Archive for the ‘Mediation’ Category

Mediation Message No. 135

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 135
“DON’T GIVE UP. DON’T EVER GIVE UP.” – JIMMY VALVANO

Intensive preparation is a sine qua non for a successful mediation. (See Mediation Messages 42 and 111 for preparation elements.) After that, it’s important that all participants, including the mediator, maintain a positive attitude throughout the mediation’s ups and downs, which will surely occur.

Mediation can produce a combination of emotions – some positive and some not so – because the process, as the discussions progress, can be both uplifting and frustrating. Regardless, it’s essential, even when a successful resolution seems far off, that the attorneys remain hopeful because negativity can lead to letdown and then failure.

Former North Carolina State Coach Jimmy Valvano’s uplifting message, “Don’t give up. Don’t ever give up,” which he made about his failing health, is both a wonderful life lesson and an appropriate mantra for mediation when nothing seems to be working. Thus, all is not lost if a party at a mediation is inflexible or has even packed up and is walking out. (I’ve hustled down to the parking area and brought a party back to the mediation and ultimate resolution.) By remaining reasonable, creative and engaged, no matter what has already occurred, good things are more likely to happen.

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, July 2017

Mediation Message No. 134

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 134
TRIAL COURTS ARE GATEKEEPERS AS TO DEFAULT APPLICATIONS

Grappo v. McMills (2017) 11 Cal.App.5th 996 sends a strong statement to both attorneys and, in particular, the trial courts that applications for default judgments must be closely scrutinized and that only appropriate claims should be approved. In Grappo, appellant Donald Grappo, representing himself, filed a complaint alleging ten causes of action, seven of which were in one paragraph, the other three ranging from two paragraphs to five. The complaint named five defendants, two entities and three individuals, none of which or whom was described or identified. Grappo did not identify himself either, or describe any claimed connection or relationship with any of the defendants. He served the complaint on Kenneth McKean, who was named in the caption but not identified in the complaint—and who, from all indications, had no relationship with Grappo. Six months later, Grappo filed a request for default against McKean and his law firm (McKean & McMills), seeking a default judgment for $9,982,308.83, with a claimed itemization of damages not found in the complaint. The clerk entered the default, but the court refused to enter judgment, entering instead an order listing specific reasons for the refusal. McKean then died, of which Grappo was aware. Two weeks later, he filed another request for default and judgment which was not mailed to anyone. This request sought a judgment for $12,012,818.88, once again with numbers found nowhere in the complaint. In the declaration portion in the default request, Grappo referred to “$60,000,” an amount in the prayer for the claimed value of personal property referred to in the eighth cause of action “belonging to some of the heirs of the Michael A. Grappo 2003 Trust.” The court entered judgment for Grappo and against McKean and McKean & McMills for $60,000, plus costs of $750.

Defendants filed a motion to vacate and set aside the default judgment. Grappo appealed from a resulting order vacating the judgment as to McKean. The appellate court affirmed the order and published its opinion “to remind trial courts that however burdened they be, they must vigilantly attend to their duty in connection with the default process, to act as gatekeeper, ensuring that only the appropriate claims get through.’” (Id. at p. 1000; internal quotations omitted.) “The court’s role in the process of entering a default judgment is a serious, substantive, and often complicated one, and it must be treated as such.” (Id. at pp. 1013-1014, citing Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 272-273.)

Grappo explained that had the trial court properly acted as a gatekeeper, the default judgment would not have been entered because, inter alia, the complaint did not identify the people or relationship of any of the people or entities named in the caption; the complaint did not comply with the pleading requirements in rule 2.112 of the California Rules of Court; Grappo was not the proper plaintiff because any alleged wrongs, if they had occurred, were against the Michael A. Grappo 2003 Trust and not Grappo; Grappo’s complaint did not state a claim for any loss of property; the claims of negligence and gross negligence were not supported by any allegations and the $60,000 awarded to Grappo was not supported by the complaint. (Id. at pp. 1013-1015.)

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, June 2017

Mediation Message No. 133

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 133
CONTACTS WITH CURRENT AND FORMER EMPLOYEES, OFFICERS, DIRECTORS AND MANAGING AGENTS

Because contacts with current and former employees and members of a company’s control group are always an important (and often misunderstood) issue in all types of litigation, I am summarizing the status of that law. (This is, by far, the longest Mediation Message I’ve ever written but once I started, I couldn’t stop.)

Before present Rule of Professional Conduct 2-100, there was Rule 7-103 which stated “A member of the State Bar shall not communicate directly or indirectly with a party whom he knows to be represented by counsel upon a subject of controversy, without the express consent of such counsel. This rule shall not apply to communications with a public officer, board, committee or body.” Rule 7-103 prohibited all contacts with current employees. (Mills Land & Water Co. v. Golden West Refining Co. (1986) 186 Cal.App.3d 116; Bobele v. Superior Court (1988) 199 Cal.App.3d 708, 713-714.)

