Types of Mediation

Kathy’s expertise is in commercial, insolvency and fraud-related matters. She is a Los Angeles mediator, with substantial experience in bankruptcy mediation, commercial transaction mediation, and fraud mediation. While her mediation skills will translate to any type of dispute, she is particularly effective in resolving disputes in the following areas:

Bankruptcy Mediation

A bankruptcy case can involve a range of players, all of whom can find themselves caught in a dispute. The parties can include:

  • The chapter 7 debtor
  • The chapter11 debtor-in-possession
  • Secured creditors
  • Unsecured creditors
  • Creditors’ committees
  • Equity holders
  • Chapter 7 and 11 trustees
  • The United States Trustee
  • Asset purchasers
  • Parties to contracts
  • Defendants
  • Professionals
  • Other parties in interest

Disputes in insolvency proceedings can relate to:

  • Dischargeability
  • Relief from stay
  • Valuation
  • Interest rates
  • Plan confirmation
  • Fraudulent transfer and preference claims
  • Claims objections
  • Professional fees
  • A variety of other bankruptcy-related issues

Kathy is a well-qualified bankruptcy mediator as she has over 24 years of experience as a bankruptcy attorney, handling all types of issues arising in a bankruptcy or other type of insolvency proceedings. She has represented parties on all sides of disputes in bankruptcy cases, federal equity receiverships, state court receiverships, and assignments for the benefit of creditors. Her well rounded experience in bankruptcy and other types of insolvency proceedings gives her the unique ability to fully understand the parties’ differing perspectives and to appreciate all sides of an argument. Her track record on the mediation panel for the United States Bankruptcy Court for the Central District of California, demonstrates that she is an effective bankruptcy mediator.

Business Mediation                                 

Business disputes usually occur between two business entities, or among the owners of a business, where the parties disagree on the terms of a contract, the extent of information sharing, services rendered, valuation issues, or an unlimited variety of issues.

  • Business disputes between two companies can threaten what might otherwise be a profitable venture for both parties.
     
  • Business “divorces” between the owners of a business can also devastate a business when the owners of the business don’t see eye to eye on how to go their separate ways. These types of disputes can involve control over the company, the business operations itself, breach of fiduciary duty issues, or the disposition of the company’s profits, among others.

Whether third parties are making claims against a business, or the owners of a business are in a dispute, Kathy can propose creative alternatives that leave both sides with a reason to resolve the dispute short of litigation. Kathy helps to focus the parties on the preserving value, whether in an operating business or a liquidation, and on the importance of preserving relationships, if appropriate or necessary for the parties.

Complex Commercial Litigation Mediation

Commercial disputes are on the rise. Litigation is often quickly commenced and, before they know it, the parties are in the midst of an expensive and time-consuming discovery process, as well as contentious and costly pre-trial motions.

  • Early use of mediation can create an environment conducive to resolving the dispute in lieu of litigation and, in many instance, can repair the relationships that have broken down in the process.
     
  • The mediation process can help the parties to ascertain the reason for the breakdown and to evaluate the relationship, which can then assist them in strategizing about a solution going forward.

Kathy has extensive experience in commercial litigation matters. To assist each party in seeing the other side of the argument and in reaching a mutually agreeable resolution, she focuses on separating the personal issues from the substantive issues. If the parties so choose, Kathy may recommend substantive proposals using the confidential mediation process to guide the parties in thinking about alternatives. The use of separate caucuses advances the discussion quickly by permitting the parties, in confidence, to talk openly about the issues and possible solutions without fear of adverse consequences.

Community Property Mediation

In community property states such as California, issues relating to community and separate property may arise in a divorce or bankruptcy proceeding. The three most common types of disputes relate to determining:

  • What is community property
  • The value of the community property
  • How to divide it

The types of property involved can range from real property to personal property, including businesses, and retirement plans, to other less common assets such as tax refunds, lottery ticket proceeds, 529 accounts, prepaid insurance, club memberships, or frequent flyer miles. No matter what the underlying asset is, if two parties claim ownership of the same asset, the dispute needs to be resolved either through unpredictable litigation or the more controlled and cost-effective process of mediation.

Kathy, as a California lawyer, has dealt with community property issues arising in a variety of contexts for over 24 years. She is sensitive to the very personal nature of the division of community property and is therefore gentle on the personalities but firm and clear on the substantive issues. Her approach as a mediator is to guide the parties to think creatively about long term solutions that can put an end to costly litigation as well as an end to the emotional cost of ongoing fighting.

Contract Mediation

Oral or written contracts exist in virtually every aspect of business. Many written contracts today contain clauses requiring some form of alternative dispute resolution.

  • Mediation, of course, is one of the most common forms of dispute resolution and the one that leaves the parties the most in control of the ultimate outcome of the dispute.
     
  • Unlike in litigation where one party wins and one loses, neither party to a contract dispute has to lose in mediation.
     
  • A voluntary mediation can settle a dispute in a manner that is acceptable to both parties to the contract.
     
  • Mediation creates opportunity for a business solution to a contractual dispute.

Kathy seeks to take the emotional charge out of the dialogue in mediation and focus the parties on the real problem and on solutions, rather than discussing who is at fault. Whether the dispute is with partners, clients, vendors, former employees, professionals, or competitors, Kathy can assist with the discussion about the interpretation and meaning of language in a contract to help craft a fair and prompt resolution. In private caucuses, the parties can explore settlement ideas with Kathy to test what might work with the other side.

Fraud Mediation

Fraud cases can be a challenge to resolve because the dispute is often singularly focused on money.

  • Plaintiffs and insurance companies are often unaware of the full extent of any fraudulent activity, and both could benefit enormously from early evaluation of the case and an exchange of information. The accelerated learning curve on the facts of the case and the applicability of insurance coverage can be invaluable whether or not the case is ultimately resolved at mediation.
     
