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?



Seven Findings about “Successful Mediation” — from a Study of Mediation in International Relations

International mediation (photo by Marilyn Swanson)

By: Donald L Swanson

I recently stumbled upon a fascinating report of a study on issues and trends called “Successful Mediation in International Relations.”  This study looks at 79 international disputes (of which 44 are mediated) occurring during a 45 year period, between 1945 and 1989.  The study makes multiple findings about these mediation efforts.

Question: Do any of the finding in this study also apply to the mediation of disputes between private parties?

This article identifies seven findings in the study.  For each finding, the foregoing question needs to be asked.

Finding # 1:  Regime Types – Autocracies Fare Poorly in Mediation

“A traditional hypothesis . . . posits that those states which are more democratic or pluralistic are less prone to initiate violent interactions than their non-democratic counterparts.  . . .  however . . . democratic states are no less prone to conflict than any other type of regime, although they rarely fight among themselves.

“In those conflicts where one of the disputants was a multiparty state, the average probability of successfully mediation was 24% (i.e. above the overall average of 22%).  In the 34 mediation attempts involving two multi-party states, 35% were successful.  The corresponding figure for the 36 mediation attempts between one-party state dyads was only 6%.

Question: Does this finding apply to the mediation of disputes between private parties?

Finding # 2:  Relative Power – Unequal Power Fares Poorly in Mediation

“[T]he smaller the power differences between the adversaries, the greater the effectiveness of international mediation.  . . .  The idea that mediation is most effective in disputes involving adversaries with equal power receives strong support” from the data.

“[A] clear pattern emerged showing a high mediation impact (that is, abatement or settlement of a dispute) when power capabilities are evenly matched, and low to no impact when power disparity is high.”

“No mediation occurred in 48% of disputes between countries of unequal power . . . And in those disputes that were mediated between unequal states, only 6% were successful.  Where both parties were of roughly equal power, the probability of mediating successfully was over five times as great (32%).”

“We found the probability of successful mediation to be highest when the parties were not only equal in power, but were both relatively weak states.

Question: Does this finding apply to the mediation of disputes between private parties?

Finding # 3:  Previous Relations – Friends Mediate Better than Enemies

“[P]arties with a history of friendship or cooperation will also approach a present conflict more cooperatively.”

“Not surprisingly, it appears significantly easier to mediate between friends.  A mediator entering this type of dyad has almost twice the chance of success compared to any other mediation (46% as opposed to an average of 22% for all others).”

“Furthermore, though adversaries with a past history of more than one dispute receive most mediation attempts, they also demonstrate the lowest probability of success (16%).”

Question: Does this finding apply to the mediation of disputes between private parties?

Finding # 4:  Duration of the Dispute – Timing is Everything (But Difficult to Discern)

“To be effective, mediation must take place at the right moment.  . . .   There is, however, little agreement as to what constitutes, or how to recognize, such a moment.”

“Generally, the longer a dispute goes on, the less amenable it is to mediation; but there does seem to be a minimum amount of time necessary before mediation is successful.  In those disputes that have continued for more than 12 months when mediation occurs, the probability of success is only 19%.  But mediation attempts taking place one to three months into a dispute show a greater chance of success (37%) than those initiated when the conflict is less than one month old (23%).

Question: Does this finding apply to the mediation of disputes between private parties?

Finding # 5:  Number of Mediation Attempts – Less is More

“Our data indicate a slight increase in probability of successful mediation after one or two previous attempts (32%).  After this point, however, the probability of success begins a long decline.”

“A mediator entering a conflict after three or four previous attempts at mediation will have no better chance of mediating successfully than one who is the first to attempt mediation (the probability of success in both instances is 23%).”

“If seven or more attempts at mediation have preceded a mediator’s intervention, the probability of success is just 13%.  Even the most persistently mediated conflicts (i.e. with  or more mediation attempts) only achieve average success (22%).”

