Negotiation News: Volume 1, Issue 3
This is a continuation of last month’s article on confidentiality that explores some of the key cases, and a proposed legislative response that will create a specific exception to the blanket statutory confidentiality. I know it can be a bit laborious to get through, but it is important and hopefully, thought-provoking.
The Pros and Cons Of Mediation Confidentiality and What, If Anything, To Do About Them
In my previous article on mediation confidentiality, I focused on the statutory scheme within the Code of Civil Procedure and the Evidence Code that assures confidentiality within mediations.
This article (“the sequel”) addresses the courts’ interpretation of these statutes
and a recently-proposed Legislative exception to mediation confidentiality.
Confidentiality is fundamental to the free exchange of positions and interests in
mediation. There is a strong public policy in California toward resolving disputes between parties out of court. Evidence Code sections 1115-1128 provides for strict confidentiality of mediation communications and writings, unless certain enumerated statutory exceptions are satisfied to waive confidentiality
But mediation confidentiality is not without its problems. The courts have consistently held that absent express waivers, “confidential” means “confidential” under Evidence Code 1119. Absent any such express agreements that satisfy the statutory requirements for admissibility, evidence of conduct, communications or agreements made during mediation, even those alleged to be in bad faith, coercive or impulsive, are inadmissible to assist an aggrieved party in subsequent proceedings in which evidence of what happened during mediation is sought to be admitted. In Fair v. Bakhtiari, 40 Cal. 4th 189 (2006), the Court stated, “a writing [expressly waiving confidentiality] must directly express the parties’ agreement to be bound by the document they sign… Durable settlements are more likely to result if the statute is applied to require language directly reflecting the parties’ awareness that they are executing an “enforceable or binding” agreement.”
And therein lays the rub. Absent a statutorily compliant agreement, adhering to strict confidentiality has, at times, produced results with which the courts have become increasingly uncomfortable. This article provides a brief overview of some of the more important cases, and the proposed legislative response to the Supreme Court’s decision in Cassel v. Superior Court, 51 Cal. 4th 113 (2011).
The Courts Have Consistently Reaffirmed Confidentiality
As a preliminary but important aside, in civil cases, mandatory settlement conferences are not subject to the mediation confidentiality statutes, pursuant to Evidence Code section 1117. This includes mandatory settlement conferences where a settlement officer is appointed to preside over the conference. CRC Rule
3.1380 (d) (providing for appointments at settlement conferences). However,
court-ordered mediations that are ordered pursuant to CCP section 1775, are
subject to the confidentiality provisions set forth in Evidence Code sections 1115-
1128, section 1152, and Evidence Code section 703.5. (CCP section 1775.10) Section
703.5 provides that a mediator is incompetent to testify in subsequent proceedings, except in cases of conduct resulting in civil or criminal contempt, crime, or State Bar disciplinary proceedings.
Let’s take a look at some of the important case law:
Foxgate Homeowners Assn. v. Bramalea Calif. Inc., 26 Cal.4th 1 (2001) – Foxgate involved claims of bad faith conduct by one of the parties to a mediation. The California Supreme Court, in reversing the Court of Appeal, held that the mediator, in a report to the trial court concerning the bad faith conduct of one of the participants, or any other mediation participant, could not disclose that bad faith conduct to the trial judge. Since the Legislative intent is to promote a free and open exchange of positions and interests, the Supreme Court stated, “This frank exchange is achieved only if the participants know that what is said in mediation will not be used to their detriment through later court proceedings…” (Id. at 14)
The “takeaway” from Foxgate: The Foxgate decision affirmed mediation confidentiality, even in the face of a mediator’s report detailing the bad faith conduct by one of the participants. While mandatory settlement conferences
have a statutory “good faith” component (CRC Rule 3.1380(c), mediations do not. Thus, after Foxgate, a party may attend mediation and act mischievously or unreasonably act in “bad faith” without the court ever knowing about it, or being able to do anything about it. In so ruling, the California Supreme Court came down squarely on the side of preserving mediation confidentiality in virtually all circumstances.
Simmons v Ghaderi, 44 Cal. 4th 189 (2008) – Simmons involved a medical malpractice case. Since this was a medical malpractice case, the physician’s insurer needed consent from the physician to settle the case. An oral agreement was reached at mediation, and was subsequently reduced to writing and signed by the Plaintiff. However, before signing, the defendant physician verbally stated that consent was revoked and left the mediation. Plaintiff contended that there was a valid, enforceable agreement notwithstanding the absence of the
defendant’s signature (thus making the agreement arguably unenforceable under CCP 664.6 and inadmissible under Evidence Code 1118). Plaintiff then amended her complaint to allege breach of contract and proceeded to trial on that cause of action. It was only during trial (and not before) that the issue of confidentiality was raised. The trial court entered judgment for Plaintiff on the breach of
In reversing the trial and appellate courts, the California Supreme Court held that while an oral agreement may have been reached in principal before the Defendant revoked consent, there was no enforceable statutorily compliant agreement for the admissibility of any such agreement, assuming it was valid to begin with.
