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Recent Amendments to Commercial Division Rules Promote Use of Alternative Dispute Resolution

  |   By Drew Pakett

Two statewide amendments to the Commercial Division Rules went into effect on January 1, 2018.  The amendments, which place a strong emphasis on the use of alternative dispute resolution, are designed to help encourage more efficient resolutions of disputes.  The main focus of these amendments is on mediation.  As part of mediation, a neutral mediator facilitates a negotiation by assisting the parties in identifying and addressing the relevant issues.  The parties are not required to reach a settlement, and a mediator’s decision is not binding on the parties.  The goal is to avoid protracted litigation while also having the parties agree to a mutually acceptable outcome.

Specifically, the amendment to Rule 10 (entitled “Submission of Information”) now requires counsel to certify that they have discussed with their clients the availability of alternative dispute resolution options in their case.  In addition, counsel will be required to submit a statement at the preliminary conference (and at each subsequent conference) informing the court whether their clients are willing to participate in mediation.  The second amendment is to Rule 11 (entitled “Discovery”).  It applies where parties indicate their willingness to mediate, and requires that counsel expressly state in the preliminary conference order a date by which a mediator is to be chosen.

These amendments follow the recently renewed mandatory mediation program put in place in New York County’s Commercial Division.  As part of this program, cases are randomly selected for participation in mediation (although the program is mandatory, parties may opt out of the program in limited situations – (i) where all parties stipulate that the case is not suitable for mediation, or (ii) if a party can show good cause as to why mediation is not appropriate).

Once a case is selected for mediation, a mediator is assigned through the court’s panel of mediators (although the parties also have the right to choose another mediator outside of the panel).  The first session is to take place within thirty days from the date the mediator is confirmed, and the entire process is to conclude within forty-five days from that date.  Litigation is not stayed during this time without approval by the court.  Furthermore, at least ten days prior to the first session, each party is to submit to the mediator a memorandum setting forth the party’s opinions as to the facts and issues in the case, contentions, and suggestions as to the bases on which the case might be settled.  There is no charge for the first four hours of mediation.  However, the mediator must be compensated for any additional time.

With this new focus on alternative dispute resolution, counsel and their clients are now effectively required to have an open dialogue about the possibility of mediation at an early stage in the litigation.  Not only can this allow for a more efficient way to resolve disputes and eliminate any uncertainty of having a third party (a judge or jury) be the ultimate decision maker, it can also assist in avoiding substantial legal fees that may be incurred through subsequent motion practice, discovery, and trial.  In fact, with the mediation program in place in New York County, parties are even able to take advantage of mediation at no cost (for the first four hours).  Furthermore, with these recent amendments, the Commercial Division has created an environment where counsel may suggest mediation to their adversaries without the concern of being viewed as lacking confidence in their position in the litigation.

Hopefully, these amendments will result in a higher rate of early settlements for cases assigned to the Commercial Division.