Posts Tagged ‘mediation confidentiality’

MEDIATION CONFIDENTIALITY OVERVIEW

Because of the recent Cassell v. Superior Court (2011) 51 Cal.4^th 113 decision, it is timely and appropriate to review all of the Supreme Court’s rulings on mediation confidentiality.

Mediators, pursuant to Evidence Code sections 1119 and 1121, may not report attorney misconduct or bad faith to jurists who have the underlying cases on their calendars. (Foxgate Homeowners’ Association, Inc. v. Bramalea California, Inc. (2001) 26 Cal.4^th 1.) Foxgate was the first of the Court’s cases which held that mediation confidentiality is to be strictly interpreted.

Mediation confidentiality extends to all writings, including exhibits, prepared for mediation. (Rojas v. Superior Court (2003) 33 Cal.4^th 407.) For example, a document made for mediation that summarizes a plaintiff’s damages is protected while a summary of the same damages prepared by a company bookkeeper during the course of the business’s operation is not.

To be enforceable, a mediation settlement must include a “direct statement to the effect that it is enforceable or binding”; in other words, the writing “must directly express the parties’ agreement to be bound by the document they sign.” (Fair v. Bakhtiari (2006) 40 Cal.4^th 189.)

A potential due process violation is the only judicially crafted exception to confidentiality in the absence of legislative action. (Simmons v. Ghaderi (2008) 44 Cal.4^th 570.)

All mediation discussions are confidential; thus, clients cannot sue their attorneys for anything said or done in or pursuant to mediation, even if no one else was present during that communication or act. (Cassel v. Superior Court, supra, 51 Cal.4^th 113.) Again, the Court reminded that only the Legislature can create inroads to mediation confidentiality, the only exception being when strict interpretation would produce an absurd result.

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 2011

 

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.

 

 

 

FACEBOOK AND FEDERAL MEDIATION CONFIDENTIALITY

If you saw “The Social Network,” skip this introduction; if not, and you’ve been hiding in a cave for the last few years, be advised that the Winklevoss twins and a third party sued Mark Zuckerberg, the Facebook founder, for allegedly stealing the concept from them. In turn, Facebook sued the Winklevosses. A California Northern District Court judge ordered everyone into mediation, during which the participants signed a confidentiality agreement stipulating that all statements made during the process were privileged, non-discoverable and inadmissible “in any arbitral, judicial, or other proceeding.” During that mediation, the parties entered into a settlement with the Winklevosses agreeing to give up their competing company for cash and a piece of Facebook. Facebook filed a motion seeking to enforce the settlement after negotiations over the form of the final deal documents fell apart. The Winklevosses argued that the settlement agreement was unenforceable because it lacked certain material terms and had been procured by fraud.

The district court found the settlement agreement enforceable, in part, because what was said and not said during the mediation was excluded under the Northern District Court’s Alternative Dispute Resolution local rule 6-11, which it read to create a “privilege” for “evidence regarding the details of the parties’ negotiations in their mediation.” The resulting appeal in Facebook v. Winklevoss (9th Cir. 2011) nos. 08-16745, 08-16873, 09-15021, 2011 U.S. App. LEXIS 7430 provides an opportunity to compare the status of mediation confidentiality in California’s state courts and the Ninth Circuit.

Chief Judge Alex Kozinski, writing for the unanimous court in Facebook, affirmed the exclusion of the alleged mediation misrepresentations but with reasoning that differs from the California Supreme Court’s approach to the situation. Because there are no federal rules or statutes concerning mediation confidentiality, each of California’s four district courts have adopted their own approaches to the matter. Facebook undercuts the effectiveness of those rules by finding “It’s doubtful that a district court can augment the list of (federally created) privileges by local rule.” Having created this ambiguity, the Court then sidestepped the issue it had just created and held, in any event, that the local rules did not apply because a private mediator had been used.