Existing Rule 2-100 provides: “(A) While representing a client, a member shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer. [¶] (B) For purposes of this rule, a ‘party’ includes: [¶] (1) An officer, director, or managing agent of a corporation or association, and a partner or managing agent of a partnership; or [¶] (2) An association member or an employee of an association, corporation, or partnership, if the subject of the communication is any act or omission of such person in connection with the matter which may be binding upon or imputed to the organization for purposes of civil or criminal liability or whose statement may constitute an admission on the part of the organization.”

“Control group” and “managing agent” defined (see 2-100(B)(1)): A control group consists of “ ‘ “officers and agents … responsible for directing [the company's] actions in response to legal advice.” ’ ” (Bobele v. Superior Court, supra, at p. 712.) A managing agent is “An employee that “exercise[s] substantial discretionary authority over significant aspects of a corporation’s business.” (White v. Ultramar (1999) 21 Cal.4th 563, 577 [definition for punitive damages purposes]; Snider v. Superior Court (2003) 113 Cal.App.4th 1187, 1208-1209 [White’s definition applies to Rule 2-100(B)(1) and is consistent with the control group definition in Bobele].)

Rule 2-100(B)(2)’s “binding” statement language: “(P)aragraph (B)(2) focuses on the subject matter of the communication and arguably applies to employees outside of an organization’s control group if the subject matter of the conversation is the employee’s act or failure to act in connection with the matter at issue, and that act or failure to act could bind the organization, be imputed to it, or if the employee’s statement could constitute an admission against the organization.” (Snider v. Superior Court, supra, at pp. 1202-1203; italics in original.) The “may constitute an admission on the part of the organization” category “only applies to ‘high-ranking executives and spokespersons’ with the authority to speak on behalf of the organization.” (Id. at p. 1209; the same standard applies to authorized admissions as an exception to the hearsay rule in Evidence Code sec. 1222. (O’Mary v. Mitsubishi Electronics America, Inc. (1997) 59 Cal.App.4th 563, 572; accord, Snider v. Superior Court, supra, at p. 1203.)

Rule 2-100 regarding contacts with current members: “[R]ule 2-100 permits opposing counsel to initiate ex parte contacts with … present employees (other than officers, directors or managing agents) who are not separately represented, so long as the communication does not involve the employee’s act or failure to act in connection with the matter which may bind the corporation, be imputed to it, or constitute an admission of the corporation for purposes of establishing liability.” (Triple A Machine Shop, Inc. v. State of California (1989) 213 Cal.App.3d 131,140, 143.) La Jolla Cove Motel & Hotel Apartments, Inc. v. Superior Court (2004) 121 Cal.App.4th 773, 788-789 holds that rule 2-100 allows attorneys to contact directors for a represented corporation where the director’s separate counsel had consented to the contact although the corporation’s counsel had not. (Id. at pp. 776-777, 784.) La Jolla Cove Motel, however, does not allow contacts “in most situations” with “a director of a corporation” “by opposing counsel without the permission of corporate counsel. It is only in the situation where the director has retained separate counsel that rule 2-100 allows ex parte contact upon consent of that counsel.” (Id. at p. 789.)

Former employees, including managerial, under rule 2-100, can be contacted: “Plaintiffs may inquire about relevant facts but not about any privileged communications concerning those facts.” (Bobele v. Superior Court, supra, at pp. 714-715 [rule 7-103 analysis]; see also Nalian Truck Lines, Inc. v. Nakano Warehouse & Transportation Corp. (1992) 6 Cal.App.4th 1256, 1259 (Rule 2-100 permits communications with a former member of the corporation’s “control group”) and Continental Insurance Co. v. Superior Court (1995) 32 Cal.App.4th 94, 118-119 (Nalian’s reasoning applicable to both rule 2-100(B)(1) and (2).) Mills Land & Water Co. v. Golden West Refining Co., supra, at p. 128 discouraged contacts with former company directors because they could possess potentially privileged information about the pending litigation but has been distinguished by La Jolla Cove Motel & Hotel Apartments, Inc. v. Superior Court, supra, at pp. 788-789 because Mills Land relied upon former rule 7-103, which imposed a blanket prohibition against contacts with any constituents of a business or corporation.

Policy allowing former employees to be interviewed: Former employees are sometimes the best available source of information regarding unprivileged events (State Farm & Casualty Co. v. Superior Court (1997) 54 Cal.App.4th 625, 638) and they may be reluctant to speak if they could only do so in the presence of the entity’s attorney. (G-1 Holdings, Inc. v. Baron & Budd (S.D. N.Y. 2001) 199 FRD 529, 533.)

Rule 2-100 should be interpreted narrowly: “(R)ule 2-100 must be interpreted narrowly because a rule whose violation could result in disqualification and possible disciplinary action should be narrowly construed when it impinges upon a lawyer’s duty of zealous representation.” (Continental Ins. Co. v. Superior Court (1995) 32 Cal.App.4th 94, 119.)

