January 2014 | Earn one hour of MCLE Credit in Legal Ethics
By William K. Mills
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Ask most lawyers about the “mediation privilege,” set forth in
California Evidence Code sections 1115-1128, and you will hear the well-worn
idiom that anything said “for the purpose of, in the course of, or pursuant to”
a mediation is confidential and inadmissible beyond the scope of the mediation.
Several years ago, the California Supreme Court in Cassel v. Superior Court,
51 Cal. 4th 113, 117-118 (2011) (“Cassel”), characterized the mediation
privilege as “clear and absolute” and stated that it “broadly provid[es] for
the confidentiality of things spoken or written in connection with a mediation
proceeding.” However, is the application of the mediation privilege really so "clear
and absolute?" What is considered "a mediation proceeding?" What
triggers the application of the mediation privilege? More importantly, why do
these questions matter for lawyers and their clients?
Consider the following scenarios:
These are not hypotheticals, but based on actual cases: Cassel,
51 Cal. 4th 113; Rojas v. Superior Court, 33 Cal. 4th 407 (2004)
("Rojas"); and Foxgate Homeowners’ Assoc. v. Bramalea
California, Inc., 26 Cal. 4th 1 (2001) ("Foxgate"). The
California Supreme Court held in each case that communications between a lawyer
and a client in the course of mediation, writings prepared for mediation and a
mediator’s account of a proceeding are confidential and absolutely inadmissible
in any subsequent proceedings on the grounds that the material relates to or is
the product of a mediation. Application of the mediation privilege results in
the abandonment of potential claims based on conduct in connection with the
mediation, including malpractice against the lawyers, or claims that the
settlement should be voided for the parties’ conduct. One court described such
abrogation as “harsh and inequitable" consequences, which a party should
accept only after fair warning. Wimsatt v. Superior Court, 152 Cal. App.
4th 137, 164 (2007). Nevertheless, the California Supreme Court has
proven willing to draw a clear line of inadmissibility for mediation conduct
Would the results have been the same had these conversations and
documents been made in connection with a different alternative dispute
resolution proceeding such as a settlement conference, a court-ordered
mediation, or a neutral evaluation? As lawyers, we encounter each of those
contexts frequently, and in most instances would prefer for many reasons that
the communications relating to these various settlement-related forums remain
strictly confidential, inadmissible and buried deeply — never to see the light
of day. Surprisingly, the mediation privilege does not protect those
communications unless all parties agree that it should.
Evidence Code section 1115(a) defines mediation as “a process in
which a neutral person or persons facilitate communication between the
disputants to assist them in reaching a mutually acceptable agreement.” In Travelers
Casualty and Surety Co. v. Superior Court, 126 Cal. App. 4th 1131,
1138-1139 (2005) (“Travelers”), citing, Saeta v. Superior
Court, 117 Cal. App. 4th 261, 269 (2004), the court noted that “[a]lthough
mediation takes many forms and has been defined in many ways, it is essentially
a process where a neutral third party who has no authoritative decision-making
power intervenes in a dispute to help the disputants voluntarily reach their
own mutually acceptable agreement.” In theory, what qualifies as a mediation is
to be determined by “the nature of the proceeding, not its label.” Seemingly then, when a neutral third person is involved in any settlement
discussion — whether a mandatory settlement conference at the courthouse, a
voluntary settlement discussion offered through the local bar association, or a
voluntary mediation — the mediation privilege is triggered, right? Well . . .
not so fast.
The most explicit (yet perhaps not widely known) exception to
the expansive definition of “mediation” is set forth in Evidence Code section
1117(b)(2). That statute provides that the mediation privilege does not apply to “[a] settlement conference pursuant to Rule 3.1380 of the California
Rules of Court[,]” e.g., a mandatory settlement conference. As discussed in Jeld-Wen,
Inc. v. Superior Court, 146 Cal. App. 4th 536, 540 (2007), voluntary
participation is a fundamental principle of mediation. A court order requiring
civil litigants to attempt to settle their dispute is incongruent with the
voluntary nature of mediation and it follows that the mediation privilege would
not apply. So, as long as the parties are not ordered to attempt to resolve
their dispute and are participating voluntarily, the mediation privilege is
triggered, right? Again … perhaps not.
