In what circumstances may a New York state civil court judge order parties to participate in mediation to try to settle the case?
22 NYCRR § 202.70, Rule 3(a), provides that, at any stage of a matter, a New York court may direct the appointment of an uncompensated mediator for the purpose of mediating a resolution of all or some of the issues presented in the litigation.
Similarly, 22 NYCRR § 202.26(a) grants New York courts the authority to schedule mandatory settlement conferences.
New York courts may also order parties to litigation to attend mandatory mediation pursuant to local court rules or ADR programs. (Kato International LLC v. Gerard Fox Kaw, P.C., 195 A.D.3d 516, 150 N.Y.S.3d 711 (N.Y. App. Div. 2021), Perez-Wilson v. McPhee, 23 Misc.3d 1053, 874 N.Y.S.2d 779, 2009 NY Slip Op 29094 (N.Y. Sup. Ct. 2009), New York State Unified Court System, Commercial Division - New York County, ADR Overview)
One such program is the Commercial Division's Alternate Dispute Resolution Program. The Commercial Division’s Alternate Dispute Resolution Program requires parties in certain disputes attend mediation where ordered, however, any settlements are purely voluntary. (New York State Unified Court System, Commercial Division - New York County, ADR Overview)
In In re Davidson, 2022 N.Y. Misc. LEXIS 254, 2022 NY Slip Op 22018, 2022 WL 222514 (N.Y. Sur. Ct. January 12, 2022), the Surrogate's Court of New York, Rockland County, noted that it routinely orders matters to mediation.
In Hankook Tire Am. Corp. v. Samsung Fire & Marine Ins. Co., 2020 NY Slip Op 32451(U) (N.Y. Sup. Ct. 2020), the Supreme Court of New York, New York County, issued an order referring a case involving an insurance dispute to mediation.
Where a New York court orders parties to attend mediation, failure to abide by the court's order may result in sanctions. (Silverman v. Rosenbaum, 2019 NY Slip Op 30233(U) (N.Y. Sup. Ct. 2019), Perez-Wilson v. McPhee, 23 Misc.3d 1053, 874 N.Y.S.2d 779, 2009 NY Slip Op 29094 (N.Y. Sup. Ct. 2009), Carnegie Associates Ltd. v. Miller, 94 A.D.3d 404, 946 N.Y.S.2d 107, 2012 N.Y. Slip Op. 2422 (N.Y. App. Div. 2012))
In Carnegie Associates Ltd. v. Miller, the Supreme Court of New York, Appellate Division, First Department, acknowledged that trial courts have both the authority to order parties to mediation and the authority to impose certain sanctions on parties who fail to abide by such orders.
22 NYCRR § 202.70, Rule 3(a), provides that at any stage of the matter, the court may direct the appointment of an uncompensated mediator for the purpose of mediating a resolution of all or some of the issues presented in the litigation:
(a) At any stage of the matter, the court may direct or counsel may seek the appointment of an uncompensated mediator for the purpose of mediating a resolution of all or some of the issues presented in the litigation. Counsel are encouraged to work together to select a mediator that is mutually acceptable and may wish to consult any list of approved neutrals in the county where the case is pending. Additionally, counsel for all parties may stipulate to having the case determined by a summary jury trial pursuant to any applicable local rules or, in the absence of a controlling local rule, with permission of the court.
22 NYCRR § 202.26(a) provides that New York courts may schedule mandatory settlement conferences:
(a) Settlement conference. At the time of certification of the matter as ready for trial or at any time after the discovery cut-off date, the court may schedule a settlement conference which shall be attended by counsel and the parties, who are expected to be fully prepared to discuss the settlement of the matter.
In Perez-Wilson v. McPhee, 23 Misc.3d 1053, 874 N.Y.S.2d 779, 2009 NY Slip Op 29094 (N.Y. Sup. Ct. 2009), the Supreme Court of New York, New York County, explained that a court may order parties to engage in mediation pursuant to local court rules or programs and that failure to abide by such an order may result in sanctions (at 1053-1055):
It is ordered that all counsel for the parties, along with the claims adjuster for the insurance carrier appearing for defendant,
[23 Misc.3d 1054]
shall appear before the court-assigned mediator Shelley Rossoff Olsen, on Friday, February 27, 2009 at 12 o'clock noon, room 106, at 80 Centre Street, New York, New York. It is further ordered that upon the failure of the defendant's insurance carrier's adjuster to appear at the above-scheduled court date, an order will be entered against defendant striking defendant's answer, for the failure to comply with a court order.
