Monthly Archives: July 2012

Mediators May Play Key Role in Municipal Bankruptcies

Posted on by Hon. Randall Newsome (Ret.)
Randy Newsome, JAMS

Hon. Randall J. Newsome (Ret.)

Hon. Randall Newsome (Ret.) successfully served as a mediator in hundreds of cases both as a full-time neutral at JAMS as well during his 28 years as a settlement and bankruptcy judge.

In the past few months, there has been a marked increase in the number of counties and municipalities either declaring bankruptcy or heading down the road towards filing for Chapter 9. We’ve seen this happen to Jefferson County in Alabama, and then Stockton, Mammoth and San Bernardino in California. The pace of these is not likely to decrease, with even Warren Buffet forecasting more municipal and county bankruptcies. In light of this, legislators will be looking for new tools to navigate such uncharted territory. As Buffet noted, now that large cities are declaring bankruptcy, others may soon follow suit as a previously unthinkable option to deal with mounting debt.

Perhaps seeing the way the wind was blowing on this, California passed a law in October 2011 that sets up specific requirements for municipal bankruptcies. As a condition of declaring Chapter 9, a municipality must either 1) declare a fiscal emergency (as was the case with San Bernardino; or 2) agree to a 60-day mediation period, after which if they still cannot put a deal together they are free to file Chapter 9. The mediation period may be extended at least once – and multiple extensions are technically possible if the parties are willing.

Granted, mediation in Stockton did not work per se, at least in a traditional sense of a successfully negotiated deal. However, this does not mean that mediation did not play an important role in the bankruptcy process – and the eventual resolution of the case. It is likely that mediation revealed areas of agreement for at least some of the parties, while some issues remained unresolved. This is not a process that didn’t work; this is progress.

As these municipal bankruptcies take shape, it could be that the most overlooked benefits of mediation may begin to shine. Mediation gets things organized, it gets parties talking, and it clarifies positions. It reveals points of agreement that could lead to early, potentially money-saving, deals for parties where they would have had to wait for Chapter 9 if they did not engage in mediation. In short, mediation breathes a little air into what can be a tense, fractious process where parties are entrenched and missing great opportunities because they cannot yet not see eye to eye. Mediation opens space for things to happen – even things that many may not have expected before going in.

This is likely what legislators in California had in mind when they passed the law providing for mediation in municipal bankruptcies. In fact, they made a point of not calling the process mediation. Rather, they used the term neutral evaluation. Legislators did not want a process where someone shuttled back and forth between entrenched parties with offers. Instead, they wanted an evaluative process where a neutral voice had the power to not only offer counsel and advice, but provide leadership and direct the parties to points of agreement and even options they cannot see for themselves. This is where the true value of an experienced mediator shines.

As municipalities confront bankruptcies, mediation may provide an opportunity to take a realistic look at the situation and discover options for reaching deals that may not be apparent from heading straight into Chapter 9. As such, mediators could become true economic allies for our country’s ailing cities.

 

Referees and Special Masters Help Navigate Litigation Roadblocks

Posted on by Barbara Reeves Neal, Esq.
Barbara Reeves Neal, JAMS

Barbara Reeves Neal, Esq.

Barbara A. Reeves Neal is a JAMS neutral in Santa Monica, Calif. She resolves complex, high-profile commercial, employment and professional liability disputes in the construction & engineering, energy, healthcare, and insurance industries. Ms. Reeves Neal is a fellow of the Academy of Court Appointed Masters.

Budget cuts have gutted the state’s civil trial courts, clogging dockets, causing delays and forcing attorneys to be much more creative in managing their cases. One often overlooked option is the appointment of referees and special masters to handle matters before, during and after trials.

References, which can be stipulated to by both parties or appointed by the court following a motion by one party, have their pros and cons. On the positive side, they can help save time and expense and move a case toward trial or resolution sooner. On the negative side, they cost money.

Regardless, the cost of appointing a referee often offsets future expenses by eliminating costly disputes that can arise out of a case.

Discovery management, including the production of electronic data, is an especially fertile area for the use of special masters and referees. Someone with experience in the legal system can help set reasonable discovery boundaries and deadlines and prevent expensive disputes before they happen.

Referees can also decide dispositive and non-dispositive motions quickly, and hold hearings telephonically.

Referees and masters also aid the court in the settlement of complex disputes, and can also assist the parties in categorizing a case to help break out different types or levels of injury, liability or damages. Once issues are categorized, the referee or master is able to narrow issues and target settlement efforts at certain plaintiffs or defendants.

Aside from expense, another concern about referees and special masters include delegating judicial functions to a private neutral who could very well take over the process and derail progress toward trial.

This can be addressed early with careful drafting of the order or stipulation appointing the referee or special master. The reference should outline what the referee or special master is being assigned to do, when and how he or she will report to the court, and a provision regarding fees that includes expectations of the parties about this issue.

Referees and special masters allow courts and parties to streamline case management and resolve cases quickly, and also bring expertise in areas such as accounting, finance and technology. The courts, parties and attorneys can all benefit from increased use of referees and special masters.

MasterCard, Visa Settle Historic Price Fixing Case

Posted on by Chris Poole

Credit card companies and the banks that issue the cards have agreed to pay merchants nearly $7.25 billion to resolve dozens of lawsuits filed by retailers in 2005. The settlement includes at least $6.05 billion in payments to some 7 million merchants for past damages and an eight-month reduction in fees valued at $1.2 billion.

The pact is potentially the largest antitrust settlement in U.S. history.

Additionally, Visa and Mastercard will reduce “swipe fees” – fees paid by merchants to issuers when cards are used – while they implement new rules for such transactions. The changes will likely go into effect in 2013.

If approved, this settlement will represent the largest ever recovery in an antitrust case and will be the second largest class action settlement ever.

To read more about the settlement, please click here for the USA Today coverage, here for CNN coverage or here for Reuters coverage.

Why Diversity Matters in ADR

Posted on by Chris Poole

Recently some members of JAMS along with an outside attorney delivered a presentation for Bloomberg BNA on diversity in ADR, focusing primarily on gender and ethnic diversity within commercial and other high monetary value disputes, which are typically handled by national or regional providers.

Mark Smalls, JAMS chief marketing officer, moderated the presentation featuring Kimberly Taylor, JAMS chief operating officer, Hon. Robert Baines, a JAMS panelist and Wayne Outten, managing partner with Outten & Golden in New York.

The presentation covered the current state of diversity within ADR, specifically among the mediators and arbitrators retained to settle these disputes. Additionally, the speakers shared why improving diversity in ADR is important, including benefits for inside and outside counsel along with their clients. It also highlighted current programs addressing the issue and concluded with a discussion of the roles that various stakeholders can play.

Click to view the presentation.

CLE credit is available in certain states and jurisdictions. Click to listen to the webinar.