There can be no doubt that the United States Bankruptcy Courts will be dealing with fall-out from the COVID-19 pandemic for months, if not years, to come. According to the statistics released by the Administrative Office of the U.S. Courts, business bankruptcy filings, which declined over the last year, increased 17% in the month of March 2020.  Since January 2020, the United States Bankruptcy Court for the District of Delaware has seen 57 Chapter 11 cases filed by entities in virtually all business sectors: pharmaceuticals, transportation, health care, manufacturing, energy, the restaurant industry, and retail.

As those familiar with bankruptcy understand, a Chapter 11 bankruptcy case is very different from a stand-alone patent infringement or personal injury lawsuit. Indeed, the umbrella under which Chapter 11 cases proceed is broad enough to accommodate the resolution of discrete lawsuits as related matters, along with the more typical adjudication of claims and the recovery and distribution of estate assets among the various creditors. Consequently, these Chapter 11 cases will likely involve multiple related entities and/or layers of disputes between various creditor groups and be determined pursuant to both legal principles and equitable considerations.

Bankruptcy judges have long had an arsenal of tools at their disposal to help navigate the complexities of such cases, including ADR. Although the administration of a Chapter 11 case is often a give-and-take process with all parties at the table bargaining over each step, there are disputes and situations that cannot be resolved through party-directed negotiations, e.g., because the sheer number of interested parties or the number of contested motions and adversary proceedings become obstacles to a successful reorganization.

One of the most widely used ADR tools in bankruptcy is mediation. Rule 9019-5 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware provides that "[t]he Court may assign to mediation any dispute arising in an adversary proceeding, contested matter or otherwise in a bankruptcy case." This rule has been invoked to great effect over the years, with the bankruptcy judges in Delaware often referring matters to their colleagues for mediation. A robe is always a good motivator when it comes to having parties assume reasonable, conciliatory postures. In this regard, judges may have the time and energy to spend days, if not weeks, trying to resolve a matter, according to now retired bankruptcy judge Kevin Gross. In addition to being such a mediator when he was on the bench, Judge Gross also regularly appointed private mediators with specific and relevant experience to help resolve disputes.

There remain occasions, however, when the stakes are so high, the parties so numerous, or the case-related issues so complex that any single individual would be challenged to take on the task of mediating, whether the mediator is a judge or a private party. In a case with multiple parties and issues, a single mediator often engages in a game of whack-a-mole: each time the mediator resolves one dispute with a set of parties, he or she finds that several more disputes raised by different parties have popped up. This is where the flexibility of ADR can most effectively be used, as the bankruptcy judges in Delaware have recognized and embraced. In at least two recent bankruptcy cases, bankruptcy judges have appointed multiple mediators to serve in different capacities consistent with the needs of each case.

In In re Exide Holdings, Inc., et al., Case No. 20-11157(CSS), Chief Judge Christopher S. Sontchi entered an order giving the parties a limited amount of time to consensually resolve issues relating to the environmental liabilities arising from various non-performing properties of the Debtors (NPPs). The parties are expected to participate in global settlement discussions, as well as site-specific discussions. If the participants can't reach a settlement by June 30, 2020 (as extended by mutual agreement), they have been ordered to participate "in one or more mediations" that are relevant to the respective participants. Chief Judge Sonchi has appointed multiple mediators to help the participants resolve the many outstanding environmental challenges. More specifically, two of the mediators are designated to mediate those issues that are specific to NPPs located in California and Pennsylvania. The participants are given the opportunity to choose which of the three remaining mediators may be best suited to preside over the issues relating to any of the other NPPs. In short, the environmental liabilities of the Debtors pose a formidable obstacle to the success of the bankruptcy proceedings. The bankruptcy judge is using mediation as a focused means to resolve discrete disputes to help clear the path to emergence from bankruptcy.

In another example, Judge Laurie S. Silverstein recently entered an order referring certain "Mediation Issues" to mediation in In re:  Boy Scouts of American and Delaware BSA, LLC, Case No. 20-10343 (LSS).  Rather than using mediation to resolve discrete issues as Judge Sontchi did in In re Exide, Judge Silverstein issued a very broad order, appointing three mediators "for the purpose of mediating the comprehensive resolution of issues and claims in BSA's chapter 11 case through a chapter 11 plan." This allows the parties to propose in writing which specific issues should be addressed by the mediators, with the mediators determining "the allocation of responsibility amongst themselves with respect to the Mediation Issue(s) that are the subject of [each] Mediation Proposal. . . ."  In this case the formidable obstacle to emerging from bankruptcy is the weight of pending and future sexual abuse lawsuits, a very different scenario than the site-specific problems encountered by Judge Sontchi in In re Exide. With more indeterminate controversies to resolve, Judge Silverstein chose a more open-ended approach to mediation.

In the end, ADR—including arbitration, neutral evaluation and mediation—includes a variety of means to settle disputes outside the courtroom, means that can be employed as creatively as the issues presented require. When lawyers find themselves embroiled in a Chapter 11 case, all these alternatives to litigation should be explored. While arbitration is not designed to accommodate multiple parties with a myriad of disputes, it can be employed to identify and resolve distinct issues in an expeditious fashion. Likewise, neutral evaluations are helpful in the context of bringing parties closer to a resolution of a defined issue. In the bankruptcy context, mediation remains the most called upon form of ADR. A good mediator can muster the most relevant facts, divine what the parties really want and craft a solution that the parties (even with their disparate interests) can live with. The mediation process can help preserve business relationships for those companies trying to emerge from bankruptcy as a growing concern. In cases replete with controversial issues, mediation serves as a consensual, confidential process that may help heal wounds.

Engaging multiple mediators introduces a new facet to an established practice, bringing to the table each mediator's diverse background, experience and perspective. It may be that the lawyers involved in the case will recognize the advantages of splitting the issues and/or parties among a team of such mediators. Even with a creative judge, it is likely that the parties will have to be amenable to creative ADR or nothing good will come of it. In the end, it should be recognized that the most complex of cases can generally be broken down into discrete issues (legal, commercial, corporate, and/or financial), and that the more opportunities there are to tap into the strengths of a mediator's skill set, the more likely it is that not only the individual issues being mediated will resolve expeditiously, but that the bankruptcy case will move forward expeditiously to a successful reorganization.

Whether it is judge-directed or party-directed, both the bench and the bar should be engaged in exploring the potentialities of ADR. The worst of times call for the best of tools.

Sue L. Robinson is a former U.S. district judge for the District of Delaware and is currently an attorney at Farnan LLP in Wilmington. Her practice focuses on consulting in complex commercial litigation, mock trials and arguments, alternative dispute resolution, and arbitration.