MEDIATION ETHICS
JUDGE MICHAEL D. MARCUS (RET.)
Two ironies exist involving ethical standards in mediations. The first is that mediation, an important component of the civil justice system, is lightly regulated. That may be an oversight but, anecdotally, the system appears to be working well without the need for increased oversight. The second irony, as discussed later on, is that, because of the scope of mediation confidentiality provided by Evidence Code sections 1119 et seq., a violation of ethical standards will rarely result in judicial, legal or disciplinary repercussions.
The Judicial Council may eventually create ethical standards for private mediations but presently its rules in Title 3, Div. 8, rule 3.850 et seq. only apply to court-ordered mediations conducted by panel mediators. (Note that judges may only order matters to mediation in which the amount in controversy does not exceed $50,000 for each plaintiff [rule of court 3.891, subdivision (b)] although they often will “encourage” litigants in cases with greater potential damages to also engage in the process.) Despite the current absence of standards governing privately retained mediators, the existing rules should still be guideposts for all mediators, except where otherwise noted.
The Mediator’s Ethical Duties
Privately retained mediators do not have formal disclosure obligations to prospective counsel and their clients. In contrast, court-connected mediators must maintain impartiality toward all of the participants and make reasonable efforts to keep them informed about matters that reasonably could raise a question about their ability to conduct the proceedings impartially. Matters which could raise questions about a mediator’s motives include past, present, and current interests, relationships, and affiliations of a personal, professional, or financial nature and the existence of any grounds for disqualification of a judge specified in Code of Civil Procedure section 170.1. (Rule of Court 3.855, subdivisions (a), (b)(1)(A) and (B).) Court-connected mediators also have a continuing duty to disclose potential areas of conflict that might affect their impartiality. (Rule of Court 3.855, subdivision (b)(2).)
Privately retained mediators should also reveal the existence of substantial personal relationships with one of the attorneys or parties but the utility of requiring them to notify prospective counsel of all of the issues that are required of court-connected mediators is of questionable value since they generally have been vetted by the attorneys who are considering them whereas court-connected mediators are more often an unknown quantity to prospective attorneys.
The Northern District of California for the United States District, which has the most elaborate standards regarding the conduct of mediations of the four California
Copyright Michael D. Marcus March 2010
federal districts, provides that the court’s rules governing conflicts of interest apply to the appointment of mediators from the court’s panel and that the parties may object to that appointment. (ADR local rules 2-5(d) and 6-3(a).) The Southern District provides that mediators appointed by the court may be disqualified, on motion, for bias or prejudice and that such mediators shall disqualify themselves for the same grounds as would a judicial officer. (Local rule 600-4(c).) The Eastern District provides that prospective neutrals must disclose grounds for disqualification under both 28 U.S.C. § 455(b) and where their impartiality might reasonably be questioned. (Local Rule 271(f)(3).
Like any attorney with a healthy ego, mediators can occasionally be confronted with whether they are competent to handle a case that comes before them. And like any self-respecting attorney, they are supposed to only mediate those legal issues with which they are familiar. In that regard, court-connected mediators must self-assess their competence to conduct a mediation. (Rule of Court 3.856, subdivision (d).)
Mediators have the “power” to persuade and cajole but not to order the parties to do anything. (Saeta v. Superior Court (2004) 117 Cal.App.4th 261, 269, 271; Travelers Casualty and Surety Company, et al. v. Superior Court (2005) 126 Cal.App.4th 1131.) It is the parties, and not the mediator, who are in control of resolving the dispute. (Ibid.) After all, the system is designed to operate best when the parties and their counsel agree to commit to a settlement. It is ineffective when the mediator dominates the proceeding to the extent that the parties’ exercise of free will is negated.
Since mediators have no actual power, they are not obligated to ensure the substantive fairness of an agreement reached by the parties. (Rule of Court 3.857, subdivision (b).) Also, while mediators “may present settlement options and terms” and “may also assist the parties in preparing (the) written settlement agreement,” that assistance should be confined “to stating the settlement as determined by the parties.” (Rule of Court 3.857, subdivision (h).) In other words, their role is merely that of a scribe in the preparation of a written settlement.
It may be tempting to turn a mediation into an agreed-upon arbitration but such temptations should be approached with caution because the mediator who becomes an arbitrator may have been compromised by hearing inadmissible argument. Despite this danger, if the parties wish to have the mediator arbitrate their case, they should consent in writing to that process, which should include a warning by the mediator when the transition from mediation to arbitration is occurring. (Rule of Court 3.857, subdivision (g).)
