Bankruptcy Mediation Start-Up: A History from One Jurisdiction
It’s January 2011. I’m sitting in a conference room at the Federal Courthouse in Omaha (the building is new and beautiful; you should visit it sometime). It’s a “brown-bag luncheon” for the local bankruptcy bench and bar. We’re on the last agenda item (open forum), and the judge asks for input. Having recently completed a couple of state court mediations, I raise my hand and say, “What about using mediations in bankruptcy?” Next thing that happens: I’m chair of the Nebraska Bankruptcy Court Mediation Committee.
How hard can this be? We gather together a blue-ribbon committee, including a couple of law school mediation professors, a clerk of court official, and a bunch of attorneys that span the business/consumer and debtor/creditor divides. Having model local rules to draw from would be to die for — but we don’t, so we poach from local rules in other jurisdictions and cobble together a respectable-looking set of local rules. And the local bankruptcy court promptly adopts them. Then we find trained mediators and create a list of highly qualified, court-approved mediators.
Then the hard part begins. It is assumed that “if we build it, they will come.” No such luck.
An alleged Ponzi scheme case is going on when our rules are adopted, and the chapter 11 trustee files 117 transfer-avoidance actions. He agrees that a mandatory mediation system would be appropriate for those actions, so the system is established. All 117 actions settle. None are tried. But mediation sessions occur in only five of them.
Other than the Ponzi case, we see no mediation activity — nothing — for five months after adopting the rules. Meanwhile, the Mediation Committee is working hard at promoting bankruptcy mediation: writing articles, speaking at bankruptcy CLE events, chatting up mediations with colleagues, etc. Additionally, I’m watching activity in pending cases like a hawk. Every time a significant event occurs (e.g., a motion for summary judgment is denied), I shoot an email to the disputing attorneys suggesting, as chair of the Mediation Committee, that the dispute is ripe for mediation.
But nothing seems to work. On occasion, there is even a sense of hostility to a mediation suggestion. I do not understand the hostility, but here is a guess: Bankruptcy attorneys are good at settling disputes — that’s a huge part of being a successful bankruptcy attorney. So “We don’t need no stinking mediations” is how some of that initial hostility seemed.
Aside from the Ponzi case, the first mediation motion is filed five months after adoption of the rules. One party wants to mediate. The other doesn’t. The court denies the mediation motion and then appoints a trustee.
Aside from the Ponzi case, the first mediation session occurs seven months after adoption of the rules. The session does not succeed, and the case goes on through trial and appeal.
But, somewhere along the way, attitudes begin to change. I don’t know what it is, and I can’t put a finger on it. Perhaps it’s a result of promotional persistence over time. Or maybe a change is occurring in the legal community. But whatever its source, openness to mediation begins to appear. There is a dawning of a new day — the Age of Mediation Aquarius (or something like that). One of the initially hostile naysayers even suggests that a bankruptcy dispute be mediated. I declare victory (to myself).
Then, as luck would have it, the economy improves.