Mediation Message No. 93

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 93

THE FOURTH ANNUAL YEAR-END REVIEW

Once again, I’m summarizing the mediation and arbitration topics I wrote about in the previous eleven months. Before discussing them, thank you for your support in helping me to be honored by the Daily Journal as a Top 50 California Neutral for the sixth time in the last seven years.

This year’s Mediation Messages started with an analysis of two true mediation topics (the joint caucus and binding mediation) but then segued into substantive, evidentiary and procedural subjects that impact the value of a case and, thus, settlement – which, of course, is the raison d’etrê of mediations. Refer to the Mediation Messages or Arbitration Insights identified below on my website (www.marcusmediation.com) if the following summaries do not suffice.

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The evolution of the joint caucus was discussed in Mediation Message no 83 (January 2013).  The practice of holding a joint caucus at the beginning of every mediation has now been replaced by separate caucuses. Nonetheless, a joint caucus at the beginning of mediation can be helpful if a complaint has not yet been or just been filed and there has been no or little discovery. A joint caucus later in mediation can be useful when discussions have bogged down regarding a factual or legal issue and the mediator believes that the best way to break this impasse is to have the attorneys get together to clarify or explain their respective positions.

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In Mediation Message No, 84 (February 2013), I looked at binding mediation, in which a neutral, by agreement of the parties, makes a binding determination regarding the dispute after an unsuccessful mediation. The process was sanctioned in Bowers v. Lucia Companies (2012) 206 Cal.App.4th 724. Although binding mediation may be an appropriate remedy to settle a case, before initiating that process, the parties should require the agreed-upon neutrals to disclose all potential conflicts and make sure that they, too, have waived the conflict that mediators, and about to be arbitrators, might be influenced by argument that they heard in separate mediation caucuses. The better process is to not have the same person mediate and arbitrate a matter.

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The reemergence of the fraud exception to the parol evidence rule was the subject of Mediation Message no. 85 (March 2013). Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169 overruled Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, which had limited the fraud exception to the parol evidence rule to evidence that “must tend to establish some independent fact or representation, some fraud in the procurement of the instrument or some breach of confidence concerning its use, and not a promise directly at variance with the promise of the writing.” (Id. at p. 263.) In invalidating Pendergrass’s  narrow application of parol evidence when fraud has been alleged, Riverisland reaffirmed the maxim “’[I]t was never intended that the parol evidence rule should be used as a shield to prevent the proof of fraud.’” (Ibid.)

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Judicial admissions were discussed in Mediation Message no. 86 (April 2013). Dang v. Smith (2010) 190 Cal.App.4th 646 advises that “statements in a pleading are always admissible against the pleader to prove the matter asserted — as is any other statement by a party.” (Id. at p. 657.) Barsegian v. Kessler & Kessler (2013) 215 Cal.App.4th 446 applied a narrower interpretation to such admissions, observing that “not every factual allegation in a complaint automatically constitutes a judicial admission.” Instead, Barsegian noted that “a judicial admission is ordinarily a factual allegation by one party that is admitted by the opposing party. The factual allegation is removed from the issues in the litigation because the parties agree as to its truth. Thus, facts to which adverse parties stipulate are judicially admitted. (Citation.) Similarly, in discovery when a party propounds requests for admission, any facts admitted by the responding party constitute judicial admissions. (Citation.) And when an answer admits certain factual allegations contained in a complaint or cross-complaint, those facts are likewise judicially admitted. (Citation.)” (Id. at p. 451.) Barsegian’s analysis misses the point that judicial admissions may also occur when a party’s legal language is inconsistent with a previously held position and thus is “conclusively deemed true.” (Dang v. Smith, supra, at p. 657.) Therefore, the defendant in Dang could use the plaintiff’s allegation in the complaint to its benefit, without having to admit or stipulate to it (as Barsegian so holds), because the plaintiff had taken a position inconsistent with a previous claim.

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The five-year deadline to try a case (see Mediation Message no. 87 [May 2013]) was not a factor in the halcyon days of adequate court-funding. But, with recent budget shortfalls, it is again a potential issue, which makes Gonzalez v. County of Los Angeles (2004) 122 Cal.App.4th 1124 worth considering. Gonzalez holds that the five-year deadline is tolled when the action is submitted to mediation during the last six months of the five-year period.

