In a $100 million lawsuit from Space Coast Credit Union againstseveral Wall Street banks and credit rating agencies, a federaljudge has ordered the parties to get together at a nonbindingmediation session.

The $3 billion Space Coast and the five banks and two ratingagencies must agree to a confidential mediation session within 14days. If an agreement is not met the clerk of the court willappoint a mediator, according to U.S. Magistrate Judge Barry S.Seltzer in the U.S. District Court for the Southern District ofFlorida.

The case could be removed from the trial calendar and bothparties may face sanctions if the mediation session is not held,according to the judge's order.

Space Coast in Melbourne, Fla., recently filedsuit against Merrill Lynch, Wachovia Capital, Barclays Capital,Lehman Brothers' former CEO Richard Fuld, and credit ratingagencies Standard & Poor's and Moody's alleging that thedefendants caused more than $100 million in losses to EasternFinancial Florida Credit Union.

Space Coast acquired Eastern Financial in 2009, which sustainedfinancial losses from 2008 to 2010. In large part, those lossesresulted in the collapse of Eastern Financial and the loss of itsindependent strength thereby creating the need for a mergerpartner, Space Coast said.

Space Coast said it identified several ways that the defendantsallegedly manipulated the credit ratings including makingout-of-model or manual adjustments to the rating agencies' creditrating models to obtain better ratings for the mortgage-relatedsecurities at issue in the case.

Meredith Gibson, senior vice president of marketing at SpaceCoast, told Credit Union Times this latest development is just thecase taking its course. The credit union's attorney did not haveany additional comments at this time, she added.

What typically happens in mediation varies based on the detailsof the case, attorneys say. However, the discussions are almostalways confidential and privileged unless there are certainexceptions such as when the mediation is required by law to be opento the public or if the mediation was intentionally used to plan orattempt to conceal a crime.

According to John Hachmeister, an attorney with Mediate.com,mediation is often used as a tool to settle a dispute and canpotentially save in costs and fees if the case were to go totrial.

“Mediation is a good tool at least to determine where you arevis-à-vis the opposition at this point in the litigation,”Hachmeister wrote on the site. “You are able to show the strengthsof your case and, based upon those strengths and the strengths ofthe other party's case, accurately assess the case with yourclient.”

In the Space Coast case, the judge said at least 14 days beforethe mediation date, the credit unions and the defendants, whoserepresentatives must have full authority to enter into a compromiseand settlement, must present their confidential briefs identifyingthe issues to be resolved.

Both parties are required to equally share the cost of mediationunless otherwise ordered by the court. Upon completion of thesession, the mediator has seven days to submit areport. 

Meanwhile, a separate order has set a pre-trial time line withpretrial motions for May 24, 2013. A date for a two-week trial tois also scheduled to start Sept. 9, 2013.