Posts Tagged ‘enforcing settlements’

Mediation Message No. 101

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 101

ADMISSIBILITY OF MEDIATION SETTLEMENT AGREEMENTS

In re Marriage of Daly and Oyster (2014) 228 Cal.App.4th 505 is a reminder that settlement agreements at mediation, if they contain the appropriate language, can be admissible in subsequent proceedings, notwithstanding Evidence Code section 1119, subd. (b), which states, in substance, that no writing prepared for, in the course of  or pursuant to a mediation is admissible or subject to discovery.

Daly and Oyster found that a stipulated judgment, entered into at mediation, regarding a marital settlement agreement (MSA), was admissible at a trial to enforce the judgment because it had been signed by the parties and expressed their agreement to be bound by the stipulated judgment. “Here, the parties characterized the stipulated judgment as a ‘marital settlement agreement,’ agreed it would ‘be the operable court judgment with relation to the Stipulated Judgment for Dissolution,’ and agreed the court would ‘reserve[] jurisdiction to supervise the payment of any obligation ordered paid or allocated in this Stipulated Judgment; supervise the execution of any documents required or reasonably necessary to carry out the terms of this Judgment; and supervise the overall enforcement of this Judgment.’” (Id. at p. 511) The above imprecise language, according to the appellate court, provided for the MSA’s admissibility under Evidence Code section 1123 because, in effect, it “reflected the parties’ agreement that the stipulated judgment be subject to disclosure and be enforceable.” (Ibid.) Section 1123 provides, in part, that “A written settlement agreement prepared in the course of, or pursuant to, a mediation, is not made inadmissible, or protected from disclosure, by provisions of this chapter if the agreement is signed by the settling parties and any of the following conditions are satisfied: (a) The agreement provides that it is admissible or subject to disclosure, or words to that effect. (b) The agreement provides that it is enforceable or binding or words to that effect.” (Emphasis added.)

MDM’s helpful hint: A settlement agreement created and executed at mediation by all of the parties (and not just some of them) is admissible at a subsequent proceeding if the agreement provides either that it is admissible or subject to disclosure, or enforceable or binding, or words to that effect. Rather than risk a court fight about their respective intents concerning the prospective admissibility of a mediated agreement, parties should expressly state in the agreement that it is both “admissible or subject to disclosure and enforceable and binding” rather than hope that a court will later find that the agreement’s ambiguous terms “in effect” reflect that intent.

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 2014

Mediation Message No. 96

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 96

EVERYTHING YOU NEED TO KNOW ABOUT C.C.P. SECTION 664.6

Mediation Message no. 95 looked at the mechanics of enforcing settlements, pursuant to C.C.P. section 664.6. This Mediation Message supplements that analysis.

Parties must personally approve an oral or written settlement. As discussed in last month’s Mediation Message, Levy v. Superior Court (1995) 10 Cal.4th 578 holds that parties must personally execute settlement agreements because that process affects substantial rights. Johnson v. Department of Corrections (1995) 38 Cal.App.4th 1700 applies Levy’s reasoning to all settlement agreements, written and oral. Corporations, like individuals, must also approve settlements. (Gauss v. GAF Corp. (2002) 103 Cal.App.4th 1110, 1118 [Levy construed “party” in section 664.6 to mean "the specific person or entity by or against whom legal proceedings are brought."].)

An agent or person with sole and exclusive authority to settle claims on a party’s behalf is not an exception to the requirement that a party must personally consent to settlement terms. (Id. at pp. 1119-1121; see also Murphy v. Padilla (1996) 42 Cal.App.4th 707, 716 holding that motions to enforce oral settlements made before the court cannot rely on agency principles.)

An exception to the personal consent requirement to settlements occurs if the client is covered fully under an insurance policy that gives the insurer the right to settle the matter without the insured’s consent. (Fiege v. Cooke, et al. (2005) 125 Cal.App.4th 1350, 1355 [settlement by a carrier within policy limits does not prejudice the substantial rights of the insured].)

“Orally before the court” does not require that the settlement be on the record. Section 664.6 provides, in part, that parties may stipulate to settle a case “orally before the court.” 1538 Cahuenga Partners v. Turmeko Properties, Inc. (2009) 176 Cal.App.4th 139, 143 holds that a settlement agreement was enforceable where the party and his counsel had discussed the terms in the judge’s chambers.

Enforceable settlements under section 664.6 in the same case need not all be written or made orally before the court; they may be a combination of each as long as the material terms of all agreements are the same. (Elyaoudayan v. Hoffman (2003) 104 Cal.App.4th 1421, 1431.)

