Sullivan Hazeltine Allinson llc

Attorneys at Law

Mediation provides expediency, certainty for parties in bankruptcy

Mediation and arbitration have become increasingly popular alternatives to litigation as legal costs have continued to rise.Mediation is a particularly attractive option to resolve disputes early in the litigation process because it provides expediency and certainty at a fraction of the cost of proceeding to trial.Accordingly, litigants often chose to mediate to ensure a faster and less expensive resolution

Unlike arbitration, the goal of mediation is to encourage parties to reach a consensual resolution of their disputes.A mediator is a facilitator whose goal is to bring the parties to consensus.Because there is almost always some uncertainty as to the probability of success in litigation, a skilled mediator leverages the vulnerabilities of each party’s position and the cost of litigation to incentivize the parties to move toward the middle.Mediation takes a different type of communication, a different mindset, than traditional litigation, because the goal is for every side to leave the table with something, but not everything, they want.

While mediation most often takes pace after a legal action has been initiated, it is not uncommon for parties to mediate a dispute prior to commencing litigation.Mediation has become so commonplace that some attorneys focus their entire practice on mediating disputes.Across the board the benefits of mediation are reduced cost, a quicker resolution and a reassuring degree of certainty for all parties.

Alternative dispute resolution is particularly important in Delaware Courts.The Delaware Superior Court has required alternative dispute resolution in many types of litigation for decades.While the preferred choice for many years was arbitration, mediation has become increasingly popular in resolving disputes, and the Delaware Superior Court now has a yearly three-day, intensive mediation training program that participants must complete in order to become an approved mediator.Moreover, the Delaware legislature has enacted a statute recognizing the validity of arbitration clauses in most contracts and permitting a party to file an action in the Delaware Chancery Court requiring a recalcitrant counter-contract party to arbitrate.And the Delaware District Court has for years had a program for mediating appeals from decisions of the Delaware Bankruptcy Court.

Bankruptcy mediation is also very important in the Delaware Bankruptcy Court.In 2004, the Delaware BankruptcyCourt enacted a general order requiring mediation in most adversary proceedings in order to help clear its docket of 15,000 then-pending adversary proceedings.Mediation has proven to be a very effective tool for resolving these disputes and almost all adversary proceedings now settle either prior to or a result of mediation.In fact, the mediation program has been so effective that Delaware bankruptcy judges often order mediation in matters not covered by the general order and, in other matters, the parties themselves frequently chose mediation the hopes of reaching a faster, more cost effective, resolution of their dispute.

While mediation is most often used in bankruptcy adversary proceedings and contested matters involving only a few parties, the Bankruptcy Court has also used mediation as a tool to resolve complex, case dispositive issues involving virtually all of the major parties in a bankruptcy case.Significant examples in the Delaware Bankruptcy Court include the Catholic Diocese of Wilmington and SemCrude, L.P. bankruptcy cases.Mediation also played an important part in the confirmation of the City of Detroit’s bankruptcy plan of reorganization.

SHA’s Bill Hazeltine recently became a certified mediator for the Delaware Superior Court and is listed on the register of approved mediators and arbitrators for the Delaware Bankruptcy Court.Mediation is an interesting departure from Bill’s day to day practice: It involves the same knowledge and legal skills, but in a different application. Instead of being an advocate for his client, Bill takes on the role of a neutral third party in helping to resolve disputes in an efficient, cost effective manner.Bill looks forward to continuing this part of his practice.

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