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Mediator steps down in bankruptcy case, citing concern over confidentiality

As we’ve pointed out before on this blog, mediation is not always successful. A recent example of this involves major casino outfit Caesars Entertainment Operating Co Inc (CEOC), which filed for bankruptcy in January 2015, claiming that Caesars Entertainment Corp, its parent company, and two private equity sponsors had claimed valuable assets owned by the company.  

The central issue in the dispute is how much the parent company and the private equity sponsors should be contributing to CEOC’s bankruptcy. Because the bankruptcy case involves a repayment plan, the parent company and the private equity sponsors will released from creditor claims as part of the process.   

To resolve the complex dispute, a mediator was brought in, but mediation has been unsuccessful thus far. In fact, the mediator who has been working in the case up until now recently stepped down, citing the “atypical views” of the bankruptcy judge overseeing the case. Specifically, the mediator had reportedly objected to the bankruptcy judge’s suggestion that he should testify in court regarding the progress of the mediation. The problem there, according to the mediator, is confidentiality.

Confidentiality is, of course, an important feature of mediation, and is intended to safeguard the ability of parties to openly communicate without undue fear that their statements could put them at a disadvantage if the mediation breaks down and it becomes necessary to pursue the case in court. Sources didn’t indicate whether mediation in this case was requested by the parties or ordered by the court, but in either case, the point about confidentiality would be a central element of mediation.

Although confidentiality is certainly an important aspect of the process of mediation, not everything shared in mediation is completely confidential. We’ll look further at this issue in our next post. 

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