Mediation to resolve plan-related and other disputes in Chapter 11 has proliferated in recent years, and for good reason. As seen with debtors like JCPenney, Windstream Holdings Inc., Frontier Communications, Puerto Rico and Tribune Company, mediation can resolve complex, multiparty disagreements, paving the way for a debtor’s emergence from bankruptcy. When faced with seemingly intractable, complicated disputes that routinely beset corporate debtors, mediation can be a uniquely helpful tool for directors and officers (“D&O”) as they attempt to manage stakeholders with competing interests, guide their company through bankruptcy, preserve jobs and maintain business operations. Unlike litigation, which results in a binary outcome in favor of one party and the prospect of appeals, mediation allows participants to craft creative, multiparty solutions that propel a debtor towards plan confirmation and out of bankruptcy. While litigation occurs in public, subjects parties to rigid rules and ends with a binding, judicially determined outcome, mediation is held in private, under the guidance of a neutral mediator who creates a bespoke process intended to facilitate voluntary dispute resolution. As a result, when embroiled in a contested Chapter 11 process or discrete adversary proceeding, corporate debtors and their stakeholders may view mediation as worthwhile, or even necessary.
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