  • On the defense side, fraud cases often turn into a strategy of negotiation. For the alleged fraudster, a significant benefit is the early resolution of the allegations in a nonpublic forum.
     
  • Mediation of fraud cases provides the opportunity for both sides to review pending or possible agency actions and permits the parties to control the outcome of the matter instead of rolling the dice, especially when ethics and possible criminal conduct have been made an issue.

Kathy is an experienced fraud mediator as well as an experienced litigator in a wide variety of fraud-related cases. Her familiarity with the issues allows her to focus on the strengths and weaknesses of each parties’ position, while maintaining strict confidentiality of the information shared. As mediator, Kathy can serve as the conduit to make recommendations about settlement but can control the sharing of information to the other side to best protect the parties and nurture a resolution. She is effective at gauging the temperature of the parties and in recommending the appropriate time to disclose critical information.

Professional Malpractice

When a lawyer, auditor or other professional has been sued for professional malpractice, or is just threatened to be sued, the stakes are usually quite high for both sides. For the plaintiff, large dollars are often at issue. For the professional, reputation as well as potential monetary liability are at stake.

  • If a complaint has not yet been filed, early mediation can be invaluable to both sides as the parties can resolve the matter out of the public eye and before costly discovery is underway.
     
  • If the complaint is already on file, both parties can benefit from mediation, particularly if the applicable insurance policy is self-diminishing as legal fees and costs are incurred by defense counsel.
     
  • Any involved malpractice insurance company should have a representative at mediation as well because agreements reached in mediation will require the consent of both the insured and the insurer.

Given the high level of emotions in a malpractice dispute, Kathy permits the parties to vent their emotions. But she does this in the private forum of a separate caucus as she guides the parties in channeling those feelings toward a productive resolution. She encourages each side to use mediation as a reciprocal opportunity to learn more about the other side’s case and to take the opportunity to put the unpleasantness of a malpractice case behind them.

Ponzi Scheme Mediation

Ponzi schemes are a distinct type of fraudulent scheme that involve particular and sometimes unique issues of law.

  • Defrauded victims often seek to sue the perpetrators or allegedly culpable third parties to try to make themselves whole.
     
  • Bankruptcy trustees and federal equity receivers bring clawback actions asserting preference and fraudulent transfer claims against investors who were paid money from a Ponzi scheme.
     
  • Ponzi scheme cases require dividing up a pie too small to pay everyone in full, making resolution of these disputes challenging.
     
  • Certain presumptions and defenses may apply in Ponzi scheme cases that are unique to these types of circumstances and not readily understood by the parties.
     
  • Resolving disputes in Ponzi scheme cases through mediation can be extremely beneficial to all parties involved in the dispute as otherwise the costs of discovery and expert witnesses can be quite high for both sides.

Kathy is the co-author of The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes, which is the go-to book for legal issues arising in a Ponzi scheme case. She is also the author of Ponzi-Proof Your Investments: An Investor’s Guide to Avoiding Ponzi Schemes and Other Fraudulent Scams.

In her legal practice, Kathy has practical hands on experience in representing all types of parties in Ponzi scheme disputes, including trustees, receivers, investors, and other types of creditors. Kathy’s extensive knowledge on the law involved in these types of cases along with her understanding of the equitable considerations that a court will evaluate make her the perfect choice for a mediator of the disputes arising in Ponzi scheme cases. She assists the parties in:

  • Understanding the likely outcome at trial
  • Assessing their litigation risks
  • Forecasting the costs of taking the dispute all the way through trial

Through those discussions, Kathy assists the parties in evaluating the strengths and weaknesses of their cases with an eye toward resolving the dispute short of litigation.

Secured Transactions Mediation

Most real estate transactions involve a mortgage. Most asset purchases also involve a loan or credit transaction in which the lender acquires a security interest in the collateral acquired by the borrower. Unfortunately, there are many opportunity for disputes in secured transactions. Disputes may arise about:

  • The terms of the loan
  • Whether a default has occurred
  • Whether a security interest is properly perfected
  • Whether the security interest reaches certain collateral or after-acquired property
  • The respective priorities of multiple security interests against the same collateral

Kathy has extensive experience from her legal practice in dealing with secured transaction issues and is therefore able to assist parties in evaluating their positions in a dispute. Because the issues are often not black and white, Kathy can work with both sides of a disputed issue to fashion a mutually acceptable outcome to the dispute.

Securities Mediation

Mediation often occurs on a parallel track with a formal FINRA (Financial Industry Regulatory Authority) arbitration proceeding. Investors may assert claims against their brokers for:

  • Misrepresentation
  • Breach of fiduciary duties
  • Conflicts of interest
  • Negligence
  • Fraud

Because arbitration can lead to unpredictable and sometimes disturbing results, mediation is a popular form of dispute resolution in a securities arbitration case. FINRA reports that its mediation program has achieved an 80% success rate.

In an arbitration, the parties lack control over the outcome, but in mediation the parties have complete control. Although mediation can be commenced at any time after an arbitration proceeding has been commenced, mediation can also take place before, or in lieu of arbitration. The parties do not give up any rights to arbitrate or litigate if they do not reach a satisfactory settlement in mediation.

Kathy has represented both brokers and investors in fraud disputes and well understands the issues that may arise. Her knowledge of the industry as well as her ability to draw out information from the parties makes her a good choice to mediate disputes involving securities issues.

Contact

Kathy Bazoian Phelps

1999 Ave. of the Stars, Ste. 1100, Los Angeles, CA 90067

kphelps@diamondmccarthy.com

+1 (424) 278-2330

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