Even though most attorneys should know about the application of confidentiality to mediations, court-connected mediators are still required to advise the participants about the principle. (Rule of Court 3.854, subdivision (b).) When speaking to one participant outside the presence of other participants, such mediators must also advise all participants about the confidentiality of separate communications with them and that they cannot divulge those communications without consent. (Rule of Court 3.854, subdivision (c).)
The Lawyer’s Ethical Duties
From the perspective of a mediator, especially in court-connected mediations where the mediator is either performing without compensation or at a substantially reduced fee, it is galling for an attorney to cancel a mediation at the last moment or not show up at all. Although the plaintiff or the party seeking affirmative relief are required to notify court-connected mediators that the matter has settled or been disposed of at least two days before the calendared hearing (Rule of Court 3.1385, subdivisions (a)(1) and (2)), not all attorneys comply with this act of courtesy. The failure to provide this notice may result in monetary sanctions. (Ibid.) This is one of the few instances where sanctions can be imposed for non-compliance with ethical standards because this particular conduct occurs outside of the confidential mediation process.
In non-California jurisdictions, attorneys should advise their clients about all alternatives to litigation, including settlement opportunities. (See American Bar Association, Section of Litigation, Ethical Guidelines for Settlement Negotiations [ABA Guidelines], 3.1.1 which provides that “A lawyer should consider and discuss with the client, promptly after retention in a dispute, and thereafter, possible alternatives to conventional litigation, including settlement.”) This standard may run counter to the aggressive attorney who believes that all cases should be tried. (Note that ABA ethical rules may be considered as a collateral source of proper professional conduct in California where there is no direct California authority and such rules do not conflict with this state’s policies. [State Compensation Ins. Fund v. WPS, Inc. (1999) 70 Cal.App.4th 644, 655-656]; see also Rule of Professional Conduct 1-100, subdivision (A) stating that “Ethics opinions and rules and standards promulgated by other jurisdictions and bar associations may also be considered.”)
Although California does not have a rule comparable to the ABA’s 3.1.1, it can be argued that Business and Professions Code section 6068, subdivision (m) and Rule of Professional Conduct 3-500, which require lawyers to keep clients reasonably informed of significant developments relating to the representation, include the responsibility to advise the clients of settlement opportunities, including the availability of mediation. There are, however, no cases which have interpreted these regulations to require California attorneys to advise their clients about the availability of mediation.
Rule of Court 3.894, subdivision (b)(1), provides that the parties to a court-connected mediation shall, at least five court days before the first mediation session, serve a list of their mediation participants on the mediator and all other parties. Supplemental lists must be served promptly to reflect the presence of additional persons. The purpose of the participation list is not clear (perhaps it gives the mediator notice of the size of the room that might be needed); regardless, many attorneys ignore this rule.
A more important rule is that all participants to a court-connected mediation, including insurance representatives, unless excused by the mediator, must appear personally at the mediation. (Rule of Court 3.894, subdivisions (a)(1) and (2).) The party, attorney or insurance representative whom the mediator has excused or shall be allowed to participate by telephone “must promptly send a letter or an electronic communication to the mediator and to all parties confirming the excuse or permission.” (Subdivision (a)(3).)
The four California federal districts have their own attendance requirements for parties, counsel and, in the case of the Northern and Eastern Districts, insurance representatives for mediations conducted through the respective courts. (See Northern District ADR local rule 6-10 and Eastern District local rule 271(l)(1); Central District local rule 16-15.5(b) and (c); Southern District local rule 600-7(c).)
As a practical matter, all mediations work best when all parties, persons with settling authority and insurance representatives are present. If an integral person or party cannot appear, effective lawyering suggests that the attorney for that person or party advise the mediator ahead of time about the unavailability of the individual or entity. Accommodations may be arranged for that person’s absence or, perhaps, the mediation may have to be continued; regardless, it is better to discuss this issue before the mediation rather than have it fall apart because a key person could not attend and no one was notified ahead of time of that problem.
Attorneys must provide their clients with competent representation at the mediation. (See Rule of Professional Conduct 3-110, subdivision (A) [“A member shall not intentionally, recklessly, or repeatedly fail to perform legal services with competence.”].) However, as pointed out earlier, any remedy, as a result of ineffective representation, such as a motion to set aside the settlement or a malpractice action, are probably unavailing because of mediation confidentiality. (See the discussion, infra, where the California Supreme Court has granted a hearing in Cassel v. Superior Court (2009) 179 Cal.App.4th 152 to consider whether mediation confidentiality applies to pre-mediation meetings between only the client and his attorneys, whom he thereafter sued for legal malpractice.)
