USE OF MEDIATOR DECLARATIONS IN ENFORCING SETTLEMENTS

Radford v. Shehorn (August 2010) 187 Cal.App.4th 852 holds that a party cannot use a mediator’s declaration, which the opposing party had not agreed to, in a dispute about the contents of a written settlement agreement because that declaration violates “mediation confidentiality statutes.” (Id. at p. 857.) The court relied upon Evidence Code sections 703.5 and 1121 to arrive at this conclusion. Section 703.5 provides, in substance, that mediators are not competent witnesses in civil proceedings concerning the conduct of the mediation. Section 1121 states that mediators may not submit a “report, assessment, evaluation, recommendation, or finding of any kind” about the mediation that is not required by rule or law, unless all parties agree otherwise.

The issue in Radford was whether a settlement agreement executed at a mediation consisted of one or two pages. One of the parties introduced the declaration of the mediator stating that the agreement had two pages. The appellate court found that the trial court erred in admitting the declaration but held that the error was harmless.

The lesson of Radford is that all parties to a mediation settlement, should they believe that a mediator’s declaration might be necessary in a future (but not yet contemplated) legal proceeding, should include language in the settlement consenting to the later admissibility of that declaration; otherwise, a subsequent declaration submitted by one party without the express agreement of the other is not admissible. Suggested language to achieve that mutual understanding could read, “The parties to this settlement agree that any of them may use the declaration of (the mediator’s name), the mediator in this matter, in all subsequent proceedings regarding that mediation and settlement, including those to enforce or interpret the terms of the settlement.” Obviously, the parties should discuss such language ahead of time with the mediator who, without such a warning, may not want to get involved in later disputes.

As a reminder, the above suggested language is meaningless unless the parties also agree in the same settlement to waive mediation confidentially, as required by Simmons v. Ghaderi (2008) 44 Cal.4th 570. (See the discussion about this issue in Mediation Messages nos. 45 and 62.) Without this additional language, the settlement is inadmissible and, thus, unenforceable, and the moving party is faced with the anomaly of an admissible mediator declaration and an inadmissible agreement. Accordingly, the following sentence should be used, along with the highlighted terms in the previous paragraph, to accomplish the goal of being able to use the mediator’s declaration: “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.”

Radford should be distinguished from motions to compel the testimony of mediators about the circumstances of confidential mediations, where there has not been a prior agreement to allow such testimony. In Mediation Message no. 56, I discussed two cases, one state and one federal, which allowed parties, in limited circumstances, to compel mediator testimony. Rinaker v. Superior Court (1998) 62 Cal.App.4th 155 holds that a mediator can be compelled to testify about the statements of a witness at mediation who is testifying adversely against juveniles in a subsequent proceeding. Olam v. Congress Mortgage Company (N.D. Cal. 1999) 68 F.Supp.2d 1110 holds that a mediator’s testimony can be compelled in a civil proceeding to establish whether a defaulting party was competent to enter into a settlement agreement that the opposing party was seeking to enforce. (It is arguable that both Rinaker and Olam are case law exceptions to the exclusion of mediator “assessment, evaluation, recommendation, or finding of any kind” as required by Evidence Code section 1121.)

Rinaker and Olam should be considered in two situations: a party to a mediation settlement agreement, in which all the parties have expressly waived mediation confidentiality (i.e., see Simmons v. Ghaderi), wants the mediator to testify regarding what occurred at the mediation or where a due process violation might occur if mediation confidentiality were used to prevent a mediator’s testimony.

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
Landline (310) 201-0010
Cell (310) 433-4155

Copyright Michael D. Marcus, September 2010

SIMMONS v. GHADERI REDUX

Simmons v. Ghaderi (2008) 44 Cal.4th 570 is one of the most important decisions concerning mediation in many years but the least understood. Since many attorneys are unfamiliar with the case and what it requires, I am discussing it once again. (I first wrote about this case in Mediation Message no. 45.)

In Simmons v. Ghaderi, the mother and brother of a deceased infant sought to enforce a settlement at a mediation against a defendant doctor in a medical malpractice matter. The doctor had orally agreed to settlement but then had second thoughts and did not sign the written agreement. In a subsequent court trial for breach of the oral settlement agreement, the court found the defendant had breached an enforceable oral contract. The appellate court affirmed the judgment.

In reversing the judgment, 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 Supreme Court noted that Evidence Code section 1124 requires several steps, as set forth in section 1118, for the admissibility of such an agreement. In substance, within 72 hours of the oral agreement, the parties must prepare and execute a written document in which they agree that its terms are binding on them.

On a practical level, Simmons v. Ghaderi is a primer on what parties must do at mediation to create an enforceable settlement agreement. If an oral agreement has been reached, they must comply with Evidence Code section 1118 (see above) to make it admissible. After the parties have reduced their understanding to a 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, for the enforcement of a written settlement agreement achieved because of mediation, 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.”

