Chapter VII STANDARDS OF PROFESSIONAL CONDUCT FOR MEDIATORS

• Jurisdiction: United States

VII. STANDARDS OF PROFESSIONAL CONDUCT FOR MEDIATORS

C. Edward Dobbs

Amediator of a dispute arising in a bankruptcy case will find little in the way of definitive guidance on the standards of conduct to govern his or her service.

A mediator should be concerned about the applicable standards of conduct for at least three reasons. First, a violation of a standard may result in the mediator being disciplined under applicable state rules or removed from an approved roster of neutrals maintained by the bankruptcy court. Second, a settlement agreement reached as the result of the conduct of a mediator who is found to be coercive or otherwise inappropriate may lead to the voiding of the settlement agreement by an adversely impacted party. Third, mediator misconduct may result in malpractice or other liability to one or more of the parties.¹⁰⁶

A. Sources for Guidance

A mediator should first look to the bankruptcy court's local rules for guidance. Most local rules deal with relevant topics such as conflicts of interest, disqualification, mediator settlement proposals, compensation and confidentiality. While it is likely that such guidance applies only in a court-connected mediation as opposed to one undertaken by the parties privately and without court referral, the guidance will nevertheless be relevant and useful. The standards set forth in most local rules, while helpful to a degree, are woefully incomplete. The mediator may, therefore, feel the need to consult model rules of conduct that have been promulgated by various bar and other organizations.

The Model Standards of Conduct for Mediators (the "Model Standards"), for example, were prepared jointly by the American Arbitration Association, the Section of Dispute Resolution of the American Bar Association and the Association for Conflict Resolution, and were revised in 2005. Although the Model Standards are not applicable to bankruptcy mediations unless so provided by local rules¹⁰⁷ or bankruptcy court order referring a matter to mediation, they have been adopted in a number of states.¹⁰⁸

In addition, the Commission on Ethics and Standards in ADR, sponsored by Georgetown University Law Center and the CPR Institute for Dispute Resolution, has drafted a model rule intended to cover the responsibilities of lawyers acting as third-party neutrals in mediation and other ADR processes (the "CPR Model Rule").¹⁰⁹ Some guidance may also be found in the National Standards for Court-Connected Mediation Programs (the "National Standards"), which were developed as a joint project of the Center for Dispute Settlement in Washington, D.C., and the Institute of Judicial Administration in New York City, with the active involvement of an advisory board comprised of individuals throughout the country.

A majority of the states have adopted rules and standards applicable to mediations conducted with respect to state court proceedings.¹¹⁰ Like the Model Standards, the state rules deal with recurring mediation themes of self-determination, conflicts of interest, impartiality and confidentiality, among other issues. A number of states have simply adopted, with minor modification, the Model Standards.¹¹¹ Although state rules will not necessarily apply in a bankruptcy mediation, at least two bankruptcy courts have incorporated by reference in their local rules the applicable state rules.¹¹² In addition, most states have organizations that provide ethical guidance or render ethics opinions applicable to the practice of mediation, and those opinions can provide helpful guidance.

For lawyer-mediators, the applicable state version of the American Bar Association's Model Rules of Professional Conduct provides little guidance. Rule 2.4(b) of the Model Rules simply states that a lawyer serving as a third-party neutral must inform unrepresented parties that the lawyer is not representing them. Further, if the lawyer knows or reasonably should know that a party does not understand the lawyer's role in the matter, the lawyer must explain the difference between the lawyer's role as a third-party neutral and the lawyer's role as one who represents a client. However, state ethics opinions differ on the question whether a mediator is engaged in the practice of law and therefore bound by the rules of professional responsibility applicable to lawyers in states.¹¹³ In states where mediation is regarded as the practice of law, a lawyer-mediator will need to be sensitive to the potential application of lawyer ethics rules to the conduct of the lawyer as a mediator. At times, lawyer-mediators may find themselves in a dilemma when attempting to balance ethical guidelines for attorneys and those that may be relevant specifically to the attorney as mediator. For example, a lawyer-mediator observing misbehavior by a party's counsel in a mediation conference may be obliged by legal ethics to report the misbehavior, while mediation confidentiality rules may preclude the lawyer-mediator from making such a report.

