 By: Elizabeth S.
Stong, Bankruptcy Judge, Eastern District of New York (U.S.)*
“The notion that
most people want black-robed judges, well-dressed lawyers and fine paneled
courtrooms as the setting to resolve their disputes is not correct. People with
problems, like people with pains, want relief, and they want it as quickly and
inexpensively as possible.”
Chief
Justice Warren E. Burger
Our
Vicious Legal Spiral, 16 Judges Jour.
22, 49 (Fall 1977).
More than ten years ago, I wrote a short article for the
ALI-ABA publication The Practical Litigator entitled “A User’s Guide to
Alternative Dispute Resolution in Business Cases.” At the time, I was a commercial litigator
at a large New York-based law firm, and my practice was concentrated in complex
business cases, generally representing defendants. My interest in alternative
dispute resolution flowed from my growing conviction that the best litigator
should know how to take a problem-solving approach to a case. I also began to
see that often, even an imperfect settlement can be a better outcome for the
client than a good trial. I became trained as a mediator, joined the mediator
panel of the federal district court, and helped to establish a court-annexed
mediation program for New York State Supreme Court’s Commercial Division, in
Manhattan. I also served from time to time as an arbitrator. But
overwhelmingly, my practice and perspective remained that of a big-firm
litigator.
Fast forward about ten years, to late 2009. It has been my
privilege to serve as a bankruptcy judge for more than six years, since
September 2003. I go to work in a federal court house, I wear a robe rather
than a suit in the courtroom, and I conduct conferences, motions, and trials
nearly every day. I have presided over thousands of bankruptcy cases, and
issued more orders determining more issues than I can count. Our docket, like
many courts’ dockets, is largely made up of individual consumer cases, and my
work is divided about equally between consumer and business cases.
It would be reasonable to assume that having traversed the
divide between bar and bench, and having become part of the adjudicatory
process – the very dispute resolution process to which mediation and other ADR
techniques posit themselves as “alternative” – I would no longer look to ADR
tools as effective means of dispute resolution. But it would also be wrong.
The fact is, as a bankruptcy judge, I see more, not fewer,
reasons for counsel, clients, and parties to consider ADR tools and techniques,
including facilitated negotiations and mediation, to resolve and even to avoid
disputes. The purpose of this article is to revisit some of the topics from ten
years ago with the additional perspective of the bench, and to consider how
these topics apply in the simultaneously broad and specialized context of
dispute resolution in business bankruptcy cases.
ADR: The Big Picture
Ask most lawyers to define alternative dispute resolution
and you’ll usually get a list of the formal and informal processes for resolving
disputes between parties that do not entail bringing the dispute to closure in
a court proceeding. Ask most judges and you’ll hear answers ranging from deep
knowledge and engagement in the issues to a gentle mistrust that such processes
belong in, or even near, a court house.
Ten years ago, I wrote that ADR is more than the processes
it encompasses, and that in the business dispute setting especially, the best
way to think about ADR is in terms of its goals. The goals of ADR in business
disputes always include resolving the parties’ dispute, but they often go
farther. An important goal in one situation may be preserving the parties’
relationship. In another it may be managing and minimizing the costs and
burdens of the dispute. And in yet another it may be addressing the underlying
issues that gave rise to the dispute so that future disputes can be avoided. Or
in the most common case there may be a combination of goals, some more apparent
than others.
As a bankruptcy judge, this seems even truer. The
bankruptcy process is well served by counsel and parties who know their case and the
applicable law, understand the business, and can navigate effectively the
bankruptcy process as set forth in the Bankruptcy Code and Rules. But it is
also essential that counsel appreciate their role as problem solvers. In a
federal civil action, the parties may litigate for months or even years without
encountering the judge. In a business bankruptcy case, the parties may appear
in court on “first-day” motions within the first hours or days after the
petition commencing the case is filed. Those hearings address matters that are
the life-blood of the company’s potential reorganization, including whether the
company may use its cash collateral, pay its workers, and borrow funds to keep
the door open and the lights on. These “first-day” motions may begin as
contested matters and end up in a consensual resolution, often with significant
input from the bankruptcy judge.
