How to Read the Constitution

Let me put it this way; there are really only two ways to interpret the Constitution — try to discern as best we can what the framers intended or make it up. No matter how ingenious, imaginative or artfully put, unless interpretive methodologies are tied to the original intent of the framers, they have no more basis in the Constitution than the latest football scores. To be sure, even the most conscientious effort to adhere to the original intent of the framers of our Constitution is flawed, as all methodologies and human institutions are; but at least originalism has the advantage of being legitimate and, I might add, impartial.

Hat Tip to Matthew J. Franck

In mediation, I consider carefully the words of your mediation brief and the meaning you wish to convey by the words you choose. Similar attention is paid to the words of any agreement or applicable statute you are construing. Our Constitution deserves no less attention than that from our courts and elected representatives.

Mediation remains confidential in California

On July 21, 2008, the California Supreme Court confirmed for the third time that, in matters within the jurisdiction of California state courts, mediated in accordance with California law, confidential means confidential.

Simmons vs. Ghaderi (2008) 44 Cal.4th 570, concerns the mediation of a medical malpractice suit. During mediation, the defendant’s medical malpractice insurance provider arrived at settlement terms with plaintiffs, which terms were orally accepted by the plaintiffs and placed in a written settlement agreement for the parties to sign. The defendant, however, revoked her consent to settle and left mediation without signing the settlement agreement.

In opposing plaintiffs’ Code of Civil Procedure section 664.6 motion to enforce what they contended was an oral settlement reached in mediation, the defendant argued that no enforceable settlement was reached because she had not signed the written settlement agreement and had withdrawn her consent to settlement. But the defendant did not object to consideration of the evidence of what had occurred in mediation. The trial court denied plaintiffs’ motion to enforce settlement, finding that the requirements of CCP section 664.6 had not been met, but suggested that, alternatively, an enforceable oral contract may have been reached during mediation.

At the trial of what was limited to the defendant’s alleged breach of an oral settlement agreement reached during mediation, the defendant did object that the mediation confidentiality statutes precluded plaintiffs from proving the existence of an oral settlement agreement. Plaintiffs’ evidence of what had occurred at mediation, however, was admitted over the defendant’s objection and the trial court concluded that plaintiffs and defendant’s agent had, indeed, entered into a valid, enforceable oral contract before the defendant withdrew her consent. The Court of Appeal affirmed the trial court’s judgment, finding that the defendant was estopped from asserting mediation confidentiality by her own failure to object and her use in pretrial motions of the evidence of what had occurred during mediation.

In reversing this decision, the California Supreme Court unanimously found that the Court of Appeal had improperly relied on the doctrine of estoppel to create a judicial exception to the statutory requirements of confidentiality in mediation proceedings. Agreeing with the Court of Appeal’s dissenting opinion that this case is more accurately described as an implied waiver by conduct case, than an estoppel case, and finding that implied waiver does not apply to mediation confidentiality, the Supreme Court held, unambiguously, that:

Here, the mediation confidentially statutes made inadmissible all evidence of an oral contract between plaintiffs and defendant during mediation.

In California, confidential means confidential.

See Simmons vs. Ghaderi here.

Copyright © 2008 by Kevin K. Forrester. All rights reserved.

Attempt mediation before litigation, or lose attorney’s fees right

The plaintiff in the case of Jay Lange v. Roxanne Schilling, et al. (2008) 78 Cal.Rptr.3d 356, ultimately spent over $113,000 in attorney fees to recover a $13,000 judgment, but failed to recover his attorney’s fees because he did not attempt to mediate his dispute before commencing litigation.

Paragraph 22 of the California Association of REALTORS (CAR) form purchase and sale agreement, used in this and the majority of California residential real estate transactions, provides the following attorney’s fees language:

In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller, except as provided in paragraph 17A.

17A, however, is the critical paragraph of the CAR Agreement for the purposes of Mr. Lange and this post. 17A states, in pertinent part, that:

Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action…. If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action.

(See Lange at 357-358, emphasis added.)

