The Business Court recently reminded that while there is great value to showing up and seeing what might happen at mediation, the costs of a decision to avoid the process can be more easily quantified.

In Chi v. N. Riverfront Marina and Hotel LLLP and Feng v. N. Riverfront Marina and Hotel LLLP, 2023 NCBC Order 35, the Court considered a motion for sanctions arising from a scheduled two-day, video mediation in which 8 of 19 plaintiffs appeared for the first session and only their lawyer attended the second. The case arose from a Cape Fear riverfront project created to attract foreign investors through the Fifth Preference Visa Program (EB-5) that allowed qualifying investors to seek conditional permanent resident status in exchange for equity investments exceeding $500,000 in targeted geographies. Plaintiffs claimed some of the personal and written representations directed to them were false.

Judge Earp’s order addressed the central bulwarks of mediation in North Carolina: who has to show up, and when do they get to leave. Those rules, the Court reaffirmed, are straight-forward:

“The parties to a superior court civil action in which a mediated settlement conference is ordered, their attorneys and other persons or entities with authority, by law or by contract, to settle the parties’ claims shall attend the mediated settlement conference unless excused by rules of the Supreme Court or by order of the senior resident superior court judge.” (N.C.G.S. § 7A-38.1(f) (emphases added)

“It is the duty of the mediator to determine in a timely manner that an impasse exists and that the mediated settlement conference should end.” (MSC Rule 6(b)(3))

The parties had agreed that plaintiffs (each Chinese citizens) would participate in the mediation via Zoom, with available translation services. Counsel for the 11 absent plaintiffs indicated they had “scheduling conflicts that precluded their attendance.” After day 1 of the mediation, plaintiffs’ counsel understood via the mediator that settlement would only be possible within a range her clients could not reach. Thereafter, she appeared at day 2 – without her clients – “to convey this apparent impasse.” Chi, ¶¶ 8, 10-11.

The Court noted that, by statute, “[a]bsent ‘good cause[,] failure to attend an ordered mediation may result in sanctions.” Id. ¶ 15 (citing N.C.G.S. § 7A-38.1(g). Such “good cause” exists when “a party’s ‘inability to attend [is] caused neither by its own conduct nor by circumstances within its control.’” Id. ¶ 16 (citing Triad Mack Sales & Servs., Inc. v. Clement Bros. Co., 113 N.C. App. 405, 408 (1994). Judge Earp found no evidence to explain that the absent plaintiffs missed the mediation “for any reason beyond their control,” nor to suggest what caused the purported “scheduling conflicts.” Id. ¶¶ 22-23.

The Court also found that, even though plaintiffs “unilaterally decided that an impasse was inevitable,” it was not their call to make. That belonged to the mediator, former Business Court Chief Judge James Gale. Because “the authority to declare an impasse belongs to the mediator, not the parties,” simply sending their counsel to the second session to announce their conclusion usurped the mediator’s role. Id. ¶ 24.

The Court imposed sanctions upon the plaintiffs in the amount of defendants’ attorneys’ fees in connection with the mediation and seems likely to have imposed the mediator’s fees on plaintiffs, as well, if they had not already willingly paid the full fee.

Judge Earp sent the parties back to mediation.

Takeaways

• Coordinating the participation of multiple, individual plaintiffs in a mediation is just another of the burdens plaintiffs assume proceeding in this posture. Individual discovery responses, and lots of depositions, are on the menu too. Even in the Litigation-by-Video Age it’s a challenge for the most organized counsel.

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