Consequences for violation of rule 2-100: “(T)he corporate attorney-client privilege extends not only to communications between corporate counsel and members of the control group, but also to communications with middle and low level corporate employees.” (Upjohn Co. v. United States (1981) 449 U.S. 383, 390.) “Rule 2-100 does not define the scope of the attorney-client privilege; rather, it bars ex parte communications with opposing parties regardless of whether the information sought, obtained or conveyed is privileged from disclosure.” (Triple A Machine Shop, Inc. v. State of California, supra, at pp. 140-141.) Violation of the privilege by an improper ex parte communication may lead to disqualification, exclusion of the evidence or other appropriate measures to achieve justice and ameliorate the effect of improper conduct. (Snider v. Superior Court, supra, at p. 1212.) The improper ex parte communication requires an intention to violate rule 2-100 “or any other standard of ethical conduct.” (Jorgensen v. Taco Bell Corp. (1996) 50 Cal.App.4th 1398, 1404; Snider v. Superior Court, supra, at p. 1215 [actual knowledge required before an attorney violates rule 2-100].) A failure to conduct discovery or communicate with opposing counsel where counsel has reason to believe that an employee of a represented organization might be covered by rule 2-100 may constitute circumstantial evidence of actual knowledge that the employee came within rule 2-100. (Id. at pp. 1215-1216.)

Obligations of counsel regarding contacts with a current member of an entity: “(T)o avoid potential violations of the attorney-client privilege, an attorney contacting an employee of a represented organization should question the employee at the beginning of the conversation, before discussing substantive matters, about the employee’s status at that organization, whether the employee is represented by counsel, and whether the employee has spoken to the organization’s counsel concerning the matter at issue. If a question arises concerning whether the employee would be covered by rule 2-100 or is in possession of privileged information, the communication should be terminated.” (Id. at p. 1213.)

Warning letters about possibly improper contacts with current members of an entity: “Once a dispute arises that could lead to litigation, it is also incumbent upon an organization and its counsel to take proactive measures to protect against disclosure of privileged information by informing employees and/or opposing counsel their position concerning communications between employees and opposing counsel.” (Ibid.) Warning letters may be sent before the filing of a lawsuit. (Jorgensen v. Taco Bell Corp., supra, at p. 1403.) The organization may also instruct its employees to contact them before speaking to opposing counsel. (Snider v. Superior Court, supra, at p. 1212.) The entity, however, may not “bring former employees back into the fold for purposes of a lawsuit merely because there is a risk that the former employee might disclose unfavorable facts.” (Bobele v. Superior Court, supra, at p. 713.)

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, May 2017

Mediation Message No. 132

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 132
NEGOTIATION PHASES OR PROCESSES AT MEDIATION

The types of negotiation tools used at mediations go through stages. This Mediation Message examines each of those processes in the order that they usually occur.

Distributive or marketplace bargaining – In most instances, mediations start with distributive or marketplace bargaining, in other words, the parties exchange single numbers, a process very similar to how people buy houses and cars. Generally, the plaintiff makes the first move, although the defendant, for strategic reasons, may go first. (See Mediation Message no. 14 which discusses the pros and cons regarding who should make the first move.) There is no set number of demands and offers before integrative or market place bargaining loses its effectiveness; it occurs when the exchanges cease to produce significant movement. For example, if the plaintiff’s opening demand is $425,000, the defendant responds with a $5,000 offer, the plaintiff answers with $410,000 and the defendant next offers $7,500, it should be obvious to everyone that distributive-marketplace bargaining has run its course.

Integrative bargaining – Distributive bargaining is competitive and concerned with distributing something (generally money) whereas the parties in integrative bargaining are trying to make more out of what is at issue and discuss the process as equals, which is not the situation with distributive bargaining. Integrative bargaining may be more useful in partnership and marital dissolutions.

Brackets – Brackets are most often the next method used when marketplace bargaining ceases to be effective. They invigorate the negotiations, provide some insight into a party’s thinking and allow the parties to make bigger moves without compromising their respective credibility because the brackets are conditional or amorphous, since a party is indicating it will move only if the other side is also willing to move. (See Mediation Message no. 80 for an in-depth discussion of brackets.) Brackets, however, rarely lead to settlement by themselves, so the parties may return to distributive or marketplace bargaining after the financial divide has become smaller.
Where are you or what is your authority? – This question is not an existential inquiry. Instead, at some point in the mediation (especially, the bracketing process), it may become obvious to the mediator that a party is disinclined to make meaningful or significant moves. When that occurs, the mediator should attempt to find out, with an absolute promise of confidentiality, what that party is attempting to achieve. This discussion may reveal that the party has limited authority or sees the value of the case much differently than does the opposing party. If it’s an “authority” issue and cannot be resolved immediately by a telephone call, the options are either to recess the mediation or have the mediator make a proposal (see below), which is kept open so that the party with the “authority” problem has an opportunity to resolve it.

