Mediators Subject to Same § 455 Recusal Standards as Judges — Must Disclose a Potential Conflict Whenever Impartiality Might Reasonably Be Questioned — Liljeberg Standards Govern

CEATS, Inc. v. Continental Airlines, Inc., 2014 U.S. App. LEXIS 11843 (Fed. Cir. June 24, 2014):

b. Rule 60(b)(6)

Rule 60(b)(6) gives federal courts authority to relieve a party from a final judgment "upon such terms as are just." Liljeberg, 486 U.S. at 863-64; see Fed. R. Civ. Proc. 60(b)  [*11] ("[T]he Court may relieve a party . . . from a final judgment . . . for . . . (6) any other reason that justifies relief."). In Liljeberg [Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 863-64 (1988)], the Supreme Court first held that the district court judge violated 28 U.S.C. § 455(a) by failing to recuse himself. The plaintiff in Liljeberg sought a declaration that it owned a hospital then under construction. While the case was pending, the defendant in the case engaged in negotiations with a third party to purchase the hospital. The presiding judge sat on that third party's board of trustees. Id. at 852-56. The Supreme Court held that a reasonable observer would have questioned the judge's impartiality and have expected him to recuse himself. Id. at 861. Because the judge failed to recuse himself, he violated 28 U.S.C. § 455(a) ("Any justice, judge, or magistrate of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned." (emphasis added)).

That violation of § 455(a), however, did not automatically entitle the movant to relief from judgment under Rule 60(b)(6). Id. at 863-64 ("Rule 60(b)(6) relief is accordingly neither categorically available nor categorically unavailable for  [*12] all § 455(a) violations."). A movant is entitled to relief under Rule 60(b)(6)--the "catch-all" provision--if "such action is appropriate to accomplish justice" and only in "extraordinary circumstances." Id. at 863-64 (quoting Klapprott v. United States, 335 U.S. 601, 614-15 (1949) (internal quotation marks omitted)). The Supreme Court set forth three factors to consider "in determining whether a judgment should be vacated for a violation of §455(a)": (1) "the risk of injustice to the parties in the particular case;" (2) "the risk that the denial of relief will produce injustice in other cases;" and (3) "the risk of undermining the public's confidence in the judicial process." Id. at 864.

Though CEATS argues that the district court was incorrect to apply the Liljeberg test to mediators, Appellant's Br. 28-30, it nonetheless relies on the three Liljeberg factors to argue for reversal and argues that mediators are bound by the same neutrality requirements as judges and arbitrators. Appellant's Reply 11. Because, as explained below, we agree with CEATS that mediators are bound by disclosure requirements similar to the recusal requirements of judges, we find it proper to apply the Supreme  [*13] Court's analysis in Liljeberg to mediators. To apply that test, we first consider whether Faulkner violated his duty to disclose by failing to disclose the facts surrounding the Karlseng litigation. If Faulkner should have disclosed--similar to how the judge in Liljeberg should have recused himself--we would then turn to the three factors to determine if relief under Rule 60(b)(6) is warranted by virtue of that violation.

1. Mediators' Neutrality Requirements

Although we recognize that mediators perform different functions than judges and arbitrators, mediators still serve a vital role in our litigation process. Courts depend heavily on the availability of the mediation process to help resolve disputes. Courts must feel confident that they are referring parties to a fair and effective process when they refer parties to mediation. And parties must be confident in the mediation process if they are to be willing to participate openly in it. Because parties arguably have a more intimate relationship with mediators than with judges, it is critical that potential mediators not project any reasonable hint of bias or partiality. Indeed, all mediation standards require the mediator to disclose  [*14] any facts or circumstances that even reasonably create a presumption of bias. E.g., Am. Bar Ass'n Model Standards of Conduct for Mediators ("ABA Standards for Mediators") § III.C (2005) ("A mediator shall disclose, as soon as practicable, all actual and potential conflicts of interest that are reasonably known to the mediator and could reasonably be seen as raising a question about the mediator's impartiality." (emphasis added)).4 This duty to disclose is similar to the recusal requirements imposed on judges. Compare ABA Standards for Mediators § III.C ("A mediator shall disclose, as soon as practicable, all actual and potential conflicts of interest that are reasonably known to the mediator and could reasonably be seen as raising a question about the mediator's impartiality." (emphasis added)) with 28 U.S.C. § 455(a) ("Any justice, judge, or magistrate judge of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned." (emphasis added)).5