So how do these goals of ADR measure up against the
problem-solving goals of the bankruptcy process? One commonly articulated goal is
preserving the parties’ relationships. In the reorganization of a business, the
company’s financial distress may have damaged key relationships with any or all
of lenders, suppliers, landlords, and customers. The failure to repair any one
of these relationships can spell disaster for the company’s prospects to
reorganize successfully. Another often-cited goal is keeping costs down. Of
course, this is essential in a bankruptcy case. And a third goal can be to
address the underlying issues that caused the difficulties in the first place –
this is, of course, a fundamental challenge in a business restructuring. If the
company does not address the underlying causes of its financial distress, it is
likely not to succeed in its reorganization efforts.
Courts have been supportive of ADR initiatives by parties
to disputes before them. As one court observed:
We
recognize that [ADR] is an evolving concept and that new mechanisms,
often borrowing on more traditional ones, are being created. Although we would not likely be inclined to enforce an
agreement toresolve a dispute
through trial by combat or ordeal, we do not wish to put a straightjacket on the creative development of new
forms of [ADR] that individual
parties, or industries, find useful and preferable to litigation. Annapolis Prof’l Firefighters Local 1926 v. City of
Annapolis, 642 A.2d 889, 895 n.
6 (Md. Ct. Spec. App. 1994).
So ten years ago, as a litigator, I wondered why so many
lawyers seem to mistrust ADR for the resolution of business disputes. And I
questioned why so many ADR practitioners, including “neutrals” who conduct ADR
processes such as mediation, arbitration, and early neutral evaluation,
mistrust business lawyers who seek to have a role in ADR? Now I would ask two
additional questions: why do some courts seem to avoid ADR as a case management
tool, and why are some ADR professionals, including arbitrators and mediators,
concerned about courts embracing these techniques?
Then and now, my answer is the same – not for any good
reason. Courts can only improve their case management by understanding and
incorporating ADR tools where appropriate. These are simply additional tools,
and potentially very effective tools, to achieve a creative, efficient, and
productive resolution to a business problem.
Similarly, skilled ADR professionals have nothing to fear
from the involvement of courts in the dispute resolution process. A judge who
understands the mediation process can help the parties address both their
positions and their interests. It is often easier for a judge than for counsel
to identify both strengths and weaknesses of the parties’ positions, and to
suggest the possibility of settlement. The court can also remind the parties
that the alternative to a negotiated resolution is a prompt hearing or trial
date and a decision that will leave at least one party, and perhaps many
parties, worse off than a negotiated resolution.
As a lawyer, I found that well-prepared lawyers can be
among the most highly skilled and creative negotiators and can provide needed
information and guidance to clients attempting to solve their business
disputes. They are also most aware of their clients’ “BATNA” – the best
alternative to a negotiated agreement.
As a bankruptcy judge, it’s apparent that it would be
impossible to function effectively as a business bankruptcy lawyer without a
problem-solving approach to disputes and the skills necessary to accomplish
that result, including through the thoughtful use of ADR. And courts should be
able to promote, not inhibit, consensual resolutions through case management.
Bankruptcy litigation moves at an accelerated pace, but it still imposes
significant burdens in attorneys’ fees, client time, and negative publicity. It
can damage a company’s business relationships at a time when they may already
be fragile. And there is likely to be the distraction of uncertainty about the
ultimate outcome. Equally important, courtroom contests can shift the parties’
focus toward past disagreements rather than future opportunities, and can
damage or even destroy the parties’ prospects for a reorganization that would
be a mutually beneficial outcome.
