On August 31, 2011, the Second Appellate District of the California Court of Appeal issued an opinion that while ostensibly discusses the validity of an arbitration provision, recites facts that are so bizarre, one can only wonder, “What were they thinking?”

            In Duick v Toyota Motor Sales, USA, Inc. (Case No. B22483) (Duick v. Toyota), Amber Duick sued both Toyota and its advertising agency, Saatchi & Saatchi North America, Inc. for intentional infliction of emotional distress, negligence and false advertising, among other claims, seeking many millions in damages.

            The facts are so bizarre, I must quote them in full:     

           Duick’s claims arise from her apparently unwitting participation in an internet-based advertising campaign launched by defendants in connection with Toyota’s Matrix automobile. The campaign, known as “Your Other You,” “consisted of sending an unwitting recipient emails from an unknown individual.”  During the campaign, any visitor to the Toyota Matrix web site (“player 1”) could designate another person (“player 2”) for participation in the Your Other You “interactive experience.”  Player 2 would then receive an email purportedly from player 1, inviting player 2 to click a hyperlink that was in some manner “identified with Toyota.” The link would direct player 2 to a web page entitled “Personality Evaluation,” which displayed a drawing of a door with the word “Begin” underneath. Clicking on the door would direct player 2 to a second web page entitled “Personality Evaluation Terms and Conditions.” In order to continue beyond that page, according to evidence introduced by defendants, player 2 was required to scroll through certain text (the “terms and conditions”) and, at the end of that text, click a box next to the following sentence:  “I have read and agree to the terms and conditions.”

          The first paragraph of the terms and conditions states, “You have been invited by someone  who has indicated that he/she knows you to participate in Your Other You.  Your Other You is a website provided by [Toyota] that offers you . . . an interactive experience.”  The second paragraph further states, “If you review and agree to the Terms and Conditions detailed below . . . you may participate in a 5 day digital experience through Your Other You. . . . You may receive email messages, phone calls and/or text messages during the 5-day experience.” A subsequent paragraph also states, “You understand that by agreeing to these Terms, you are agreeing to receive emails, phone calls and text messages from Toyota during the 5-day experience of Your Other You.”  The terms and conditions contain the following arbitration provision:  “You agree that . . . any and all disputes, claims, and causes of action arising out of, or connected with, Your Other You . . . shall be resolved individually, without resort to any form of class action, and exclusively by arbitration to be held solely in Los Angeles, California under the auspices of the American Arbitration Association and pursuant to its Commercial Dispute Resolution Rules and Procedures.”

          The record before us does not describe the further web pages (if any) to which player 2 would be directed after agreeing to the terms and conditions.  Over the next several days, however, player 2 would receive emails of an unsettling nature from an “unknown individual” who appeared to have access to some personal information concerning player 2 (information that presumably was provided by player 1, without player 2’s knowledge, at the initial stage).

          Duick was apparently cast in the role of player 2. She received “an unsolicited email asking [her] to take a personality test.”  She does not remember clicking the box signifying her agreement to the terms and conditions, and she claims that for various technical reasons the text of the terms and conditions was impossible to read in its entirety.

           In any event, Duick later began to receive emails from an individual identifying himself as “Sebastian Bowler.” The text of the first email reads, “Amber mate!  Coming 2 Los Angeles Gonna lay low at your place for a bit. Till it all blows over.  Bringing Trigger.”  Duick received another email from Bowler the following day, accurately stating her previous home address, describing it as a “Nice place to hide out,” and advising her that “Trigger don’t throw up much anymore, but put some newspaper down in case.”  The email also provided a link to Bowler’s MySpace page, which portrayed him as a 25-year-old Englishman and “a fanatical English soccer fan who enjoyed drinking alcohol to excess”; the page also displayed photographs of a pit bull dog.

          Additional emails from Bowler to Duick over the next few days purported to describe his cross-country journey by car to visit her, including photos and videos of his travels and references to his efforts to evade law enforcement (“I seem to have lost the coppers for now, so I’m all good, mate”; “Had a brush with the law last night.  Anyway, hopefully I’ll have lost them by the time I get to your place”). One message explained that Bowler “ran into a little problem at the hotel,” and Duick subsequently received an email from an individual identifying himself as “Jimmy Citro,” purporting to be the manager of a motel and billing Duick for the damage Bowler had done to the motel’s property. The final email included a link to a video revealing that Bowler was a fictional character and that the entire sequence of emails was an elaborate prank, all part of an advertising campaign for the Toyota Matrix.  ( Id. at pp 2-4.).