In a section 664.6 motion to enforce a settlement, the court may not create the material terms of the settlement; its only authority is “to decid(e) what terms the parties themselves have previously agreed upon.” (Critzer v. Enos (2010) 187 Cal.App.4th 1242, 1252-1253, citing Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 809–810 and also relying on Terry v. Conlan (2005) 131 Cal.App.4th 1445 [court erred in granting section 664.6 motion where record demonstrated no meeting of minds concerning material terms of settlement].)

When section 664.6 is not available (for example, the parties never agreed to its application or one of the parties did not personally approve the settlement), the settlement can still be enforced by summary judgment, a suit for breach of contract, a suit in equity (Robertson v. Chen (1996) 44 Cal.App.4th 1290, 1293) or by amendment of the pleadings to raise settlement as an affirmative defense. (Gauss v. GAF Corp., supra, 103 Cal.App.4th at p. 1122.) Neither Robertson nor Gauss mentions that these alternatives to section 664.6 are more costly since a section 664.6 stipulation may include a condition that the prevailing parties in a motion to enforce a settlement shall be entitled to their attorney’s fees and costs.

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, March 2014

Mediation Message No. 95

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 95

ENFORCING SETTLEMENTS PURSUANT TO C.C.P. SECTION 664.6

When drafting a settlement agreement, parties have the opportunity to stipulate that the trial court “may enter judgment pursuant to the terms of the settlement.” (Code of Civil Procedure section 664.6.) If this condition is not agreed to and the case is voluntarily dismissed with prejudice, the court has lost jurisdiction over the matter. (Basinger v. Rogers & Wells (1990) 220 Cal.App.3d 16, 21.) If that should happen, the only remedy is to ask the court to vacate the dismissal under C.C.P. section 473, subd. (b) because of “mistake, inadvertence, surprise or excusable neglect.” (Id.)

Also, whenever a settlement includes conditions to be performed over time (such as periodic payments or repairs), settling parties should strongly consider adopting the second sentence of section 664.6 which provides, “If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement.” This language allows the court to maintain jurisdiction even after an action has been dismissed. (Hagan Engineering v. Mills (2003) 115 Cal.App.4th 1004, 1010-1011.) Because of such a stipulation, the trial court had continuing jurisdiction over the disclosure of confidential records held by the Franciscan Friars in a sex abuse matter. (In re The Clergy Cases I (2010) 188 Cal App.4th 1224, 1237.)

MDM’s helpful hint: When continuing jurisdiction of the court is desirable, it is not enough to merely refer to the requisite language in the settlement agreement (Hagan Engineering v. Mills, supra, at p. 1008), which must be personally executed by the litigants. (Levy v. Superior Court (1995) 10 Cal.4th 578, 583, 586 [“settlement is such a serious step that it requires the client's knowledge and express consent.”].) Instead, the parties must request the court to maintain jurisdiction over them to enforce the settlement. This can be achieved either by asking, in the Judicial Council Request for Dismissal form that is filed with the court, that, pursuant to section 664.6, it “retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement” or by making the same request in a formal motion filed with the court.

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, February 2014

Mediation Message No. 62

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

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

Mediation Message No. 37

Enforcing Mediation Agreements (Part IV)

Not surprisingly, the California Supreme Court held on December 15, 2006 in Fair v. Bakhtiari, no. S129220, 2006 DJDAR 16184, 2006 WL 3627208, that a settlement agreement reached through mediation is enforceable and not confidential if it incorporates the language of Evidence Code section 1123(b). (I predicted this result November 2005 in message no. 28.)

In Fair, the parties concluded a mediation with a document captioned “Settlement Terms.” The final paragraph of that agreement provided that “Any and all disputes (are)subject to JAMS arbitration rules.” When the parties were unable to finalize the settlement, the plaintiff moved to compel arbitration, contending that he and the defendants had agreed to be bound by the settlement document. The appellate court held that the memorandum was admissible because the above quoted arbitration provision constituted “words to [the] effect” that the settlement terms were “enforceable or binding” under section 1123(b).

The Supreme Court, noting a conflict between the legislature’s desire to provide some flexibility to the enforcement of mediation settlements and the importance of maintaining mediation confidentiality (see Foxgate Homeowners’ Assn. v. Bramalea California, Inc. (2001) 26 Cal.4th 1 and Rojas v Superior Court (2004) 33 Cal.4th 407), opted for the latter policy and reversed the appellate court, finding that its reading was “unduly expansive” since the settlement language did not “include a direct statement to the effect that it is enforceable or binding.” The Court also held that the use of such language negates the need for the trial court to examine extrinsic language to rule on the admissibility of a settlement agreement.

