Chapter IV PROCEDURES FOR IMPLEMENTING MEDIATION

• Jurisdiction: United States

IV. PROCEDURES FOR IMPLEMENTING MEDIATION

Leslie A. Berkoff, et al.

A. Agreeing to Mediate, Selecting the Mediator and Mediation Approaches

1. General

Leslie A. Berkoff

The use of mediation can arise at the suggestion or direction of the court or upon the request of the parties. As the popularity of using mediation as a tool within the bankruptcy courts has grown, the mechanisms for implementing this process have developed as well. The most traditional construct, similar to that used in state and other federal courts, is the enactment by each bankruptcy court of a formal set of rules and guidelines governing the assign-ment of cases to mediation, the selection of mediators, and the entire process. While each district's procedures will vary, at the outset there is often a pre-approved list of mediators that the parties or the court can draw from for each matter. At times, the court may independently select a mediator (such as requesting fellow judges from the same or sister courts to serve, which is a common practice in high-profile cases). These lists can include lawyers and nonlawyers. Often, a requirement for being on this list is a companion commitment to accept some pro bono assignments from the court. Thereafter, the mediator and the parties must follow the respective rules for formalizing the selection and engagement of the mediator.

Separate and apart from these local rules, there has developed a growing trend, especially in "mega cases," for the early implementation of procedures upon request of the debtor or a liquidating trustee to have the court establish a mediation protocol in cases to govern a variety of disputes. Often, these are intended for use in clawback actions (preferences and fraudulent conveyances). At times, they can be more unique given the facts of a particular case such as the creation of mediation protocols in the Lehman case for derivative actions. This will be discussed in more detail in IV.D. While these orders often contain specific guidelines and procedures independent of any governing local rules, they often track and follow the local rules or detail why deviation is necessary. (Requests to modify local processes should be given careful thought as to why the pre-approved rules of the local court are insufficient, especially since the judge hearing the case may have had a hand in approving these rules). Generally, requests to modify local procedures are more along the lines of enhancements or the creation of case-specific timelines to dovetail with the overall litigation scheme or key deadlines in a particular case.

2. Confidentiality

Hon. Raymond T. Lyons (Ret.)

Confidentiality in mediation is meant to encourage frank and open discussion among the parties without concern that any statements or concessions made during mediation will be used later to prejudice a party. There are several legal sources providing confidentiality for mediation communications. In federal court, the Alternative Dispute Resolution Act, 28 U.S.C. § 651, et. seq. requires each district court to adopt local rules providing for the confidentiality of its alternative dispute resolution processes and prohibiting disclosure of confidential dispute-resolution communications. Adversary proceedings in bankruptcy are covered by the ADR Act. The Uniform Mediation Act, adopted in several states and the District of Columbia, grants a privilege for mediation communications, subject to limited exceptions, and provides that all communications are confidential to the extent agreed to by the parties.

Many court rules establishing mediation programs provide for confidentiality, as do the rules of ADR provider organizations. The ABI Model Mediation Rules have an extensive confidentiality section, as do the Model Standards of Conduct for Mediators. Federal Rule of Evidence 408 and some state evidence rules prohibit the admission of statements made during compromise negotiations to establish the validity or amount of a claim. Case law has found mediation communications confidential under common law and sets forth the standards for requiring disclosure of confidential communications in exceptional circumstances. Private contracts to mediate may provide for confidentiality. Practitioners are urged to review the confidentiality provisions of the applicable statutes, rules and case law in their jurisdiction. Reliance on the Federal Rules of Evidence or similar state rules of evidence may not be sufficient. Any mediation order, stipulation or agreement should contain a confidentiality provision.

3. Mediator Selection

Richard E. Mikels

Once the parties have agreed to mediate a case or have been ordered to mediate by the court, the obvious next step is to select a mediator. The individual that the parties ultimately select will have a great deal of influence over the manner in which the mediation is conducted. Indeed, selection of the mediator may well determine the ultimate success or failure of the mediation.

