Protecting Mediation Communications in Bankruptcy Cases

August 2022

Publication| Bankruptcy & Corporate Restructuring

Over the past decade, some of the most important aspects of Chapter 11 reorganizations have been sent to mediation with increased frequency. Headline-grabbing cases like The Weinstein Companies, Purdue Pharma and Boy Scouts of America have all turned to mediation to attempt to achieve consensus concerning significant tort, personal injury and abuse claims, while smaller and/or lower-profile cases that have utilized mediation are too numerous to mention. Due to the increased frequency of mediation, including in high-stakes (and high-profile) cases, bankruptcy courts have begun to grapple more regularly with an issue non-bankruptcy judges and commentators have struggled with for years: the extent to which mediation communications are confidential, privileged and/or excluded from admissible evidence.

Determining whether to afford confidentiality or privilege status to mediation communications or bar their admissibility is a balance of competing policy concerns. On the one hand, most agree that in order for mediation to be successful, a participating party must have confidence that it can be honest in communicating with the mediator and opposing parties without fear that the communications will be used against it in court if the mediation is unsuccessful. As one court put it, “[t]he process works best when parties speak with complete candor, acknowledge weaknesses, and seek common ground, without fear that, if a settlement is not achieved, their words will be later used against them in the more traditionally adversarial litigation process.” Thus, “[w]ithout the expectation of confidentiality, parties would hesitate to propose compromise solutions out of concern that they would later be prejudiced by their disclosure.” On the other hand, creating new evidentiary bars and privileges interferes with the tenet in American jurisprudence that the public is entitled to “every person’s evidence.” Indeed, there are times that the only evidence in support of a claim or defense is something that was stated or learned at mediation, such as communications tending to show that in fact no agreement was reached at mediation where the existence or not of a settlement is the issue being litigated.

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