Settlement Agreement Confidentiality

We have learned that mediation confidentially is protected in California by contract law, by the plain meaning of statutory law, and by our highest state court’s confirmation that our statutory law means what it says.  But what about our settlement agreements; what about the anticipated results of our mediations, are they confidential too?

The answer, as found by the Second California District Court of Appeal in the case of Estate of Thottam, is that it depends upon the agreements of the parties and the plain meaning of the applicable statute.

Evidence Code Section 1123 provides 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.

(c) All parties to the agreement expressly agree in writing, or orally in accordance with Section 1118, to its disclosure.

(d) The agreement is used to show fraud, duress, or illegality that is relevant to an issue in dispute.

In other words, a settlement agreement is not made inadmissible if the agreement provides that it is admissible, the agreement provides that it is enforceable, the parties to the agreement agree to its disclosure, or the agreement is used to show fraud, duress, or illegality.

The importance of these distinctions was made clear in Estate of Thottam, which involved a dispute among siblings regarding the distribution of assets from their deceased mother’s estate. Before the mediation of this dispute, all three siblings and the mediator signed a “mediation and facilitation confidentiality agreement.”

During mediation, a chart was prepared showing assets along the left margin and including three columns, one for each sibling. The chart was filled in to designate specific allocations of the listed assets, and each sibling signed and dated their respective column at the top of the chart and initialed each entry in their column.  (No other “settlement” language was contained on the chart.)

After mediation, one of the siblings, Peter, prepared two agreements concerning the estate assets, both of which included the chart prepared in mediation, and neither of which would be signed by the other siblings. The other siblings, Elizabeth and Jameson, took the position that no agreement was reached in mediation.

Litigation ensued. Elizabeth refused to answer Peter’s deposition questions concerning the chart prepared during mediation or discussions about the chart during mediation. Elizabeth sought a protective order and Peter sought to compel Elizabeth’s testimony.

Peter’s motion to compel was granted, based upon the fact that the “mediation and facilitation confidentiality agreement” between the parties stated that:

“all matter discussed, agreed to, admitted to, or resulting from” the mediation would “(1) be kept confidential and not disclosed to any outside person (excluding spouses), (2) shall not be used in any current or future litigation between us (except as may be necessary to enforce any agreement resulting from the Meeting), and (3) shall be considered privileged and, as a settlement conference, non-admissible under the California Evidence Code in any current or future litigation between us.”

The judge granting the motion to compel deposition testimony decided that the exception to the mediation privilege found in Evidence Code 1123(c) was satisfied by the parties’ agreement highlighted above. In other words, the court found that parties can agree to disclosure of a written settlement agreement before reaching or even discussing a written settlement agreement.

The chart was in.

The trial judge disagreed, taking the position that the Evidence Code 1123(c) could only be satisfied by a disclosure agreement executed after the parties had reached their settlement agreement.

The chart was out, and with it Peter’s evidence that the siblings had reached any agreement in mediation.

The Court of Appeal, however, disagreed with the trial court, holding that there is no requirement that a section 1123(c) agreement concerning disclosure be made “at or after the time of settlement.” The court further found that the chart was a written settlement agreement for purposes of Evidence Code 1123(c), and remanded the case for a new trial.

The chart was back in.

So, yes, a settlement agreement is confidential (“inadmissible”), unless (1) the agreement provides that it is admissible, or (2) the agreement provides that it is enforceable, or (3) the parties to the agreement agree to its disclosure before, at, or after the time of settlement, or (4) the agreement is used to show fraud, duress, or illegality.

Mediators are advised to review their mediation and confidentiality agreements in light of this decision.

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

Politics, mediation, war and peace

 War is not an independent phenomenon, but the continuation of politics by different means.

 Karl (Carl) von Clausewitz (1780-1831) 

The statement that ‘war is a continuation of politics by other means’ is important not because Clausewitz said it but because it reflects a fundamental reality.

Christopher Bassford, Clausewitz in English: The Reception of Clausewitz in Britain and America, 1815-1945, Chapter 4 (New York: Oxford University Press, 1994).

The fundamental reality of litigation, mediation, arbitration and trial is that each is a continuation of the other, and the best results in mediation are achieved by those best prepared for war.  Parties who attend mediation knowing the facts of their case, their likelihood of proving the facts that matter, their litigation budget, and their closing argument are more likely than not to settle.  Your ability to secure a durable settlement increases in direct proportion to your readiness, willingness, and ability to fight.  Mediation is not a place to find out the value of your case, it’s a place to find out if you’re going to settle the case you have.

