Recently, I  came across the unpublished decision in Benesch v. Green, 2009 WL 4885215, Case No. C-07-3784 EDL (N.D. Cal. Dec. 17, 2009) (“Benesch”)(Benesch v Green ) in which the Honorable Elizabeth D. La Porte, United States Magistrate Judge, relied wholly on the California statutes and case law in rendering a decision on mediation confidentiality. It caught my interest because, although a federal case, it applied California law on mediation confidentiality.

       In Benesch, plaintiff (Fritzi  Benesch) sued her former attorney, (Sharon Green) for legal malpractice arising  as a result of a two day mediation that occurred in April, 2006. Id. at *1.

      In that former state court action, plaintiff sued her daughter Valli  Benesch Tander, her son-in-law, Robert Tandler, her estate planning attorney William Hosisington and the law firm of Orrick, Herrington  & Sutcliffe. The mediation concluded with the parties signing a document entitled “Terms of Settlement” (“Term Sheet”). Thereafter, when the defendants moved to enforce the settlement, plaintiff argued in state court that the Term Sheet did not accurately reflect her intent with regard to provisions for her other daughter, Connie Benesch. The state trial court rejected this argument, and entered an order enforcing the settlement.   Id.

      Consequently, plaintiff filed this action in San Francisco County Superior Court in July 2007 (Case No. 07-462683). Alleging diversity jurisdiction (28 U.S.C. §1332(a)), the defendant removed it to federal court. There, the matter proceeded until 2009 when defendant moved to amend her Answer (originally filed in July 2007) to add the defense that plaintiff’s complaint is barred by California’s mediation confidentiality statutes (California Evidence Code §1115 et seq.).
 

      Defendant also moved for summary judgment on this same ground: that California’s mediation confidentiality statutes “. . .precludes plaintiff from establishing her malpractice claim and defendant from meaningful defending herself. Id.
 

      As plaintiff filed a non-opposition to defendant’s motion to amend her answer, the court granted the motion.

       With respect to defendant’s motion for summary judgment, the court denied it without prejudice based on its extensive discussion of California statutory and case law on mediation confidentiality.  

       Initially, the district court noted that mediation confidentiality is protected by California Evidence Code §§1115-1128. It then noted that California Evidence Code §1122  (Evid. C. 1122  ) sets out certain exceptions, thereby making such communications admissible in certain limited situations. However, the district court found no applicable exception: none of the parties to the mediation expressly waived mediation confidentiality. Id. at *3- *4.
 

      The district court also reviewed the California decisions including Foxgate Homeowners’ Ass’n v. Bramelea California, Inc., 26 Cal. 4th  1, 108 Cal. Rptr. 2d 642, 25 P.3d 1117 (2001) (Foxgate )and Simmons v. Ghaderi, 44 Cal. 4th 570, 80 Cal. Rptr. 3d 83, 187 P.3d 934 (2008) (Simmons v Ghaderi ) in which the Supreme Court of California strictly applied the mediation confidentiality statutes “. . .even when doing so may lead to an inequitable result.” Id. at *4.  For example, the district court cited the California appellate court decision in Wimsatt v. Superior Court, 152 Cal. App 4th 137, 61 Cal. Rptr. 3d 200 (2007) ( Wimsett) recognizing that the application of mediation confidentiality to a mediation may well mean that a party is forced to forego any claims for alleged legal malpractice. Id.

       The district court then discussed the most recent appellate decision, Cassel v. Superior Court, 179 Cal. App. 4th 152, 101 Cal. Rptr.3d 501, 2009 WL 3766430 (Cal. Ct. App. Nov. 12. 2009) ( cassell-opinion) in which the petitioner sued his former attorneys for malpractice arising from their representation  of petitioner in a lawsuit. Petitioner alleges that during the mediation of  that prior lawsuit, his attorney, now the defendant, forced him to accept a settlement for far less than was acceptable to him. The issue before the appellate court was whether communications between petitioner and his counsel which occurred during the two days prior to the actual mediation and at the actual mediation in which the two of them were the only ones present and participating ( that is, neither opposing counsel nor the mediator was present) were protected by mediation confidentiality.  The majority held that such conversations were not protected. The dissent strongly took issue, noting that this holding contravened both statutory and case law. Id. at *6-*7.    