The Court pointed out the myriad statutory requirements that the parties must strictly comply with for admissibility. After mentioning Evidence Code section
1119 (the blanket mediation confidentiality statute, unless the other
waiver/admissibility statutes are complied with), the Court undertook a systematic analysis of the Evidence Code exceptions. Evidence Code 1122 allows for admissibility of “…a communication or a writing” if “all persons who conduct or otherwise participate in the mediation expressly agree in writing or orally in accordance with section 1118 to the disclosure of the communication, document or writing.” Section 1123 allows for the disclosure of a written settlement agreement if the agreement is signed by the parties
The Court further stated:
Section 1124 specifies that an oral agreement made in the course of, or pursuant to, a mediation is not made inadmissible, or protected from disclosure, if
certain conditions involving section 1118 are satisfied. Oral agreements in
accordance with section 1118 occur when: (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.
The Court also mentioned Section 1126, which provides that statements made during the mediation remain confidential during the mediation, but also after the mediation ends. The Court then rejected the application of any judicial exceptions, including estoppel and waiver, to the confidentiality statutes, citing the absence of due process in the case before them.
The “takeaway” from Simmons: Absent an agreement signed by all parties that complies with Sections 1122, 1123, 1124 or 1118 (if it is an oral agreement and complies with the statutory scheme set forth above), mediation confidentiality remains sacrosanct. The Court came down strongly in favor of confidentiality and notwithstanding any claims of waiver or estoppel by failure to object to the admissibility of mediation-based evidence before the subsequent trial.
Cassel v. Superior Court, 51 Cal. 4th 113 (2011): This case has been the subject of considerable comment within the mediation community. In a nutshell, Cassel arises from a legal malpractice case where Plaintiff’s counsel advised Plaintiff to accept just over $1 million during mediation (an amount which Plaintiff contended was far less than his case was worth) and was alleged to have engaged in tactics against him to intimidate him into accepting the settlement. The Plaintiff had sought to admit not only evidence of what occurred at the
mediation, but also evidence of his mediation prep meeting with his counsel two
days earlier. The Supreme Court held that neither the evidence from the pre- mediation meeting nor the evidence of the tactics employed at the mediation to obtain the settlement were admissible.
The Court, in declining to disrupt the statutory scheme of mediation confidentiality, stated:
…[t]he Legislature might reasonably believe that protecting attorney-client conversations in this context facilitates the use of mediation as a means of dispute resolution by allowing frank discussions between a mediation disputant and the disputant’s counsel about the strengths and weaknesses of the case, the progress of negotiations, and the terms of a fair settlement, without concern that the things said by either the client or the lawyers will become the subjects of later litigation against either. The Legislature also could rationally decide that it would not be fair to allow a client to support a malpractice claim with excerpts from private discussions with counsel concerning the mediation, while barring the attorneys from placing such discussions in context by citing communications within the mediation proceedings themselves.
We express no view about whether the statutory language, thus applied, ideally balances the competing concerns or represents the soundest public policy. Such is not our responsibility or our province. We simply conclude, as a matter of statutory construction, that application of the statutes’ plain terms to the circumstances of this case does not produce absurd results that are clearly contrary to the Legislature’s intent. 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. (emphasis added)
Justice Chin pointedly expressed great reservations about the result in his concurring opinion as follows at p. 138:
“[t]his holding will effectively shield an attorney’s actions during mediation, including advising the client, from a malpractice action even if those actions are incompetent or even deceptive. Attorneys participating in mediation will not be held accountable for any incompetent or fraudulent actions during that mediation unless the actions are so extreme as to engender a criminal prosecution against the attorney. This is a high price to pay to preserve total confidentiality in the mediation process.” Cassel, 51 Cal. 4th at 138 (J. Chin, concurring in the result) (emphasis added)
The takeaway from Cassel: The court reaffirmed the virtually absolute protection afforded by the mediation statutes. However, the Court also expressed some discomfort in finding a more arguably “just” result, and instead being relegated to applying “the statute’s plain terms.” Justice Chin stated that mediation confidentiality exacted a “high price” from clients who may have been the victims of legal malpractice during mediation and/or a pre-mediation conference.
The Proposed Response To The Court’s Reservations Expressed In Cassel
The Cassel Court concluded that creating judicial exceptions was unwarranted since upholding confidentiality did not produce an “absurd” result (though Justice Chin was clearly troubled by the result).
Noting the Court’s concerns, California Council of Bar Associations adopted a resolution to amend Evidence Code section 1120. At present, Evidence Code 1120 does not preclude the admission of otherwise admissible evidence solely because of its use at mediation or a mediation consultation. Additionally, Evidence Code 1120 provides that (a) an agreement to mediate a dispute or (b) to extend the time within which to act or refrain from acting in a civil action is admissible, as is the fact that a mediator served, is serving, will serve, or was contacted about serving as a mediator in the dispute.