The guidance contained in the Model Standards, the CPR Model Rule, the National Standards and state rules and ethics opinions, while not binding in bankruptcy cases unless made applicable to a particular mediation by local rules or court order, may be deemed to establish standards of care, the breach of which might be asserted as grounds for a malpractice claim against a mediator.¹¹⁴

Except for standards in local rules that may not be altered by the parties, mediation participants may agree upon the standards to govern mediator conduct in their mediation agreement or pursuant to a bankruptcy court order referring the matter to mediation.

The paragraphs that follow will attempt to distill the various sources of standards into "best practices" while noting conflicts in standards where they exist and highlighting specific conduct requirements contained in some local rules.

B. Party Self-Determination

It is generally recognized that, while a mediator may exercise persuasive influence over the parties in the mediation process, the mediator should not attempt to compel the parties to do anything, purport to decide the dispute, or direct resolution of any matter.¹¹⁵ The Model Standards, the CPR Model Rule and some state rules require a mediator to conduct the mediation process based on the principle of party "self-determination."¹¹⁶

The right of self-determination includes selecting the mediator, participating in the formulation of the agenda of matters to be discussed at the mediation, providing input to the mediator regarding the timing and location of the mediation (unless otherwise dictated by local rule), evaluating offers and counterproposals before settling upon any of them, asking for clarification of any issues unclear to a party, and participating in or withdrawing from the process.¹¹⁷ In explaining the process of mediation to inexperienced participants, the mediator should advise the parties that the outcome of the mediation rests with them and that there is no obligation on the part of any participant to agree to any settlement, even one recommended by the mediator.¹¹⁸

Thus, a mediator should not undermine party self-determination for reasons such as higher settlement rates, ego, increased fees, or outside pressures from court personnel, program administrators, provider organizations, the media or others.¹¹⁹

Reflecting differing views on the propriety of an evaluative mediation style, some state ethics rules for mediators discourage mediators from offering opinions on the merits of a controversy or the value of a settlement.¹²⁰ To be contrasted with these state rules or ethics opinions are local rules that not only countenance an evaluative approach, but can be read to encourage use of such an approach.¹²¹

While a mediator is not personally responsible to ensure that each party has made a free and informed choice to reach a particular settlement decision, the mediator should, where appropriate, make the parties aware of the importance of consulting other professionals to help them make informed choices.¹²²

C. Conflicts of Interest and Disclosure

Mediator candidates are obliged by some local rules to, and should as a matter of course, conduct a conflict check prior to agreeing to serve as mediator of a dispute.¹²³ The scope of inquiry should be consistent with conflict searches applicable to lawyers under rules of professional conduct.¹²⁴ The mediator candidate's conflict search will be based in large part upon information provided by the parties, which, if not provided, should be solicited by the mediator and should include a complete identification of the parties and their representatives, insurers, lawyers, witnesses and expected attendees at the mediation, as well as the key issues involved in the dispute.¹²⁵

After conducting a conflict check, the mediator should disclose to all participants past or existing relationships with any participant (personal or professional), involvement by the mediator with the subject matter of the dispute, and all other potential relationships or experiences that might reasonably call into question the candidate's impartiality.¹²⁶ Full disclosure should include all circumstances reasonably known to the mediator that may affect the mediator's neutrality or appearance of neutrality and disinterestedness, including any financial or personal interest in the outcome; any existing or past financial, business, professional, family or social relationship with any of the parties, including any prior representation of any of the parties, their counsel and witnesses, or service as an ADR neutral for any of the parties; any other source of bias or prejudice concerning a person or institution that is likely to affect impartiality or might reasonably create an appearance or partiality or bias; and any disclosures required of a lawyer-mediator by law or contract.¹²⁷ The scope of the required disclosures should cover relationships to parties or immediate family members, business...