During mediation, attorneys must reasonably consult with their clients “respecting the means of negotiation of settlement, including whether and how to present or request specific terms.” (ABA Guideline 3.1.3.) And, the final settlement terms are within the client’s control and not the attorney’s. “A lawyer can exercise broad general authority from a client to pursue a settlement if the client grants such authority, but a lawyer must not enter into a final settlement agreement unless either (a) all of the agreement’s terms unquestionably fall within the scope of that authority, or (b) the client specifically consents to the agreement.” (ABA Guidelines 3.2.1.)
An exception to the requirement that a client’s consent to a settlement must be obtained occurs if the client is covered fully under an insurance policy that gives the insurer the right to settle the matter without the insured’s consent. (Fiege v. Cooke, et al, (2005) 125 Cal.App.4th 1350 (2005).)
Attorneys who represent more than one party at a mediation must be careful not to enter into an aggregate settlement of a claim without the informed written consent of each client. (California Rule of Professional Conduct 3-310, subdivision (D).) For example, a $100,000 global settlement that is to be shared by two parties requires the informed consent of both. The better practice, to avoid the application of the above rule, is for each party to agree in the settlement to a specific division of the $100,000.
Mediation Confidentiality Applies to Both Mediators and the Participants
The confidentiality of the mediation process presents attorneys with the opportunity to argue creatively about the merits of their respective cases. There are, however, no legal consequences, because of that same confidentiality, when creativity turns into a misrepresentation. While an attorney cannot mislead a judicial officer (Business and Professions Code section 6068, subdivision (d); Rule of Professional Conduct 5-200, subdivision (B)), misrepresentations to mediators are neither sanctionable nor disciplinable. The analysis starts with Foxgate Homeowners’ Association, Inc. v. Bramalea California, Inc. (2001) 26 Cal.4th 1, which states that mediators, pursuant to Evidence Code sections 1119 and 1121, may not report attorney misconduct to the judges who have the cases on their calendars.
Foxgate provides that “Neither a mediator nor a party may reveal communications made during mediation” (id. at p. 4) and that Evidence Code section 1121 prohibits both mediators “and anyone else from submitting a document that revealed communications during mediation and (bars) the court from considering them.” (Id. at p. 13.) The opinion also holds that:
Although a party may report obstructive conduct to the court, none of the confidentiality statutes currently make an exception for reporting bad faith conduct or for imposition of sanctions under that section when doing so would require disclosure of communications or a mediator’s assessment of a party’s conduct although the Legislature presumably is aware that Code of Civil Procedure section 128.5 permits imposition of sanctions when similar conduct occurs during trial proceedings. FN. 13.
FN.13. The conflict between the policy of preserving confidentiality of mediation in order to encourage resolution of disputes and the interest of the state in enforcing professional responsibility to protect the integrity of the judiciary and to protect the public against incompetent and/or unscrupulous attorneys has not gone unrecognized. (Citations omitted.) As noted, however, any resolution of the competing policies is a matter for legislative, not judicial, action.
Therefore, we do not agree with the Court of Appeal that the court may fashion an exception for bad faith in mediation because failure to authorize reporting of such conduct during mediation may lead to ‘an absurd result’ or fail to carry out the legislative policy of encouraging mediation. The Legislature has decided that the policy of encouraging mediation by ensuring confidentiality is promoted by avoiding the threat that frank expression of viewpoints by the parties during mediation may subject a participant to a motion for imposition of sanctions by another party or the mediator who might assert that those views constitute a bad faith failure to participate in mediation. Therefore, even were the court free to ignore the plain language of the confidentiality statutes, there is no justification for doing so here. (Id. at p. 17.)
Rojas v. Superior Court (2003) 33 Cal.4th 407 extends confidentiality to all writings, including exhibits, that have been prepared for mediation.
Simmons v. Ghaderi (2008) 44 Cal.4th 570 qualifies Foxgate’s and Rojas’s strict interpretation of mediation confidentiality in holding that due process and express waiver are the only exceptions to that rule in the absence of legislative action. It cited, with approval, Rinaker v. Superior Court (1998) 62 Cal.App.4th 155, in which a mediator was compelled to testify at a juvenile delinquency proceeding regarding statements by the victim at a related mediation about the identities of the juveniles because a minor’s due process right of confrontation outweighs the right of confidentiality. (44 Cal.4th at p. 582.)