Although fast-disappearing in the wake of California’s budget
woes, voluntary settlement conferences offered through local courts are a
useful resource for civil litigants to consider long before being ordered to a
mandatory settlement conference and before a case may be at a point where the
parties are ready for private mediation. By its name the parties are voluntarily agreeing to attend a settlement conference; therefore, there should be no
question that the mediation privilege applies, right? Not necessarily. At least
one California court has left the issue open to debate.
In Travelers, the parties stipulated to the appointment
of an active judge to serve as a settlement judge. Travelers, supra,
126 Cal. App. 4th at 1135. The settlement judge held a “Valuation Hearing”
after which he issued a report rendering an opinion on the verdict potential
and reasonable settlement value of the underlying cases for use in later
proceedings in the case. Id., at 1135-1138. Understandably, several
parties objected to the use of the report in later proceedings on the grounds
that the judge’s issuance of the report exceeded the powers of a settlement
judge and violated the mediation privilege’s confidentiality provisions. Id., at 1138.
The Second District Court of Appeal began its analysis by noting
that “[m]ediation generally falls into two categories. The first is traditional
or classic mediation, where attorneys are not present, the mediator meets
directly with the parties to facilitate negotiations and the mediator is
passive, expressing neither judgment nor opinion on the merits. The
second is the type of mediation conducted as part of voluntary settlement
conferences. In that form, lawyers are present and the mediator takes a
more active role, often expressing an opinion on the merits, but without
authority to reach a decision.” Id., at 1139 (emphasis added).
The court believed the settlement discussions in Travelers fell into the second category of mediation. Id., at 1147, fn. 8. However,
despite finding that this proceeding was a “mediation” within a voluntary
settlement conference, the court declined the opportunity to clarify whether
the mediation privilege set forth in Evidence Code sections 1115-1128 applies
to voluntary settlement conferences:
We expressly decline to consider or clarify any
differences that might exist between a mediation and voluntary settlement
conference. Therefore, our decision should not be construed as holding that all
voluntary settlement conferences are mediations which are subject to the rules
concerning the conduct of mediation proceedings. Id., at 1147, fn. 8.
The take-away from Travelers seems to be that mediations
are a type of voluntary settlement conference; yet, not all voluntary
settlement conferences are mediations subject to the mediation privilege.
What would a court do in the case of a court-ordered mediation
before a panel of unpaid volunteers? Is that a mediation in which the parties
are required to participate? What about an early neutral evaluation at which a
judge — or volunteer attorney — presides? Like a voluntary settlement
conference in Travelers, a neutral evaluator will express an opinion on
the merits of the case, but is without authority to render a decision. Further,
Rule of Court Rule 3.727(6) provides that in connection with the initial case
management conference in Superior Court cases:
[T]he parties must address, if applicable, and the court may
take appropriate action with respect to . . . (6) Whether the parties have
stipulated to, or the case should be referred to, judicial arbitration in
courts having a judicial arbitration program or to any other form of
alternative dispute resolution (ADR) process and, if so, the date by which the
judicial arbitration or other ADR process must be completed.
Does the court’s order pursuant to Rule 3.727(6) prevent
application of the mediation privilege? Some might argue that the Rule
3.727(6) is merely a facility for organizing and promoting voluntary mediation
and that a court’s order reflecting the parties’ agreement to participate in
mediation does not vitiate the mediation privilege. Yet, questions and
confusion remain. How can one be certain outside the context of a process that
all parties expressly denote as a mediation that the mediation privilege will apply?
This issue is important because without a definitive answer, there
is a risk that statements made in mediation will be held admissible in later
proceedings, creating uncertainty and risk for lawyers and their clients.
Lawyers may be second-guessed if their clients suffer some form of buyer’s
remorse after a settlement is executed; parties may seek to void settlements
based upon statements made at mediation that were later determined to have been
inaccurate; or, or some other issue may arise that places the participants’
settlement conference-related conduct or statements under scrutiny.