The California Third District Court of Appeal, citing Frei v. Davey (2004) 124 Cal.App.4^th 1506, 22 Cal.Rptr.3d 429, and other California cases held, bluntly, that “the agreement means what it says: plaintiff’s failure to seek mediation precludes an award of attorney fees.”   (Lange at 357.)

(The Lange v. Schilling decision was recently certified for publication, thanks to the efforts of the California Association of REALTORS, and is available here.)

Copyright © 2008 by Kevin K. Forrester. All rights reserved.

Hang Together

We must all hang together, or assuredly we shall all hang separately.

Benjamin Franklin (1706-1790)

1776 - at the signing of the Declaration of Independence

Patriot Post.

Buyers vs. Agent

A case in which real property buyers alleged that the $1.2 million purchase price they paid for a Carlsbad, California house in 2005 was too high, and blamed their agent, has been decided in favor of the agent:

Buyers vs. Agent, April 1, 2008;

Jury Says REALTOR Not to Blame for Purchase Price, April 11, 2008.

"With an enthusiastic and unanimous response, the jury found that [Mike] Little had executed a reasonable standard of care when he showed his clients, Vern and Marty Ummel, more than 80 homes in a house hunt that began in May 2005, ultimately leaving them to their decision to pay $1.2 million for their house two months later."

There are lessons to be taken from this case by buyers, sellers, and agents alike, not the least of which is the tragedy of winning. 

 

Confidential means confidential

In matters within the jurisdiction of California state courts, mediated in accordance with California law, confidential means confidential.

California mediation confidentiality is defined by contract law, statutory law, and common law.

Contract law, because most mediators require parties, their attorneys and others in mediation to sign an agreement before mediation commences that includes words to the effect that:

All statements made in preparation of or during the course of this mediation are privileged settlement discussions, are made without prejudice to any party’s legal position, and are undiscoverable and inadmissible for any purpose in any legal, administrative, or other proceeding.

Statutory law, because section 1119 of the California Evidence Code states that:

Except as otherwise provided in this chapter:

(a) No evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible or subject to discovery, and disclosure of the evidence shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given.

(b) No writing, as defined in Section 250, that is prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation, is admissible or subject to discovery, and disclosure of the writing shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given.

(c) All communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation shall remain confidential.

(See also Evidence Code Sections 1115 - 1128.)

And common law, because California appellate courts have held that the California Evidence Code means what it says.

Foxgate Homeowners’ Association, Inc. vs. Bramalea California, Inc. (2001) 26 Cal.4th 1, and Genoveva Rojas vs. Superior Court (2004) 33 Cal.4th 407, for example, are both early California Supreme Court opinions supporting the Legislature’s definition of mediation confidentiality. In the words of the court:

One of the fundamental ways the Legislature has sought to encourage mediation is by enacting several mediation confidentiality provisions. (Foxgate at 14.)  As we have explained, confidentiality is essential to effective mediation because it promotes a candid and informal exchange regarding events in the past. This frank exchange is achieved only if participants know that what is said in the mediation will not be used to their detriment through later court proceedings and other adjudicatory processes. To carry out the purpose of encouraging mediation by ensuring confidentiality, our statutory scheme . . . unqualifiedly bars disclosure of specified communications and writings associated with a mediation absent an express statutory exception. (Foxgate at 15.)  Rojas at 415-416 (internal quotation marks omitted).

There are, however, and will continue to be, efforts to define, or redefine, or construe, or limit mediation confidentiality. In the recent case of William Wimsatt vs. Superior Court (2007) 152 Cal.App.4th 137, the Court of Appeal upheld the broad standards of mediation confidentiality enacted by the California Legislature and protected by the California Supreme Court even though doing so, the court believed, may have prevented a party to the mediation from pursuing a legal malpractice lawsuit against his own attorneys. Accordingly, the Wimsatt opinion includes this comment by the Court of Appeal:

Given the number of cases in which the fair and equitable administration of justice has been thwarted, perhaps it is time for the legislature to reconsider California’s broad and expansive mediation confidentiality statutes and to craft ones that would permit countervailing public policies be considered.

