lack of imagination from the other side.

Another Faulty Rationale: Exhaustion Helps

Another faulty rationale for end-of-the-case mediation is the exhaustion element: when parties are weary of paying fees, weary of the time and energy consumed by the lawsuit, and concerned about risks of losing, they become more-inclined to settle. But this exhaustion element bears an unreasonably high price to pay for getting into a better mood for settling the case.

Bankruptcy Experience 

This early-mediation idea is now institutionalized in the Delaware Bankruptcy Court. In 2013, the Delaware Court establishes an early-mediation program for preference cases (see this article).

And it should be noted that early-mediation benefits are particularly in-play for bankruptcy reorganization disputes. Reorganization cases are best served when many disputes are resolved as quickly as possible. The business needs of a debtor, typically, cannot survive long and protracted battles. A debtor, simply, cannot afford to fight every battle all the time. So, early-mediation can be critical to the success of the reorganization process.

Conclusion

Early-mediation is optimal for resolving legal disputes, especially in bankruptcy cases. But end-of-the-case mediation is what usually happens (without any attempt at early mediation).  This is wasteful and needs to change!