Outside of the context in which the mediation privilege clearly
applies, statements and conduct in negotiation of settlement are
protected, if at all, by Evidence Code section 1152. The protection of Evidence
Code section 1152 falls far short of the broad coverage of the mediation
privilege. That provision, in sum, makes inadmissible evidence of negotiation
statements and conduct to prove liability or damages, unless otherwise
admissible. Thus, such statements or conduct can be admissible for other
purposes, including, but not limited to, proof of truth, knowledge or bias. See
Carney v. Santa Cruz Women Against Rape, 221 Cal. App. 3d. 1009, 1023-1024
(1990); Moreno v. Sayre, 162 Cal. App. 3d 116, 126 (1984).
The simple way to avoid uncertainty about the application of the
mediation privilege is for parties to a settlement discussion to stipulate that
the mediation privilege applies. Before settlement discussions occur — whether
with opposing counsel over coffee, in judge’s chambers, or in counsel’s private
office — it is advisable to request that all parties agree in writing that
the mediation privilege and consequent rules set forth in Evidence Code
sections 1115-1128 will fully and without question apply to their proceeding.
This simple request, perhaps redundant in many formally arranged mediations,
can alleviate the risk that the broad scope of the mediation privilege’s confidentiality
will not apply to a given ADR proceeding.
It is common among ADR services organizations throughout the
state to obtain a stipulation at the outset of any mediation proceeding. Those
stipulations assure that each participant confirm the proceeding is a voluntary
mediation to which the mediation privilege specifically applies. A party's refusal
to sign that stipulation would bring a quick and resounding halt to the process
and would indicate that the reneging party is not serious about or interested
in mediation. Suggesting the use of a stipulation like that in connection with
other forms of settlement discussion would provide similarly useful information
— and protection, once signed.
There can be little doubt that California courts are extremely protective
of the mediation privilege. State courts consistently refuse to create
exceptions to the mediation privilege when, arguably, the facts of a case
result in an unfair result. “[I]n banning any court-created exceptions to the
statutory confidentiality protections, the Supreme Court emphasized that the
Legislature had weighed the possibility of some unfair results against the
strong public policy supporting mediation and come down on the side of
mediation.” Provost v. Regents of University of Cal., 201 Cal. App. 4th 1289, 1303 (2011); See also, Rojas, supra, 33 Cal. 4th at 423-424 (holding that there is no good cause exception to the privilege); Eisendrath
v. Superior Court, 109 Cal. App. 4th 351, 362-363 (2003)
(holding that no exception to the privilege can be implied); Foxgate, supra, 26 Cal. 4th 1, 4 (holding that there are no judicial exceptions
to the confidentiality requirements of Evidence Code sections 1119 & 1121
[regarding confidentiality of a mediator’s reports and findings]). The fact,
extended by Cassel, that the mediation privilege is broad and inclusive,
has and will continue to promote a false sense of security that other types of
settlement negotiations will be protected by the privilege in the same way as
mediations. However, despite the breadth of the mediation privilege, in other
types of proceedings, caution must be exercised to assure that the mediation
privilege will protect counsel and their clients from later proceedings based
upon what happens at mediation.
The confidentiality assured by the mediation privilege is an
essential and integral part of mediation. It encourages the frank exchange of
information between the parties and promotes candor-based problem solving that
leads to more settlements than would otherwise occur. Doubts about the application
or scope of the mediation privilege in any given ADR forum results in less
information sharing, less willingness to investigate material information and
more indirect communications among the parties and neutrals. Indeed, the
prospect of “dispute resolution” changes dramatically depending on the level of
confidentiality that is assured to a given proceeding. Accordingly, the first
step in any dispute resolution process should be to avoid assumption and assure
that the parties and counsel agree (and memorialize in writing) that
California’s expansive mediation privilege applies to their settlement-related discussions.
William K. Mills is a partner at Parker Shumaker Mills LLP,
Los Angeles. Associates Justin D. Denlinger and Jason J. Rudolph and law clerk Earle
Benjamin Seagle IV also contributed to this article. Mills is a certified specialist
in legal malpractice by The State Bar of California Board of Legal
Specialization and a member of the State Bar Standing Committee on Professional
Responsibility and Conduct (COPRAC). This article appears in the California Bar
Journal as part of COPRAC’s outreach and educational efforts. For more
information on COPRAC go to calbar.ca.gov/ethics.
The views expressed herein are his own.