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Court-Mandated Mediation: Lessons Learned In New Jersey?

From the Business Conflict Blog of Peter Phillips.

For many years, the New Jersey Court Rules have empowered certain judges to issue Orders of Referral to Mediation. Administared by the state’s Administrative Office of the Courts, the New Jersey mediation program was way ahead of its time and has prompted tens of thousands of civil mediations.

The program is about to be modified, and indeed a few months ago was threatened with termination. It is instructive to review how it has worked, where the problems have arisen, and what changes might make it better.

Orders to mediate are authorized by Court Rule 1:40. By that authority, Superior Court and Municipal Court judges may require parties to attend a mediation session at any time following the filing of a complaint. (1:40-4(a)) Mediators are assigned (1:40-6) from a pool of qualified and trained mediators maintained by the State Administrative Office of the Courts, who have expressed a willingness to serve in any of the various counties of the State. (1:40-12) Parties have 14 days from the issuance of the order to select a different mediator from the one assigned by the court. Mediators must expend one hour of preparation and one hour of the mediation without fee; parties may opt out of the process after that hour. Thereafter, parties must equally share the costs of the mediation and the fee is set by the mediator and the court. (1:40-4(b)).

Elaborate provisions ensure the confidentiality and inadmissibility of mediation communications. (1:40-4(c)-(d)) Training and continuing education requirements for mediators are set forth (1:40-12(b)).

Guidelines have been issued to mediators requiring them to absorb travel expense, office space or other ancillary costs; warning them to advise parties of preparation time in excess of one hour (which in any event may not be charged unless the actual mediation extends past the first hour); and advising them of the court’s availability to issue an Order to Show Cause against a party that refuses to pay the invoice of a Rule 1:40 mediator.

Recently, the courts have voiced concerns about the program. These include:

  • a low rate of resolution and docket-clearing (around 30%)
  • failure to receive mediator reports within the time limits
  • excessive time spent by court administrators filing paperwork, tracking down delinquent mediators, granting extensions of time and preparing OSCs for relatively small fee amounts
  • other demands on court administration in support of a program that, in a time of resource constraints, is less mission-critical than other court operations

Mediators in the program voice other kinds of concerns:

  • The assignment of mediators by the court constrains the growth of a quality-driven market in the State
  • Both good and poor mediators have the same number of assignments, resulting in many parties and counsel having poor experiences in mediation (”The last mediator I had just wanted to split the baby.”)
  • The two-hour “no-fee” period announces to counsel that the court considers mandatory mediation as, in reality, a condition precedent to continued litigation, and it is therefore widely viewed as such (”Mr. Mediator, please advise when one hour is up and we will be on our way.”)
  • As a consequence, mediation is considered “do-gooder” work for volunteers, retirees and wanna-bes, not requiring professional skills (”So what do you do for a living, Mr. Mediator?”)

Thus a program that, on its face, looks like it would promote mediation and result in a deep pool of highly experienced mediators, while reducing judicial caseloads, actually has resulted in increased administrative burden to the courts; no demonstrable increase in rate of settlement (99% of civil cases in New Jersey settle whether or not they are mediated) and a derisive attitude towards mediation by the litigation bar.

Word is that some changes are in the offing. New Jersey courts may, in the future, order parties to select a mediator of their own choice, with a default appointed in the event of failure to do so. On the other hand, hundreds of attorneys recently took a day’s “training” in foreclosure mediation, so the court roster of mediators will continue to be of speckled quality and the very good mediators will float in a diluted pool. And I know of no discussion to change the “Tell us when an hour is up” phenomenon, and its disheartening consequences on the profession.

Discussions with business court judges in other states suggest a different trend: court-ordered mediation conducted by mediators of the parties’ choice or else drawn from among a very select roster, and paid by the parties at market rates for their professional services. Mediators who overcharge are dealt like mechanics who overcharge — they don’t get re-hired. Settlement rates are higher; the process is taken more seriously because the participants are paying for it; mediator reputations are subject to a robust, quality-driven professional market; and the court doesn’t involve itself in anything other than receiving a yes/no report at the end.

In some states, judges or magistrates not assigned to the case are designated mediators in the matter, in the hope that the case will settle and the docket cleared. Indeed, Delaware Chancery is charging litigants for this service — and charging them rich, too: a filing fee of $10,000 and a per day mediation fee of $2,500. And why not? If you have the best business court in the nation, why not flaunt it?

Mediation has value to litigants, and settled cases have value to our public institutions of justice. Why not treat it as if it does?


F. Peter Phillips

F. Peter Phillips is a commercial arbitrator and mediator with substantial experience providing consultation on the management of business disputes to companies around the globe. A cum laude graduate of Dartmouth College and a magna cum laude graduate of New York Law School, Mr. Phillips served for nearly ten years… MORE >

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