Good faith and bad faith participation in mediation is judged by what you do, not what you believe about the case. Under Federal Rule of Civil Procedure 16(f), a court can sanction anyone who fails to appear at a court-ordered mediation, shows up substantially unprepared, or does not participate in good faith. You are never required to settle or to accept a particular number. You are required to engage as though settlement is possible.
What Good Faith Looks Like
Courts measure good faith by objective conduct: did you show up, did you prepare, and could the person in the room actually say yes to a deal.
The most consistent requirement is that someone with full settlement authority attend in person. For an individual, that means you. For a corporation or insurance carrier, it means sending a representative who can sign a binding agreement and authorize payment on the spot, without calling a supervisor for permission. In Nick v. Morgan’s Foods, a federal court sanctioned a defendant that sent a representative with only $500 in settlement authority while the general counsel who could actually make decisions stayed home. The court called the presence of an authorized representative “the cornerstone of good faith participation.”
Preparation is the other half. Reviewing the case file, understanding the claims and defenses, and arriving ready to discuss both strengths and weaknesses of your position are what courts expect. Rule 16(f) treats being “substantially unprepared to participate” as sanctionable on the same level as failing to appear at all.
Mediation Statements
Many courts and mediators require each side to submit a written mediation statement before the session. Even where it is not required, preparing one is the clearest way to demonstrate good faith. A useful statement covers the key facts, the governing law, an honest assessment of where your case is strong and where it is vulnerable, prior settlement history, and any non-monetary interests that could help or complicate a deal. It should not read like a motion for summary judgment. The mediator already knows both sides think they are right. Candor about risk is what moves the room.
Conduct That Crosses Into Bad Faith
Skipping a court-ordered session without a legitimate excuse is the clearest violation. Subtler tactics are more common.
The “empty chair” problem is the one courts see most. A party technically attends but sends someone whose authority is capped far below any realistic settlement range, or a corporate employee who has to run every number up the chain. Courts have repeatedly held this defeats the purpose of the process. Related is using mediation as free discovery. The Nick court observed that when a party sends someone without real authority, “the mediation becomes a stealth discovery session, to the unfair benefit of the party whose decision-maker is not in attendance.” The participating side reveals its strategy, its settlement posture, and its case valuation. The bad-faith party gives up nothing.
Other conduct courts have treated as bad faith includes refusing to submit a required mediation memorandum (the Nick court called this a “calculated refusal”), refusing to make any offer at all when liability is reasonably clear, arriving late or leaving early, refusing to engage with the mediator, and withholding documents the other side needs to evaluate the case.
Hard bargaining is not bad faith. A low offer because you genuinely believe the case has low value is legitimate. Offering nothing, refusing to explain your position, or sending someone who cannot negotiate is a different matter.
Sanctions a Court Can Impose
Rule 16(f) gives courts broad authority. The rule states that a court “may issue any just orders,” including the severe remedies listed in Rule 37(b)(2)(A), and it requires the court to order the noncompliant party to pay reasonable expenses, including attorney’s fees, “unless the noncompliance was substantially justified or other circumstances make an award of expenses unjust.”
Sanctions typically escalate with the severity of the conduct:
- Payment of the mediator’s fee for the wasted session. Private mediators charge from a few hundred to over $1,000 per hour, so a lost full day adds up.
- The opposing party’s attorney’s fees, travel, and preparation costs for the session that was rendered useless.
- An order for a second mediation at the bad-faith party’s expense.
- Evidentiary sanctions prohibiting the offending party from presenting certain evidence or supporting certain defenses at trial.
- In extreme cases, striking pleadings, dismissing claims, or entering default judgment under Rule 37(b)(2)(A).
In Nick, the court ordered the defendant and its counsel to pay the plaintiff’s attorney’s fees for the failed mediation and the sanctions motion, reimburse the plaintiff’s personal attendance costs, pay the mediator’s fee, and pay an additional $1,500 to the Clerk of Court reflecting the money the defendant saved by not preparing.
Why Bad Faith Is Hard to Prove
Confidentiality is what makes mediation work and also what makes bad faith hard to punish. Federal law requires each district court to “provide for the confidentiality of the alternative dispute resolution processes and to prohibit disclosure of confidential dispute resolution communications.” Most states have parallel protections, and roughly a dozen have adopted the Uniform Mediation Act, which creates a formal privilege shielding mediation communications from later use in court.
In practice, the mediator cannot tell the judge what happened in the room. The mediator’s report is typically limited to whether the case settled and whether each party appeared. The mediator will not say who was unreasonable or who refused to budge, and the parties themselves are usually barred from testifying about what the other side said or offered during the session.
This means only the most verifiable forms of bad faith get sanctioned. Failing to appear, sending an unauthorized representative, or refusing to submit required documents can all be established from outside the mediation room. A party who attends, sits quietly, and makes a single insulting offer before declaring impasse is very difficult to sanction, because proof requires revealing confidential communications. Exceptions to the privilege exist under the Uniform Mediation Act for threats of bodily harm, planning a crime, or professional misconduct by the mediator, and some courts allow limited disclosure when a party violates a specific term of a mediation order. The general rule still strongly favors confidentiality, even at the cost of letting some bad-faith conduct go unpunished.
If You Are Sanctioned
You generally cannot appeal a bad-faith sanction right away. Under the collateral order doctrine as interpreted by the Supreme Court in Cunningham v. Hamilton County, sanction orders of this type do not qualify for immediate interlocutory appeal. You must wait until the underlying case reaches a final judgment and then raise the sanction as part of a regular appeal.
The timing has real consequences. A monetary sanction imposed midway through litigation typically has to be paid while the case continues. Objecting on the record preserves the issue, but relief from an appellate court will not come quickly, and the trial judge’s finding of bad faith will shape how the rest of the case proceeds.
How Sanction Payments Are Taxed
A sanction paid to a court or government entity for violating a mediation order is generally not deductible. The Internal Revenue Code disallows deductions for amounts paid “to, or at the direction of, a government or governmental entity in relation to the violation of any law,” and a court fine for bad-faith conduct falls squarely within that prohibition.
The rule has an exception. It does not apply to amounts paid “by reason of any order of a court in a suit in which no government or governmental entity is a party.” So if the court orders you to reimburse the opposing party’s attorney’s fees in a private civil case, that payment may be deductible as a litigation expense, because it moves between private parties rather than to the government. A payment to the clerk of court and a payment to opposing counsel can appear in the same sanctions order and receive opposite tax treatment, which is worth running past a tax professional against the specific wording of the order.