There are several sources to help find a mediator. Many courts, for example, maintain a list of approved mediators, complete with resumes and other qualifications.⁴⁶ Bankruptcy mediation can differ from other types of mediation. This is not to say that bankruptcy mediation requires a mediator who is a bankruptcy judge, bankruptcy lawyer or bankruptcy financial advisor to the exclusion of all other mediators. However, quite often a mediator who does understand bankruptcy law and the ins and outs of bankruptcy practice will be an ideal choice. To increase the pool of qualified bankruptcy mediators, ABI and St. John's University School of Law designed a course to train mediators specifically for bankruptcy disputes. Someone who has taken this course would be an obvious choice to be a mediator in a bankruptcy case. The members of ABI's Mediation Committee would also be helpful for suggestions about mediators who are well versed in bankruptcy. The ABI website may be consulted to locate committee members. Similarly, alternative dispute resolution service providers such as JAMS and the American Arbitration Association maintain databases of available mediators.

As an alternative, in some cases a court may appoint the mediator. However, a 2011 survey of corporate counsel in Fortune 1000 companies that was co-sponsored by Cornell University's Scheinman Institute on Conflict Resolution, the Straus Institute for Dispute Resolution at Pepperdine University School of Law, and the International Institute for Conflict Prevention & Resolution indicated that companies overwhelmingly favor selecting their own mediators over having them appointed by a court or regulatory agency.⁴⁷ That study also noted that ADR providers and previous experience/word of mouth are the most common ways in which mediators are selected (presumably because these sources allow parties more control over the mediation process) and that the use of agency or court-appointed mediators has dropped off significantly in the last 15 years.

4. Mediator Styles

Richard E. Mikels

In many ways, the most important traits of a mediator are similar to those of many bankruptcy lawyers and other bankruptcy professionals, particularly debtor's professionals. The professionals for a debtor often find themselves in the role of pulling people together to craft an agreement among parties with disparate interests. Even in circumstances where there are excellent attorneys, quite often an independent mediator can be beneficial. The particular traits for a mediator may differ from case to case; however, an excellent bankruptcy mediator will need to have knowledge of the law, experience with the specific aspects of bankruptcy practice that make it differ-ent from other practices, creativity, patience, exceptional listening and communication skills, an ability to gain the trust of the parties, and a gift for putting the parties at ease. Parties to the mediation are also well-served by having a mediator with a good sense of humor, persistence, superior analytical skills, empathy and interpersonal skills.⁴⁸ A mediator will need to draw upon his or her particular talents to reach a successful result.

While many of the above traits are difficult to evaluate in any way other than based on reputation or personal experience, there are several traits that are often used in marketing materials by mediators. One such measurable is the mediator's success rate. While many mediators report a success rate as high as 90 percent, it is important to probe further into the calculation by asking at what stage the disputes comprising the statistic settled, how complex the settled disputes were, and how many mediation sessions were re-quired.⁴⁹ The reason for this is that a particular mediator's success rate can be an extremely misleading statistic. The job of the mediator is to help the parties resolve their disputes, yet in some instances a resolution is not appropriate. Sometimes mediation is premature, but the work done at the mediation helps the parties reach a settlement several months later. Should such a situation qualify as a success or a failure? What if the parties decide at the mediation that further discovery is necessary? Should the mediator coerce the parties into a settlement without the necessary discovery just to boost his or her success rate? What if the issues involved are so contested that a court resolution would be the best course for the parties?

Does that mean that a mediator who did not push the parties into a bad settlement ran an unsuccessful mediation? The obvious lesson to be drawn from these questions is that blind reliance on success rates can be a mistake. A successful mediation is one that explores all possible options for the parties and helps them bridge conflicts. This cannot be measured in a single statistic.

Another measurable, and essential, consideration when selecting a mediator is evaluating a particular mediator's stylistic approach. Commentators generally agree that there...