The Historical Background of ADR
In many respects, the goals and processes of ADR are not
new. Since 1937, the Federal Rules of Civil Procedure have authorized courts to
conduct judicial settlement conferences, with the aim of achieving early and
cost-effective settlements. In its present form, Rule 16(a)(1) authorizes the
court to direct the attorneys for the parties and any unrepresented parties to
attend a conference “for such purposes as . . . expediting the disposition of
the action.” Rule 16(c)(9) also directs that, at the pre-trial conference, the
court may take “appropriate action” as to “settlement and the use of special
procedures to assist in resolving the dispute when authorized by statute or
local rule.” The Rule further provides that the court may require “a party or
its representative [to] be present or reasonably available by telephone in
order to consider possible settlement of the dispute.” Fed. R. Civ. P. 16(c).
See generally Wagshal v. Foster, 28 F.3d 1249, 1252-53 (D.C. Cir.1994), cert. denied,
514 U.S. 1004 (1995) (comparing the process of mediation to the obligations
under Rule 16). Even in its original 1937 incarnation, Rule 16 authorized
courts to “direct the attorneys for the parties to appear before it for a
conference to consider . . . [t]he simplification of the issues [and] [s]uch
other matters as may aid in the disposition of the action.” Fed. R. Civ. P. 16,
as adopted, 308 U.S. 645 (1938). Rule 16’s provisions authorizing courts to
promote settlement and “resolv[e] the dispute” through case administration are
made applicable to bankruptcy litigation by Federal Rule of Bankruptcy
Procedure 7016 and its predecessor, Bankruptcy Rule 716, which provide that Rule 16 applies in bankruptcy adversary
proceedings. As the 1973 Advisory Committee’s Note to Rule 716 explains, “[t]he
economies of time and money and greater efficiency in the judicial process
attainable by the use of pre-trial procedures should be available in adversary
proceedings in bankruptcy cases. See Yankwich, “The Impact of the Federal Rules
of Civil Procedure in Bankruptcy”, 42 Cal. L. Rev. 738, 756 (1954).” Bankr. R.
716 (advisory committee’s note 1973, superseded 1983). Compare Bankr. R. 716 (1973), with Fed. R. Bankr. P. 7016 (no
substantive change).
Congress dramatically expanded the role of ADR in the
federal courts in 1990, with the adoption of the Civil Justice Reform Act
(“CJRA”), 28 U.S.C. §§ 471-82.
Recognizing that the expansion of ADR was one of the
“cornerstone principles” of the CJRA, the Senate Judiciary Committee stated:
[T]he
last 15 years have witnessed the burgeoning use of dispute resolution
techniques other than formal adjudication by courts . . . . While the data
is not yet complete, studies of various ADR programs have shown generally favorable results . . . . As
the Federal Courts Study Committee concluded: ‘Experience to date provides
solid justification for allowing individual federal courts to institute ADR
techniques in ways that best
suit the preferences of bench, bar and interested publices. . . .’ The
[Judiciary] committee strongly agrees with this assessment S. Rep. No. 101-416,
at 28 (1990), reprinted in 1990 U.S.C.C.A.N. 6802, 6831.
In the CJRA, Congress required every federal district
court to adopt a Civil Justice Expense and Delay Reduction Plan, and directed
each district court, in developing its Plan, to consider whether “to refer
appropriate cases to [ADR] programs.” 28 U.S.C. § 473(a)(6). Some courts have
reached well beyond the requirements of the plans adopted under the CJRA, and
have specifically required lawyers to review the relative costs and merits of
ADR and litigation with their clients. See, e.g., Schwarzkopf Tech. Corp. v.
Ingersoll Cutting Tool Co., 142 F.R.D. 420, 423-24 (D. Del. 1992) (in response
to the CJRA, court directed attorneys to certify that they had discussed with
their clients both the probable expense of the litigation and any available ADR
measures that might resolve the dispute more efficiently).