The proposed amendment to Evidence Code 1120, adding part (b)(4), was before the California Assembly as AB 2025. The proposed change provides, in pertinent part, that “communications directly between the client and his or her attorney during mediation” are admissible in an action for legal malpractice or breach of fiduciary duty, or both, and in a State Bar disciplinary action, “if the attorney’s professional negligence or misconduct forms the basis of the client’s allegations against the attorney.”
Without question, AB 2025 is a specific attempt to enact a legislative exception in response to Cassel. But will it work, and if so, how?
A few questions come to mind:
1. Doesn’t the proposed amendment take Evidence Code 1120 in a whole new direction? The other portions of Evidence Code 1120 allow evidence not to become inadmissible solely by reason of its introduction at mediation, as set forth above. However, these other sections are quite benign, and address specific situations that are, in truth, tangential to the mediation process. For the first time, by virtue of AB 2025, the Legislature is being asked to allow evidence of communications that take place during the mediation.
2. How would the evidence come in? If these are purely communications
between a client and his or her counsel during a mediation, then assuming there is no writing memorializing pure attorney client communications,
the lawsuit might be based primarily upon “he said/she said” evidence. This would discourage any attorney from giving frank and honest advice during mediation for fear of litigation later. It cannot be over-emphasized that mediations are unique in that things happen much more quickly than they do in the discovery process. Lawyering during the course of mediation often requires a series of frank and honest re-evaluations of previously held positions and the risks and uncertainties of taking them to trial. Unlike a trial, concessions are continuously made (as they must be) if the parties are to come to an agreement. Some are hard fought, while others occur more smoothly.
The chilling effect that this exception would have on mediation and negotiation conduct or advice cannot be overstated.
3. What role if any would a mediator play in such litigation? What if one of the allegations concerned communications that came up in caucus with the mediator? Or, if the mediator stepped out of the room to allow the
attorney and client to discuss an offer from the other side, and returned to
hear the client say something to the effect of “yes, that’s a great offer that’s acceptable to me” or “my attorney is pressuring me to take this. I don’t want to, but he says I have to take it.”
Evidence Code section 703.5 provides:
No person presiding at any judicial or quasi-judicial proceeding, and no arbitrator or mediator, shall be competent to testify, in any subsequent civil proceeding, as to any statement, conduct, decision, or ruling, occurring at or in conjunction with the prior proceeding, except as to a statement or conduct that could:
(a) give rise to civil or criminal contempt,
(b) constitute a crime,
(c) be the subject of investigation by the State Bar or Commission on Judicial Performance, or
(d) give rise to disqualification proceedings under paragraph (1) or (6) of subdivision (a) of Section 170.1 of the Code of Civil Procedure.
Since AB 2025 includes State Bar proceedings, mediators may already be competent to testify in those proceedings, notwithstanding any other confidentiality issues that may preclude their testimony. But they are decidedly not competent to testify in subsequent civil proceedings. (NOTE: As of mid- April, AB 2025 will not be coming to a vote in the current Legislative session. It remains to be seen whether it will be re-introduced).
The California Supreme Court exercised judicial restraint in construing the mediation confidentiality statutory scheme. In the cases that have come before them, including the three mentioned above, the Court has come down squarely on the side of preserving virtually full confidentiality not only in mediations, but also in pre-mediation discussions between an attorney and client, unless the exceptions spelled out in the statutes are strictly complied with. Nevertheless, Cassel showed that the court is becoming uncomfortable with some of the results at which they have arrived in interpreting these statutes. Cassel can certainly be read as a call for some legislative “help” to allow for more arguably “just”
Nevertheless, AB 2025 creates a number of pitfalls and practical problems. The proposed statutory amendment is directed squarely at Cassel, but in so doing, it creates a situation where frank and honest advice cannot be given as it has been in the past. One can only imagine that if AB 2025 were adopted, less candid advice would be given, and potentially, fewer cases will resolve.
Mediation is a unique proceeding in which information is exchanged far more quickly than in discovery, and positions and interests are constantly evolving. To second guess those decisions, in addition to creating a “stalemate” over whether the mediator may be called to testify, creates more problems than it solves.
Settling cases has long been encouraged by the Legislature and the Courts. Confidentiality is an indispensable component to settlement. Even if bad faith, mercurial or coercive conduct is protected, chipping away at mediation confidentiality is not the answer. Often, but not always, such conduct can be addressed or controlled within the mediation process. Whenever possible, it should be, and should not be subject to legislative exceptions that disturb confidentiality by attempting to create “perfection” to the detriment of the good.
Sean E. Judge is a mediator with offices in Woodland Hills, CA. In his 21 years as a litigator, he has represented corporate and institutional clients, and individual litigants and small businesses, both as Plaintiffs and Defendants. He can be reached via telephone at 818-616-8500, at www.judgemediation.com or via email at [email protected].