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For the businesses that flock to the Delaware Court of Chancery because they hate surprises, the court has found a new way to keep them coming and sustain Delaware’s signature law practice. It is mediation — an option whereby dueling parties consent to hash out their grievances through a judge’s guidance in the informal privacy of chambers, shielded from the tribulations of a prolonged trial and the possibility of losing. Mediation is a variation on what has made Chancery so attractive to businesses to begin with — its degree of predictability based on its two centuries of history as an equity court, where there is an established case law based on fairness and where decisions are rendered by individual judges, not by juries that can be capricious. “Let’s call it Trial Lite,” said Charles M. Elson, the professor who runs the new Corporate Governance Center at the University of Delaware. “It’s a smart idea. If it saves the expense and time of a full-blown trial and works a result that’s favorable to all parties, then I think they’re doing the job.” The court has had Rule 174 for voluntary mediation on its books for about two years. Its use is too new for anyone to have studied it formally, but it’s clear that its increasing practice coincided with the arrival of Vice Chancellor Leo E. Strine Jr. on the five-judge Chancery bench in late 1998. Strine is an unabashed cheerleader for mediation. It reminds him of his days as Gov. Thomas R. Carper’s counsel, the job he held before going to the bench, when he was brokering legislative matters and learned the basic fact of Delaware political life, namely, “Part of how you move policy along is you bring people together.” Strine estimates he has done about 10 mediations. “It’s another tool in our arsenal,” he said. “People feel better when they can reach their own resolution.” Chancellor William B. Chandler III also is a believer. “We move matters off our docket, saving countless hours of trial time. Every one we can mediate is an enormous saving in time and effort and costs.” The Chancery judges don’t mediate their own cases. They may suggest mediation, or the parties may ask for it, and then it’s handed off to another member of the court. Chandler believes that one of the reasons mediation is working is that it is handled by a judge versed in the court’s ways. “My instincts tell me lawyers like it. It comes with an imprimatur of objectivity and authority, because you’re dealing with a judge,” he said. REVERSING A REVERSE SPLIT Attorneys Robert J. Valihura Jr. and Arthur L. Dent recently took their clients through mediation in McKane v. Hart. The case involved a reverse stock split in which defendant James W. Hart, a sole director and majority stockholder in a holding company with textile and industrial fabric subsidiaries, sought to reduce corporate shares by calling them in and issuing a smaller number. Plaintiff David B. McKane filed for breach of fiduciary duty and asked for the reverse stock split to be rescinded. The case was before Strine. Valihura, a Talleyville, Del., solo practitioner who is also a Republican state representative, was counsel to the plaintiff, and Dent, who practices at Potter Anderson & Corroon in Wilmington, represented the defendant. “The parties were miles apart. The court intimated it would be willing to mediate this case if the parties were willing,” Valihura said, and they were. “Having a mediator, especially a member of the court, let the parties get an insight into who was right and who was wrong.” Vice Chancellor Stephen B. Lamb took on the mediation, which was scheduled within a matter of weeks. They met in chambers and talked through the issues, and the two parties expressed their differences. Lamb worked a little shuttle diplomacy, meeting first with Dent’s side and then Valihura’s. Although the parties didn’t settle then, they did shortly thereafter — with both lawyers saying it was a direct result of the mediation. The terms still are confidential because the settlement isn’t final yet. The attorneys emerged sold on the process. “The mediation played a role. It’s a great tool, particularly if you can get another member of the court [to mediate],” Dent said. PRACTITIONER LIKES IT “I’d recommend it to any of my clients. It does shorten the length of the case and allows people to think about where their case is. It’s helpful to corporate America to realize there are alternate solutions to being a winner and loser,” Valihura said. If the lawyers find mediation rewarding, Chandler says the judges do, too. “It’s a little bit different than being a judge, a different skill set, like trying to broker a solution with the Arabs and Israelis,” he said. Vincent A. Bifferato Sr., the retired Superior Court resident judge for New Castle County, has made mediation a central part of his practice since he joined Bifferato Bifferato & Gentilotti of Wilmington in the spring. He isn’t at all surprised that Chancery Court is having success with mediation, simply because of the inherent nature of the process. “Sometimes it’s the first time the parties have met. I offer people coffee, and there’s always a bowl of candy on the table to get people to relax,” he said. Not all cases, of course, lend themselves to mediation. Lawrence A. Hamermesh, a Widener University law school professor with a Chancery focus, expects the court will employ it to sort out complex disputes. It also could work in cases where the parties have an ongoing relationship, such as labor and management matters in which, as Hamermesh put it, “what you get from them today, they’ll take out of your hide tomorrow.” “The more complex, the more parties, the more mediation can work. I’ve seen it work — and work well — when you have cases with multiple parties with a lot of give-and-get,” Hamermesh said. Bifferato is sure the court is onto something with mediation. “I’m so thrilled that Chancery is doing it,” he said. “I think it will be a benefit to them and improve their status as a trial court.”
Implementing Good Corporate Governance. November 6-17.

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