Bankruptcy courts have similarly embraced the notion of
court-annexed ADR. Many courts have adopted court-annexed mediation programs
to assist in managing the heavy caseload that we face and to promote the
productive resolution of disputes. Some courts have adopted specialized ADR
procedures for certain kinds of disputes, such as preference actions. In 2004,
for example, the bankruptcy court in the District of Delaware, where many large
business bankruptcy cases are filed, adopted a General Order providing for the
mandatory mediation of claims to avoid a preferential transfer.That same year,
the district court in the District of Delaware, where appeals from bankruptcy
court decisions are generally heard, adopted an order providing for the
mandatory mediation of bankruptcy appeals.
Facilitative and Evaluative ADR
As a lawyer, I wrote that ADR can take many forms, and
there may be as many styles of ADR as there are business problems. Now as then,
commentators agree that two general and complementary approaches exist:
facilitative ADR and evaluative ADR. From a lawyer’s perspective, facilitative
ADR is often shorthand for mediation, and evaluative ADR is understood to refer
to processes that lead to an assessment or decision, including early neutral
evaluation and arbitration.
Taking the view from the bench, it’s clear that
facilitative and evaluative techniques complement each other in alternative dispute
resolution – and also exist in case management, especially in a business
reorganization case, where the case may require an immediate conference on an
unexpected impasse in the parties’ negotiations at one moment, a prompt
evidentiary hearing and decision at another, and a full day for hearings and
caucuses among the parties at the next. That is, the spectrum of approaches
from facilitative to evaluative dispute resolution is analogous to the range of
roles that may be assumed by a bankruptcy judge in a business bankruptcy case.
What is facilitative ADR? In a facilitative ADR effort,
the neutral encourages the parties to communicate with each other and to assess their
own interests and the realistic prospects for a settlement. In a purely
facilitative mediation, the neutral does not opine as to how the dispute should
be resolved, or what a likely outcome would be in court. Rather, the neutral
emphasizes that the parties control the process, and encourages the parties to
develop their own resolution to the dispute.
How does facilitative ADR compare with an evaluative
process? As a lawyer, I wrote that in an evaluative ADR session, the neutral may
assume a role that is much more akin to the role conventionally undertaken by a
judge, and provide the parties with an assessment of the merits of some or all
aspects of the case. The mediator’s assessment may come in the form of a
mediator’s proposal of a possible framework and terms for settlement. Some
forms of ADR are explicitly evaluative, such as arbitration and early neutral
evaluation, and the objective of the ADR proceeding is for the neutral, as
arbitrator or evaluator, to assess and even decide the dispute. I also noted
that there are risks associated with evaluation because the parties may feel
that the neutral is taking sides. See generally Kimberlee K. Kovach and Lela P.
Love, “Evaluative” Mediation is an Oxymoron, 14 Alternatives 31 (1996). One or
both parties may feel that the neutral has underestimated the merits of their
positions. At a minimum, one or both parties may feel that the neutral has
prejudged, or misjudged, the dispute to its disadvantage, and may conclude that
the mediation has failed.
Now, after six years on the bench, I appreciate that in
the business bankruptcy context, the role of the judge is both facilitative and
evaluative, so the comparison may not be so stark. And in a complex business
bankruptcy dispute, a mediator may combine aspects of facilitation and
evaluation to get the best results. In this setting, the neutral’s evaluation
of the merits of the dispute, including the parties’ likelihood of success in
court and the associated timetable and uncertainty, may well prove a potent
catalyst for the ultimate resolution of the dispute. This may be especially
true when the mediator is a judge, and therefore viewed by the parties as
having special insight into these issues. The mediator’s assessment may be
based on the record of the case, written submissions provided by the parties,
oral statements made at the mediation session by the parties or their
attorneys, and the mediator’s own background and experience in the field. And
it may be offered in a conference among all of the participants or in a caucus
with one of the parties.