Court orders must be obeyed for the court system and process to have any effect. As stated by the Court of Appeals:
"In Kihl v Pfeffer (94 NY2d 118, 123 ), we affirmed the dismissal of a complaint for failure to respond to interrogatories within court-ordered time frames, observing that `[i]f the credibility of court orders and the integrity of our judicial system are to be maintained, a litigant cannot ignore court orders with impunity.'" (Brill v City of New York, 2 NY3d 648, 652-653 .)
Should defendant's insurance company's claims adjuster fail to appear at the above-scheduled mediation date, counsel for defendant shall appear on such date and time with an affirmation made under penalty of perjury, explaining why his/her client's pleadings should not be stricken for failure to comply with this court's order. Failure to appear with such an affirmation will be deemed prima facie evidence of willful and contumacious conduct warranting sanctions. (See Brewster v FTM Servo, Corp., 44 AD3d 351, 352 [1st Dept 2007] ["(plaintiff's) unexplained noncompliance with a series of court-ordered disclosure mandates ... created an inference of willful and contumacious conduct"].)
The within order is a result of the failure of defendant to obey two prior directives by the court mediator Shelley Rossoff Olsen, requiring the appearance at a mandatory mediation date, of the claims adjuster for the insurance carrier appearing for the defendant. The claims adjuster was previously specifically directed to appear at mediation dates on January 30, 2009 and on February 20, 2009, yet both directives were blatantly ignored.
The court's Neutral Evaluation Program ("Mediation") was developed to facilitate settlements and conserve judicial resources. (See Protocol for the Court—Annexed Neutral Evaluation Program ["Mediation"], http://www.nycourts.gov/supctmanh/Neutral_Evaluations.htm.) When a note of issue is filed in a case assigned to a General Assignment Part, the case is automatically assigned for mediation. (Id.) Because the mediation
[23 Misc.3d 1055]
process addresses the merits of the case, appearing counsel are required to be knowledgeable and fully authorized to settle. (Id.) Moreover, when necessary, "[c]laims adjusters or other persons with full authority to settle on the part of defendants are present ... Experience has demonstrated that the presence at the [mediation] of the decision-maker for a party can greatly assist the productivity of the process." (Id.) Similarly, the Uniform Rules for Trial Courts also provide that, where appropriate, a court may order "parties, representatives of parties, representatives of insurance carriers of persons having an interest in any settlement ... to also attend ... at ... settlement conference[s]." (Uniform Rules for Trial Cts [22 NYCRR] § 202.26 [e].)
Thus, such mediation procedures were established to resolve cases expeditiously and conserve judicial resources and defendant's failure to produce an insurance claims adjuster as twice directed by the mediator, evidences willful and contumacious conduct which cannot be tolerated by this court.
One common mediation program utilized by New York courts is the Commercial Division's Alternative Dispute Resolution Program. For example, in Kato International LLC v. Gerard Fox Kaw, P.C., 195 A.D.3d 516, 150 N.Y.S.3d 711 (N.Y. App. Div. 2021), the New York Supreme Court, Appellate Division, First Department, upheld an order directing parties involved in a lease dispute to attend the program (at 712):
In light of the motion court's acknowledgement that there were questions of fact as to damages, however, defendants’ motion to vacate the note of issue should have been granted since the note of issue incorrectly stated that discovery was complete and defendants are entitled to discovery limited to the issues reserved for trial (see Ruiz v. Park Gramercy Owners Corp., 182 A.D.3d 471, 119 N.Y.S.3d 865 [1st Dept. 2020]). As defendants point out, a trial on damages will require the court to resolve questions as to how plaintiff calculated the electricity charges billed to defendant tenant, despite plaintiff's alleged failure to install the contracted-for submeter, and when the premises were relet (see Center for Specialty Care, Inc. v. CSC Acquisition I, LLC, 187 A.D.3d 46, 55, 130 N.Y.S.3d 7 [1st Dept. 2020]). Because plaintiff's motion for summary judgment was filed less than a month after service of its reply to counterclaims, the action was stayed for eight months during the pendency of the motion (CPLR 3214[b]). Contrary to plaintiff's contention, the order directing the parties to participate in the Commercial Division's Alternative Dispute Resolution Program did not order the CPLR 3214(b) stay lifted. Under the circumstances, it cannot be said that defendants waived their entitlement to discovery on the remaining issues.