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Multiple Code of Civil Procedure section 998 settlement offers was the subject of Mediation Message no. 88 (June 2013). Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014 held that a party can recover its expert fees incurred from the date of a first 998 offer when it then makes another such offer and the opposing party does not accept either offer. Martinez reminded that the trial court can address any concerns it may have when considering what post- 998 offer expert fees to award if a successful section 998 offer “results in mischief or confusion, or any gamesmanship appears.” (Id. at pp. 1026-1027.)

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Stipulations for judgment were the subject of Mediation Message no. 89 (July 2013) since they are often incorporated as terms in settlement documents. Greentree Financial Group, Inc. v. Executive Sports, Inc. (2008) 163 Cal.App.4th 495 holds that such stipulations cannot include unenforceable penalties and that “The amount set as liquidated damages ‘must represent the result of a reasonable endeavor by the parties to estimate a fair average compensation for any loss that may be sustained.’” (Id. at p. 499.) Greentree does not hold, as is commonly believed, that stipulations for judgment cannot provide for the amount of damages requested in a complaint. The case states only that the amount of the judgment must bear a reasonable relationship to any actual damages that might flow from the defendant’s failure to comply with the stipulation’s financial terms.

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Mediation Message no. 90 (August 2013) offered thoughts on how “other conduct” evidence (see Evid. Code section 1101, subd. (b)) can be used to prove or disprove material allegations at trial. It is important to note that such evidence may be used by both plaintiffs and defendants and, interestingly, may be admissible, according to Johnson v. United Cerebral Palsy/Spastic Children’s Foundation (2009) 173 Cal.App.4th 740, simply by arguing that it is relevant and not prejudicial pursuant to Evid. Code section 352. (Id. at p. 767.)

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Mediation Message no. 91 (September 2013) was about human frailties, including greed, bad judgment and overreaching. In Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, a plaintiff’s attorney, after the settlement of a consumer class action, first asked for over $24 million in fees and then almost $13 million in fees and costs. The trial court, with the appellate court affirming, awarded the attorney nothing in fees and sanctioned her $165,000 because her billing records were inconsistent and contained omissions, the total number of hours claimed was excessive, her efforts to promote the fee claim were self-serving and not for the benefit of the class and she had been unprofessional in fighting discovery of her time records.

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Arbitration Insight no. 24 (October 2013) analyzed Mt. Holyoke Homes, LP, et al. v. Jeffer Mangels Butler & Mitchell, LLP (2013) 219 Cal.App.4th 1299, which holds that arbitrators must disclose references of parties to arbitrations on the arbitrators’ web sites or resumes. According to Mt. Holyoke, the age of the reference, that the person being referenced had no professional relationship with the arbitrator and that the reference was discoverable on the internet are irrelevant. Instead, “An objective observer reasonably could conclude that an arbitrator listing a prominent litigator as a reference on his resume would be reluctant to rule against the law firm in which that attorney is a partner as a defendant in a legal malpractice action.” (Id. at p. 1313.) At the time this summary was written, the California Supreme Court had not yet indicated whether it would grant a hearing in Mt. Holyoke.

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Early settlement demands and an insurer’s duty to settle were the subjects of Mediation Message no. 92 (November 2013). The need for specific settlement demands, as contrasted with generalized settlement comments to an insured’s attorney or carrier, was made clear in Reid v. Mercury Ins. Co. (2013) 220 Cal.App.4th 262, which holds that an insurer has no duty to settle with a third party, and thus no liability to its insured for the bad faith failure to settle, until there has been a settlement demand or “any other manifestation the injured party is interested in settlement.” (Id. at p. 266.) “For bad faith liability to attach to an insurer’s failure to pursue settlement discussions, in a case where the insured is exposed to a judgment beyond policy limits, there must be, at a minimum, some evidence either that the injured party has communicated to the insurer an interest in settlement, or some other circumstance demonstrating the insurer knew that settlement within policy limits could feasibly be negotiated. In the absence of such evidence, or evidence the insurer by its conduct has actively foreclosed the possibility of settlement, there is no ‘opportunity to settle’ that an insurer may be taxed with ignoring.” (Id. at p. 272.)

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 2013

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