In summary, every written mediation settlement agreement, to be enforceable, must contain language substantially similar to the above highlighted terms. It is recommended that attorneys who use form or standardized settlement agreements insert these words in brackets that can be deleted in their entirety if the settlement is arrived at by means other than mediation.

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 2010

TRIAL COURTS HAVE LIMITED POWER TO ORDER MEDIATIONS

This message is dedicated to those lawyers who believe that trial courts have unlimited authority to order mediation in all civil matters. In actuality, courts only have the power to order parties to mediation where the amount in controversy does not exceed $50,000 for each plaintiff. (Rule of Court 3.891, subdivision (a)(1).) Where the amount exceeds $50,000, the parties may stipulate to mediation no later than 90 days before trial, unless the court permits a shorter time. (Subdivision (a)(2).)

What some attorneys mistake for an order to mediate is instead judicial “encouragement” that they mediate the dispute. Nonetheless, whether a court is gentle prodding the parties to mediate or erroneously applying the law, the more important question is how to respond to such an “order” when the amount in controversy exceeds $50,000. Since you’re not going to win any points by reminding judges about rule 3.891, subdivision (b), attorneys in the impacted matter should agree to mediate the dispute, when it would be effective to do so, notwithstanding the inappropriateness of the order. (See Mediation Message no. 59 which discusses considerations in deciding when to mediate.) On the other hand, if you and opposing counsel agree that mediating at that time would be ineffective, your alternatives are either to remain silent and mediate or jointly advise the court (in very understated terms) that the order is in excess of its jurisdiction. In the latter circumstance, the judge will not be pleased with either one of you but his/her wrath should at least be evenly distributed.

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 2010

SUPREME COURT MAY SHAKE UP MEDIATION CONFIDENTIALITY

On the heels of Cassel v. Superior Court (2009) 179 Cal.App.4^th 152, which held that communications just before and during mediation between a client and his attorneys are not confidential (see Mediation Message no. 57 for a discussion of Cassel), comes Porter v. Wyner (2010) 183 Cal.App.4^th 949, modified May 10, 2010, with a similar holding. The California Supreme Court granted a hearing in Cassel and it is almost a certainty that it shall also grant a hearing in Porter and consolidate the two cases for argument.

In Porter v. Wyner, clients sued their attorneys for, inter alia, breach of fiduciary duty, constructive fraud and negligent misrepresentation. These parties had been involved in a mediation in the underlying matter. In the instant matter, the lawyers’  motion in limine to bar the admission of evidence at the former mediation and to strike statements from the complaint made at that mediation were denied.

At the subsequent trial, the Porters testified to communications with the defendant lawyers during the mediation and also introduced documentary evidence of mediation communications. The lawyers, as both adverse witnesses and in rebuttal, discussed their mediation communications with the Porters.

Shortly after the jury returned a partial verdict for the Porters, the California Supreme Court issued Simmons v. Ghaderi (2008) 44 Cal.4^th 570, which holds that the only exceptions to mediation confidentiality are express waiver by the parties and where due process rights may be violated. (See Mediation Message no. 45 for a discussion of Ghaderi.) The trial court misinterpreted Ghaderi and granted the defendants’ motion for a new trial. An appeal from that ruling led to the (2-1) decision in Porter v. Wyner which reversed the trial court’s order and instructed it to consider all of the mediation statements in ruling on the motion because that evidence should not have been excluded.

The core rationale of the majority in Porter v. Wyner is that mediation confidentiality is intended to “protect the free flow of communication and ideas” rather than “protect communications or agreements between a client and his own counsel should a conflict arise between them.” (Id. at p. 960.) The majority  reasoned that “A mediation is not conducted to resolve a dispute between a lawyer and the client the attorney represents. The communications in the attorney-client relationship like the ones at issue in this case fall outside those to which the confidentiality applies.” (Id. at p. 961.) The majority was also concerned that mediation confidentiality could be used as a shield “against (an) attorney for any breached side agreements, representations and deficiencies  that might take place or come to light during the mediation.” (Id. at p. 962.)

In discussing Cassel v. Superior Court, I speculated that the Supreme Court, even if it chose to protect consumers, will most likely hold that conferences between clients and their attorneys during, rather than before, mediation shall remain confidential. Porter v. Wyner’s subsequent assault on mediation confidentiality, which is better written than Cassel, causes me to re-evaluate that opinion. Although the Supreme Court has continually supported the concept of mediation and related mediation confidentiality, it must come to grips with the tension between a broad application of such confidentiality and its potentially negative impact on consumer protection. I am no longer going to hazard what the Court will do in resolving that conflict; I can opine only that the result, whichever way it goes, will have a major impact on the mediation process.