Wouldya-Couldya – After lengthy negotiations have taken place and with some sense of how the parties value their respective cases, the mediator, on his own, “floats” a settlement term to one side or, alternatively, asks that same party what it is trying to settle the case for. The mediator then may discuss with the disclosing party the term’s reasonableness or probability of success. (This process is always undertaken with the promise of absolute confidentiality.) If the mediator believes the suggested settling term is achievable, he may, at an appropriate moment and without any telegraphing, discuss that term with the opposing side. The subject is dropped if it does not produce a favorable response. However, if there is some comparability between the “wish lists” for the two sides, the mediator will then attempt to narrow the divide between the two positions until unanimity (and a settlement) is achieved.

“Split the baby” – This tactic simply has the mediator suggesting that the pending demand and offer be equally divided. It works best when the parties have been negotiating for a while and the difference between the demand and offer is relatively small, although larger amounts are susceptible to this device. It also can be a corollary to or work in conjunction with “wouldya-couldya.”

Take it or leave it – One of the parties, either because of limitations on its authority to settle the matter or out of frustration, tells the mediator it wants to make a “take it or leave it” demand or offer. The mediator should warn that party that it has to “walk” or promptly leave the mediation if the demand or offer is not accepted because to continue negotiating after a rejection demeans the offeror’s credibility. Obviously, this tactic is used sparingly since it is drastic and often rejected.

Best and final – This negotiating step often occurs after an impasse in negotiations and, unlike “take it or leave it,” allows for further negotiations because it is not absolutely final. It is used when one party believes the only way to resolve the conflict is to have the mediator make a proposal.

Baseball – Like baseball arbitration, the parties submit their respective settlement terms (usually financial numbers) to the mediator. The mediator must pick one of the two submitted terms and may not offer an alternative. This method is rarely used because it is totally unpredictable.

Mediator’s proposal – The proposal has two approaches: it either reflects the mediator’s expectation as to which settlement terms will be acceptable to everyone or, alternatively, is the mediator’s evaluation of what the case is “worth.” In the second approach, for example, the mediator might have opined that the plaintiff’s case has a substantial chance of being “defensed” at a motion or trial. In that situation, the proposal will have a lesser value than the first type that attempts to bridge the parties’ goals. Because of the potential disparity between the two types of proposals, mediators should advise the parties which approach they are using. Depending on the wishes of the parties, the proposal can be responded to immediately or kept “open” for an agreed upon period of time. Also, depending on the nature of the individual case, the proposal may reflect input from one or both parties or solely reflect the mediator’s educated guess on terms that will be acceptable to all. (See Mediation Message no. 127 for a detailed discussion of the mediator’s proposal.)

Court trial or arbitration – If the case cannot settle, the mediator may discuss with the parties their waiving a jury trial or arbitrating it, if the case does not have strong emotional appeal or holding down costs is an important consideration for both sides. If they choose arbitration, it is preferable that the parties not ask the mediator to be the arbitrator but, if they do, the mediator must, pursuant to Rule of Court 1620.7(g), inform the parties, inter alia, of the consequences of their having previously revealed confidential information to him or her.

Hi-Lo – If the case cannot settle at mediation and if it shall be tried to a court, jury or arbitrator, the mediator may suggest that the parties agree beforehand that any judgment or award shall be no greater or less than two specified amounts.

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, April 2017

Mediation Message No. 131

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 131
BASIC INTRODUCTORY REMARKS AT MEDIATION

If a plaintiff, defendant or representative of either is unfamiliar with the mediation process, I begin their separate caucus by talking about confidentiality, my neutrality and the uncertainty and expense of litigation. These introductory comments are intended to put them at ease and serve as a bridge to the more critical discussions about the cases, themselves. The comments are, as follows:

Mediation confidentiality – The only rule or requirement about how a mediation is to be conducted is that it is confidential, which means that everything that happens here is off the record and cannot be used in any way later on, if this process should be unsuccessful. The purpose of confidentiality, which is created by statute and confirmed by court decisions, is to allow us to talk freely, without any concern that what we talk about can be used against you. (If a party appears to be nervous, I may precede the discussion about confidentiality with the observation that “There’s no need to worry about this process. It’s confidential, you’re not going to be in the same room with the other side and you have your attorney to answer any questions.”)

Mediator neutrality – I don’t represent anyone here; I don’t represent you and I don’t represent the other side. My neutrality doesn’t mean that I can’t or don’t have opinions about the facts and law in this case. In other words, I’m not a potted plant (pointing to a real such plant if it’s visible) and will do more than relay demands and offers. Like Brendan Sullivan, who actively represented Oliver North in the Iran-Contra hearings and told the Senators he was not a “potted plant,” I’ll probably make comments about the applicable facts and law, if I think they’ll be helpful.

The uncertainty and expense of litigation –Mediation is a well-accepted alternative to litigation and trial (or arbitration). If you follow the results of trials in the papers or on television, you know that their outcomes are uncertain because judges are the gatekeepers of the evidence juries can hear and jurors, ordinary citizens like you and me, can make surprising and unpopular decisions. Further, your trial may not take place for quite a while. Before that, there will be discovery of all types, which will involve your participation, including your probable testimony at deposition. This time-consuming process, which is also expensive, is never good for anyone’s emotional well-being.