      Finding that there is a strong policy in California to uphold mediation confidentiality and that the California Supreme Court has repeatedly disapproved of “judicially created exceptions” to the mediation confidentiality statutes (Id. at *4,*7), the district court concluded:

       It appears to the Court that the reasoning of the Cassel dissent, rather than the majority, is more persuasive and true to the statutory language and the California Supreme Court’s injunction not to create implied exceptions.  See Ticknor v. Choice Hotels Int’l, Inc. 265 F.3d 931, 939 (9th Cir. 2001). (“The task of a federal court in a diversity action is to approximate state law as closely as possible in order to make sure that the vindication of the state right is without discrimination because of the federal forum. In doing so, federal courts are bound by the pronouncements of the state’s highest court  on applicable state law”.) Id. at *7.( Emphasis original.)

      Notably, without any discussion, the district court adopted and applied California statutory and case law, following the unstated principle that as this was an action under its diversity jurisdiction, state law supplied the rule of decision.  Neither the parties nor the court discussed this assumption nor whether any sort of federal “mediation privilege” or common law privilege should apply pursuant to Rules 408 and 501 of the Federal Rules of Evidence.

       Thus, whereas this decision was meant to be enlightening, it actually leaves me in the dark as to the applicable rule for “mediation confidentiality” in federal court.

      . . . Just something to think about.
 

     Caveat:  On January 19, 2010, the parties jointly filed a Notice of Settlement in Principle requesting that the next status conference be postponed for sixty (60) days to allow their settlement to be documented and the action dismissed.

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      Often, during a mediation, I have asked a party if she wants to make the first offer. More times than not, especially if it is the defendant, the party tells me that she wants the other party to go  first on the rationale that it is a sign of weakness or some similar explanation for her to make the opening offer.

       In response, I often explain that just the opposite is true: she who makes the first offer often has the advantage: she sets the parameters of the negotiations as well as affecting the other party’s expectations. In sum, she has the “upper hand” or the leverage in the negotiation.

       This notion of “anchoring” was the topic of Linda Bulmash’s latest Negotiation Tips (Los Angeles County Bar Association Vol III, No. 4 – January 2010) entitled “Making the First Offer Can Be the Smart Move.”(LACBA “Negoiation Tips” (January 2010) )Ms. Bulmash notes that the best negotiators think in terms of affecting the other party’s expectations in deciding whether to make the first offer:

      “First offers act as an anchor point, drawing the other side into your suggested range. Studies have shown that 85 percent of the time, first offers correlate with the final outcomes. Even if the first offer is not within a reasonable range, it still affects the negotiation’s outcome.”

       ”For those of us who think we are hip to the game, savvy and sophisticated, the impact of first offers shows that we are still suggestible. As proof of that theory, participants in a college study were asked to state their Social Security number before estimating the number of physicians in Manhattan. They all picked numbers that correlated with and were close to their Social Security number.”

      ”Before deciding whether to make the first offer, ask yourself:
          

       1. What do I want to achieve by making this offer?
      

       2. Do I have enough information to make this offer?
      

       3. How do I want to affect the other side’s expectations?
     

       4. How will this offer affect the other side’s expectations?
     

       5. What kind of offers and counteroffers do I need to make to move strategically closer to my bottom line?
     

       6. Should my offer be firm or flexible?

       7. How can I propose the offers”

      So, in your next negotiation, instead of automatically rejecting the notion of making the first offer, take a moment and look at the long range effect of your going first: how will it affect the expectations of the other side. Will your first offer, effectively, act as an anchor so that you resolve the matter within your  range of expectations?

      . . .Just something to think about.

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      Have you ever made a decision because it “felt” right? That is, you can’t explain the rationale or logic behind how and why you decided what you did, but deep in your “gut”, you “know” you made the “right” decision simply because it “felt” right.
 

      It turns out that you are not alone. All of us have made such decisions because we are “wired” to decide things, using not just our rational and logical brain, but our emotional brain as well. Our most “logical,” and “rational” decisions are emotionally based.
 

      All of this and more is explained in a book that I just finished reading entitled,  How We Decide by Jonah Lehrer (Houghton Mifflin Harcourt 2009). In it, Lehrer explains that we do, indeed, use emotions to make decisions.
 

      How? Each of us have dopamine neurons. These are the molecular source of our feelings. (Id. at p. 47). It is the release of the dopamine that makes us feel good; it is “chemical bliss”, flooding the brain with a “feel – good chemical” (Id. at p. 61). To achieve this “chemical bliss” on a repeat basis, we will engage in the behavior that causes it, again and again. Similarly, to the extent that these neurotransmitters tell us to be wary, we will listen to them and avoid similar situations in the future: The dopamine neurons immediately stop firing and as a result we experience a negative emotion. (Id. at p. 47) which “teaches” us – not to do “that” again!
 