4   Because the United States District Court for the Eastern District of Texas has adopted the ABA's standards for mediators, we use that as the primary example of governing disclosure obligations  [*15] for mediators in this decision. E.D. Tex. Civ. R. App'x H ¶ IV ("Any person serving as a mediator pursuant to [the United States District Court for the Eastern District of Texas's] plan is subject to the Model Standard of Conduct for Mediators that were adapted by the American Bar Association in August 2005 or similar ethical standards or guidelines."). Because Judge Falkner is a JAMS mediator, moreover, and has agreed to be bound by its disclosure obligations, we refer to those as well. See JAMS Int'l Mediation Rule 6 (2011) ("Any mediator . . . will disclose both to JAMS International and to the parties whether he or she has any financial or personal interest in the outcome of the mediation or whether there exists any fact or circumstance reasonably likely to create a presumption of bias." (emphasis added)); see also Unif. Mediation Act § 9(a)(1)-(2) (2001) (requiring disclosure of "facts that a reasonable individual would consider likely to affect the impartiality of the mediator" (emphasis added)); 1 Alt. Disp. Resol. § 4.44 (3d ed.) (Sep. 2013) ("A mediator must disclose all actual and potential conflicts of interest reasonably known to the mediator. After disclosure, the mediator  [*16] must decline to mediate unless all parties choose to retain the mediator. The duty of disclosure governs conduct that occurs during and after the mediation." (emphasis added)); Tex. Mediator Standards of Practice and Codes of Ethics § 4 ("[P]rior to commencing mediation, the mediator shall make full disclosure of any known relationship with their parties or their counsel that may affect or give the appearance of affecting the mediator's neutrality." (emphasis added)).

5   For additional support, see Unif. Mediation Act Official Comments § 9(a)(1)-(2) (2001) ("This provides legislative support for the professional standards requiring mediators to disclose their conflicts of interest . . . . It is consistent with the ethical obligations imposed on other ADR neutrals."); id. § 9(c) ("Section 9(a)(1) and 9(b) expressly state that mediators should disclose financial or personal interests, and personal relationships, that 'a reasonable person would consider likely to affect the impartiality of the mediator.' . . . Prudence, professional reputation, and indeed common practice would compel the practitioner to err on the side of caution in close cases."); see also Commonwealth Coatings Corp. v. Cont'l Cas. Co., 393 U.S. 145, 149 (1968)  [*17] (requiring "that arbitrators disclose to the parties any dealings that might create an impression of possible bias" (emphasis added)).

While mediators do not have the power to issue judgments or awards, because parties are encouraged to share confidential information with mediators, those parties must have absolute trust that their confidential disclosures will be preserved. See In re Grand Jury Subpoena Dated Dec. 17, 1996, 148 F.3d 487, 492 (5th Cir. 1998) ("Confidentiality is critical to the mediation process because it promotes the free flow of information that may result in the settlement of a dispute."); 1 Alt. Disp. Resol. § 4.41 (3d ed.) (Sep. 2013) ("A mediator must be fair and impartial to gain the trust and respect of the parties."). Indeed, mediation is not effective unless parties are completely honest with the mediator. See In re Grand Jury, 148 F.3d at 492; see also In re Teligent, Inc., 640 F.3d 53, 58 (2d Cir. 2011) (collecting cases).

Just as a judge is required to recuse himself under § 455(a) whenever "his impartiality might reasonably be questioned," mediators are required to disclose a potential conflict whenever there are facts and circumstances that "could reasonably  [*18] be seen as raising a question about the mediator's impartiality."6 ABA Standards for Mediators § III.C (emphasis added). Because mediators have disclosure obligations which are similar to the recusal requirement imposed on judges, we find it appropriate to examine Faulkner's disclosure obligation under Liljeberg.

6   Of course mediators are not subject to the full array of ethical restrictions and obligations imposed upon judicial officers. What we consider today are only the similarities between their respective disclosure and recusal obligations.

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