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, March 2017

Mediation Message No. 130

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 130
EXPERT WITNESS DECLARATIONS AND MOTIONS FOR SUMMARY JUDGMENT

Perry v. Bakewell Hawthorne, LLC (Cal. Supreme Court Feb. 2017) no. S233096, 2017 Cal. LEXIS 1351 holds that the exclusionary rule for expert witness declarations that do not meet disclosure requirements applies to summary judgment as well as the trial phase. The case is also a valuable reminder about the importance of admissible evidence at MSJs and the remedies available when an expert disclosure is late or needs to be amended or augmented.

In Perry, a defendant moved for summary judgment as to the plaintiff’s claim that he had been injured in a fall on property owned by one defendant and leased by another. The plaintiff made no disclosure to a demand for an exchange of expert witness information. In response to a defendant’s MSJ, however, he submitted the declarations of two experts who opined that the stairs he fell on were in disrepair and did not comply with building code and industry standards. The trial court sustained the moving defendant’s objection to the introduction of these declarations because the plaintiff had failed to disclose those experts. Summary judgment was granted and the California Supreme Court affirmed the appellate court’s affirmance of that order.

Noting that the C.C.P.’s exclusionary rule for the failure to respond to an expert witness disclosure demand does not mention the summary judgment stage, Perry observed that “section 437c, subdivision (d) requires that affidavits and declarations submitted in summary judgment proceedings ‘set forth admissible evidence.’ Therefore, we hold that when the court determines an expert opinion is inadmissible because disclosure requirements were not met, the opinion must be excluded from consideration at summary judgment if an objection is raised.”

Perry also provides a tutorial for those situations where a party seeks either to augment an expert witness list, amend an expert’s declaration or has failed to respond to a disclosure demand. It reminds that a party may move under section 2034.610 to augment an expert witness list or amend an expert’s declaration, which the court may permit if section 2034.620’s several conditions are met. Similarly, an untimely disclosure may be allowed under section 2034.710 if the statutory conditions in section 2034.720 are satisfied. “(T)hese remedies are available to a party before summary judgment, and should be invoked as soon as the party discovers the need to submit a declaration by a previously undisclosed expert. Unless the court grants relief, the declaration contains inadmissible evidence, excludable upon objection if the failure to disclose was unreasonable.”

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, February 2017

Mediation Message No. 129

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO.  129

THE ATTORNEY-CLIENT PRIVILEGE IS NOW DIMINISHED

The simple question in Los Angeles County Board of Supervisors v. Superior Court (2016) 2 Cal.5th 282 (L.A. County) is whether invoices by an outside law firm to a governmental agency are covered by the attorney-client privilege and, therefore, exempt from disclosure under the California Public Records Act (PRA). L.A. County’s supposedly narrow holding that the privilege may not extend to such invoices in inactive matters has, however, much broader implications.

In L.A. County, the ACLU submitted a PRA request to the County for invoices specifying the amounts the County had been billed by any law firm in connection with nine different lawsuits alleging excessive force against jail inmates. The County agreed to produce copies of the requested invoices related to lawsuits that were no longer pending, with attorney-client privileged and work product information redacted, but declined to provide invoices for the pending lawsuits. The ACLU filed a petition for writ of mandate, seeking to compel the County to comply with the PRA and to disclose the requested records for all nine lawsuits because the public had a right to know whether taxpayer money had been appropriately spent in defending the lawsuits. The trial court granted the petition and the Court of Appeal, upon petition, vacated the superior court’s order.

Justice Cuellar, writing for the 4-3 majority (joined by Chin, Lui and Kruger), reversed the Court of Appeal and remanded the matter to that court consistent with the opinion in L.A. County. He recognized that the attorney-client privilege “protects the confidentiality of invoices for work in pending and active legal matters” but “does not categorically shield everything in a billing invoice from PRA disclosure,” particularly those invoices where the matter is no longer active. He began by looking at the attorney-client privilege in Evidence Code section 954, which confers a privilege on the client “to refuse to disclose, and to prevent another from disclosing, a confidential communication between client and lawyer.” Next, Cuellar concluded that the “privilege only protects communications between attorney and client made for the purpose of seeking or delivering the attorney’s legal advice or representation,” since Evidence Code section 952 “twice states that the privilege extends only to those communications made ‘in the course of [the attorney-client] relationship,’ a construction suggesting a nexus between the communication and the attorney’s professional role.” (Id. at pp. 293-294.) Thus, he reasoned, the mere fact that an attorney has transmitted a communication to a client does not make it protected by the attorney-client privilege. (Id. at p. 296.) Justice Werdegar, dissenting for herself, the Chief Justice and Justice Corrigan, observed that “The majority’s decision to add consideration of a communication’s purpose as an additional, nonstatutory element to the Legislature’s definition of a ‘confidential communication’ is unsupported in law.” (Id. at p. 302.) She then added, “this court is simply not free to add elements and prerequisites to a statutory rule of evidentiary privilege. Whether it might be wise policy to find a ‘confidential communication’ within the meaning of section 952 must be one ‘made for the purpose of seeking or delivering the attorney’s legal advice or representation’ is a question more properly consigned to the discretion of the Legislature and not this court.” (Id. at p. 306.)

