Mediation Confidentiality Collides with Accountability in Court-Ordered Mediation


In the Bankruptcy Court for the Southern District of New York, a judge held a hearing upon Order to Show Cause why Wells Fargo, which had been required to participate in a mediation, should not be sanctioned for the conduct of its counsel in that mediation.  The mediator testified, Wells Fargo’s counsel testified, and at least one other counsel for a participating party testified — all concerning Wells Fargo’s conduct during the mediation.  The court held that there had been a failure to mediate, held Wells Fargo in contempt of the mediation order, and sanctioned them.

The case is In re A.T. Reynolds and Sons, Inc., 424 B.R. 76 (Bnkr. S.D. NY  2010).  The parties were ordered to mediation by order dated August 27, 2009.  On November 17, 2009, the mediator reported to the court that one of the parties failed to participate in good faith, and that a report would be submitted.  That report alleged that (a) Wells Fargo was unclear about the issues to be mediated, and sought a mediation statement identifying them; (b) Wells Fargo demanded to know the names of the individuals who would attend the mediation; (c) Wells Fargo sent a “junior” counsel to the mediation; (d) Wells Fargo’s counsel “repeat[ed] a pre-conceived mantra that indicated that Wells Fargo was not open to any compromise”; and (e) when the mediator threatened to report his conduct to the court, Wells Fargo’s counsel replied that his “client would never agree to my acting as mediator in the future in which Wells Fargo might be a party.”

For its part, Wells Fargo replied that its counsel was a senior attorney with 10 years’ experience; that the client representative at the mediation had full settlement authority; that Wells Fargo could not prepare for the mediation when the mediator said that the issues would be determined at the proceeding itself, and they “will go where the river takes us”; and that parties to mediations are fully entitled to take “no-pay” positions.

At the hearing the court called the mediator to testify.  He reported that Wells Fargo’s counsel interrupted his adversary and  “did not go through risk analysis.”  Counsel for the opposing party testified that the mediation ended “because we weren’t even getting past square one.” 

The court, in its opinion, engaged in a legal analysis of what constitutes “good faith” in mediation and noted that the case law “cannot be construed to mean that a party can decide ahead of the mediation that it will accept a single, preconceived settlement, then refuse to engage in the risk analysis that is fundamental to mediation.”  While a party can’t be forced to settle, concluded the court, it must participate in the process “beyond insisting that it won’t settle.” 

Moreover, the court found that “counsel to Wells Fargo sought to control the procedural aspects of the mediation by resisting filing a mediation statement and demanding to know the identities of the other party representatives.”

Wells Fargo and its counsel were therefore required to pay the mediator and the other parties their costs in preparing for and attending the mediation.  “The Court concludes that attendance at a mediation without participation in the discussion and risk analysis that are fundamental practices in mediation constitutes failure to participate in good faith.”

Now, I’m still learning.  But so are we all (I hope) and there’s enough in this opinion that’s contrary to my practices as a mediator that I need a reality check.  Or maybe a reality slap.

A.  My mediation agreement requires the parties to inform each other of the identities of their representatives a week ahead of time, and vests in me the power to exclude people.

B.  I tell the parties at the start of a court-annexed mediation that I will tell the court only whether it settled or whether it didn’t, and will maintain every other aspect of every communication in confidence.

C.  I also ask them to sign a confidentiality agreement that they will not testify or present evidence as to what happened in the mediation, and that they acknowledge such information and statements are both privileged and inadmissible.

D.  I tell parties that if I’m subpoenaed I will oppose it, and that I have insurance to cover the cost.

E.  I try to conduct the mediation so that the parties control the process as much as possible (this is called party autonomy), and certainly if a party wants to know who is coming and what issues are going to be discussed I will make every effort to get that information to that party (this is called not ambushing a negotiator).

F.  When a party tells me they’ve moved for summary judgment and want to wait for the motion before mediating, I tell them to come on along anyway and explain to the other side why they have a slam-dunk; better we should try to assess the merits than have a judge do so, who knows the law but doesn’t know either of your businesses.

G.  Maybe I’m dealing with a lot of dumb folks, but when I suggest risk analysis, or walk a party through a simple decision tree, most of them are unfamiliar with the technique.  Indeed, the very idea that a 100% win three years from now means a present-value discount for payment today is news to a lot of litigants and often changes their thinking.  Failure to engage in risk analysis is contempt?  Who knew?


H.  If I heard that any mediator threatened a party or its counsel with reporting its mediation conduct to a court, not only would I agree that the counsel should never again engage that mediator — I would never do so either.

Am I nuts here?  Are mediators who practice as I practice making a big big mistake?  Most important, is a party’s clear statement of an unwillingness to pay, accompanied by the facts and law supporting that view, now sanctionable?



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F. Peter Phillips
F. Peter Phillips is an arbitrator and mediator practicing through Business Conflict Management in Montclair, New Jersey. He is also the Director of the Alternative Dispute Resolution Skills Program at New York Law School where, as Adjunct Professor, he teaches Alternative Dispute Resolution, Negotiation, and International Commercial Dispute Resolution.

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