Those whom I have mediated with know that I already provide the parties with a stipulation for settlement that includes enforcement language more specific and broader than that required by Fair because it not only unambiguously states that the agreement “shall be enforceable and binding” but also refers to Code of Civil Procedure section 664.6, which permits the parties to stipulate in writing that the trial court may enter judgment pursuant to the settlement terms. I shall continue to recommend that language because of its specificity and breadth.

Copyright, Michael D. Marcus, December 2006

Mediation Message No. 28

ENFORCEMENT OF MEDIATION SETTLEMENT AGREEMENTS (PART II)

In Mediation Message No. 21 (December 2004), I observed that Fair v. Bakhtiari (2004) 122 Cal.App.4th 1457, in the absence of specific language that the parties intended their mediation settlement to be binding, had nonetheless given a very liberal interpretation to its enforceability where other language in the agreement indicated that the parties “in effect” wanted such a result. (The opinion held that the settlement at issue, which provided only that all disputes would be settled by arbitration, had complied with Evidence Code section 1123(b), which states that a written mediation settlement is an exception to confidentiality requirements if it “provides that it is enforceable or binding or words to that effect.” [emphasis added].)

Then, in Mediation Message No. 25 (April 2005), I advised that the California Supreme Court had granted review as to this decision. Two weeks ago, an article in the Los Angeles Daily Journal suggested that mediations may become an endangered species if the Supreme Court reverses the appellate court ruling in Fair v. Bakhtiari. Such fears, however, are simply not warranted.

It is highly improbable that the Supreme Court, which for many years has encouraged the use of alternative dispute resolution to both lighten court calendars and to simplify the litigation process (see, for example, Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 [recognizing the “strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution”]), would now abandon that policy. Instead, if Fair v. Bakhtiari is reversed, the Court will probably do nothing more than require the parties at mediations to state unambiguously their intent in any settlement agreement that it be enforceable. As a practical matter, it is my opinion that such language, to be iron-clad, should provide that “It is the intent of the parties, pursuant to both Evidence Code section 1123(b) and Code of Civil Procedure section 664.6, that all of the terms of this agreement are enforceable and binding upon them.”

(See Message no. 37 which discusses the Supreme Court’s subsequent opinion in Fair v. Bakhtiari.)

Copyright, Michael D. Marcus, November 2005

Mediation Message No. 21

ENFORCEMENT OF MEDIATION SETTLEMENT AGREEMENTS

(A hearing was granted in Fair v. Bakhtiari. My discussion of the Supreme Court’s opinion in the matter is at Message no. 37.)

Mediation messages 11 and 17, in combination, discussed the legal principle that all oral and written mediation communications, including settlement discussions, are confidential, pursuant to Evidence Code section 1119, Foxgate Homeowners’ Assn. v. Bramalea California, Inc. (2001) 26 Cal.4th 1 and Rojas v. Superior Court (2004) 33 Cal.4th 407.

Nonetheless, there are exceptions to this umbrella of confidentiality. One is provided in Evidence Code section 1123 which states that written settlement agreements prepared during or pursuant to mediation are admissible in court if signed by the “settling parties” and any one of the following is satisfied: “(a) The agreement provides that it is admissible or subject to disclosure, or words to that effect;” “(b) The agreement provides that it is enforceable or binding or words to that effect;” “(c) All parties to the agreement expressly agree in writing, or orally in accordance with Section 1118 (which defines “oral agreement), to its disclosure;” or “(d) The agreement is used to show fraud, duress, or illegality that is relevant to an issue in dispute.”

The recent case of Fair v. Bakhtiari (2004) 122 Cal.4th 1457 looks at the situation where a mediation settlement agreement did not expressly contain one of conditions (a) through (d), above, but did provide that all disputes regarding the agreement were subject to arbitration. Assisted by its consideration of the Law Revision Commission Comments to section 1123 and the phrase “or words to that effect,” which is found in both conditions (a) and (b), Fair applies a commonsense interpretation to section 1123 and holds that the settlement agreement at issue was admissible because “inclusion of the arbitration agreement demonstrates that the parties necessarily intended the settlement terms document to be ‘enforceable or binding.’” (At p.1465.) Accordingly, it reversed the trial court’s denial of a motion to compel arbitration for the purpose of resolving a conflict in the agreement.

The lesson of Fair is that if parties want a mediation settlement agreement to be enforceable, they should make certain that it is signed by all of them and that it contains language consistent with at least one of the enumerated conditions in section 1123. While, in their absence, Fair empowers a trial court to look at the entire language of the agreement to find an intent to enforce it, it is far easier, in the first place, to include at least one of the four conditions to ensure the agreement’s admissibility.

Copyright, Michael D. Marcus December 2004