You were just recently selected as the mediator in a large chapter 11 case, and the judge happily approved your selection. You prepare, you schedule, and you then look forward to what you believe will be a successful mediation session.
Alas, it is not to be. The mediation is not only unsuccessful, but at least one party may not have participated in good faith. What do you do? The answer to that question may depend on what court you are appearing before, the rules set forth in the general and/or case-specific ADR order, and the nature of the conduct of the offending party.
When Must Bad Faith Be Reported?
Courts have different rules that govern a mediator’s reporting obligations to the court. Before and after being selected as a mediator, you should review those rules so that you have a full understanding of what you must report, what you may report, and what actions, if any, you cannot report.
For instance, in the U.S. Bankruptcy Court for the Southern District of New York, a “mediator shall report any willful failure to attend or participate in mediation in good faith in the mediation process or conference.”[1] On the other hand, in the U.S. Bankruptcy Court for the District of Delaware, only “[w]illful failure to attend any mediation conference, and any other material violation of this Local Rule, shall be reported to the Court by the mediator….”[2] Optional reporting requirements, such as a party “not attempting to schedule or resolve the mediation in good faith,” can also be added in specific cases.[3]
Must a Mediator Report a Failure to Attend the Mediation Conference?
Yes. Where a party fails to attend a mediation conference, most courts require a mediator to report such a violation.[4]
Even if both parties attend the mediation, a mediator can report a violation if the mediator believes that the conduct at mediation demonstrated that one of the parties did not have the appropriate level of authority and thus essentially did not attend the mediation.[5]
May a Mediator Report a Minimal Level of Participation?
Yes. In Nick v. Morgan’s Foods,[6] the applicable local rule “require[d] the mediator to immediately inform the judge of any failure to attend any ADR conference, to comply with the Referral Order, or to otherwise cooperate with the ADR process.…”[7] The mediator determined that sending an uninformed representative to the mediation with only a $500 settlement authority and failing to submit a required pre-mediation statement amounted to a violation of the rule and thus “informed the district court of appellant’s minimal level of participation.”[8]
Can a Mediator Report Prior to the Conclusion of the Mediation?
Yes, as long as the applicable rule does not prohibit it. This took place in In re A.T. Reynolds & Sons,[9] where, after a “side session last[ing] over an hour … [t]he mediator informed the Bankruptcy Court that one of the parties was not participating in good faith … [before] [t]he mediation then reconvened.” A mediator should be careful that such reporting does not negatively affect the parties’ perception of the mediator’s neutrality.
Can a Mediator Submit an Affidavit to Attest to What Occurred at Mediation?
Yes. A mediator can attest to what transpired at a mediation without necessarily “reporting” any sanctionable conduct.[10]
Can a Mediator Issue a Report Without Violating a Mediation Confidentiality?
Yes. While most court orders provide that mediation is confidential and statements made during the mediation process may not be divulged by the mediator to the court, such court orders also obligate a mediator to issue a report. To do so, a mediator should avoid “provid[ing] the Court with any details of the substance of the conference”[11] or the “content of the mediation effort.”[12]
Does the “Good Faith” Buck Stop with the Mediator?
No. If permitted by the underlying court order, parties to a mediation can bring good-faith issues to the attention of the court.[13] In fact, courts have held that even if the underlying ADR order only specifically provided for a mediator to issue a report concerning “improper mediation conduct,” such plan did not preclude a party from doing so, either.[14]
Conclusion
A mediator has significant discretion in determining what may amount to a lack of good faith and in what he/she should report to a court.
[1] United States Bankruptcy Court, Southern District of New York, Procedures Governing the Mediation of Matters and the Use of Early Neutral Evaluation and Mediation and Voluntary Arbitration in Bankruptcy Cases and Adversary Proceedings (“SDNY ADR Order”), § 3.2 (emphasis added).
[2] Delaware Local Bankruptcy Rule 9019-5(c)(iv)(B) (emphasis added).
[3] In re Draw Another Circle LLC, Case No. 16-11452, Procedures Order, Docket No. 1501 (Bankr. D. Del. 2017).
[4] See, e.g., Negron v. Woodhull Hospital, 173 Fed. Appx. 77, 79 (2d Cir. 2006) (where party failed to bring a principal party to the mediation, the mediator reported it as a “violation of a court order”).
[5] See Richard v. Spradlin, 2013 WL 1571059, at *5 (E.D. Ky. April 12, 2013) (sanctions were awarded based on mediator’s report, which “detailed the defendants’ failure to prepare for, and proceed with, the ordered mediation”), aff’d, 572 F. App’x 420 (6th Cir. 2014).
[6] 270 F.3d 590 (8th Cir. 2001).
[7] Id. at 595.
[8] Id. at 593.
[9] 452 B.R. 374, 378 (S.D.N.Y. 2011).
[10] See Brooks v. Lincoln National Life Insurance Co., 2006 WL 2487937 (D. Neb. Aug. 25, 2006) (in granting sanctions, court relied upon mediator’s factual affidavit in finding that party representative scheduling a 2:30 p.m. flight demonstrated “lack of willingness to negotiate the entire day”).
[11] Delaware Local Bankruptcy Rule 9019-5(f)(ii).
[12] SDNY ADR Order § 5.1.
[13] See Brooks, 2006 WL 2487937 (both parties sought sanctions based on conduct at mediation).
[14] Fisher v. SmithKline Beecham Corp., 2008 WL 4501860, at *3 (W.D.N.Y. 2008) (court denied defendant’s assertion that “the ADR Plan rules permitted only a mediator to report any alleged improper mediation conduct” and sanctioned defendant for filing summary judgment motion on the eve of mediation while the opposing counsel was in transit, then using such motion as the mediation presentation).