Pursuant to the New York State Unified Court System, Commercial Division - New York County, ADR Overview, the Commercial Division may order parties to attend mediation through the Commercial Division Alternative Dispute Resolution Program. Although participation in the program is mandatory where ordered, settlement is purely voluntary:
The Commercial Division in New York County Supreme Court operates the Commercial Division Alternative Dispute Resolution Program. The Program is basically a mediation program, in which neutrals meet with the attorneys and parties in Commercial Division cases, review the facts and legal issues presented by the case, and attempt to facilitate discussions between or among the parties and their attorneys and explore the possibility of settlement. Upon the directive of the Administrative Judge, commercial cases from outside the Division may become eligible for inclusion in the ADR Program. By Administrative Orders dated May 24, 2016 and April 19, 2017, commercial cases from certain Parts outside the Division may be referred to the Program.
Cases are referred to the Program by Order of Reference of the assigned Commercial Division Justice or authorized non-Division Justice. Determination of the cases that should be referred and the appropriate time at which to refer them are matters for the discretion of the assigned Justice. Generally, the Program prefers to receive cases early in their life so that a settlement may be explored before the parties have spent large sums in the discovery process.
When an Order of Reference is signed by a Justice, the parties are required to participate in mediation in accordance with the Rules and Procedures of the ADR Program. Settlement, however, is, of course, purely voluntary.
In re Davidson, 2022 N.Y. Misc. LEXIS 254, 2022 NY Slip Op 22018, 2022 WL 222514 (N.Y. Sur. Ct. January 12, 2022), the Surrogate's Court of New York, Rockland County, noted that it routinely orders matters to mediation (at 14-15):
While this Court certainly appreciates the benefits of alternative dispute resolution, and in fact, routinely orders matters to mediation per the 2020 Presumptive Mediation rules, this Court must agree with the Kings County Surrogate's Court that HN7 failure to comply with the Part 137 Rules for arbitration of fees disputes does not require dismissal of a SCPA § 2110 petition nor divest this Court of subject matter jurisdiction over the petition. First, as that Court pointed out, Part 137 Rules are aimed at "fee disputes" filed by complaint. A fee petition in Surrogate's [**7] Court is not necessarily a [*15] fee dispute at all. It is a petition for the setting of fees, which is frequently uncontested.
In Hankook Tire Am. Corp. v. Samsung Fire & Marine Ins. Co., 2020 NY Slip Op 32451(U) (N.Y. Sup. Ct. 2020), the Supreme Court of New York, New York County, issued an order referring a case involving an insurance dispute to mediation (at 4-5):
By order dated December 7, 2018, the case was referred to the Alternative Dispute Resolution Program of the Commercial Division. That order provides that "counsel shall comply in full with all ADR Rules. Failure to do so may result in the imposition of sanctions or other appropriate action by the
court." The order further provides that the "proceedings in this action, including discovery and motion practice, shall not be stayed during the ADR process."
In Carnegie Associates Ltd. v. Miller, 94 A.D.3d 404, 946 N.Y.S.2d 107, 2012 N.Y. Slip Op. 2422 (N.Y. App. Div. 2012), the Supreme Court of New York, Appellate Division, First Department, acknowledged that trial courts may order parties to mediation but held that sanctions for failing to abide by such an order may be limited (at 405):
Similarly, despite plaintiff's conceded failure to proceed with the court-ordered mediation, it was also error to strike its pleadings pursuant to 22 NYCRR 202.26(e). While 22 NYCRR 202.26 authorizes the trial court to schedule pretrial conferences, a mediation, pursuant to Rule 3 of the Rules of the Commercial Division of the Supreme Court (22 NYCRR 202.70[g]), is not a pretrial conference. More importantly, even if this rule did apply, the only sanction authorized by 22 NYCRR 202.26(e) for a party's failure to appear at a pretrial conference is “a default under CPLR § 3404,” which initially only authorizes the striking of the case from the court's trial calendar. Accordingly, here, striking plaintiff's pleadings, which by operation of law resulted in dismissal of this action is not warranted pursuant to 22 NYCRR 202.26(e).