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 2010

TIMING IS EVERYTHING

The timing of a mediation can be almost as important as the facts of the case. For example, it is generally accepted that mediation immediately before trial results in a settlement because of concerns about additional fees and costs and the impending uncertainty of trial. So, rather than wait for the court to order or suggest that you mediate, arrange for that process when it is most advantageous to your client.

• Mediate before the complaint has been filed – This is the optimum time to save fees and costs. The party who is more knowledgeable about the facts also has an advantage. But such knowledge can be an impediment to settlement if the other, less informed side cannot confirm the truth or existence of those facts. Thus, the party in control of the facts should consider whether or not to tell the opponent about them. Further downsides of pre-filing mediation are that the facts and contentions have not been developed by either side and there may not yet be insurance coverage.
• Mediate soon after the complaint has been filed – This period, like pre-filing mediation, saves fees and costs, although not as much as the latter, but has the benefit of showing that the plaintiff is serious about the case. Filing can also bring about a covered claim.
  
• Mediate immediately before or after a motion for summary judgment/summary adjudication has been filed – If the motion is supported by sound legal and factual contentions and might be granted, the party opposing it should attempt to settle the case before the motion is to be heard. At the same time, the moving party should take advantage of this opportunity. After such a motion has been denied, the opposing party is generally more emboldened and in a better position to claim that it has a good chance to win at trial.
• Mediate just before trial – As mentioned above, the uncertainty of what a jury might do and the fear of additional fees and costs, especially if the trial will be long or there is a prevailing party attorney’s fee clause or attorney’s fee statute, are prime reasons for settling “on the court house steps.” Additionally, mediating just before trial is an opportune time because both parties know each other’s theories and can accurately assess the pluses and minuses of trying the case. The downside of a delayed mediation is it allows the opposing party to become familiar with the facts and increases the client’s expenses.

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 2010

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.

BRING ESSENTIAL DOCUMENTS TO THE MEDIATION

Besides bringing your wits, clients and people with authority to settle the case (see Mediation Message No. 38) to mediations, you are strongly advised to bring the entire file and a long form settlement agreement.

As at trial, attorneys should attend mediations with all of the pleadings, correspondence, discovery and exhibits in hard copy or accessible on a laptop, since it is often necessary, in discussing the case with the mediator, to refer to a complaint or answer, deposition transcript or interrogatory response or photograph or letter to support or contradict an important proposition. If the needed writing or exhibit is not available, the lawyer must then ask a person at his/her office to fax or e-mail the document. And, if the requested item cannot be found or forwarded, its immediate effectiveness is lost with resulting negative consequences.
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MEDIATION CONFIDENTIALITY – ANOTHER SUPREME COURT CASE IS COMING

In granting review this month in Cassel v. Superior Court (2009) 179 Cal.App.4th 152, the California Supreme Court has another opportunity to either solidify its position that mediation confidentiality should be rarely breached (see Foxgate Homeowners’ Assn. v. Bramalea California, Inc. (2001) 26 Cal.4th 1; Rojas v. Superior Court (2004) 33 Cal.4th 407; Simmons v. Ghaderi (2008) 44 Cal.4th 570) or take the opposite tact that consumer protection should be an exception to such confidentiality.
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COMPELLING A MEDIATOR TESTIMONY

California state courts allow only express waivers and potential due process violations as exceptions to mediation confidentiality. (Simmons v. Ghaderi (2008) 44 Cal.4th 570.) Although the federal courts in California are less restrictive regarding the scope of such confidentiality (see Mediation Message No. 55), they still, as a generality, only waive the concept in limited circumstances.
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FEDERAL MEDIATION RULES REGARDING CONFIDENTIALITY

Since I’ve written extensively about the impact of mediation confidentiality on California state court proceedings (see Mediation Messages 11, 17, 21, 34, 37, 39, 45 and 49), it’s only appropriate that I also discuss that principle as applied by the three California federal districts in their respective local rules.

The Northern District, which has the most elaborate guidelines of the three California federal districts regarding the conduct of mediations, applies confidentiality to anything that was written for or said in connection with a mediation, including “any position taken, and any view of the merits of the case expressed by any participant in connection with any mediation.” (Local rule 6-12(a).) That rule does not prohibit a report to or inquiry by the ADR Magistrate Judge regarding a possible violation of the ADR local rules. (Local rule 6-12(b)(3).) These local rules do not include a requirement that the parties negotiate in good faith.
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PROPOSED ETHICAL RULE CONCERNING MEDIATORS AND ARBITRATORS

The State Bar’s Special Commission for the Revision of the Rules of Professional Conduct (RRC), which is rewriting California’s Rules of Professional Conduct, has out for public comment eleven proposed ethical rules, one of which (rule 1.12) concerns mediators, arbitrators and former judges. The comment period for these rules ends on November 13, 2009.

California does not have an existing ethical rule for the conduct of mediators and arbitrators although Rules of Court 3.850 et seq. govern the activities of mediators in court-connected mediations. Those rules do not apply to privately retained mediators.
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