             Pursuant to the arbitration clause, the defendants moved to compel arbitration. The trial court denied the motion, and the appellate court affirmed on this appeal.

            The appellate court agreed with Ms. Duick that the provision compelling arbitration was unenforceable because of “fraud in the inception or execution.” That is, “ “the fraud goes to the inception or execution of the agreement, so that the promisor is deceived as to the nature of his act, and actually does not know what he is signing, or does not intend to enter into a contract at all, mutual assent is lacking and [the contract] is void. In such a case it may be disregarded without the necessity of recession.” “ (Id. at p.5.) (Emphasis original.)

            The  appellate court pointed out that the terms and conditions were drafted by defendants, not by Ms. Duick, and were given the misleading title of “Personality Evaluation Terms and Conditions”. In the court’s view, this title gave the impression to any reader that a personality evaluation test was involved and not the advertising prank that was about to descend onto Ms. Duick. Indeed, it certainly did not provide any sort of notice whatsoever of what was about to occur to Ms. Duick! (Id. at  p.6). Moreover, as the appellate court noted, because the terms used in the agreement were so vague and opaque, it was impossible to fully understand what was about to occur, even after reading them. (Id.)

            In sum, because “defendants deprived Duick of a reasonable opportunity to know the character of the proposed contract,” ( Id. at  p.7), the appellate court found the contract void from its inception and thus unenforceable. Consequently, the defendants could not compel arbitration.

            Notably, the appellate court took pains to note that it was not deciding the matter on the merits and was in no way addressing the merits of the case or its possible outcome.

            So… I guess this case stands for the obvious proposition that one must have a valid, enforceable agreement  (and not one induced by fraud) in order to then enforce its arbitration provision (or any of its other provisions for that matter.) But, I still wonder…. What  were  the defendants thinking when they dreamed up and approved this advertising campaign!

           …. Just something to think about!

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            Recently, Daniel Druckman sent me an article he co-authored with Cecilia Albin entitled “Distributive Justice and the Durability of Peace Agreements” republished in volume 37 (number 3) of the Review of International Studies at pp. 1137-1168 (2011). (Equality and Distributivbe Justice) (Abstract: Equality Matters) The article “. . . explores the relationship between principles of distributive justice and the durability of negotiated agreements.” (Id. at p. 1137). Taking a look at sixteen peace agreements negotiated in various parts of the world during the early 1990’s, researchers coded them for the four principles of distributive justice – equality, proportionality, compensation and need, to determine how critical were these principles to the lasting effect or durability of each agreement. What they found is that equality matters: those peace agreements incorporating “equality” as a core value correlated strongly with durability, and much more so than the other principles of Distributive Justice. (Id. at p. 1164).

            The authors define “Distributive Justice” as “. . .consist[ing] of general standards for allocating collective benefits or burdens among the members of a group or community. They are principles of outcome justice as distinct from justice of the process and procedures from which outcome result.” (Id. at p. 1138).

            Reading through this article, I got the sense that many of the hypotheses discussed apply with equal force to individual “peace” agreements, as well.

            For example, the authors mention that others have argued that;

Forward-looking outcomes, emphasizing improved future relationships, are thought to lead to more durable agreements than backward-looking outcomes concerned with settling past grievances and reparations. These arguments are based on the idea that justice (or fairness) promotes trust which results in more stable relationships. (Id. at p. 1141).

            The authors note that the distributive justice principles of compensation and need are “backward” looking: “compensation occurs when the parties seek to rectify damages or costs that have been incurred. . . in the past.” (Id. at p. 1146). It addresses past injustices. “Needs,” again, addresses past injustices as it “. . .refers to essential living conditions and related wants that have been neglected during the course of a conflict. Many needs are survival relevant. . . .” (Id. at p. 1146).

             Not surprisingly, the authors note that when agreements address only the symptoms (i.e. are backward-looking), the conflict tends not to disappear. Consequently, for a negotiated agreement to be lasting or durable – it must deal with the sources of conflict, or the principles of equality and proportionality and thus be forward-looking.               

            Looking back at many mediations, this concept seems to hit home; the settlement appears to be more durable where the parties agree to work together in the future, rather than simply pay money from one to the other. The concept of “trust” has a lot to do with this. In a forward looking agreement, there must be a degree of “trust” for it to work. The parties become invested in the future, and so the settlement becomes durable. 

            Equality or (“fairness”) seems to be at the heart of all negotiated durable agreements or settlements, whether they be one-on-one or nation-to-nation. Indeed, the researchers found that emphasizing equality as a core term in the agreement contributes to the success or durability of the peace agreement. “Equality” (translated as “fairness”) appears to be an universal principle that applies no matter how small or large the dispute. (Id. at pp. 1145-1147).

