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Groundbreaking Court Decision Requires Courts to Comply with Mediators

Heather Scheiwe Kulp, July 15th, 2011

Housing advocates are lauding the Nevada Supreme Court’s trio of decisions, released Thursday, about Nevada’s foreclosure mediation program. However, under the surface of Pasillas, Redmon, and Leyva lurks factors that could cause upheaval in the foreclosure mediation world, negatively impacting borrowers around the country.

For mediation geeks like us, Nevada’s foreclosure mediation program already raises major questions. Nevada foreclosure mediators are required to submit a report stating if sanctionable actions occurred in the mediation and recommending what sanctions should be imposed (see NRS 107.086(5)). Though in most other states such reports would violate mediation codes of conduct, if not laws, these reports constitute an enumerated exception to Nevada’s Rule 19 on foreclosure mediation confidentiality.  Comfort for the queasy came in the form of judicial discretion; the Nevada district court retained discretion to decide whether to impose the recommended sanctions.

Pasillas changes this. The Court reinterpreted Nevada’s mediation statute to require, not permit, the district court to sanction mediation participants if the mediator reports “sanctionable” behavior. Even more, the Court suggests that mediators should interpret party communications—whether violations were intentional, whether prejudice was caused, and whether parties seem willing to engage in future negotiations—for the district court, so the court may determine what sanctions to impose.  The result: the mediator’s report will essentially constitute a finding of a statutory violation and an evaluation of how bad the violation was. This puts the mediator in the position of being the final judge, a position that violates party self-determination – the essential ingredient that separates mediation from other processes.

Even more, these decisions will chill foreclosure mediation participation, especially in opt-in programs where parties must choose to participate. Foreclosure mediation participants–  that means borrowers, too–  expect a safe environment where information can be exchanged and options for resolution generated. Now, with the mediator in the judge’s seat (and strict, not substantial, compliance required), borrowers will fear that not crossing a “t” on a document could jeopardize their home. Mediation would no longer be a place of self-determination, but of judgment.

For folks involved in foreclosure mediations already, we know how infrequently every “t” is crossed, on either side of the negotiation table. So, even if you agree with one of the outcome of these cases – that a servicer must strictly comply with statutory document requirements, or be sanctioned – the decisions still jeopardize the flexibility, confidentiality and potential efficacy of the foreclosure mediation around the country.

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One Response to “Groundbreaking Court Decision Requires Courts to Comply with Mediators”

  1. […] behavior and recommend sanctions based on that behavior. Based on recent case law, judges must comply with mediators’ recommendations for sanctions.  While other mediation programs have not gone so far, many have established similar expectations […]

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