Having looked at the standards for the attorney-client privilege, Cuellar then applied them to current and former billing invoices from attorneys to their clients and held that the privilege encompasses everything in billing invoices in pending and active cases, even if not made for the purpose of legal representation, because the information, even if general in nature, “may come close enough to this heartland to threaten the confidentiality of information directly relevant to the attorney’s distinctive professional role.” (Id. at p. 297.) However, “In contrast to information involving a pending case, a cumulative fee total for a long-completed matter does not always reveal the substance of legal consultation. … Instead, the privilege turns on whether those amounts reveal anything about legal consultation.” (Id. at p. 298.) Werdegar, in dissent, noted that this holding conflicts with Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725 that Evid. Code section 954 prohibits courts from parsing a communication between lawyer and client in order that those parts not involving a legal opinion or advice can be disclosed. (Id. at pp. 304-305.) She further noted that the attorney-client privilege “survives the termination of litigation and continues even after the threat of liability or punishment has passed.” (Id. at p. 305.)

The implications of L.A. County go far beyond PRA or FOIA requests for old public agency invoices or any attorney invoices, for that matter. As Werdegar warned in her dissenting opinion, “The majority’s suggestion the protective power of the attorney-client privilege under section 954 may not continue to encompass all portions of a document that previously qualified as a ‘confidential communication’ under section 952 is mischievous in the extreme. Following today’s decision, attorneys in this state must counsel their clients that confidential communications between lawyer and client, previously protected by the attorney-client privilege, may be forced into the open by interested parties once the subject litigation has concluded. If a limiting principle applies to this new rule, it is not perceptible to me.” (Id. at p. 305.)

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, January 2017

Mediation Message No. 128

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO.  128

SEVENTH ANNUAL YEAR-END REVIEW

This year’s Mediation Messages and Arbitration Insight combine observations about mediation, procedural law that impacts litigation or settlement, expert testimony, rules of evidence at arbitration and trial tactics. Refer to the Mediation Messages identified below on my website (www.marcusmediation.com) if the following summaries are not sufficient.

MEDIATION

The parties only caucus (April – Mediation Message no. 121): This is a process in which no attorneys are present. It should be used sparingly where the mediator believes a meeting between responsible and mature principles can “clear the air.”

Binding mediation (May- Mediation Message no. 122): This is a procedure in which a mediator, if the mediation is not successful, can become an arbitrator. It can occur if the parties select the neutral beforehand to mediate the dispute and, if it is not resolved, agree that the neutral can render a final and binding award. Alternatively, the parties may choose, after the mediation process has broken down, to have the neutral issue an award.

Mediation briefs should be shared (October – Mediation Message no. 126): In most instances, mediation briefs should be shared before the commencement of mediation. The only sound reason for not exchanging a mediation brief is if it contains either a fact (perhaps a smoking gun) or a legal tactic (discovery or motion) that should be held in abeyance. But that’s easily resolved; if you don’t want the opponent to know about facts, legal theories or arguments that are best held in reserve, put them in a separate, confidential brief for the mediator and provide the known facts and contentions in a non-confidential memorandum.

Mediator’s proposals (November – Mediation Message no. 127): This message discussed what the mediator’s proposal is, when it should be made, whether it should be made if a party does not consent to the process, whether it should be oral or written, when it should be answered, whether it is binding, what happens if both parties don’t accept it and the options if both parties don’t accept it.

PROCEDURAL LAW

Expedited jury trials (January – Mediation Message no. 118): The voluntary Expedited Jury Trial Act (Code of Civil Procedure §§ 630.01 – 630.10)  is now permanent  and mandatory until January 1, 2019, where the amount in controversy does not exceed $25,000, subject to the following nine exceptions: punitive damages are sought; damages in excess of insurance policy limits are sought; a party’s insurer is providing a defense subject to a reservation of rights; the case involves a claim reportable to a governmental entity; the case involves a moral turpitude claim that may affect an individual’s licensing; there is a claim of intentional conduct; one of the parties has filed a pleading that changes the jurisdictional classification from limited to unlimited; there is a claim for attorney’s fees, unless those fees are pursuant to a contract or, lastly, the court finds good cause not to require an expedited trial.

The five-year rule (February – Mediation Message no. 119): Gaines v. Fidelity National Title Insurance Co. (2016) 62 Cal4th 1081 is a primer on the necessary steps to prevent the running of the five-year trial rule and resulting dismissal pursuant to C.C.P. sec. 583.310. Unlike mediation, which the majority in Gaines found to be an event inside a lawsuit and, therefore, does not abate a proceeding, the case holds that contractual arbitration tolls the five-year period under section 583.340, subd. (b).