The federal counterpart to Rinaker is Olam v. Congress Mortgage Company (N.D. Cal. 1999) 68 F.Supp.2d 1110 which holds that a mediator’s testimony can be compelled in a civil proceeding to establish whether a defaulting party was competent to enter into a settlement agreement that the opposing party was seeking to enforce. (Foxgate Homeowners’ Association, Inc. v. Bramalea California, Inc., supra, factually distinguished Olam because the parties in Foxgate had waived confidentiality but, otherwise, recognized Olam as a comprehensive discussion of mediation law. (Id. at p. 16).)
Both Rinaker and Olam provide the process that a trial court should go through in deciding whether or not to compel a mediator’s testimony. Olam is more detailed in explaining that process.
Rinaker states that the court should conduct an in camera hearing “to weigh the public’s interest in maintaining the confidentiality of mediation against the minors’ constitutionally based claim of need for the testimony, and to determine whether the minors have established that the mediator’s testimony is necessary to vindicate their right of confrontation.” (Id. at p. 161.) For example, the need for the mediator to testify in open court would be excused if he or she could not recall the statement needed to impeach the witness. (Id. at p. 170.) Also, the in camera process allows the trial court to assess the probative value of the mediator’s testimony. (Ibid.)
Rinaker rejected the suggestion that the moving party should be required to demonstrate that “there is no other evidence, unrelated to the mediation, which could be used to undermine” the testimony of the witness to be impeached. (Id. at p. 171.)
Olam, in reliance on Rinaker, allowed the mediator to first testify in closed proceedings regarding the plaintiff’s statements at mediation who was now claiming that the settlement should be voided because of “undue influence” at the mediation. Olam, as does Foxgate, also noted that California Evidence Code section 703.5 confers on the mediator an independent privilege not to testify about statements or conduct in the mediation and that Rinaker had not focused on that provision. The mediator in Rinaker had objected to testifying only on the basis of Evidence Code sec. 1119 and not 703.5.
Olam states that the goal of the first stage of the two-step balancing process “is to determine whether the harm that would be done to the values that underlie the mediation privileges simply by ordering the mediator to participate in the in camera proceedings can be justified by the prospect that (the mediator’s) testimony might well make a singular and substantial contribution to protecting or advancing competing interests of comparable or greater magnitude.” (Id. at pp. 1131-1132.) In the second stage, the court should weigh and assess “(1) the importance of the values and interests that would be harmed if the mediator was compelled to testify (perhaps subject to a sealing or protective order, if appropriate), (2) the magnitude of the harm that compelling the testimony would cause to those values and interests, (3) the importance of the rights or interests that would be jeopardized if the mediator’s testimony was not accessible in the specific proceedings in question, and (4) how much the testimony would contribute toward protecting those rights or advancing those interests — an inquiry that includes, among other things, an assessment of whether there are alternative sources of evidence of comparable probative value.” (Id. at p. 1132.)
Rinaker and Olam should be considered in two situations: (1) a party to a mediation settlement agreement, in which all the parties have expressly waived mediation confidentiality, wants the mediator to testify as to what occurred at the mediation and (2) a due process violation might occur if mediation confidentiality were used to prevent a mediator’s testimony.
As noted in Simmons v. Ghaderi, supra, the parties may avoid mediation confidentiality, when seeking the trial court’s assistance in enforcing a settlement, by expressly waiving its application. That waiver, to be valid, must be clear and unambiguous; thus, a mediation settlement agreement should incorporate the language of Evidence Code section 1123(b) which states, in part, that the agreement should provide either that it is admissible or subject to disclosure or it is enforceable or binding or that all parties to the agreement have expressly agreed in writing to its disclosure. (Fair v. Bakhtiari (2006) 40 Cal.4th 189.)
Foxgate and its progeny, therefore, allow attorneys to report mediation misconduct, such as the failure of an attorney or party to appear at a mediation, but all communications during the mediation process, no matter how scurrilous or misleading, unless consented to by the parties or needed to uphold a due process right, are confidential until the legislature says otherwise. (See also Wimsatt v. Superior Court (Kausch) (2007) 152 Cal.App.4th 137 affirming the breadth of mediation confidentiality to extend to any writing or statement that would not have existed but for a mediation.)
