Negotiation News:  Volume 4, Issue 4

Welcome back to Negotiation News! In this issue, we’re taking another look at mediation confidentiality, which was again broadly upheld in the recent case of Amis v. Greenberg Traurig, LLP. However, since the Cassel case in 2011, the Law Revision Commission has taken a hard look at the issue of fairness in keeping all mediation communications completely confidential, and Legislative exceptions are currently under consideration. So, things may change in the future.

The Sound of Silence (Redux)

Mediation confidentiality isn’t going anywhere. ‘At least, for now.

In 2011, the California Supreme Court affirmed the broad protections of mediation confidentiality (as set forth in Evidence Code sections 1115 et. seq.) in the case of Cassel v. Superior Court (2011) 51 Cal. 4th 113. In Cassel, the plaintiff alleged that he settled his case for less than its fair value because his former counsel “induced him to settle” by coercing him to enter into a settlement agreement during mediation. (Cassel, 51 Cal. 4th at p. 118). The Supreme Court held that any such communications were protected by mediation confidentiality, and thus affirmed the trial court’s exclusion of evidence on this point, effectively ending plaintiff’s case.

In Amis v. Greenberg Traurig LLP, B248447, filed March 18, 2015, the Court of Appeal affirmed Cassel. In Amis, Plaintiff was a minority shareholder in a clothing export company. During litigation with one of its designers, Plaintiff’s company entered into an agreement to be purchased by a Japanese company, “pending a ‘favorable resolution or settlement” of the litigation with the designer. Amis, B248447, page 3.

The litigation with the designer proceeded to mediation where it was resolved. The settlement agreement provided for periodic payments to the designer, with a stipulated judgment for $2.4 million if payments were not made. Shortly thereafter, the Japanese firm decided not to purchase Plaintiff’s company. With no funds with which to make payments, Plaintiff’s company defaulted and judgment was entered accordingly. Thereafter, Plaintiff, who became personally liable for the judgment, declared bankruptcy.

Plaintiff alleged legal malpractice against his law firm, Greenberg Traurig (“GT”) for allowing him to enter into the settlement without fully advising him of the risks associated with entering into the agreement, especially if the Japanese firm did not complete its purchase of Plaintiff’s firm. The trial court entered summary judgment in favor of GT, stating that mediation confidentiality provided an absolute bar to the admission of any evidence of the advice given or the agreement entered into, since it was negotiated and finalized during mediation.

In affirming, the Court of Appeal stated, “Our Supreme Court has broadly applied the mediation confidentiality statutes and all but categorically prohibited judicially crafted exceptions, even in situations where justice seems to call for a different result. (emphasis added) Cassel, supra, 51 Cal.4th at p. 118 . . . “To carry out the purpose of encouraging mediation by ensuring confidentiality, the statutory scheme . . . unqualifiedly bars disclosure of communications made during mediation absent an express statutory exception. Judicial construction, and judicially crafted exceptions, are permitted only where due process is implicated, or where literal construction would produce absurd results, thus clearly violating the Legislature’s presumed intent.  Otherwise, the mediation confidentiality statutes must be applied in strict accordance with their plain terms. Where competing policy concerns are present, it is for the Legislature to resolve them.” (emphasis added).

The takeaway: Courts aren’t creating any judicial exceptions to the mediation confidentiality statutes set forth in the Evidence Code, even where there are allegations of malpractice. The Amis court explicitly found that despite an outcome that was devastating to Plaintiff, his claim for malpractice did not allow it to create an exception because (a) due process was not implicated and (b) the statutes did not produce an absurd result, though unjust results will be allowed to stand.

Despite the court’s broad protection of mediation confidentiality, the California Law Revision Commission is taking up this issue, considering possible amendments to Evidence Code sections 703.5, 958 and 1119. The most recent changes under consideration, as of April 15, 2015, are (1) the possibility of in camera disclosures that balance confidentiality with the public policy of allowing a plaintiff to present evidence of potential harm, and (2) potentially allowing evidence of attorney malpractice in mediation only if corroborated by other evidence.

For a read of the April 15, 2015 text, here’s the link: http://www.clrc.ca.gov/pub/2015/MM15-13.pdf .

• Charity

As always, when booking your mediation, please direct me to the website of your charity and I will donate part of the fees in your name.

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].