      In short,

      “Dopamine neurons automatically detect the subtle patterns that we would otherwise fail to notice; they assimilate all the data that we can’t consciously comprehend. And then, once they come up with a set of refined predictions about how the world works, they translate these predictions into emotions.” (Id. at p. 48).   

 
       Thus, they will get excited by predictable rewards and get even more excited by unpredictable rewards:

      “The purpose of this dopamine surge is to make the brain pay attention to new, and potentially important, stimuli. Sometimes, this cellular surprise can trigger negative feelings such as fear. . . .

      “Most of the time, the brain will eventually get over its astonishment. It’ll figure out which events predict the reward, and the dopamine neurons will stop releasing so much of the neurotransmitter. . . .” (Id. at p. 60).

       For example, as Lehrer explains, suppose you have to make a decision on whether to purchase a stock. You review all the financial data but cannot keep it all straight, much less process all of the information. But you have to make a decision – and so you do so – based on what “feels” right. In truth,

      “. . . your emotions will ‘reveal a remarkable degree of sensitivity’ to the actual performance of all of the different securities. The investments that rose in value will be associated with the most positive emotions, while the shares that went down in value will trigger a vague sense of unease. These wise yet inexplicable feelings are an essential part of the decision-making process. Even when we think we know nothing, our brain know something. That’s what our feelings are trying to tell us.” (Id. at p. 48).

       The author goes into a lot more detail than I am able to in this blog: it is quite fascinating and has taught me that even the most “rational”, and “logical” decision is emotionally based.
 

      During a mediation, I sometimes implore the participants to “think with their heads, not with their hearts.” After reading this book, I will no longer do so as I know this is impossible: sometimes our best decisions are emotionally based!
 

      . . .Just something to think about.

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       As I have mentioned in my blog, I mediate a lot of “lemon law” disputes filed under the Federal Magnuson – Moss Warranty Act, 15 U.S.C. §2301 et seq. and under California’s Song-Beverly Consumer Warranty Act, Cal. Civil Code §1790  et seq. and/or California’s Commercial Code §2313 for breach of express warranty, Commercial Code §2314 for breach of implied warranty of merchantability and Commercial Code §2315 for breach of implied warranty of fitness for a particular purpose. Usually, these disputes involve automobiles. That is, plaintiff believes that her automobile is a “lemon” and wants the manufacturer to repurchase it.
 

      But, last week, the U.S. Ninth Circuit Court of Appeals issued an opinion in which the alleged “lemon” was an Apple iPod! Yes – an iPod!
 

      In Birdsong v. Apple, Inc., Case No. 08-16641,(Birdsong v Apple,Inc. ) plaintiffs-appellants Joseph Birdsong (who bought 2 iPods in 2005)  and Bruce Waggoner (who bought one iPod in 2005) filed a class action complaint against Apple, Inc. alleging that the iPod “. . .is defective because it poses an unreasonable risk of noise induced hearing loss to its users.” (Id. at 16870). Plaintiffs did not allege that they suffered actual hearing loss but only that this possibility exists. They sued to force Apple to make a safer iPod. As might be guessed, the district court dismissed plaintiffs’ third amended complaint from which dismissal, plaintiffs appealed.

       According to the third amended complaint, the iPod is capable of producing sounds as loud as 115 decibels. Apple does include a warning about avoiding hearing loss or damage, both in the instructions provided with each iPod and on its website.
 

      As noted, neither plaintiff alleged actual hearing loss or damage but only that such was possible. Apple, Inc. filed motions to dismiss the previous amended complaints to which plaintiff responded by filing new amended complaints. However, its motion to dismiss the third amended complaint was heard and granted by the court.
 

      In assessing each of the legal theories alleged, the Ninth Circuit agreed with the district court. For example, the implied warranty of merchantability (under California’s Commercial Code §2314(2)), implies that goods “are fit for ordinary purposes for which the goods are used.” That is, it ““provides for a minimum level of quality.”” (Id. at 16872). It is breached when
“. . .the product lacks “even the most basic degree of fitness for ordinary use.”” (Id. at 16872-3)
 

      Because plaintiffs did not allege an actual malfunction or history of malfunction, much less actual injury, but only made suggestions on how the iPod could be made safer, the Ninth Circuit agreed with the district court that plaintiffs failed to allege any beach of an implied warranty of merchantability.
 

      As plaintiffs abandoned their claims of breach of an express warranty and implied warranty of fitness for a particular purpose, the appellate court did not address these claims.
 