Facebook then found that the district court had been right to exclude the proffered evidence because the parties’ confidentiality agreement provided that all statements made during the course of the mediation were privileged settlement discussions and inadmissible for any purpose, including in any legal proceeding. Accordingly, Facebook affirmed that the Winklevosses had been properly prohibited from introducing evidence of any alleged mediation misrepresentations.

Facebook unambiguously holds that parties in federal proceedings, when involved in private mediations, can negotiate for the total confidentiality of mediation communications. Less clear is the status of confidentiality where the mediation has been conducted by a court-appointed person. Added to this confusion is that each of California’s four district courts has its own approach to confidentiality. (For example, in commentary 6-12 to its local rules, the Northern federal district court notes that absolute confidentiality, regardless of the circumstances, may be excused in “limited circumstances in which the need for disclosure outweighs the confidentiality of a mediation,” such as threats of death or substantial bodily injury; use of the mediation to commit a felony and the right to cross-examination in a quasi-criminal proceeding.) In contrast,  the mediation communications in Facebook would be absolutely confidential in a California state court whether the mediator had been privately retained or court appointed and whether or not the parties had agreed in writing to apply confidentiality to all court proceedings. For the moment, therefore, the California courts are well ahead of their federal counterparts.

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 2011

 

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.

THE COURT STAYS THE COURSE ON MEDIATION CONFIDENTIALITY

In Cassel v. Superior Court (2011) S178914, 2011 DJDAR 658, the California Supreme Court was faced with two clear options – continue to hold that mediation confidentiality is to be liberally construed despite the surrounding circumstances or find that confidentiality should not be used to shield negligent attorneys from malpractice suits. The Court chose to stay the course and held that mediation confidentiality has few exceptions.

In Cassel, the petitioner filed a complaint against his former attorneys for breaching their professional, fiduciary and contractual duties because they had used allegedly bad advice, deception and coercion at a mediation to force him to settle the case. Petitioner wanted to use his conversations with the attorneys immediately preceding and at the mediation to prove his case. The trial court ruled that discussions between petitioner and the lawyers two days and one day before the mediation, in which mediation strategy and settlement amounts had been discussed, and all communications and conduct at the mediation between petitioner and the lawyers, were inadmissible. A majority of the Court of Appeal granted mandamus relief, reasoning that mediation confidentiality statutes are not intended to prevent a client from using communications with his or her lawyer outside the presence of all other mediation participants in a legal malpractice case against that lawyer.

Cassel began with a reminder that the Legislature had provided only express waiver by the participants as an exception to mediation confidentiality and that the only judicially crafted exceptions were where “due process is implicated” and “literal construction would produce absurd results, thus clearly violating the legislature’s presumed intent.” The Court also reviewed Foxgate Homeowners’ Association, Inc. v. Bramalea California, Inc. (2001) 26 Cal.4^th 1; Rojas v. Superior Court (2003) 33 Cal.4^th 407; Fair v. Bakhtiari (2006) 40 Cal.4^th 189 and Simmons v. Ghaderi (2008) 44 Cal.4^th 570 which held, in their entirety, that confidentiality  has been broadly applied.

With Foxgate, Rojas, Fair and Simmons as a foundation, Cassel held that the purpose of Evidence Code section 1119, subdivision (a), which provides that “[n]o evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation … is admissible or subject to discovery …” extends to all oral communications at a mediation, even if they only take place between parties and their own attorneys.

Cassel further holds that petitioner’s discussions with his attorneys before the mediation concerning mediation strategy and settlement were confidential because section 1119, subds. (a) and (b) apply to all utterances and writings  “for the purpose of, in the course of, or pursuant to, a mediation.” Instead of attempting to create a bright line test for establishing when a pre or post-mediation utterance or writing is mediation related, and thus confidential, Cassel simply found that petitioner’s discussions with his attorneys came within the statute because they “concerned the settlement strategy to be pursued at an immediately pending mediation … (and) were closely related to the mediation in time, context, and subject matter …”

Cassel noted that the mediation confidentiality statutes, unlike Evidence Code section 958, which eliminates confidentiality protections otherwise afforded by the attorney-client privilege in suits between clients and their lawyers, have no exception for legal malpractice actions. The Court reasoned that the attorney-client and mediation confidentiality statutes achieve separate and unrelated purposes; the former “allows the client to consult frankly with counsel on any matter, without fear that others” may use these confidences whereas the latter “serve[s] the public policy of encouraging the resolution of disputes by means short of litigation.”