            What the researchers also found – which makes sense even on an individual level – is that there is a distinction between “authentic” and “tactical” justice:

 The latter is motivated by a need to appear just for reasons unrelated to fairness. It is a method of persuasion used to promote an agreement that serves the tactician’s interests or to manage a conflict that has become costly: Its effectiveness turns on perceptions of the tactician’s authenticity. . . . This negotiator is masking self-interest behind a veil of apparent joint interest. . . . (Id. at p. 1143).

            “Tactical” justice leads to a less durable agreement. (Id.)

            So, it seems that “justice” (that is, “fairness” or “equality”) matters. And, that “justice” must be “authentic.” If “justice” is used simply as a mask to better one’s own self interest at the expense of the other, the agreement will not last for long.

            Whether one speaks about disputes between neighbors, strangers, groups or nations, this wisdom rings true: everyone wants what is just and fair, and to be treated with equality.  So even though this article deals with international disputes between warring factions seeking to end civil wars and strife and to create peace, it seems to me that its hypotheses and the principles of distributive justice apply to the everyday disputes that we all seem to have from time to time.  No matter how small the dispute, we  still want “justice” and to be treated fairly and equally.

            . . .Just something to think about! 

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            Let us suppose that Jane Jones is driving along one of the many freeways in Los Angeles, and as is typical, the flow of traffic suddenly and abruptly comes to a halt. That is, in a nanosecond, Jane goes from 60 mph to 0 mph. While she is alert and stops in time, the driver behind her, Patricia Smith, is not – she is busy texting. Consequently, Ms. Smith’s vehicle plows into the rear of Ms. Jones’ vehicle, causing Ms. Jones to suffer various and multiple soft tissue injuries.

            Ms. Jones seeks medical treatment, going first to the emergency room to be checked out and then to the chiropractor to be treated. By the time all is said and done, her medical expense is $15,000, but luckily, Ms. Jones has fantastic medical insurance. Her insurer is able to negotiate both with the ER hospital and her chiropractor for a reduced rate and is able to pay $7,500 in full settlement of all medical expenses.

            This being the litigious state of California, Ms. Jones sues Ms. Smith for her injuries and medical expenses. Because of the “collateral source” rule, Ms. Smith cannot obtain an offset or otherwise benefit from the fact that Ms. Jones had fantastic insurance which paid her medical expenses. That is, Ms. Smith can not pay less to Ms. Jones simply because Ms. Jones was prudent enough to have health insurance. Rather, Ms. Jones will be entitled to claim the full amount of her damages from Ms. Smith. (See, Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1,6). But, the question remains: Is Ms. Jones entitled to collect from Ms. Smith the amount of $15,000 actually billed by the ER and her chiropractor – or the amount of $7,500 that was actually paid?

            Over the past twenty years, the appellate courts in California have split on the answer; some ruled Ms. Jones would be entitled to the $15,000 while others have held she would be entitled to only what was actually paid – the $7,500.

            On August 18, 2011, in Howell v. Hamilton Meats & Provisions, Inc., Case No. S179115, (Howell v Hamilton Meats) the California Supreme Court settled the dispute by holding that in such situations, the plaintiff would be entitled to only the amount actually paid out – or $7,500 in our example:

We hold, therefore, that an injured plaintiff whose medical expenses are paid through private insurance may recover as economic damages no more than the amounts paid by the plaintiff of his or her insurer for the medical services received or still owing at the time of trial. (Id. at p. 28.)

            In reaching this conclusion, the court concluded that a defendant – Ms. Smith in our example – is not obtaining a “windfall” “. . .merely because the injured person’s health insurer has negotiated a favorable rate of payment with the person’s medical provider.” (Id. at p. 18). The court reached this conclusion based on a 2005 study of hospital costs (Id. at p. 18) revealing that “[h]ospital charge setting practices are complex and varied.” (Id.) Consequently, the court responded that neither as the full bill that a provider charges represents the “real” value of the services, neither does the “discounted” amount represent an “artificial” or “arbitrary” value. Rather, the court concluded that the discounted amount neither is a “windfall” to the defendant nor acts to encourage the defendant to engage in “risky conduct.” (Id. at p. 22).

            Perhaps, the court’s most realistic appraisal appears at the end of its opinion:

 There is, to be sure, an element of fortuity to the compensatory damages the defendant pays under the rule we articulate here. A tortfeasor who injures a member of a managed care organization may pay less in compensation for medical expenses than one who inflicts the same injury on an uninsured person treated at a hospital (assuming the hospital does not offer the person a discount for its chargemaster prices). But, as defendant notes, “[f]ortuity is a fact in life and litigation.” (Id. at p. 27).