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When I mediate as a judge, I am reluctant to offer an
assessment or proposal too early in the process. But once a framework has been
established for productive discussions, a judicial “mediator’s proposal” to bridge
the gap has often helped parties to overcome an impasse. While this can take
place in a conference among all of the participants or in a caucus with one of
the parties, the fact that we are proceeding in a courtroom generally leads me
to take this up with parties individually – both so that they can tell me what
I may be overlooking, and to avoid the impression that I am “ruling” in the
matter. The neutral’s evaluation of aspects of the parties’ positions often becomes
the starting point, and even the destination, for settlement
ADR Tools: Mediation, Arbitration, Early Neutral
Evaluation, and More
Ten years ago, it seemed useful to review the basic ADR
tools from a lawyer’s perspective – mediation, arbitration, and early neutral
evaluation. In bankruptcy court, mediation is overwhelmingly the preferred
process in court-annexed ADR programs, but a review of the basic attributes of
these three processes remains helpful.
Mediation
Mediation is a private, confidential, structured process
where parties are joined by a neutral mediator in a structured session aimed at
assisting the parties to reach a negotiated resolution to their dispute. One
court has described mediation as “a process in which a neutral person or persons
facilitate communication between the disputants to assist them in reaching a
mutually acceptable agreement.” Gibson v. Bobroff, 57 Cal. Rptr. 2d 235, 239
(Cal. Ct. App. 1996) (citation omitted).
Courts may direct parties to participate in mediation, but
only the parties can reach an agreement in mediation. Settlements reached
through mediation are often broader in scope than purely economic settlements
of lawsuits, and creative mediators, lawyers, and parties can achieve results
that could not be directed by a court. As another court found, “[u]nlike the
litigation and arbitration processes, mediation does not necessarily place the
parties in an adversarial relationship. Nor do parties emerge from the
mediation process as clearly defined winners and losers.” Poly Software Int’l,
Inc. v. Su, 880 F. Supp. 1478, 1493-94 (D. Utah 1995) (citation omitted). The
court also noted that “mediation is the one option which is most likely to
preserve an ongoing business relationship that might otherwise break down during
a more acrimonious adversarial proceeding.” Poly Software, 880 F. Supp. at 1494
n.10.
Although there is plenty of room for creativity in
structuring the mediation process, it generally has several defined phases. Before
the parties meet with the mediator, they may submit written statements of their
positions on the relevant factual and legal issues. An effective submission
also provides the context necessary to understand the interests that underlie
the dispute. These submissions are generally confidential, and provided only to
the mediator. The mediator may conduct telephone conferences with counsel and
the parties to become familiar with the issues and the status of the parties’
own negotiations.
When I mediate as a judge, I am always interested in any
written submissions that the parties may choose to make, but I also pay close
attention to the docket in the case and in any related proceedings. Often, I
speak with the parties both together and separately before convening an
in-person session, in order to hear their perspectives on the law and the
facts, and also to understand their interests and the opportunities and
potential obstacles to a settlement.
At the mediation, the mediator generally opens the
proceedings with a description of his or her role and the confidentiality of
the proceedings. Next, each side may make an opening statement. Skilled lawyers
recognize that the audience for this statement includes the mediator, the
opposing lawyer, and the client. Witnesses are not called, rules of evidence do
not apply, and cross-examination does not occur.
The mediator may ask for a caucus with one of the parties
and that party’s attorney, with only the attorneys, or perhaps even only the
parties. Caucuses provide additional or more complete information about the
facts, a party’s needs and positions. They also provide an opportunity to test
possible methods for resolution. Communications during a caucus are not shared
with other participants in the mediation unless the participants specifically
authorize the mediator to do so.
How does this change when the mediator is a judge, and the
setting is a courtroom? Mediating as a judge creates special
opportunities, and perhaps also some special challenges. Judges usually
function as decision-makers, and assess the law and the facts on a daily basis.
