Mediation Message No. 45

CREATING AN ENFORCEABLE MEDIATION SETTLEMENT AGREEMENT

First came Foxgate Homeowners’ Association v. Bramalea California, Inc. (2001) 26 Cal.4th 1 which held that a mediator may not report a participating attorney’s misconduct to the trial court. Next was Rojas v. Superior Court (2004) 33 Cal.4th 403 which held that all writings prepared for mediation are not discoverable. And now the Supreme Court once more firmly supports the principle of mediation confidentiality with its July 21, 2008 decision in Simmons v. Ghaderi (2008) 44 Cal.4th 570 that such confidentiality “clearly applies to prohibit admissibility of evidence of settlement terms made for the purpose of, in the course of, or pursuant to a mediation unless the agreement falls within express statutory exceptions.”

As a quick overview, and for those who are reading this message “on the run,” Simmons v. Ghaderi holds simply that neither estoppel nor implied waiver are exceptions to mediation confidentiality. The following is a detailed analysis for the remainder who want to know the specifics and implications of this case.

The Facts

The mother and brother of a deceased infant filed a wrongful death complaint against Lida Ghaderi, a treating physician. At a mediation in the matter, Ghaderi executed a standard consent-to-settlement form which authorized her medical insurance provider to negotiate a maximum settlement of $125,000 on her behalf. After plaintiffs accepted the $125,000 offer, Ghaderi revoked her consent and did not sign the settlement agreement, which the plaintiffs and their counsel had executed.

Thereafter, plaintiffs moved to enforce the settlement on the ground that an oral agreement had been reached with the insurance carrier while it had Ghaderi’s consent to settle the action. Because the trial court found, preliminarily, that the settlement agreement could not be enforced because neither defendant nor the carrier had signed the written agreement, plaintiffs, following the trial court’s suggestion, amended their complaint to add a cause of action for breach of an oral settlement agreement.

At a bench trial on the breach of contract cause of action and over defendant’s objection, plaintiffs submitted Ghaderi’s consent to settlement, the settlement agreement, defendant’s letter revoking her consent to settlement, defendant’s deposition testimony, the deposition testimony of the insurance claims specialist and a declaration by the mediator. The only defense to the breach of contract claim was that mediation confidentiality statutes precluded plaintiffs from proving the existence of an oral settlement agreement.

The trial court concluded that plaintiffs and defendant’s agent, who was acting within his authority as evidenced by defendant’s signed consent agreement, had entered into a valid, enforceable oral contract before defendant had withdrawn her consent. It then ordered specific performance of the agreement and entered judgment in favor of plaintiffs for $125,000, plus prejudgment interest.

In a 2-1 decision, the Court of Appeal held that a valid oral agreement had been reached during mediation and Ghaderi was estopped from asserting mediation confidentiality because she had presented evidence of the occurrence at the mediation and then failed to object to plaintiffs’ use of these facts during pretrial motions.

The Decision

The Supreme Court first reaffirmed that Evidence Code sections 1118 through 1126 and the California Law Revision Commission’s comments to that statutory scheme unambiguously indicate that the Legislature “intended to apply (mediation) confidentiality broadly and to limit any exceptions to confidentiality to narrowly prescribed statutory exemptions.” Consistent with that policy, the Court proceeded to strictly apply the relevant statutory scheme.

As to the oral settlement agreement which plaintiffs argued Ghaderi’s agents had entered into at the mediation, the Court noted that Evidence Code section 1124 requires several steps, as set forth in section 1118, for the admissibility of such an agreement: “(a) the oral agreement is recorded by a court reporter, tape recorder, or other reliable means of sound recording; (b) the terms of the oral agreement are recited on the record in the presence of the parties and the mediator, and the parties express on the record that they agree to the terms recited; (c) the parties to the oral agreement expressly state on the record that the agreement is enforceable or binding or words to that effect; and (d) the recording is reduced to writing and the writing is signed by the parties within 72 hours after it is recorded.” And, because the parties neither recorded the agreement nor obtained Ghaderi’s signature to it, section 1124 had not been complied with.

The Supreme Court then noted that due process and express waiver are the only judicial exceptions to mediation confidentiality. With those limited exceptions in mind, the Court then held that estoppel to contest jurisdiction, as the Court of Appeal had found, did not apply to the instant facts. “(D)efendant never asked the court to act in excess of its jurisdiction and then argued that the court had no power to act as it did. Instead, defendant consistently invoked the court’s jurisdiction throughout the litigation proceedings, maintaining that there was no enforceable settlement agreement either because substantively such agreement did not occur or because plaintiffs could not procedurally prove its existence.” (Id. at p. 584.)

Equitable estoppel was also inapplicable since “A valid claim for equitable estoppel requires: (a) a representation or concealment of material facts; (b) made with knowledge, actual or virtual, of the facts; (c) to a party ignorant, actually and permissibly, of the truth; (d) with the intention, actual or virtual, that the ignorant party act on it; and (e) that party was induced to act on it. (Citation.) There can be no estoppel if one of these elements is missing. (Citation.) Here, plaintiffs were never ignorant of the facts, nor did they change their position in reliance on defendant’s position.” (Id. at p. 585.)

The Supreme Court finally held that parties could not impliedly waive mediation confidentiality through their conduct. Citing Eisendrath v. Superior Court (2003) 109 Cal.App.4th 351, which had concluded that the implied waiver provisions in Evidence Code section 912, by their plain language, are limited to the particular privileges enumerated therein and do not extend to mediation confidentiality (id. at p. 363), the Court held that an Evidence Code section “cannot be expanded beyond its express limits” and that the Legislature had not intended to allow for the implied waiver of mediation confidentiality. Accordingly, the judgment of the Court of Appeal was reversed. (Id. at p. 586.)

Analysis

On a broad scale, the case reaffirms that the Supreme Court is a strong supporter of mediation confidentiality. On a more practical level, the decision is a primer on what a party must do at mediation to create an enforceable settlement agreement. If an oral agreement has been reached, the parties must comply with Evidence Code section 1118 to make it admissible. If the parties have reduced their understanding to writing, they must include language which complies with both Evidence Code sections 1123 and 1122. Section 1123 states, in part, that such a writing is admissible and may be disclosed if it “(a) … provides that it is admissible or subject to disclosure, or words to that effect”; (or) “(b) … provides that it is enforceable or binding or words to that effect”; (or) “(c) All parties to the agreement expressly agree in writing, or orally in accordance with Section 1118, to its disclosure.” Section 1122(a)(1) provides, in part, that a writing prepared in the course of mediation is admissible if “All persons who conduct or otherwise participate in the mediation expressly agree in writing, or orally in accordance with Section 1118, to disclosure of the communication, document, or writing.” Thus, the effective, operative wording, which I provide my mediation participants, should read, “It is the intent of the parties, pursuant to Evidence Code sections 1122(a)(1) and 1123(b) and Code of Civil Procedure section 664.6, that all of the terms of this agreement may be disclosed to a court of law and shall be enforceable and binding upon them in a court of law.”

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, August 2008

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