Excerpted from Virginia Lawyers Weekly article “Use of mediation in bankruptcy on the rise” dated 4/27/2011
Mediation in bankruptcy cases is becoming more common, as judges and lawyers discover how it can prevent the loss of millions in litigation costs in large, complex cases. Settlement of a recent Virginia construction dispute in bankruptcy court demonstrates mediation can be a useful tool in smaller cases, as well.
This method of dispute resolution, which is common in civil litigation, is gaining traction in the bankruptcy arena, one bankruptcy judge said.
Richmond lawyer David G. Browne said he was relieved to mediate a bankruptcy dispute where projected litigation costs threatened to consume all the money at stake.
The spat arose from a large Richmond area residential real estate project. Browne’s client, a site contractor who wishes to remain anonymous, filed a mechanics lien on the property after a dispute with the owner. The owner put up a bond for the lien and then declared bankruptcy.
A cash bond worth $130,000 cash bond was worth a fight, according to Browne. But the stake was too small to take it to trial. “It would have taken $50,000 of legal time on each side to litigate and try the case,” he said.
Instead, Norfolk U.S. Bankruptcy Judge Stephen C. St. John was named to work with the parties to get the claims sorted out. After a February session with St. John, the two sides agreed on a split of the bond money. “We ended up getting the majority of the bond,” Browne said.
Browne said more lawyers ought to know about the possibility of court-approved mediation in smaller cases. He said he talked with other attorneys who practice in the Richmond bankruptcy court – one was not even aware that mediation was available.
“It is a tool that I think makes a lot of sense in cases where there is a modest amount in dispute, but the case would be very expensive for both sides to litigate and actually try,” Browne said.
To read the full article by Peter Vieth, click on VLW Article.