The USDC., E.D. MO. has established a significant “Good Faith” component in court ordered mediations and will look into what happened during the mediation. Counsel should definitely comply with the court�s directives regarding mediation.

In the case of Gee Gee Nick vs. Morgan Foods [99. F.Supp.2d 1056 (USDC, E.D. MO. 2000); upheld, Eighth Circuit at 2001 U.S.App. LEXIS 23895 (Nov. 5, 2001)], Judge Sippel inquired into nature of the participation by the parties in a court-ordered mediation and ruled and that the Defendant (Appellant) and its counsel did not act in good faith and were subject to court ordered sanctions.

In Nick the court entered an Order Referring Case to Alternative Dispute Resolution that required attendance by a corporate representative with settlement authority, delivery of a required memorandum to the mediator and that the parties participate in good faith. While outside counsel attended, the required memorandum was not given to the mediator. Additionally, the corporate representative did not have independent knowledge of the facts and only possessed settlement authority up to $500.00. Any settlement offer over $500 had to be relayed via phone to in-house counsel who chose not attend on the advice of outside counsel. Two offers of settlement were extended by Nick and were rejected by Appellant and the mediation ended shortly thereafter.

The court decided that the failure to:

• Deliver the required memorandum to the mediator;
• Have a responsible corporate representative capable of participating meaningfully in the negotiations attend the mediation;

evidenced a lack of good faith. Judge Sippel sanctioned both outside counsel and the Defendant. Outside counsel did not appeal the sanctions and the Eighth Circuit upheld the sanctions against the Defendant.

The United States District Court for the Eastern District of Missouri has proposed revisions to Rule 16-6.02(b) which fine-tunes the obligations of the parties regarding attendance by responsible individuals.

The implications of the case and the rule changes are that the United States District Court for the Eastern District of Missouri will look into the mediation to see what took place and will not hesitate to assure that the parties are negotiating in good faith. So our advice is the same that you give your client, follow the rules and avoid the problems that violations cause.

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