Business Courts and ADR

On Saturday of the ABA Annual Meeting a group of judges presented a panel on “ADR in the Business Courts: How Commercial Judges Encourage Settlement.”  Joining Vice Chancellor Don Parsons (Delaware), Judge Steven Platt (Maryland), Judge Ira Warshawsky (New York) and Judge Ben Tennille (North Carolina) were Bankruptcy Judge Elizabeth Stong (Eastern District of New York) and New Jersey attorney Robert Margulies, who was instrumental in framing the presumptive mediation program for the state courts of New Jersey.

Judge Stong has been working ADR for 20 years; we first met in her capacity as Willkie Farr’s representative to CPR Institute, well before she went on the bench.  She told the story of settling a matter (while in private practice) during summation of a 6-month trial.  She said all parties knew it would never be decided by a jury, and all wished the settlement could have come earlier, yet no one seemed able to do it.  Whence the ineffable role of the judge.  The Local Rules of the Bankruptcy Court of the Eastern District of New York permit a judge to require mediation.  This judicial intervention “takes the onus off the lawyer,” she said, and facilitates timely discussion of settlement parameters.  Sometimes the mediators are other judges and sometimes they are paid outside mediators.  (I am listed on the EDNY Bankruptcy Panel).  But it is designed to reduce the chances of the kind of trial she endured as a young lawyer. 

Judge Platt reported on the Mayland system that assigns a case to a single judge from filing to conclusion.  Assignment to the “Business and Technology Program” includes a willingness to engage in ADR conducted by mediators who are trained with 40 hours of initial work and another 8 hours per year. 

Judge Warshawsky noted that the New York State system has had commercial courts since 1993.  Judges can refer cases to mediation, but the power is exercised sparingly.  Initially the mediator panel was pro bono; now the first session is without charge and the parties may continue on a paid basis if they elect to do so. The court offers free 40-hour training.  The Judge considers that the mediation system “has to work” because the system can’t provide justice to all of the cases that are filed.  He believes that, in matters where mediation is not attempted, counsel bear responsibility.

Vice-Chancellor Parsons reported that the Delaware Court of Chancery has a mediation program by rule.  The court seeks to be the finest business court in the country, and provision of mediation is therefore a necessary component.  Mediation may be by another judge or by an external mediator.  Parties seeking judicial mediation are charged $5,000.  Mediated cases are reported on a separate docket and the proceedings are confidential.  The program is new; so far 17 cases have been mediated and about half have settled.  The judges are also available to mediate a matter that has not been filed as a pending case, for a charge of $10,000. 

Robert Margulies shared his recently coined term for the nature of modern business law: “liti-gotiation.”  So pervasive has settlement discussion become in the litigation process, he said, that (at least in New Jersey) you can’t think of one without implicating the other.  The observation comports with the metrics: In the New Jersey state courts there are 100,000 filings per year, but 1,800 trials per year.  So the courts are where things get settled, not where they get tried.

With the kind permission of the Pepperdine Dispute Resolution Journal, attendees were treated to a handout of a draft article, “Getting to Yes in Specialized Courts: The Unique Role of ADR in Business Court Cases,” by Judge Tennille, Lee Applebaum and Anne Tucker Nees.  The full article will appear in Volume 11, Number 1 of the Journal.

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