FINANCIAL STATUS OF A PARTY AT MEDIATION
Not infrequently, parties (most often a defendant) at a mediation of an employment or business-related dispute, when insurance is not available, will advise me that they are experiencing financial difficulties, and either cannot pay anything close to the expected settlement and/or will need time to pay it. Plaintiffs typically scoff at such claims of “poverty,” offer anecdotal evidence of the opposing parties’ solid financial standing and then request proof of the parties’ poor financial status. Typically, parties are not prepared to present confirmation of their financial difficulties, when requested, and will call an office bookkeeper or accountant, or both, to see if documentation is available. Occasionally, some reports are available but cannot be produced right away, thereby holding up the settlement process. To prevent such delays, it is advisable that clients, who shall claim financial hardship at mediations, bring support for that situation to the mediations. That documentation may include, for example, profit and loss statements, tax liens, business and personal tax filings, loans and checking account records. Whatever records are to be produced should be given to the clients’ attorneys far enough in advance of the mediations so that they may be reviewed for their effectiveness or problems.
If financial records are to be provided, the attorney for the producing party should receive confirmation from the receiving party that such production is covered by mediation confidentiality. Another consideration is when the receiving party shall return the financial documents. If the matter settles at the mediation, the papers should be returned at that time. They should be returned at the end of a mediation, even if the matter has not settled, unless the receiving party can present a strong argument why they need to be retained. If that should occur, the producing party may want to limit which records are taken and also subject those writings to a protective order or stipulation, which should include the application of mediation confidentiality.
Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067