Dispute Bankruptcy by pwv16287


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									                         The Use of
               Alternative Dispute Resolution
                in Bankruptcy Proceedings*

*Portions reprinted by permission of JAMS.
Overview of the ADR Spectrum

Alternative Dispute Resolution (ADR) provides a
  range of alternatives between direct negotiation and

   Mediation
   Arbitration
   Facilitated Settlement
   Early Neutral Evaluation
ADR Spectrum
Advantages of ADR Use in
In most bankruptcies, there are claims and
  preferences that do not settle easily but do not
  require full-scale litigation to reach resolution

ADR can avoid unnecessary costs of discovery,
 motion practice and trial preparation
Advantages of ADR Use in
The time and expense of preparing for and appearing
  at a mediation (and other ADR proceedings) are
  modest by comparison to the costs of trial - even a
  short cause

The use of ADR can significantly shorten the length
  of the bankruptcy proceeding
Preference Actions Are Particularly
Well Suited to Mediation

   Factual issues require a case-by-case and industry-specific analysis
   Case law often does not provide a clear rule of decision for the
    case at hand
   Mediation provides a forum in which the parties’ disagreements
    can be aired and settlement reached based on a balancing of
    competing views
   Mediation provides a cost-effective forum for the resolution of
    smaller disputes
How to Initiate a Bankruptcy
ADR Program

A motion is made in the bankruptcy court for an
  order establishing the procedures for the
  submission and resolution of cases through
  mediation and/or arbitration
The Order Provides:

   Date, time, hearing location, ADR neutral

   Hearings are often held in multiple locations
    depending on the location of the debtor, the
    creditors, other parties, and the court in which the
    action is pending

   Multiple hearing locations increase program usage
    and reduce transactional costs
Documentation Accompanying the
   Explains the ADR process to be used

   Sets a schedule for the exchange of key documents and briefing

   Allows for limited discovery (Any party may seek leave for discovery designed
    to yield information necessary to assist the parties in making informed
    decisions regarding settlement)

   Discovery is completed quickly under the supervision of the mediator or
Typical Objections Raised

   Forum

   Cost

   Time

   Should not prevent trial de novo in the bankruptcy court
    (arbitration only)

   Constitutional issues, such as preference defendants being sued
    involuntarily (arbitration only)
Mediation vs. Arbitration
Arbitration-related objections are typically overcome
in two ways:

1. The ADR order can distinguish between claims and preferences.
Claims may be subject to either mediation or arbitration, while
preference actions may be limited to mediation only.
2. Wherever arbitration is an option, either side can accept the
award or estimation - or proceed to trial de novo.
ADR programs are drafted to safeguard the parties' rights to
fairness and due process.
Examples of Recent Bankruptcy ADR
Programs and Orders
   Mediations noticed between 35 and 40 days before the hearing
   Notice described the mediation process, the identity and
    qualifications of the mediator and the location of the mediation
   Clear deadlines set for the exchange of mediation-related
   Because of the relatively small dollar amount of many of the
    preference actions (between $25,000 and $50,000), a typical
    mediation day involves four to six cases
   Multiple cases with the same lawyers on the same day further
    increases efficiency and cost-effectiveness
Bankruptcy Court
ADR Programs
Bankruptcy Mediation Program

   Established in 1995
   “All controversies arising in an adversary proceeding, contested
    matter or other dispute in a bankruptcy case for referral to the
    Mediation Program”
   Specific ADR method used to be determined by mediator and
    the parties.
   Available ADR methods “include, but are not limited to,
    mediation, negotiation, early neutral evaluation and settlement
Mediation Panel

   Appointed by the Court.
   At least, one full day per quarter provided pro bono
   Thereafter, compensation as agreed by parties and
    mediator, subject to approval of Bankruptcy Judge
    if charged to bankruptcy estate
Survey Results

    October 2003 survey mailed to 7300 attorneys
     and clients who participated in Mediation
Approximately 2500, or 34% responded, as
                 Table - Assessment of Program by Participants

        Participants satisfied with the ADR Program            83%
        Participants who would use the ADR Program again       93%

        Participants who considered their settlement fair      82%

        Participants who believed parties will comply with     87%
        Participants who believe mediator was effective in
        encouraging clients to engage in meaningful           84%

        Participants who believed mediator was effective in
        getting the attorneys to engage in meaningful         85%
Mr. Levy is a principal of JAMS in San Francisco. Mr. Levy
founded JAMS’ Class Action Settlement Adjudication Program
and now supervises its Bankruptcy Claims and Preference
Resolution Facility. He is experienced in the design and
implementation of multi-party ADR programs and has overseen
several large bankruptcy processes pending in courts around
the country. Mr. Levy is an adjunct professor at the University
of San Francisco Law School and Co-Chair of the American
Bankruptcy Institute’s ADR Committee. He can be reached at

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