Denials of RFAs and their consequences (June – Mediation Message no. 123): Grace v. Mansourian (2015) 240 Cal.App.4th 523 discusses the consequences of failing to admit certain facts prior to trial despite their obvious truth. The lesson of this case is that a party, if it denies RFAs, must be prepared to present enough evidence at trial on the facts denied to be able to argue credibly to the court, in opposition to a subsequent motion for costs and fees, that he or she believed they would prevail on the facts at issue.

Significant policy and procedural requirements of RFAs (with statutory can case law support )(September – Mediation Message no. 125): RFAs are used to expedite the trial process; their scope is broad; the responding party has a duty to investigate RFAs; responses to RFAs must be specific; a party may withdraw or amend an admission in response to an RFA only on leave of court after notice to all parties; the specific ground for an objection to an RFA shall be set forth clearly in the response; a requesting party may move for a further response if an answer is evasive, incomplete, without merit or too general; a party waives all objections to the RFAs, including claims of privilege or work-product, for failing to respond timely; on motion, the court may relieve a party from waiver if certain showings are made; RFAs are admissible at trial if the moving party requests an order that the requests be deemed admitted; the “deemed admitted motion” shall be denied if the court finds that the responding party served, before the hearing on the motion, a proposed response to the RFAs that is substantially code compliant; deemed admitted matters are conclusively established and are not subject to being contested through contradictory evidence; where a “deemed admitted” motion has been granted, the court must impose a monetary sanction whose failure to serve a timely response to the RFAs necessitated the motion and, unless the court finds the party who denied the requests “had reasonable ground to believe [he or she] would prevail on the matter” or “[t]here was other good reason for the failure to admit,”  it must impose monetary sanctions for denial of RFAs found true at trial.

TRIAL TACTICS

The empty chair at trial (March – Mediation Message no. 120): Diamond v. Reshko (2015) 239 Cal.App.4th 828 advises how a trial shall be conducted where a defendant settles with the plaintiff before trial and then agrees to participate in the trial involving a co-defendant. Diamond found it was not improper for the plaintiffs to require Yellow Cab, the settling party, to participate in the trial to prevent the Reshkos, the nonsettling defendants, from making an “empty chair” argument by ascribing “fault to an actor who is not present to defend himself.” (Id. at p. 844.)

Expert testimony and the hearsay rule (August – Mediation Message no. 124): In People v. Sanchez (2016) 63 Cal.4th 665, a unanimous Supreme Court clarified what information and facts experts rely upon are and are not subject to a hearsay objection. Sanchez holds the hearsay rule applies to case-specific out-of-court statements considered by experts as true and accurate and relied upon to support their opinions, because such statements are being admitted for the truth. (Id. at p. 686.) “Case-specific facts are those relating to the particular events and participants alleged to have been involved in the case being tried.” (Id. at p. 676.) (Note: Although Sanchez is a criminal case, its holding applies to both criminal and civil cases. In criminal cases, expert testimony must also satisfy the Sixth Amendment’s Confrontation Clause.)

ARBITRATION

Rules of evidence at arbitration (July – Arbitration Insight no. 25): The applicable arbitration agreement, if there is one, should govern the manner in which the arbitration is to be conducted. If there is neither an agreement nor specified procedure, the parties should decide how they want the arbitration to be administered. If they cannot agree, arbitrators should advise the parties before the arbitration begins that the hearing, including the application of the rules of evidence, can be formal or informal; it is up to the individual parties to decide whether they wish to object to evidence and, if there are objections, the arbitrators will rule on all objections as they are made.

Judge Michael D. Marcus (Ret.)

ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, December 2016

Mediation Message No. 127

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 127

THE MEDIATOR’S PROPOSAL, PART III

This Mediation Message is called “The Mediator’s Proposal, Part III” because I’ve written about the process twice before (Messages 51 and 81), but it’s very much worth a third visit because mediator’s proposals, in the intervening period, have become the most effective method of settling cases.

What is a mediator’s proposal? Most often, it is a proposal by a mediator to settle litigation between the parties. (Much less frequently, it is used to break an impasse on interim issues, such as suggesting an acceptable bracket in the negotiations.) Generally, the proposal has two approaches: it either reflects the mediator’s educated guess as to settlement terms that will be acceptable to everyone or, alternatively, it is the mediator’s evaluation of what the case is “worth.” In the second approach, for example, the mediator might have opined that the plaintiff’s case has a substantial chance of being “defensed” at a motion or trial. In that situation, the proposal will have a lesser value than the first type that attempts to bridge the expectations of all parties. Because of the potential disparity between the two types of proposals, mediators should advise the parties which approach they are using.