To secure peace is to prepare for war.

Karl (Carl) von Clausewitz

“Travesty of Justice”?

The November 2007 "confidential means confidential" post on this site includes a link to attorney Michael Young’s web page, which chronicles the consequences of breaching mediation confidentiality in the Florida case of Doe, et al vs. Joseph R. Francis et al..  "Girls Gone Wild" founder and defendant Joseph Francis has now filed suit in Los Angeles Superior Court to set aside the mediated settlement of that now almost 5-year-old case.  CPR picks up the story here.

Study Finds Settling Is Better Than Going to Trial

 A study of 2,054 cases that went to trial from 2002 to 2005, concludes that parties can, and more often due, win without fighting.

“The lesson for plaintiffs is, in the vast majority of cases, they are perceiving the defendant’s offer to be half a loaf when in fact it is an entire loaf or more,” said Randall L. Kiser, a co-author of the study and principal analyst at DecisionSet, a consulting firm that advises clients on litigation decisions.

Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial - meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.

Read the entire article here.

1984: Peter Ueberroth Unites Nations

In 1984, the . . . Soviets were recruiting countries to retaliate for the United States’ decision to stay away from the 1980 Moscow Games, a boycott that 61 other countries joined. The Soviets announced on May 8, 1984, that their team would not come to Los Angeles because of fears for their athletes’ safety, claiming they had agreements from 100 countries to do the same.

Ueberroth said he saw the list. At the top was China.

His response was to assemble a team of envoys who could appeal to officials in undecided countries and persuade them to come. [Charles] Lee, a federal prosecutor in Los Angeles who is not Chinese but speaks fluent Mandarin, took a small group to China. Ueberroth asked a woman on his staff, Agnes Mura, to lead a group to Romania; she had been born there. Ueberroth went to Cuba.

“People think of the Olympics as a corporate structure,” said Bob Ctvrtlik, who played for the United States volleyball team at the ’84 Games and is now a member of the International Olympic Committee. “It really is not. It relies on relationships. It relies on trust. It relies on people who can cut through cultural differences and find common ground. That was the brilliance of that program.”

Ueberroth was unable to sway Fidel Castro — he keeps a framed copy of a headline from an article in The Los Angeles Times that read, “Ueberroth Strikes Out in Cuba.” But Lee’s visit was a triumph, and Mura delivered the perhaps more stunning news later in May that tiny Romania would defy the Soviet boycott.

Only 14 countries boycotted the 1984 Games. 

Current U.S. Olympic Committee Chairman Ueberroth believes that China’s agreement to attend the 1984 Olympic Games in Los Angeles saved not only the 1984 Games, but all the ones to follow. 

China’s attendance was obtained by intermediaries, through meetings, and conversation.

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.

Mediator as Juror

Thanks to Geoff Sharp for this one:  Mediator as Juror.

I highly recommend clicking through to read about the jury’s consideration of a commercial lease dispute one day in Middlesex County Superior Court.

 

Winning without Fighting

One Olympic Victory by Ronan Farrow and Mia Farrow, describes one victory in Mia Farrow’s fight to save the citizens of Darfur from what was unanimously condemned as early as 2004 by the U.S. Congress as genocide.  One Olympic Victory is the result of one voice becoming many and causing one party to a crisis to reconsider its options.  Whether through demonstration, mediation, or diplomacy, this is winning without fighting. 

(Mia Farrow has been a high profile advocate for children’s rights, working to raise funds and awareness for children in conflict affected regions, predominantly Africa. She is a UNICEF Goodwill Ambassador and has worked extensively to draw attention to the fight to eradicate polio, which she survived as a child. Her latest humanitarian effort raises awareness of the genocide occurring in Darfur, Chad and Central African Republic.  Today’s conditions in Darfur are revealed in a Joint Statement on Darfur by members of the UN Country Team in Sudan, and at MiaFarrow.org.)

 

Mediation Week

On February 22, 2008, the Judicial Council of California approved a resolution recognizing March 16-22, 2008 as "Mediation Week." The resolution signed by Chief Justice Ronald M. George and Administrative Director of the Courts William C. Vickrey recognizes the benefits and success of court mediation programs, commends the efforts of all those who make mediation and mediation programs available to the citizens of California, and encourages the courts to recognize those individuals and to publicize their mediation programs during Mediation Week.

Judicial Council of California.

 

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