            Or, to quote Forrest Gump, “My momma always said, “Life was like a box of chocolates, you never know what you’re gonna get.”  Forrest Gump (1994).

            . . .Just something to think about!

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            In my April 16, 2010 blog, I discussed the appellate decision of Porter v. Wyner, Case No. B211398 (April 8, 2010) (“Porter”). In that decision, the Second Appellate District of the California Court of Appeal held that mediation confidentiality would not protect attorney-client communications. Thus, the appellate court held that the communications between an attorney and client were admissible even though they occurred during a mediation.

            As one might suspect, this decision was appealed to the California Supreme Court. However, that court put it “on hold” pending its decision in Cassel v.  Superior Court (2011) 51 4th 113 (“Cassel”).  Once Cassel  was decided, the California Supreme Court, on April 20, 2011, transferred Porter back to the appellate court with directions to reconsider it in light of Cassel. (Cassel held that mediation confidentiality applies to communications between a client and an attorney representing her during mediation.)

            Upon reconsideration, the appellate court reversed its earlier ruling, and this time affirmed the trial court’s order granting a new trial finding that the introduction of communications made during a mediation constituted an “irregularity in the proceedings.” (Evidence Code §1128 and Code of Civil Procedure §657). Further, the appellate court remanded the matter back to the trial court to rule on the motion for judgment notwithstanding the verdict filed by the defendants.

            Initially, Plaintiffs John Porter and Deborah Blair Porter sued the Manhattan Beach Unified School District and the California Department of Education on behalf of their son who required special education services. In that suit, the Porters were represented by Steven Wyner and Marcy Tiffany, the defendants herein (“Wyner Tiffany”).

            This underlying action was resolved at mediation. Plaintiffs alleged that during this mediation, Wyner Tiffany agreed to reimburse the Porters for the attorneys’ fees and costs that the Porters had previously paid and further agreed to pay Mrs. Porter for services she rendered as a paralegal.

            Once the settlement was documented and concluded, the instant dispute arose, with Wyner Tiffany denying it had ever agreed to these things.

            Consequently, the Porters sued Wyner Tiffany for legal malpractice and related claims. During the litigation, Wyner Tiffany attempted to keep out of evidence all of the attorney-client communications made during the mediation on the grounds that they were protected by mediation confidentiality. Their attempts were denied and rebuffed by the trial court. At trial, Wyner Tiffany, initially, filed a motion in limine to exclude all such communications but withdrew it based on a waiver argument made by the Porters in their written opposition to this motion.

            After a jury trial, the jury returned a verdict for the Porters and against the defendants, awarding Mrs. Porter her back wages of $211,000 as a paralegal and awarding the Porters $51,000 for breach of the attorney fee agreement.

            About a month later, the California Supreme Court decided Simmons v. Ghaderi (2008) 44 Cal 4^th 570 (“Simmons”). (simmons_v_ghaderi ) Based on this decision, the trial court granted Wyner Tiffany’s motion for new trial on the grounds that evidence concerning mediation in the underlying action was improperly placed before the jury. Although Wyner Tiffany also filed a motion for judgment notwithstanding the verdict (Motion for Jnov), the trial court held it was moot.

            At that time, the appellate court reversed the order granting a new trial and remanded the matter back to the trial court to rule on the Motion for Jnov. It determined that mediation confidentiality applies only to communications between the disputing parties, and not to an attorney and his client – not even to those communications occurring when the mediator and/or opposing counsel are present during a mediation.

            Now, and in light of the Supreme Court’s decision in Cassel, this same appellate court reached a far different conclusion. In its unpublished decision issued on July 27, 2011 (Porter), it held that mediation confidentiality applied, without exception, noting that the California Supreme Court ““. . .has repeatedly described the mediation confidentiality provisions as clear and absolute.  . . .[T]hey must be strictly applied and do not permit judicially crafted exceptions or limitations, even where more competing public policies may be affected.”” (Id. at p. 13).

            Thus, the appellate court rejected the Porters’ arguments that defendant Wyner Tiffany gave express written agreement to waive mediation confidentiality by signing the settlement agreement in the underlying action because (1) the settlement agreement did not contain an express waiver of confidentiality; and (2) it was not signed by all participants. Both are required under Evidence Code §1122. Moreover, Wyner Tiffany signed the agreement only approving “as to form” and not as acknowledging or agreeing to the substantive provisions.