When is a mediator’s proposal made? There are no rules when it should be made. Experience, has shown, however, that a proposal is most effective when the parties have reached a stalemate and all other settlement techniques have been considered and/or exhausted. By that time, a reasoned proposal has a substantial chance of being accepted, because the mediator, after much discussion and negotiation, should be seen by all concerned as informed, knowledgeable, fair and credible.

Why has the mediator’s proposal become so popular? It has proven to be an extremely effective mechanism for resolving disputes and attorneys have found it helpful, in dealing with hesitant clients, to point to the mediator’s (a neutral third party) opinion about the value of the case.

Should a proposal be made without the consent of the parties? A mediator’s proposal should not be imposed on a party who does not want it. It is extremely unusual for parties to reject the concept, since it is not binding and, because of confidentiality, does not set a floor for future discussions; regardless, a mediator should not submit one if a party says, “Don’t do it.”

Is the proposal oral or in writing? A proposal should be in writing so that there is no ambiguity or confusion about the recommended terms and conditions.

What terms or subject matter should be in the proposal? It is not uncommon for parties to suggest that a proposal include certain terms or language, such as, if by a defendant, that the settlement be confidential, there be liquidated damages for a breach of confidentiality and the settlement sums be paid in installments or, if by a plaintiff, that all sums be paid in full within a certain period of time after execution of the release and settlement. If specific requests have not been made, the proposal should cover all material issues discussed by the parties, such as, for example, the monetary amount in controversy or who is to obtain possession of the contested property. As a practical matter, parties have little problem in subsequently resolving less important issues not covered in the proposal when the major ones have been agreed to.

When should the parties respond to a proposal? The timing of the response is up to the parties. It is preferable to obtain immediate answers to a proposal so that, should it be accepted, a settlement agreement can be finalized right away, thus preventing anyone from having second thoughts. However, persons with the authority to accept or reject a proposal may not be present or attorneys may need additional time to talk to their respective clients or adjusters about the proposal’s terms. When that occurs, attorneys should advise the mediator the period of time the proposal should be kept “open,” which can be for one day or more.

Is a proposal binding if accepted only by the attorneys for the parties? A mediator’s proposal can ask for just the attorneys’ responses or both the attorneys’ and the clients’ responses or just the clients’. The proposal is generally not binding if signed only by attorneys since the parties, themselves, have not executed it. (Note that an insurer can settle a case without the insured’s consent if the policy gives the insurer that right [see Fiege v. Cooke (2004) 125 Cal.App.4th 1350].) If all of the parties have signed and agreed to the proposal, it can become a binding document. The downside of a binding mediator’s proposal, in this instance, is it may not contain all necessary terms, such as waivers of all claims under Civil Code section 1542. Therefore, it is better to first obtain only the participating attorneys’ approvals of the proposal and then allow them to create a comprehensive release and settlement executed by their clients.

What if everyone agrees to the proposal? In that instance, the mediator advises the parties that they have a “deal” and should finalize the terms in a written settlement

What if one party accepts the proposal and the other rejects it? If that occurs, the mediator should not tell the rejecting party that the other side accepted it because that would give the rejecting party an unfair advantage in future negotiations. The rejecting party should know only how it responded. The accepting party knows, however, that the other side rejected the proposal and, to obtain a settlement, will probably have to change its settlement position.

What are the parties’ options if a proposal is rejected? The world has not come to an end. As for the accepting party, the mediator should ask how much more it can “move”; as for the rejecting party, the mediator should attempt to determine what its settlement terms are. In either instance, the mediator should find out how far apart the parties are and continue, either in person, by e-mail or on the telephone, to discuss settlement prospects with them.

Judge Michael D. Marcus (Ret.)

ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, November 2016

Mediation Message No. 126

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO.  126

EXCHANGE MEDIATION BRIEFS

There are no compelling reasons for opposing counsel not to exchange mediation briefs. (Okay, there might be one, and I’ll get to that shortly.) Because most attorneys don’t share their mediation papers with the other side and, with the demise of the joint caucus at mediation, unless the mediation takes place after substantial discovery has commenced, the parties don’t know their opponents’ factual and legal theories. Thus, mediators must spend valuable time in the beginning of the process educating the parties about the facts and laws at issue.

Ironically, attorneys rarely have any problem with mediators discussing the contents of their briefs with opposing counsel. In fact, they often consent to mediators sharing the respective briefs. At the end of the day, experience has proven time-after-time that there are few issues parties keep secret throughout the mediation.

The only sound reason for not exchanging a mediation brief is if it contains either a fact (perhaps a smoking gun) or a legal tactic (discovery or motion) that should be held in abeyance. But that’s easily resolved; if you don’t want the opponent to know about facts, legal theories or arguments that are best held in reserve, put them in a separate, confidential brief for the mediator and provide the known facts and contentions in a non-confidential memorandum. So, rise up and free yourselves from the shibboleth of the confidential mediation brief! Enjoy the exhilaration of openness! Be radical and start a trend of exchanging mediation briefs! And, in the process, make mediations more effective.

Judge Michael D. Marcus (Ret.)

ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, October 2016