The Supreme Court then discussed the non-applicability of the two judicially crafted exceptions to mediation confidentiality to the instant facts. Due process was not a factor because “the mere loss of evidence” in a lawsuit for civil damages does not implicate a fundamental interest. Nor did the result produced by applying the plain terms of the statutes to the facts of the case create a result that was absurd or clearly contrary to legislative intent.

In sum, Cassel reversed the Appellate Court judgment and left petitioner with the inability to introduce evidence of his attorneys’ alleged misconduct immediately prior to and at the mediation. For the short term, Cassell’s extensive analysis of mediation confidentiality should foreclose further lower court attempts to carve exceptions to such confidentiality. Its impact, however, may not be lengthy because, while the Court chose not to take the fork in the road that would allow clients to use communications with their attorneys at mediations in subsequent malpractice actions, it unambiguously invited the Legislature to reconsider that issue. “Of course, the Legislature is free to reconsider whether the mediation confidentiality statutes should preclude the use of mediation-related attorney-client discussions to support a client’s civil claims of malpractice against his or her attorneys.” The Court’s less than subtle invitation may be hard for the Legislature to ignore; especially, if it also considers Justice Ming Chin’s reluctant concurrence that shielding attorneys from being held accountable for their incompetent or fraudulent actions during mediation “is a high price to pay to preserve total confidentiality in 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, January 2011

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

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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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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Mediation Confidentiality Applies to any Writing or Statement that would not have Existed but for a Mediation Communication

Wimsatt v. Superior Court (June 20, 2007) no. B196903, 2007 DJDAR 8961, which not surprisingly upholds the concept of mediation confidentiality, is an interesting case nonetheless for the breadth given such confidentiality and, at the same time, its invitation to the legislature that it create exceptions to the concept.

Wimsatt and his law firm, Magaña, Cathcart & McCarthy, were sued for legal malpractice by a former client who claimed that they had breached their fiduciary duty to the client by submitting an unauthorized settlement demand to the defense. In the underlying matter, a defense attorney had written in a confidential mediation brief for a second mediation that Wimsatt had purportedly communicated a settlement demand for $1.5 million, which was $2 million less than the authorized demand at the first mediation. The case settled at the second mediation for an undisclosed amount.
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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).
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THE ROLE OF MEDIATORS AND “PARTICIPANT” CONFIDENTIALITY

Mediation places decision-making in the hands of the parties rather than with the mediator, a proposition strongly reaffirmed by Travelers Casualty and Surety Company, et al. v. Superior Court (2005) 126 Cal.App.4th 1131(Travelers Casualty).

In the Roman Catholic Diocese of Orange child sex abuse litigation, the Los Angeles Superior Court judge appointed by a stipulated order to mediate the multiple lawsuits, after listening to presentations from the plaintiffs regarding the issue of damages (counsel for the insurers chose not to participate in this part of the mediation), issued a written order setting forth his determination of the reasonable settlement value of the cases.
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MEDIATION CONFIDENTIALITY UPDATED

The very recent case of Rojas v. Superior Court (2004) 33 Cal.4th 407 has held that all writings prepared for a mediation are not discoverable. In Rojas, a lawsuit by the owner of an apartment complex against the apartments’ contractors and subcontractors for water leakage that caused toxic mold was resolved through mediation. The settlement included language that the consultants’ mediation reports and photographs were protected by the trial court’s case management order and Evidence Code sections 1119 and 1152.
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