[By Will Rogers, 2016 | Keywords: Business, Mediation]
If crop prices remain low and net farm income stays below the profit margin for significant period of time, you may have an ag customer default on a loan and file for bankruptcy. To date, we at the Association have already heard of three cases of farmers defaulting on payments involving equipment loans in the millions. While these amounts may not be typical of your customer base, you should prepare for the inventible in case commodity prices fail to rebound commodity prices.
One of the toughest challenges you may face is resolving a dispute with a customer who no longer has the ability to make payments on equipment. In some cases, you may have to go to court, employ a collection agency or repossess equipment, while others may require you to write off a bad debt. No matter the circumstances, you may want to consider using mediation to help clear up the matter and bring about the best possible resolution to the dispute.
Mediation is the process of resolving a dispute where a neutral third party helps reach an agreement by focusing on key issues of the case. In mediation there is no judgement. Rather, all parties must agree to settle the dispute. If no settlement can be reached, further legal action can be pursued.
There are several reasons to consider using mediation as a way to resolve a dispute. According to the San Francisco Bar Association website, mediation can be, “effective, quick, inexpensive, convenient, empowering and confidential.” Compared to legal cases that go to trial, mediation can last as little as “two weeks after the initial request for service is made” and can save both parties thousands of dollars in legal fees.
Using mediation can also empower the parties involved, rather than taking a risk on the outcome of a bench or jury trial, which could end up completely against your interests. In addition, it can help preserve your relationship with a customer who you may consider doing business with again in the future once the markets stabilize. Finally, mediation offers some privacy in resolving the matter, whereas the outcomes of court proceedings are a public record.
Mediation does not make sense in all situations and certainly there are cases where mediation fails. For example, there are cases that parties will not enter into mediation or find an agreement such as in the case of a third party lender or manufacturer that has a UCC filing.
In Iowa, mediation is mandatory under the law for several types of rural situations, including farmer-creditor, farm nuisance and care and feeding contracts. These types of mediation are mandatory under the Iowa Code 654. In each case, the requesting party makes a formal application to Iowa Mediation Service, providing contact information and details of the dispute when appropriate.
In Nebraska, mediation is voluntary and typically initiated through the Nebraska Attorney General’s office of Consumer Mediation Center. And while all complaints are reviewed to determine the proper course of action, there may be less opportunity to pursue a case through the state of Nebraska.
For more information regarding mediation, please consult your attorney or contact one of the following:
Iowa Mediation Service
1025 Ashworth – Suite 504
West Des Moines, IA 50265
Office of the Attorney General – Nebraska
2115 State Capitol
Lincoln, NE 68509