About 30 bankruptcy courts have local rules or other procedures that govern referral of bankruptcy matters to mediation. Given recent expansion of the use of mediation in bankruptcy courts, the Judicial Conference Advisory Committee on Bankruptcy Rules asked the Federal Judicial Center to conduct a survey to help the committee determine whether to consider national rule changes to govern mediation. The purpose of the survey was to identify any problems encountered in mediations conducted pursuant to judicial referral and to determine the severity of any problems. The Center published its survey results in a report entitled ADR in Bankruptcy: The Federal Judicial Center Survey of Mediation Participants. Earlier this year, the committee decided not to take steps toward the adoption of national bankruptcy rules concerning mediation. As a result, local rules will continue to govern the mediation process. More generally, the committee has not taken a position on the use of mediation in bankruptcy.

The Survey

For the survey, the Center obtained names and addresses of counsel and mediators who had participated in the mediation of one or more bankruptcy matters during a three-year period ending in 1997. These were matters referred to mediation by a bankruptcy judge using local bankruptcy procedures. The Center mailed a questionnaire to nearly all these counsel and mediators (1,992 recipients). Because of the large number of matters referred to mediation in the Central District of California, the Center surveyed only a 50 percent sample of practitioners who had participated in mediation in that district during the study period. The response rate to the questionnaire was 64 percent.

Findings

The survey data show that 1,043 counsel-respondents participated in somewhere between 1,054 and 2,108 mediated matters,² and 440 mediator-respondents participated in 1,480 matters. The questionnaire listed several types of problems mediation participants might have observed or perceived during the mediation process. Their responses indicate that problems occurred in 2.5 percent or less of the matters referred to mediation. The breakdown of occurrence rates by problem area is shown in Table I.

Table I: Problems Reported

	Rate of Occurrence, Counsel Responses (N=1,054-2,108 Matters)	Rate of Occurrence, Mediator Responses (N=1,480 Matters)
Mediator disclosure of confidential information	0.9%-1.8%	0.4%< /td>
Party disclosure of confidential information	1.2%-2.4%	0.6%
Confidentiality affecting judicial approval of settlement	0.8%-1.7%	2.3%
Ex parte contacts between mediator and judge	0.4%-0.8%	0.3%
Mediator failure to disclose conflict of interest	0.5%-1.0%	0.1%
Mediator bias or prejudice	0.4%-0.7%	0.1%
Mediator not a "disinterested person"	1.2%-2.5%	2.3%
Rule 5002(b) connections between mediator and judge	0.9%-1.7%	0.1%
Rule 5002(b) connections between mediator and U.S. Trustee	0.5%-1.1%	0.3%

Although none of the problems occurred with great frequency, some types of problems appear to occur relatively more frequently than others. According to counsel, the most frequent problems were:

• breaches of confidentiality
• mediators who were not "disinterested"
• confidentiality of the mediation process affecting judicial approval of settlement and
• perceived connections between mediators and judges.

According to mediators, the most frequent problems were:

• confidentiality affecting judicial approval of settlement and
• mediators who were not "disinterested."

Two questions arise from these findings. Are observed or perceived problems in mediation of little significance because they occur infrequently? Are some observed or perceived problems so serious in nature that any occurrence of the problem, even though infrequent, warrants attention?

The study also revealed several other interesting findings about mediation in bankruptcy (see Table II):

• Bankruptcy judges referred less than 24 percent of the matters sua sponte.
• Less than 7 percent of the matters were referred over the objection of one or more parties.
• The bankruptcy estate paid the mediator's fee in less than 21 percent of the mediated matters.
• The mediator played a role in formulating a reorganization plan in approximately 9 percent of the matters reported by the mediators.

Table II: Other Issues

	Rate of Occurrence, Counsel Responses (N=1,054-2,108 Matters)	Rate of Occurrence, Mediator Responses (N=1,480 Matters)
Sua sponte referrals to mediation	11.6%-23.3%	not asked
Referrals over objection of a party	3.3%-6.6%	not asked
Mediator fee paid by bankruptcy estate	10.2%-20.3%	19.0%
Mediator role in formulating reorganization plan	not asked	9.4%

The report also includes a summary of respondent comments. The full report can be downloaded from the Center's home page at http://www.fjc.gov. For a hard copy, fax a request to (202) 502-4077 or send an e-mail to [email protected].

ADR Act of 1998

At its March 1999 meeting, the Advisory Committee discussed the effect on bankruptcy courts of the Alternative Dispute Resolution Act of 1998. The committee took no action with respect to the act, which requires each district court to authorize by local rule "the use of alternative dispute resolution processes in all civil actions, including adversary proceedings in bankruptcy..." The act also requires each district court to implement its own ADR program and provide at least one form of ADR process. Each district court is also required to adopt local rules requiring litigants in civil cases to consider the use of an ADR process and providing for the confidentiality of ADR processes.

There are varying interpretations of the extent to which the act applies to bankruptcy matters. One interpretation is that the act applies only to bankruptcy cases where the reference has been withdrawn. This interpretation rests on the act's repeated references to district courts, with only two references to adversary proceedings. A second interpretation is that parties to an adversary proceeding in a bankruptcy court may use the ADR program established by the district court if the bankruptcy court does not have its own ADR program. It can be argued that these first two interpretations are supported by the act's references to 28 U.S.C. §2071(a), which governs the district court local rule-making process, without any reference to 28 U.S.C. §2075, which governs the promulgation of local bankruptcy rules. A third, and the most liberal interpretation, is that the act's requirements, including setting up a separate ADR program, apply to both bankruptcy and district courts because bankruptcy courts are units of the district courts.

Despite differing interpretations, the act does not prohibit bankruptcy courts from establishing ADR programs. In fact, a substantial proportion of bankruptcy courts already have set up their own programs, use the ADR programs of their respective district courts, or refer bankruptcy matters to ADR on an ad hoc basis without the structure of an ADR program.

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Footnotes

¹ The views expressed in this article are those of the author and not necessarily those of the Federal Judicial Center. Return to article

² An unknown number of matters identified by certain counsel-respondents are duplicates of matters identified by other counsel-respondents. To account for these duplicates, the study presents a lower bound (which is 50 percent of the number of matters reported by counsel-respondents) and an upper bound (which is the total number of matters reported by counsel-respondents). The confidentiality of the mediation process prevented the Center from including information on the questionnaires that would identify particular matters. Return to article