            Further, the appellate court concluded that Wyner Tiffany did not waive mediation confidentiality when its counsel made the strategic decision to waive it in open court by withdrawing its motion seeking to preclude the use at trial of what occurred during the mediation. The appellate court pointed out that there is no record that Wyner Tiffany itself agreed with their counsel’s oral waiver of this confidentiality: there is neither any oral consent on the record in open court nor a written agreement of waiver signed by them. The appellate court found that their counsel’s oral withdrawal of the motion in limine did not meet the requirements of  Evidence Code §1122(a) stating what is needed to constitute a waiver. (Id. at p. 16-17).

            Further, referring to Simmons, supra, the appellate court noted that the doctrines of estoppel, judicial estoppel and implied waiver are not exceptions to mediation confidentiality. (Id. at p. 17). Thus, the withdrawal of the motion in limine, even if deemed an implied waiver, was not sufficient to waive mediation confidentiality.

            Consequently, and reversing itself completely, the appellate court held that the trial court erred in admitting evidence and testimony into the trial of what occurred during the mediation. Such admissions constituted an “irregularity in the proceeding” mandating a new trial. The appellate court also remanded the issue of defendants’ motion for judgment notwithstanding the verdict for review by the trial court based on the entire record.

            Once again. . . mediations are confidential! What goes on in mediations, stays in mediations! No ifs, ands, or buts! No exceptions, no matter what!

            Will the legislature take up the cause and make an exception to mediation confidentiality for legal malpractice actions?

            We shall see!

            . . . Just something to think about!

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             Recently, I read an allegorical tale entitled, The Art of Racing in the Rain by Garth Stein (Harper 2009.) In his waning days, Enzo, a labador mix, recounts his life with his owner – Denny – a struggling race car driver. Enzo becomes quite a fan of racing and through his tidbits about racing, teaches us life’s lessons.

            One example is the principle lesson throughout the story. It is a simple concept:

. . .that which we manifest is before us; we are the creators of our own destiny. Be it through intention or ignorance, our successes and our failures have been brought on by none other than ourselves. (Id. at p. 43).

 . . .that which you manifest is before you. . . . (Id. at p. 46).

             Another important principle appears early in the novel:

. . .But what I’ve always liked best is when he [Denny] talks about having no memory. No memory of things he’d done just a second before. Good or bad. Because memory is time folding back on itself. To remember is to disengage from the present. In order to reach any kind of success in automobile racing, a driver must never remember. (Id. at p. 13).

             Enzo even discusses the concept of active listening, which is so important in relationships:

Here’s why I will be a good person. Because I listen. I cannot speak, so I listen very well. I never interrupt. I never deflect the course of conversation with a comment of my own. People, if you pay attention to them, change the direction of one another’s conversation constantly. It’s like having a passenger in your car who suddenly grabs the steering wheel and turns you down a side street. . . . Learn to listen. I beg of you. Pretend you are a dog like me and listen to other people rather than steal their stories. (Emphasis original). (Id. at p. 101-102).

              At the heart of many disputes and of so much litigation is the inability or unwillingness to take responsibility for one’s own actions. Even within the confidential confines of a mediation, a party often refuses to acknowledge much less accept responsibility or fault. Yet, I have often found that when a party does acknowledge and/or accept responsibility, it constitutes a big break through, and the matter quickly resolves itself. How true are Enzo’s words: “that which we manifest is before us.” We are indeed the masters of our fate. We brought the dispute upon ourselves, and we can bring the end to it, as well. Or as Enzo pointed out,  “. . . your car goes where your eyes go. . . .” (Id. at p. 83).

             A second life’s lesson, as Enzo points out, is not to dwell on the past. Live in the present. Dwelling on the past will not resolve anything. Matters get resolved by focusing on the present and the future. Life is like racing:

. . .racing is doing. It is being a part of a moment and being aware of nothing else but that moment. Reflection must come at a later time. (Id. at p. 14).  

              So while it may be good to reflect on the past at some point, dwelling on it only causes mistakes! And it will not settle the matter. Playing the “blame game” will lead nowhere! Stay in the present and focus on the future in trying to resolve anything.

            And – listen – to the other party. Do not interrupt and steal her story onto another topic that is all about you. One can learn a lot by listening; it goes a long way to resolving disputes. I am fascinated by how much I learn simply by listening to people, focusing on them and staying in the moment!

            As you may surmise, the book is a wonderful, beautiful story that I can read over and over again, gaining new insights each time. I will not tell you how it ends; you will have to find that out for yourself.

            . . .Just something to think about!

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