While we agree with the dissent that plaintiff's conduct was egregious, we nevertheless find that the sanction imposed by the motion court, namely, dismissal of plaintiff's complaint and the striking of its reply to defendant's counterclaims was simply not permitted. We further note that, here, plaintiff was in fact penalized for its conduct inasmuch as the motion court granted defendants' motion for costs and fees incurred as a result of plaintiff's failure to proceed to mediation.
In support of its argument that the motion court's order was appropriate, the dissent partly relies on Rule 8(h) of the Commercial Division, Supreme Court, New York County, Rules of the Alternative Dispute Resolution Program. However, the dissent alone raises this argument, one which has never been advanced by any of the parties, either on appeal or below. Therefore, we should not consider it (Misicki v. Caradonna, 12 N.Y.3d 511, 519, 882 N.Y.S.2d 375, 909 N.E.2d 1213  [“We are not in the business of blindsiding litigants, who expect us to decide their appeals on rationales advanced by the parties, not arguments their adversaries never made”] ). Moreover, contrary to the dissent's remaining position, 22 NYCRR 202.70(g) Rule 12 does not avail plaintiff since like 22 NYCRR 202.26(e), the dismissal promulgated by Rule 12, which is made more clear by its reference to 22 NYCRR 202.27, is for the failure to appear at a conference and not for the failure to proceed to mediation.
In re Schwartz, 177 A.D.3d 977, 111 N.Y.S.3d 245, 2019 N.Y. App. Div. LEXIS 8588, 2019 NY Slip Op 08565, 2019 WL 6333938 (N.Y. App. Div. 2d Dep't November 27, 2019), the New York Appellate Division, Second Department, noted that the parties and their counsel were directed to appear for a mandatory mediation session. One of the parties failed to appear for the mediation session. In addition, counsel that appeared for the missing party did not have the authority to settle. The Court noted that, although parties are not compelled to resolve disputes by settlement, parties and their counsel are required to attend mediation sessions and may not refuse to appear or participate in them (at 978):
Pursuant to a Notice of Reference of the Mandatory Civil Appeals Mediation Program, the petitioner-appellant's counsel, the petitioner-appellant, counsel for the respondent-respondent Charles Schwartz, and the respondent-respondent Charles Schwartz were directed to appear for a mandatory mediation session. The petitioner-appellant's counsel, Law Offices of Seidner & Associates, P.C., failed to insure that the petitioner-appellant appear for the regularly scheduled mandatory mediation session, without good cause, and there is no indication that the attorney who appeared for the petitioner-appellant possessed the authority to settle the matter. In this regard, we consider that the lead counsel for the petitioner-appellant sought, and was granted, an adjournment of the mediation session so that he could personally attend and yet inexplicably sent a different attorney in his stead on the adjourned date. Although parties are not compelled to resolve their appeals by settlement, parties and their counsel are required to [***3] attend mediation sessions and may not arrogate unto themselves the authority to dispense with a mediation session or to render [****2] such sessions nugatory by refusing to appear and participate in them. Accordingly, we determine that a sanction in the amount set forth above is appropriate (see 22 NYCRR 670.3 [d]  [ii],[v]). Since the respondent-respondent Charles Schwartz did not indicate the costs incurred in connection with the mediation session, an award of costs has not been considered by this Court.
In Silverman v. Rosenbaum, 2019 NY Slip Op 30233(U) (N.Y. Sup. Ct. 2019), the Supreme Court of New York, New York County, ordered mandatory mediation for parties in a civil case involving claims for breach of contract, fraudulent inducement, unjust enrichment, and promissory estoppel. The Court warned that failure to comply with the order would result in sanctions (at 3):
By order dated August 24, 2017, the parties were referred to mandatory mediation in the Alternative Dispute Resolution Program of the Commercial Division. The order warned the parties that failure to comply may subject the offender to sanctions. On November 29, 2017, the parties were notified by the court's Alternative Dispute Office to schedule and participate in an initial mediation session. The notice stated that the "parties must cooperate with one another and the neutral in regard to scheduling; the Rules provide that failure to do so may subject the offending counsel to sanctions imposed by the Justice assigned to this case."