In a bankruptcy court, it’s not unusual for a judge to determine dozens of
matters in a single motion calendar. This role may give the judge greater
credibility than another mediator, and parties may be less willing to take, or
more easily persuaded to move away from, unreasonable positions in that
setting.
In addition, counsel and clients alike appreciate that a
federal court house is a special setting, and they take the process seriously. At
the same time, a judicial mediation in a courtroom is still mediation, not
adjudication – I often note at the outset that nothing can happen to a party
unless that party agrees. I open the session on the record, taking the
appearances of all who are present, and then ask whether anyone would like to
state anything on the record, noting that it is absolutely not required to do
so. We then go off the record for the hard work of the mediation session,
beginning jointly, and breaking into caucus as appropriate.
Mediation sessions can last hours or days, and if the
matter is complex, they may be scheduled over a period of weeks or even months.
Telephone sessions, sessions with a single party and its counsel, and sessions
with counsel only, may be conducted between joint sessions. Mediation may open
a dialog among the parties that leads to settlement on its own. Most mediations
end in a settlement of some or all of the issues. As one commentator notes,
“[i]t is generally agreed that 75 percent to 90 percent of cases that reach the
mediation table will settle there.” Michael G. Ornstil, “Nailing Down Mediation
Agreements,” 32 Trial 18 (June 1996).
Arbitration
Federal policy strongly favors arbitration, as reflected
in the Federal Arbitration Act, 9 U.S.C. §§ 1-16. See, e.g., Mastrobuono v. Shearson
Lehman Hutton, Inc., 514 U.S. 52, 62 (1995) (strong federal policy favoring
arbitration justifies arbitration of punitive damage claims; “when a court
interprets [contract] provisions in an agreement covered by the FAA, ‘due
regard must be given to the federal policy favoring arbitration, and
ambiguities as to the scope of thearbitration clause itself resolved in favor
of arbitration”) (quoting Volt Info. Sci., Inc. v. Bd. of Tr. of Leland
Stanford Junior Univ., 489 U.S. 468, 476 (1989)); Allied-Bruce Terminix Cos. v.
Dobson, 513 U.S. 265 (1995) (extending application of the FAA to maximum limits
of Congress’ commerce clause power in interpreting the phrase “interstate
commerce”).
Business contracts often include a provision requiring
that disputes arising under the contract must be resolved in arbitration, and courts
routinely enforce such provisions when they are challenged. At least one court
has found that meditation and early neutral evaluation provisions in a contract
should be enforced “in much the same manner as agreements to arbitrate are
enforced.” Annapolis Prof. Firefighters Local 1926 v. City of Annapolis, 642
A.2d 889, 894 (Md. Ct. Spec. App. 1994). Many state and federal courts
incorporate some form of arbitration into their court-annexed ADR programs.
Arbitration is similar in many respects to a trial.
Discovery may be available to the parties before the hearing. The arbitrator may hold a
pre-hearing conference. Evidence and arguments are presented to the arbitrator,
and witnesses may be called to testify and to be cross-examined. Depending on
the forum procedures and the arbitrator’s practice, the rules of evidence may
not be strictly applied. Ex parte contacts with the arbitrator are not allowed,
and while the arbitrator may encourage the parties to consider settlement, the
arbitrator cannot become involved in settlement discussions. After the hearing
is completed, the arbitrator issues a decision that is binding on the parties
and enforceable in a court.
Early Neutral Evaluation
Early neutral evaluation (“ENE”) has been incorporated as
an option into several court-annexed ADR programs. ENE aims to provide the
parties with a neutral, expert assessment of the strengths and weaknesses of
their respective positions.