Until that day comes, or until the California Supreme Court permits the crafting of judicial exceptions to California’s statutory mediation confidentiality scheme, confidential means confidential.

(I commend to you the fine article by attorney Michael Young entitled “Mediation Gone Wild” chronicling the consequences of breaching mediation confidentiality in another jurisdiction, available here.)

The Great Disclosure Obligation Dilemma

Special to the San Diego Daily Transcript

Question:  When we purchased our home in 1998, we paid for a professional home inspection that revealed drainage problems with the property.  These problems were fixed before we bought the home.  We recently sold our home, and the buyers are now claiming that they have drainage problems and they are trying to hold us responsible.  They say that we “failed to disclose” the drainage problems to them, but as far as we knew there was no problem because we had it fixed.  Anyway, we sold the property “as is”, so we should have no problem, right?

Your obligation to disclose facts about the property being sold, and whether or not you sell the property “as is”, are two different questions.

My short answer is:  you have a problem.  My longer answer explores the seriousness of your problem.

A contract which states that a property is being sold “as is” means that the property is being sold and will be transferred to the buyer in its present condition.  “As is” means that the seller assumes no responsibility for making any repairs or improvements to the subject property.  It means that the obvious deficiencies in the property, such as broken windows and the like, are the buyer’s problem.  But, “as is” does not mean:  “what you see is what you get.”  “As is” does not mean that you, the seller, can avoid disclosing to your buyer all that you know about the condition of the property you are selling.

You, as a seller of real property, are required to disclose to your buyer any facts materially affecting the value or desirability of the property you are selling that are known or accessible only to you, and which are not known to or within the reach of the diligent attention and observation of the buyer.  This language is a paraphrase of a long history of Court decisions in the State of California.  It means that sellers must tell buyers facts about properties being sold when those facts are known only to the seller (they are not obvious) and would be important to the buyer in making their decision to buy.

If it would be important to you to know that at one time there were drainage problems on a property you are considering buying, then it is fair to conclude that your buyer would want to know that information also.  Even information about your property that seems to you to be trivial can be important to your buyer, or can become important when circumstances change, like when it rains.

Sometimes the failure of a seller to disclose what they know about a property can constitute actual fraud.  If a buyer is able to prove in a lawsuit or arbitration that a seller committed actual fraud in a real estate transaction by failing to disclose or by covering up important facts about a property, then that seller could be held liable for paying repair costs and damages equal to the difference in value (if any) between the purchase price paid and the true value of the property at the time of sale.  In cases of intentional fraud, punitive damages might be available to a buyer.  In most disputes involving real estate purchase and sale agreements, attorneys fees will be available to the prevailing party because most real estate purchase and sale agreements include an agreement that the losing party will be required to pay the prevailing party’s attorneys fees and costs after any legal action.

You believe, in your case, that there was no need to disclose your prior drainage problem to your buyer because the problem had been repaired.  Unfortunately, the fact of your repair does not make the information about your prior drainage problem, or the repair, potentially any less important to your buyer in making their decision to buy your property.  The decision about the condition of a property being purchased is the buyer’s decision to make, not the seller’s.  The buyer is entitled to make their decision to purchase based upon all of the facts that they, the buyer, can observe about the property, together with all of the material facts about the property known to the seller.

You, as a seller, have a legal obligation to disclose what you know.  This obligation is not reduced by the fact that you are selling your property “as is.”  The buyer is still entitled to know what “as is” means.

You now have the initial problem of responding to your buyer’s complaint, either formally or informally.  Whether you will ultimately have the larger burden of paying to help resolve your buyer’s complaint can only be determined after a full analysis of all of the facts, for which you should consult legal counsel of your choosing.  My response here is only offered as a general discussion of some of the applicable law based upon the facts contained in your question.

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Tuesday, November 26, 2002    http://www.sddt.com/ Source Code:  20021126tdb

Copyright © 2002 by Kevin K. Forrester. All rights reserved.