Many years ago, when mediation was a rarity in bankruptcy litigation, I asked an elder this question:
Why is the bankruptcy system slow to adopt mediation? »
A surprising answer
The elder gave this surprising response:
“At the time of the promulgation of the Bankruptcy Code, the bankruptcy judge was considered a mediator in his own court.”
The elder added this. Upon promulgation of the Bankruptcy Code:
- Bankruptcy judges were never intended to be Article III judges;
- Instead, bankruptcy judges were supposed to look more like:
- a magistrate magistrate (authorized by 28 USC Sec. 631 et seq.); Where
- a special master (allowed in U.S. district courts by Fed.R.Civ.P. 53 but denied in bankruptcy courts by Fed.R.Bankr.P. 9031).
An obvious illustration
An obvious and common illustration of a judge acting as a mediator is this story:
- before starting a trial, a judge meets with the disputing lawyers in chambers to explore settlement options, and
- settlement often occurs as a result, eliminating the need for a trial.
A less than obvious illustration
One of the most interesting mediator-type roles I have seen a bankruptcy judge fill, in the judge’s own court, occurred in the 1980s.
Here is what happened at the time:
- An economic recession is engulfing our region and bankruptcy filings are exploding;
- The local bankruptcy court consists of a single bankruptcy judge, a single assistant to the judge, and a handful of employees from the clerk’s office;
- The Court has no electronics – a landline phone with long distance rates to nearby towns and an electronic typewriter are as high-tech as the Court’s systems; and
- Court processing is done entirely on paper – reviewing documents in a court file means a trip to the courthouse, and getting copies of those documents is difficult.
—Dealing with an overwhelming workload
As the bankruptcy judge’s workload grew overwhelming, he handled it as follows:
- He schedules a query day once or twice a week, with eight to a dozen items to be heard every hour, all day, with an hour’s break for lunch;
- The presence of a lawyer at a hearing is mandatory – failure to appear = you lose;
- Each hearing is long, it seems, and a hearing scheduled for 11:00 a.m. could actually be at 2:20 p.m.;
- Each hearing is held on affidavit evidence;
- The judge rules from the bench at the end of each hearing and makes a short journal entry to document the decision (for example., “Request Granted” or “Request Denied”);
- As a result, lawyers hang out in the halls for a long time discussing their disputes before the Court;
- In this context, many disputes are settled: the lawyers notify the registry of the settlement and then leave the courthouse;
- The registry notifies the court that a settlement has been reached;
- Then the Court announces, when the hearing time for this dispute finally arrives, that the case is “settled” and expresses its gratitude for this outcome, then moves on to the next scheduled item; and
- The vast majority of all disputes in this bankruptcy court are settled this way.
I have always found the practice of this bankruptcy judge to be one of the most effective mediation systems I have known [note: I’m not endorsing this system . . . merely noting it’s effectiveness].
In this context, the bankruptcy judge has been the mediator. The judge:
- brings parties together – for clients who don’t show up in person, payphones are in the hallways for their attorneys to call and get settlement authorization;
- provides an incentive to settle – no one wants to wait hours for an actual hearing, and a decision from the bench on a complicated case can seem risky; and
- establishes a system that lawyers expect and rely on to prepare and execute case strategies.
— Lamenting his passing
In fact, many lawyers lamented the disappearance of this mediation-like system when it disappeared.
And it was the demise of that mediation-like system that created a later perceived need for formal mediation rules that now exist in this bankruptcy court.
The bankruptcy judge as a mediator in the judge’s own court is an old and meritorious idea.