      However, the appellate court did address plaintiffs’ claim filed under California’s Unfair Competition Law which prohibits unfair competition by means of an unlawful, unfair or fraudulent business practice. (Cal. Bus. & Prof. Code §17200-17210). Once again, because plaintiffs did not suffer an injury in fact as required by California’s recent adoption of Proposition 64, the court agreed that plaintiffs lacked standing to bring the claim. Further, the court rejected plaintiffs’ assertion that they did not receive the value of their bargain and thus lost money or property as a result of unfair competition. The court reasoned, once again, that the plaintiffs have not alleged a cognizable defect, but merely the potential for one. Thus, the court determined that the iPod is worth not less but exactly what plaintiffs paid for them.

       In short, “. . .plaintiffs’ alleged injury in fact is premised on the loss of a “safety” benefit that was not part of the bargain to begin with.” (Id. at 16879). Plaintiffs admitted that Apple, did, indeed, provide warnings against listening to music at loud volumes. Consequently, the appellate court concluded that as plaintiffs’ claims are only hypothetical in nature, the trial court did not err in dismissing the third amended complaint.
 

      Two days before Christmas, I bought a new iPod because my old one crashed. Until I saw this case, I never thought about “the law” when listening to my iPod. Rather, I connected the simple pleasure of enjoying music or podcasts to listening to my iPod. Now. . I know better! The law “works in mysterious ways”. . .everywhere . . .leaving no stone unturned!

       . . .Just something to think about!
 

      Happy New Year! May 2010 bring you peace and prosperity!

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          On December 18, 2009,  I posted a blog entitled ” What Has The World Come To” about a disturbing event that  allegeldly occurred during the California Bar Examination. According to the story, one of the test takers fell ill and while others stopped taking the exam to help him, they were not allowed to make up the time to finish the test.
    

          I received an e mail  from James Karney[mailto:jkarney@mindspring.com] advising that the story is an urban legend.

          He writes:
     

         ”As a former cop with EMS training, I was properly horrified by the alleged actions of both the bar examiner and Mr Braun. A bit of fact checking revealed his contact information–and also the following narrative of the incident that shows it is another urban legend. Thought you might want to know.”
   

         “1. The Famous Heart Attack Story, Debunked
     

         http://sites.google.com/site/cabarexamprimer/
     

         This is the original legend:
     

       ”At the July 1993 administration of the California bar exam at the Pasadena Convention Center, a 50 year old man had a heart attack, and two of the test takers, John Leslie and Eunice Morgan, stopped their exams to help the man.  They administered CPR for forty minutes until paramedics arrived, and then resumed their exams.  The proctors did not give the applicants additional time to complete their exams (in fact, the proctors are not empowered to do so).”
     

        Jerome Braun, a state bar executive, supported the decision, and said, “If these two want to be lawyers, they should learn a lesson about priorities.”
    

       John is listed as a member of the bar, meaning he passed the exam.  Eunice is not listed as a member, but I have heard that she did in fact pass.  Just think: They passed, despite sacrificing 30 minutes to save a man’s life!
     

       In November, 2001, a Primer reader contacted Jerome Braun to verify this story.  Mr. Braun clarified that the incident occurred in 1992, and the individual suffered an epileptic seizure rather than a heart attack.  Five persons taking the examination came to the individual’s aid, and their taking of the examination was clearly disrupted. Unfortunately, those seated around the person who suffered the seizure were also disrupted, but at the time the extent of the disruption could not be ascertained. To give some who were disrupted additional time and to not give it to others who were disrupted would have been unfair.
    

        In situations where there is a significant disruption, the Committee of Bar Examiners of The State Bar of California engages a  psychometric consultant to determine after grading has been completed the extent of the disruption and then makes appropriate adjustments to the scores of the individuals who suffered the disruption. Following that policy, no additional time was given the five persons who came to the aid of the individual who suffered the seizure and post-grading adjustments were made to the scores.  None of the adjustments changed the pass or fail status of any of the five.
     

       The remark attributed to Mr.  Braun was not made by him, nor to his knowledge by any person affiliated with The State Bar of California.”
     

       I am not sure that the true story is much better than the Urban Legend. Something disturbs me about the Bar’s use of a “psychometric consultant” to determine if adjustments are needed to the test scores because of a “disruption” and then making the ‘appropriate”  adjustments.  I still get the same gut reaction as with the original story and find it just as disturbing.
     

      But, I print the above, to “clarify the record’.
     

      …. Just something to think about!….

       Happy 2010!

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