In a typical ENE proceeding, the parties, through their
lawyers, make written submissions setting forth their positions and the
supporting evidence. Additional presentations may be made at a face-to-face meeting with
the neutral. Following the submission of evidence and argument, the ENE neutral
provides a non-binding assessment of the merits of the parties’ respective
positions, either orally or in writing. As in arbitration, the neutral provides
an assessment of the merits of the dispute, but unlike arbitration, the
neutral’s assessment is not binding. And like mediation, the process is
informal and not bound by established processes, but unlike mediation, the role
of the neutral is explicitly evaluative. After the parties hear the neutral’s
evaluation, they may well proceed to settlement, using the neutral’s evaluation
as a starting point for meaningful compromise.
“Med-Arb”
“Med-arb” is a hybrid procedure that combines mediation
and arbitration. In the usual med-arb proceeding, mediation is attempted, but if
it is unsuccessful, then the parties move to arbitration, often before the same
neutral who served as mediator. The arbitration may be binding or non-binding.
In a binding arbitration, the arbitrator’s decision ends the matter. In
non-binding arbitration, if the arbitrator’s decision is not satisfactory to
either side, the parties may return to litigation and trial.
Summary Jury Trials and Mini-Trials
Summary jury trials and mini-trials are two additional forms
of ADR. Here, the parties conduct mock trials before a jury or a judge, and
receive an evaluation of the case based upon their presentations. Like
arbitration, these proceedings have much in common with a trial, and they can
be costly. Like ENE, these proceedings can assist the parties in gaining a
realistic assessment of the strengths and weaknesses of their legal and factual
claims.
The Role of the ADR Neutral
If the parties have the ability to choose the ADR neutral,
either from a court panel or from a private service, what attributes should they
seek out? One commentator, Judge Harold Baer, Jr. of the Southern District of
New York, identified several important qualities in a mediator, including
patience, the ability to listen, and the ability to make the parties feel at
home. Hon. Harold Baer, Jr., Mediation – Now is the Time, 21 Litigation 5, 6
(Summer 1995). (It may be that not only a mediator, but also a judge, would be
well served by these qualities.) The specialized and accelerated nature of the
bankruptcy process, and the complex issues presented in many business
reorganizations, suggest thatsome knowledge of financial matters and perhaps
even the particular business environment, as well as the ability to move
quickly without sacrificing the patience necessary for a productive process,
are also important attributes.
Some view the characteristics of a successful mediator as
quite different from those of a successful arbitrator. One commentator
describes the difference as follows:
In
arbitration, the neutral employs mostly “left brain” or “rational” mental processes
– analytical, mathematical, logical, technical administrative; in mediation,
the neutral employs mostly “right brain” or ‘creative’ mental processes
– conceptual, intuitive, artistic, holistic, symbolic, emotional . . . Because the role of the mediator
involves instinctive reactions, intuition, keen
interpersonal skills, the ability to perceive subtle psychological and behavioral
indicators, in addition to logic and rational thinking, it is much more
difficult than the arbitrator’s role to perform effectively. It is fair to say that
while most mediators can effectively perform the arbitrator’s function,
the converse is not necessarily true. John W. Cooley, “Arbitration vs. Mediation— Explaining the Differences,”
69 Judicature 263-64 (1986).
These considerations raise an interesting question for
court-annexed mediation programs in which judges of the court may be appointed to
serve as mediators in cases before other judges of the court. Our court and
others have made this option available, and long before the CJRA, judges
referred matters for settlement conference purposes to other judges of their
court. Can a judge serve as an effective mediator or “settlement judge”? The
answer seems to be yes, but only if the judge remains keenly mindful of the
different role that he or she has taken on. The judge’s role in deciding a
dispute is challenging indeed, but the judge-mediator’s role in facilitating a
productive negotiation among the parties can be vastly more difficult – after
all, when the judge is presiding and rendering a decision, no-one but the judge
needs to agree on the outcome. Consensus is desirable, but a decision is
inevitable. By contrast, in mediation, the judge may bring knowledge,
perspective, and process skills to the role of mediator, but he or she lacks
the ability to render a decision.
