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MEDIATION: Mandatory Commercial-Case Referrals Are Coming to New York (July 3, 2012).

A new New York state report on reforming litigation relies in part on ADR to help fix the problems.

The June 20 report, titled "The Chief Judge’s Task Force on Commercial Litigation in the 21st Century," recommends various reforms to “ensure that the New York Judiciary helps [New York State] retain its role as the preeminent financial and commercial center of the world.”

At the heart of the recommendations is a new mandatory mediation pilot program for commercial cases, and a focus on boosting New York’s image as an international arbitration center.  The mediation program will begin in New York City because of its concentration of mediators, the report states; 20% of the cases filed in the state’s commercial courts will be sent to mediation, automatically.

The 34-member Task Force on Commercial Litigation in the 21st Century, was led by co-chairs Judith S. Kaye, former New York state chief judge and now of counsel at Skadden, Arps, Slate, Meagher & Flom, and Martin Lipton, a founder and name partner of Wachtell, Lipton, Rosen & Katz.

The task force met over the past six months to explore how the Commercial Division of the New York Supreme Court, which is the state's trial court, could maintain its position as a world-class court system for commercial adjudication in a challenging world economy that has led, the report says, to “vastly increased demands and shrunken resources” for the court system.
You can find the report here.    

The task force is unclear as to when its recommendations could be installed, including the mandatory mediation pilot program.  Local coverage pointed out the difficulties of installing the report's many recommendations in the face of state budgetary constraints.  See Brendan Pierson, “Report Calls for Resources, New Procedures in Commercial Court,” N.Y. Law Journal  (June 27) (available here), and Alison Frankel, “New York needs a world-class state business court. Or does it?” Thomson Reuters News & Insight (June 26)(available here). (suggesting that the task force will need stronger justifications to support investment in potentially costly court programs than its report provides).

Specifically, the report recommends:

1.  Appointing six new Court of Claims judges for assignment to the Commercial Division to confront the growth in case size and complexity;
2.  Increasing the monetary threshold for actions to be heard in the Commercial Division on a county-by-county basis, and removing the exemption to the monetary threshold of certain categories of cases, starting with actions involving arbitrations;
3.  Reviewing and adjusting the categories of cases eligible for the Commercial Division periodically;
4.  Hiring additional law clerks for all Commercial Division Justices;
5.  Recruiting a panel of “Special Masters” drawn from seasoned commercial litigators who are no longer in active practice to “hear and report” on discovery and other matters at the expense of the parties, and rehiring former justices with deep experience in the court system as Judicial Hearing Officers to assist the Commercial Division with its challenging docket;
6.  Convening periodically a “Institute on Complex Commercial Litigation” to increase “Commercial Division Justices’ engagement with members of the Bar and the Academy”;
7.  Creating a database of all Commercial Division decisions that is text-searchable by subject and/or keyword to promote the development of Commercial Division jurisprudence;
8.  Revitalizing a standalone support office, with its own office space, dedicated to the Commercial Division;
9.  Assigning Commercial Division cases early: a party may seek assignment of the case to the Commercial Division only within 90 days following service of the complaint;
10.  Adopting uniform procedures for more robust and timely expert disclosure, thereby harmonizing the disclosure rules of state and federal courts;
11.  Streamlining the way litigants address the use of privilege in cases;
12.  Creating standard forms/procedures for optional use in Commercial Division litigation;
13.  Adjusting to the burdens, and exploiting the opportunities, presented by E-discovery;
14.  Improving courtroom efficiency through the use of staggered court appearances, letter submissions for discovery motions, telephone discovery conferences, and judge-presided discovery conferences;
15.  Opening dialogues with the Appellate Division to streamline the interlocutory appeal process and make the process more liberally available;
16.  Increasing the availability of technology tools in the courtrooms;
17.  Providing optional accelerated adjudication procedure for the parties, placing limits on document demands, interrogatories and depositions, and adhering strictly to rules governing discovery disputes.
18.  Imposing monetary and non-monetary sanctions for failure to adhere to case management orders and other deadlines.

The report’s "Pilot Mandatory Mediation Program" proposal could have a significant impact on the future of the ADR community. Recognizing that more than 90% of business disputes eventually ended up in settlement, and that litigation is a time-consuming and expensive process, the task force, after consulting the opinions of in-house counsels and the practices of other jurisdictions, concludes that “court systems that require parties to engage in mediation in most business disputes help disputants to achieve" efficient, cost-effective, and fair results.
The task force developed the mandatory mediation program in order for New York to maintain its status as “a desirable place to conduct business” in an “increasingly competitive global economy."

The program will require every fifth newly assigned case to the New York County Commercial Division to engage in mediation so that “limited, cost-effective, settlement-related information exchange can occur.” 

The process would facilitate settlement negotiations among the parties before they incur the “substantial legal costs” of a full court proceeding.

To further the pilot program goals, the task force also proposed to establish procedures for early settlement-related discovery that would facilitate mediation or other settlement efforts.  It also would appoint a statewide administrator to oversee the program’s implementation and expansion throughout the Commercial Division statewide.

The task force, in fact, proposes a full procedure for the mandatory referrals.  The proposal for the process contained in the task force report is copied in full at the bottom of this page.

The arbitration initiative also is potentially significant. 

The task force recommended the designation of specific New York County justices for lead responsibility over all international arbitration-related matters that require the Commercial Division’s attention.  The move reflects the competitiveness of the international market in locating so-called arbitration seats.

The purpose of the initiative is to signal “New York’s commitment to the efficient resolution of court proceedings that relate to international arbitration [to the international business community],” because “when parties and counsel who regularly engage in international arbitration select where they will conduct their arbitrations, they place significant weight on the degree to which that forum offers specialized support for international arbitration.”  

Finally, the task force proposes the appointment of a statewide Commercial Division advisory council to “guide the implementation of the recommendations in this Report and to periodically review and help to fulfill the long-term strategic goals of a world-class Commercial Division in New York State.”

--Congsi Wu, CPR Intern


The Task Force’s mandatory mediation proposal is:

In addition to cases that are directed to mediation pursuant to Rule 3 of the Uniform Rules of the Commercial Division, every fifth newly assigned case to the New York County Commercial Division would be required to be mediated within 180 days of assignment to a Commercial Division Justice unless (a) all parties stipulated that they did not want the case to be mediated or (b) a party made a showing of “good cause” as to why mediation would be ineffective or otherwise unjust.

By no later than 90 days after assignment of the case to a Commercial Division Justice, the parties shall jointly inform the ADR Administrator that they either (a) have engaged a mediator or (b) request assignment of a mediator. If the parties request assignment of a mediator, the ADR Administrator shall identify no more than five possible mediators from the list of ADR Neutrals. Within seven days of receiving the list of neutrals, the parties shall either advise the ADR Administrator that they have agreed upon a neutral or provide the ADR Administrator of their rankings of the ADR Neutrals. For example, the first choice “1”, the second choice “2”, the third choice “3” and so on. The ADR Administrator will select the mediator who gets the lowest number on the combined lists of preferences. Once the mediator is selected, the parties shall comply with the Rules of the Alternative Dispute Resolution Program of New York County.

In the event that mediation has not been scheduled prior to the Preliminary Conference, counsel and the court shall identify at the Preliminary Conference any limited discovery that would be necessary for a successful mediation, which would be given priority over other discovery. If mediation proceeds before the Preliminary Conference has been scheduled, the parties and the mediator can independently arrange for any information exchange that would help enable resolution.