MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 84
You might have heard of binding mediation in which a neutral, by agreement of the parties, makes a binding determination regarding the dispute when mediation has been unsuccessful. You might even have thought about it. This Mediation Message, prompted by Bowers v. Lucia Companies (2012) 206 Cal.App.4th 724, which sanctions the use of binding mediation, recommendsthat before the mediation part of the process begins, the mediator-arbitrator should provide conflict disclosures to the parties and that the parties should also waive any conflicts of interest that the mediator-arbitrator might have. Inexplicably, Bowers did not discuss these requirements.
Bowers affirmed a judgment arising out of binding mediation because it found there was substantial evidence to support the trial court’s determination that both parties had agreed to the procedure; the binding mediation provision in the underlying settlement agreement was not uncertain and that binding mediation is not a constitutionally or statutorily prohibited means of waiving jury trial rights where, as therein, the parties had agreed to settle their dispute in a non-judicial forum.
Although Bowers found the concept of binding mediation to be “paradoxical,” it noted that the procedure is recognized in collective bargaining and marital dissolution situations and, according to one commentator, is “more flexible than arbitration because the mediator can request more information, documentation or discussion and the parties and their counsel can more actively participate in the process.” (Id. at p. 735.) In contrast, the earlier case of Lindsay v. Lewandowski (2006) 139 Cal.App.4th 1618, which held that a binding mediation agreement could not be enforced because the parties had never specifically agreed to the procedure, mused about the significant problems inherent in binding mediation, including the lack of recognized rules governing the process, but found it inappropriate to discuss those issues because the matter could be resolved by simply finding the underlying agreement to be uncertain. (Id. at pp. 1628-1629.)
Unlike Lindsay, Bowers failed to discuss the potential conflicts of interest that exist in binding mediation and to find that statutes and Rules of Court address that issue. Consider that opposing parties must be careful about proceeding from mediation to arbitration with the same neutral because the mediator who becomes an arbitrator may have been compromised by hearing inadmissible argument. Accordingly, if parties wish to have a mediator arbitrate their case, they should consent in writing to that process. (Rule of Court 3.857, subdivision (g).) Before that waiver, the neutral must inform the parties about the consequences of revealing information in the mediation that might be used for decision making in the arbitration phase and also give the parties the opportunity to select another neutral for that stage. (Id.) Also, if the parties have consented to binding mediation, the mediator must clearly inform them when the transition from mediation to arbitration is occurring. (Id.) Finally, since binding mediation involves a process that may turn into an arbitration, the mediator-arbitrator, before beginning the mediation, should disclose the many circumstances that could cause a person aware of those facts to reasonably entertain a doubt that the proposed neutral arbitrator could be impartial. (See Code of Civil Procedure sections 1281.9 and 170.1 and Standard 7 of the California Rules of Court, Appendix, Division VI, Ethics Standards for Neutral Arbitrators in Contractual Arbitrations.)
Thus, Bowers must be followed with caution. Binding mediation may be an appropriate remedy to settle a case but, before initiating that process, the parties should require the agreed-upon neutral to disclose all potential conflicts and make sure that they, themselves, have waived the potential conflict that a mediator, and about to be arbitrator, might be influenced by all sorts of admissible and non-admissible argument that he or she heard in separate mediation caucuses. The better process is to avoid all of these problems by never having the same person mediate and arbitrate a matter.
Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
Copyright Michael D. Marcus, February 2013
Please visit my website at www.marcusmediation.com for information about my mediation and arbitration background and experience. Copies of my previous Mediation Messages and Arbitration Insights are available by going to the articles link on the website.