“Though there may be some cumulative effects of mediation, they only seem to occur very early on.  A conflict that has resisted a few attempts at mediation will probably also resist several subsequent attempts.”

Question: Does this finding apply to the mediation of disputes between private parties?

Finding # 6:  Intensity – Low is Better than High

“Mediation is more likely to be accepted and to be successful, in low intensity disputes.”

“As the number of fatalities in a dispute increases, the likelihood that mediation initiatives will prove successful suffers a corresponding decline.  Only 17% of mediation attempts have any degree of success in disputes of more than 1,000 fatalities, compared with 42% in disputes of 100-500 fatalities.”

“Protracted and intense international disputes, though they receive far more attempts at mediation than less severe disputes, are not particularly amenable to mediation.  Such disputes have to be managed in a different manner.”

Question: Does this finding apply to the mediation of disputes between private parties?

Finding # 7:  Issues – Territory and Security vs. Ideology, Honor and Existence

“Contrary to conventional wisdom, our data indicate that disputes involving territory or security are far more amenable to mediation than those over issues of ideology or independence.”

“When the issues are defined as honor, existence or ideology, the chances of successful mediation are reduced substantially.”

“The chances of successful mediation are enhanced considerably when security is the issue in dispute.”

For example, “the possibilities for successful mediation in cold war disputes are very low (only 1 out of 10 disputes in this category resulted in some success), but relatively high in non-ideological disputes (here mediation was effective in 13 out of 31 disputes).”

Question: Does this finding apply to the mediation of disputes between private parties?




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.

U.S. Congress and Supreme Court Support ADR — But Some Bankruptcy Courts Remain Nonconformist on Mediation


By Donald L. Swanson

There is “a kind of ‘hostility to arbitration’ that led Congress to enact” the Federal Arbitration Act.

Kindred Nursing Centers v. Clark, U.S. Supreme Court Case No. 16-32 (decided May 15, 2017).

Alternative dispute resolution processes (“ADR”) include arbitration and mediation.


Congress passed the Federal Arbitration Act (“Arbitration Act”) to promote the use of arbitration for resolving disputes that would, ordinarily, be filed in state and Federal courts and to eliminate opposition to arbitration. And in the Kindred Nursing Centers v. Clark opinion, the U.S. Supreme Court upheld, last month, the broad reach and effectiveness of the Arbitration Act against challenges under Kentucky’s State Constitution.


Similarly, Congress passed the Alternative Dispute Resolution Act of 1998 (“Mediation Act”) to promote the use of mediation in Federal courts and to eliminate opposition to mediation. The U.S Supreme Court has yet to rule upon the effectiveness of the Mediation Act, but the Supreme Court would, undoubtedly, support the Mediation Act’s statutory requirements for mediation in the same manner the Court is supporting statutory requirements for arbitration in Kindred Nursing Centers v. Clark.

The Mediation Act requires U.S. district courts, and their bankruptcy units, to establish local rules for, (i) promoting the use of mediation in their courts, and (ii) providing for mediation confidentiality.

Yet, some bankruptcy judges remain hostile to the use of mediation in their courts, or they are indifferent: seeing little value in mediation. Such hostility and indifference are reflected in the following three examples.

1.  A Bankruptcy Judge in Texas declares in open court that he does not like mediation, believes mediation is a waste of time and money, and is unlikely to approve mediation under any circumstances.

2.  The bankruptcy district in Northern Illinois (Chicago) recently revokes its existing local rules on mediation (including confidentiality provisions) as “unnecessary.”

3.  Approximately 70% of all bankruptcy districts have adopted some type of local rule on mediation. The rest, however, haven’t. And judges in the don’t-have districts often earn a reputation for being indifferent, or even hostile, to mediation.

In light of the requirements of the Mediation Act, each of these three examples seems out-of-place, at a minimum, and in violation of Federal law, when viewed in a less-generous light.

Moreover, the absence of local mediation rules in approximately 30% of all bankruptcy districts is particularly troubling because of the existence of such resources as the Model Local Rules on Mediation and the accompanying Commentary offered by the American Bankruptcy Institute.

