February 2008

Most Bankruptcy Courts Offer Mediation

"The beauty of mediation is that it can give those involved in a bankruptcy case a good feeling about the legal system," Bankruptcy Judge Barry Russell (C.D. Cal.) said. "If you can help resolve your own dispute, you feel much better about the process and are much more likely to live up to the promises you make."

Mediation, defined as facilitated negotiation, is offered by more than two-thirds of the nation's 90 federal bankruptcy courts. (An informal Federal Judicial Center survey places the number at 62, but notes that additional bankruptcy courts offer other forms of alternative dispute resolution other than mediation.)

Those courts vary as to how they authorize and organize the mediation process, and there exists great variation in how frequently it is used. But the availability of mediation for creditors and debtors has drawn praise from judges and court staff alike.

"It is a valued process," said Chief Bankruptcy Judge Judith Wizmur (D. N.J.), whose court has offered mediation for over 10 years. "Use of mediation has not been particularly high, but it has proved to be very helpful in some cases."

Her court's website encourages parties to use its mediation program "as a cost-effective means to settle disputes that may arise."

This site, at www.njb.uscourts.gov/mediation, also notes that, "Mediation is intended to afford litigants a less expensive and more expeditious alternative to traditional litigation. The mediator's role is to assist the parties in reaching a negotiated settlement by conducting meetings, defining issues, defusing emotion, and suggesting possible ways to resolve the dispute."

The U.S. Bankruptcy Court for the Western District of Pennsylvania's website suggests that "almost all disputes are good candidates . .    . . Mediation can be used in a wide variety of contested matters or adversary proceedings."

In the Central District of California, 3,759 matters have been assigned to mediation since Russell helped design and make the process available in 1995. About 64 percent of those matters were settled.

"We have about 200 mediators, lawyers and non-lawyers, who have agreed to help resolve cases. The first day of their services is free, and rarely does a mediation go beyond that first day," Russell said.

Compensation for mediators varies among the courts, as do other aspects of their mediation programs, authorized by local rule, general order, or procedure.

"Some bankruptcy courts began formally offering mediation in the 1980s, but the concept of negotiation, including facilitated negotiation, has always been present in expedited dispute resolution and plan formulation in bankruptcy courts," said Robert Niemic, a senior research associate with the Federal Judicial Center and expert on mediation in bankruptcy.

One of the newer programs is offered by the U.S. Bankruptcy Court for the District of Arizona, which began its Alternative Dispute Resolution (ADR) program in 2004. That court has had nine cases assigned to mediation in the past three years, and Bankruptcy Clerk of Court Terry Miller reports that "the reaction has been very positive within our legal community."

"The court worked very closely and very early on with the local bankruptcy bar to create a successful program," Miller said. "A local ADR committee was created, and its membership consisted of judges, local attorneys, and clerk's staff."

Likewise, Bankruptcy Clerk of Court Michael Dowling of the U.S. Bankruptcy Court for the District of Hawaii reports that nine matters have drawn mediation assignments in the past three years, with six of them settled.

"Our judges promote mediation at the initial scheduling conference. Attorneys who are regular bankruptcy practitioners are aware of the program and generally are supportive," Dowling said. "Some have volunteered as mediators for an initial four hours at no charge for services."

Mediation most often is voluntary — all parties to a dispute must agree to the mediation assignment and, in some courts, on the mediator. But most bankruptcy courts with mediation also have a provision for its mandatory imposition in certain disputes. In Russell's court, a local rule allows mandatory use of mediation.

"Mediation is a settlement process, and sometimes a judge can understand that, due to strategic reasons, the parties are unwilling to come forward and have the dispute mediated. Mandatory mediation does not occur too often, but it is available to the judge," Russell said.