Posts Tagged ‘settlement at mediation’

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

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.”
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FEE SHARING BY ATTORNEYS WITH CLIENTS IN EMPLOYMENT CASES

The propriety of attorneys sharing their court-awarded fees in employment cases with their clients is an appropriate subject for a mediation message because such fees are often a factor in the settlement of employment cases.

On its face, Rule of Professional Conduct 1-320(A), which states that “Neither a member nor a law firm shall directly or indirectly share legal fees with a person who is not a lawyer,” except in four situations that are not applicable to this analysis, appears to prohibit lawyers from giving any portion of their court awarded fees to their clients. McIntosh v. Mills (2004) 121 Cal.App. 4th 333 carves out a narrow exception to this rule.
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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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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].)
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HOSPITAL LIENS REQUIRE AN UNDERLYING DEBT

Hospital liens in personal injury litigation impact settlement negotiations, since both plaintiffs and defendants take them into consideration in determining what sums the plaintiffs shall net after such liens have been paid off. Hospitals, too, rely on these liens to recover the difference between what they are paid by patients and/or their carriers and the reasonable value of the medical services provided. Parnell v. Adventist Health System/West (2005) 35 Cal.4th 595 states, however, that such liens, to be valid, require an underlying debt by the patient to the hospital.
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SOMETIMES A CLIENT NEED NOT SIGN THE SETTLEMENT

Defense lawyers in accident cases often appear at mediations without their clients or adjusters. While this practice technically violates rules requiring the attendance at court-ordered mediations of both the client and a person with full authority to settle the case (see Rule of Court 1634 and Los Angeles Superior Court Rule 12.15), an equally significant issue is whether the client’s or adjuster’s absence has frustrated the opportunity to execute a settlement at the mediation. Fiege v. Cooke, et al. (2005) 125 Cal.App.4th 1350 says that the answer to that question lies within the scope of the defendant’s insurance policy.
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TAX RELIEF IN DISCRIMINATION CASES, PART II

Mediation message no. 20 discussed the implications of the American Jobs Creation Act of 2004 (Act) on the tax consequences in discrimination judgments and settlements. Commissioner of Internal Revenue v. Banks (2005) 2005 U.S. Lexis 1370, 73 U.S.L.W. 4117 provides finality to the pre-Act split of authority on the same subject.

The “Civil Rights Tax Relief” section of the Act provides that plaintiffs in discrimination cases, retroactive to the 2003 tax year, are entitled to above-the-line deductions for both the costs of litigation and the attorneys’ fees paid to their counsel. Prior to this legislation, the IRS took the position that successful plaintiffs in such cases owed taxes on the gross settlement or award, which included the costs of the case and the fees paid to their counsel. The federal circuits had been divided as to whether the fee and costs portion of any discrimination recovery was income to the plaintiffs.
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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.
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