The neutral’s training and experience with the ADR
procedures that the parties intend to use are also important factors to consider. Many
courts have mandatory mediation programs, but not all courts require that the
court-appointed mediators have training and experience in mediation skills. The
court-annexed ADR programs in the U.S. District and Bankruptcy Courts for the Southern
and Eastern Districts of New York require such training. See Richard C. Reuben,
The Lawyer Turns Peacemaker, 82 A.B.A.J. 54, 60-61 (Aug. 1996) (discussing the
risks attendant to the provision of ADR services by untrained neutrals). And
the trend favors training in these process skills – ten years ago, the
court-annexed ADR program operated by the Commercial Division of New York
Supreme Court had no training requirement at all, but now that court and all
New York State courts require mediators in court-annexed mediation programs to
have completed a minimum of forty hours of approved training and recent
experience mediating cases in the relevant subject area. See Administrative
Order of the Chief Administrative Judge of the Courts, Part 146.4(b) (June 18,
2008). The skills necessary to be an effective mediator are, in many respects,
quite different from the skills acquired by a seasoned litigator, so years or
even decades of experience as a courtroom litigator may not be a sign that a
potential mediator can be effective. And as noted above, they can also be quite
different from the skill set generally employed by a judge.
Experience in the particular subject matter can also
assist an ADR neutral in performing effectively. For example, in the case of early
neutral evaluation, a neutral that is recognized in the field may be able to
give a far more credible assessment of the parties’ positions than a neutral
that is unfamiliar with the area. For similar reasons, a judge who is serving
as a mediator may be able to provide an assessment of the strengths and
weaknesses of the parties’ positions with some authority. A neutral that is
closely identified with a particular side of an issue – for example, a lawyer
who represents exclusively landlords or tenants in a landlord-tenant dispute,
or a lawyer who represents exclusively employees or management in employment
litigation – might be perceived by the other side as biased.
As a lawyer, I found that lawyers had an important role to
play in selecting the neutral. Much of a lawyer’s skill and training is aimed at
identifying the issues and arguments on behalf of the client, and at tailoring the
presentation of the matter to the audience, whether adversary, judge, or jury.
Where the parties have a role in selecting the neutral, the lawyer can
contribute to the success of the proceedings by applying these skills, and even
instincts, to this task.
As a judge referring my own cases to mediation, I have
been asked to assist the parties in selecting a mediator from our court’s roster.
Input from the parties is critical – are there conflicts issues to be aware of?
Is there a history between the parties that is likely to make one mediator more
effective than another? What is the reason for the impasse, and why have the parties
not been able to overcome these issues and reach a settlement on their own?
Sometimes the most valuable information can be discussed candidly among the
attorneys, but cannot be taken up with the judge.
Conclusion
Ten years ago, I concluded that ADR has much to offer in
the resolution of business disputes. Now I would add that ADR has much to
offer in the effective management of business bankruptcy cases. Business
reorganizations are more likely to succeed when all of the parties pursue not
only their legal positions, but also their interests. The prospect of a
successful reorganization may be lost if the parties spend their time in
contentious and costly litigation about past events, rather than productive
engagement about future prospects that may be mutually beneficial. In each of
the principal forms of ADR that are used in court-annexed ADR programs –
mediation, arbitration, and ENE – skilled lawyers who are familiar with the
effective use of ADR techniques can dramatically enhance the likelihood of
success of the ADR process. Equally important, bankruptcy courts that are
effective in the targeted use of court-annexed ADR programs, including
mediation, can enhance the likelihood of success of business reorganizations,
and reduce the costs of the process. And ADR professionals should embrace those
efforts.
*Note: this article
was first published in the American Bankruptcy Institute Law Review. The full
citation is Elizabeth Strong, “Some Reflections from the Bench on
Alternative Dispute Resolution in Business Bankruptcy Cases,” 17 Am. Bankr.
Institute L.Rev. 387 (2009) and is reprinted here by permission of the author and
initial publisher.
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