How can this be!!

How Mediation Can Be Effective – Even When it Doesn’t Happen

Evading the mediator

By: Donald L. Swanson

Arch Coal, Inc., files bankruptcy on January 11, 2016.

By the month of May 2016, the debtor and its creditors are in contentious negotiations over terms of a Chapter 11 plan.  At one point, the parties think they have an agreement in principal, but things fall apart when putting settlement details on paper.

On June 23, 2016, the Official Creditors Committee moves for a Bankruptcy Court order “directing the appointment of a mediator.”   In the Motion, the Committee says this:

–“all of the parties appear to agree that consensus should be reached” on confirmation issues and that “such consensus is in the best interests” of everyone;

–the Committee “remains hopeful that even before this Motion is heard by the Court, the parties may resolve their issues.”

–mediation “could yield enormous dividends and avoid the long delay that would certainly result from a litigation Armageddon.”

On June 24, 2016, various parties file a “Joinder” in support of the Motion, saying this:

–“the parties are heading toward a long and costly litigation, involving a host of complex issues,” so the parties need to “make a final good faith attempt to resolve their disputes amicably and in an expedited fashion.”

The Court schedules the Motion and Joinder for hearing on July 6, 2016.

By July 5, 2016, the parties reach an agreement on plan confirmation issues, and the hearing on mediator appointment does not occur.

Now . . . all of this would seem irrelevant in my world, except for the fact that I’ve had a similar experience:

–I’ve been appointed mediator in a court-mandated mediation, only to have the parties settle before the mediation could begin.

In my appointment-without-performance situation, I didn’t know whether to feel flattered or offended, or neither, by the prompt settlement.  In fact, while typing this, I’m not sure whether I’m bragging or complaining.

So . . . there you have it: two anecdotes showing how mediation can be effective – even when it doesn’t happen.





A Proactive Mediator Role: “Special Settlement Master”

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.





“The Walls of the Mediation Room are Remarkably Transparent”: From a Study on Mediation Confidentiality

Remarkably Transparent Walls

By Donald L. Swanson

“In sum, the walls of the mediation room are remarkably transparent.”

— James Coben & Peter Thompson

The State of California is studying mediation confidentiality in the context of legal malpractice disputes.

Suprise # 1

A surprise of the study is from a 2006 law review article by Coben and Thompson titled,  Disputing Irony: A Systematic Look at Litigation About Mediation.  The surprise is this:

In actual practice, mediation confidentiality is often ignored.

Coben and Thompson reach the following conclusions in their article:

–there is a “large volume” of reported court opinions in which “courts considered detailed evidence of what transpired in mediations without a confidentiality issue being raised—either by the parties or sua sponte by the court.”

–“uncontested mediation disclosures occurred in thirty percent of all decisions in the database, cutting across jurisdiction, level of court, underlying subject matter and litigated mediation issues.”

–Disclosures of mediation information in court include:

forty-five opinions in which mediators offer testimony,

sixty-five opinions where others offer evidence about mediators’ statements or actions, and

266 opinions where parties or lawyers offer evidence of their own mediation communications and conduct

And all of these disclosures are “without objection or comment.”

So much for confidentiality as a highest-priority in mediation cases.

Surprise # 2

Here is another surprising set of findings by Coben and Thompson:

“Courts expressly refused to protect mediation confidentiality in sixty opinions.”

Of those sixty, “few” involve “a reasoned weighing of the pros and cons of compromising the mediation process.”

Instead, the “admissibility or discovery of mediation information” is “routinely justified” on such grounds as:

–waiver and consent

–the information is not “confidential”

–the process is “not mediation”

–the provider of the evidence is “not a mediator”

–the evidence is offered “for a permissible purpose”

–the evidence is “not material” or its introduction “constituted harmless error.”


Total or nearly-complete confidentiality in mediation is far from reality.  Should something be done about this?


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.