“Mandatory mediation” is a self-explanatory term. It means this:
–A court (or a mediator with authority from the court) orders disputing parties to participate in a mediation process.
There seems to be a reticence in the bankruptcy world, generally, toward mandatory mediation. I’m not sure why this is: perhaps it’s an expansion of the adage that “mediation is a voluntary process.”
–But, while mediation is most-definitely a “voluntary process,” it can still be a required process.
Indeed, mandatory mediation is a tool that every bankruptcy court needs to have in its toolbox to use at an appropriate time. See this article titled, “Local Bankruptcy Rules Without Mandatory Mediation Authority Are Like A Toolbox Without a Vise-Grip.”
The reality is that mandated mediation is a great idea that can work exceedingly well. Here are five illustrations.
Illustration No. One: Circuit Courts of Appeals
The use of mandatory mediation dates back to some of the earliest experimental programs on mediation conducted in the Second Circuit Court of Appeals by Chief Judge Irving R. Kaufman. In an attempt to deal with exploding court dockets, Judge Kaufman creates mediation experiments that include a random assignment of cases to mediation, whether the parties want to mediate or not. Then, Judge Kaufman (and others) follow-up these experiments with studies on their effects.
One conclusion from such studies is this: the random selection and assignment of cases to mediation (i.e., mandatory mediation) can work well. The result from such experimentation and study is that nearly all Circuit Courts of Appeals have adopted mediation programs that randomly assign cases to mediation (i.e., they mandate mediation in many, many cases).
The results of mandatory mediation in the Circuit Courts are excellent. And much of the success of such programs is attributed to their mandatory character. See this article titled, “Innovation by the Second Circuit: Creating a Mediation Pathway in the 1970s.”
Illustration No. Two: City of Detroit Bankruptcy
The Detroit Bankruptcy is unusual, if not unique, in many respects. And it’s use of a team-of-mediators is one of its many innovations.
At an early stage in the bankruptcy case, the Detroit Bankruptcy Judge appoints a lead mediator and delegates to that mediator broad authority over the mediation process. Such authority includes the power to identify disputes for mediation and then order interested parties into mediation over those issues.
The lead mediator and his team-of-mediators wield their delegated powers effectively, and hundreds of mediation sessions are the result. Such sessions are not your ordinary voluntary events: these sessions are mandated — they are command appearances.
And these sessions lead to spectacularly beneficial results. See this article titled, “Mandatory Mediation: Here’s How it’s Done – The Detroit Example”.
Illustration No. Three: Mass tort bankruptcies
Mass tort cases have a long history of using mediation to resolve disputes. And so, when mass tort cases find their way into the bankruptcy realm, it should not be surprising that the mediation tool comes along too.
The diocese bankruptcy cases are a good example of how mediation is mandated and used effectively in mass tort cases. Some of the diocese debtors-in-bankruptcy fight hard to avoid liability — and they spend large sums of money in doing so that could have been used for paying creditors.
Other diocese debtors spend their efforts on making mandated mediation efforts work successfully — and these have achieved good results for all constituencies. See this article titled, “Gallup Diocese (N.M.) files Mediated Bankruptcy Plan.”
Illustration No. Four: Special Settlement Masters
U.S. District Courts have, for many years, been appointing mediators as “special settlement masters” under Fed.R.Civ.P. 53. These mediators are, typically, given broad authority under Rule 53 to initiate and control the mediation process, including authority to order parties to the mediation table (i.e., the authority to mandate mediation).
One example is the case of Argentina’s debt restructure in the U.S. District Court for the Southern District of New York (“S.D.N.Y.”). Many years ago, Argentina faces debt repayment difficulties (similar to what Puerto Rico has also experienced) and is being sued by creditors in the S.D.N.Y. The Judge in that case creates a process for managing debt collection efforts: this process looks something like a private Chapter 9.
As part of this process, the Judge appoints a mediator as special settlement master under Rule 53 and grants broad authority over the mediation process to the mediator. Such authority includes the power to mandate mediation. The mediator persists in requiring and leading mediation efforts for many years and, ultimately, succeeds in that effort. See this article titled, “Argentina: What Can We Learn From a Mediation That Achieves $8 Billion in Cash Settlements From a Distressed Debtor?”
Illustration No. Five: Shaquille O’Neal’s Case
Shaquille O’Neal [yes, the basketball player] was being sued in a Florida state court. The parties are required by Court rule to attend a mediation session. All required attendees show up at the mediation session, except for one. Mr. O’Neal does not personally appear at the session. Instead, he participates “sporadically by Skype” and sends “a representative to participate on his behalf.”
The Judge finds that such actions by Mr. O’Neal are a violation of mediation requirements and determines that “sanctions are appropriate.”
But the Judge sanctions Mr. O’Neal’s attorneys – not Mr. O’Neal personally – by requiring them to pay the plaintiff’s legal fees and costs incurred in “attending the original non-compliant mediation.” The sanctions amount is $13,058.82.
The Judge also orders the parties to mediate the case again. And, of course, it settles. See this article titled, “Mandatory Mediation: How To Get Sanctioned – the Shaquille O’Neal Lesson.”
Conclusion
Mandatory mediation is a great idea and can be an effective tool that every bankruptcy court needs to have available and to utilize as needed.
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