In a commentary to its local rules regarding mediations, the Northern federal district, while observing the confidentiality of mediation proceedings and relying, in part, on Foxgate, Rojas and Simmons v. Ghaderi for that proposition, notes that the concept of absolute confidentiality, regardless of the circumstances, may be excused in “limited circumstances in which the need for disclosure outweighs the confidentiality of a mediation,” such as threats of death or substantial bodily injury; use of the mediation to commit a felony and the right to cross-examination in a quasi-criminal proceeding. (6-12 Commentary.) The Southern District allows sanctions for the failure of counsel or a party to act in good faith in the course of a mediation “in accordance with these rules.” (600-7(g).) That sanction power appears to be inconsistent with Local Rule 600-7(d) which provides that no mediation statements shall be “made known to the trial court.”
In granting review in February 2010 in Cassel v. Superior Court, supra, 179 Cal.App.4th 152, the California Supreme Court has another opportunity to either solidify its position that mediation confidentiality should be rarely breached (see Foxgate Homeowners’ Assn. v. Bramalea California, Inc., supra; Rojas v. Superior Court, supra; Simmons v. Ghaderi, supra) or take the opposite tact that consumer protection should be an exception to such confidentiality.
In Cassel, a 2-1 decision, the majority held that discussions between Cassel and his attorneys two consecutive days immediately before and again on the day of a scheduled mediation, at which the case settled for $1.25 million, were not confidential and thus could be used by Cassel in a subsequent legal malpractice action against the attorneys for forcing him to accept the settlement rather than a higher amount that he had previously told the attorneys was what he wanted. The majority reasoned that the three meetings between Cassel and his attorneys outside the presence of opposing counsel and the mediator are not protected by mediation confidentiality because they “do not constitute oral and written communications made ‘for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation’ protected by section 1119, subdivisions (a) and (b) or communications by ‘participants’ protected by section 1119, subdivision (c).” (Id. at p. 164.)
The Cassel majority relied on Wimsatt v. Superior Court, supra, which held, in part, that a conversation between opposing counsel prior to a mediation was not protected from disclosure by mediation confidentiality. The majority also noted that, unlike the facts in Wimsatt, the communications at issue were made by the client to his own attorneys and not to an opposing party or the mediator. (Id. at p. 162.) The majority found as well that the attorneys were “not within the class of persons which mediation confidentiality was intended to protect from each other—the ‘disputants,’ i.e., the litigants—in order to encourage candor in the mediation process.” (Id. at p. 163.) Finally, the majority reasoned that the meetings between Cassel and his attorneys were for trial strategy purposes and not just to prepare for the mediation. (Id. at p. 164.)
The dissent in Cassel said that the majority position was inconsistent with well-established Supreme Court cases holding that exceptions to mediation confidentiality should be created only by the legislature; that Evidence Code section 1119, subdivision (a) covers statements that were made for the purpose of a mediation, even if not communicated to an opposing party or a mediator and had not been made during the course of a mediation (id. at pp. 165-166) and that it is the legislature’s and not the court’s role to protect clients from unscrupulous lawyers where the fundamental policies favoring mediation are not affected. (Id. at p. 167.)
The Supreme Court must now decide whether it shall continue its policy that mediation confidentiality allows for only rare exceptions or that the need to protect consumers is an additional reason for deviating from that policy. If the Court does not alter its position, it will adopt the approach of the dissent in the appellate court opinion and also probably disapprove Wimsatt to the extent that it is inconsistent. If the Court wants to protect clients from “unscrupulous attorneys,” it will probably hold that pre-mediation conferences between clients and their attorneys do not promote the purpose of mediation and, as a result, are covered only by the attorney-client privilege. Even if it adopts this latter position, the Court will most likely hold that similar conferences that take place during the mediation process are still confidential.
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Judge Michael D. Marcus (Ret.) is a mediator, arbitrator and discovery referee with ADR Services, Inc. in Los Angeles, where he specializes in the resolution of employment, commercial, personal injury, legal malpractice and real property cases. The Los Angeles Daily Journal recognized him in 2007 and 2009 as one of the top neutrals in California. Judge Marcus is a frequent speaker on mediation, arbitration, legal ethics and trial strategy for the Consumer Lawyers of Los Angeles, the Association of Southern California Defense Counsel, the CEB and numerous Los Angeles law firms. He received his B.A. from the University of California, Berkeley in 1964 and his J.D. from the UCLA School of Law in 1967.