THE REST OF THE STORY
In late December 2006, I wrote a blog on the California Supreme Court’s decision in Fair v. Bakhtiari, (Cal. 2006) 40 Cal. 4th 189, 51 Cal Rptr. 3d 871 (Case No. S129220, published December 14, 2006) in which the Court, once again, affirmed that mediation confidentiality is absolute. The Court held while documents prepared for purposes of mediation are generally inadmissible in civil proceedings, a settlement agreement prepared at the conclusion of a successful mediation will be exempt from this rule, if it “provides that it is enforceable or binding or words to that effect” pursuant to California Evidence Code §1123(b). The Court remanded the matter to the appellate court for further proceedings consistent with its rulings.
As noted in my earlier blog, therein, the parties reached a settlement through mediation. The settlement agreement that the parties signed at the mediation provided that “any and all disputes subject to JAMS arbitration rules.” Thereafter, as the parties were finalizing the settlement, they began to dispute exactly what aspects had been settled. When one of the parties moved for arbitration pursuant to the above quoted provision, the other party objected to the admission of the settlement agreement urging, in part, mediation confidentiality and the unenforceability of the agreement.
The trial court agreed and excluded the settlement agreement finding that it was not enforceable pursuant to California Evidence Code §1123(b).
In its initial ruling on this case, the Court of Appeal reversed, determining that the language in the agreement, “any and all disputes subject to JAMS arbitration rules” could only mean the parties intended the settlement terms document to be “enforceable and binding.”
(Id. at 4-5). Thus, the appellate court reasoned, the memorandum complied with the requirements of Section 1123(b) and was admissible.
The Supreme Court reversed and remanded the matter back to the Court of Appeal.
On April 6, 2007, the Court of Appeal issued its unpublished decision essentially implementing the determinations of the Supreme Court. First, it held that the settlement terms document was not admissible under Evidence Code §1123(b) (“the agreement provides that it is enforceable or binding or words to that effect”) because this language requires “a direct statement to the effect that it is enforceable or binding.” (Id. at 6-7). The appellate court ruled that the provision in paragraph 9 of the settlement agreement “any and all disputes subject to JAMS arbitration rules” is not direct enough to satisfy the narrow interpretation required by the Supreme Court.
On remand, plaintiff contended that paragraph 9 of the settlement agreement (just quoted) would satisfy California Evidence Code §1123(b) (“the agreement provides that it is admissible or subject to disclosure or words to that effect”). Taking its cue from the determinations of the Supreme Court, the appellate court rejected this contention, holding that this language must be narrowly interpreted and the writing “must directly express the parties’ agreement to be bound by the document they sign.” (Id. at 7). Finding no express agreement, the appellate court disagreed with plaintiff on this point.
The plaintiff next contended that defendants were “judicially estopped from invoking mediation confidentiality due to their repeated representations to the trial court that the case had settled in mediation.” The appellate court rejected this contention. It noted at page 8:
“Judicial estoppel applies when “(1) the same parties has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud or mistake (citations)””
The appellate court then pointed out that at least the third and fourth elements are absent. Defendants never took an inconsistent position because they never claimed that the settlement terms document was admissible. (To the contrary, they continuously objected to its admissibility.) Further, the trial court never accepted or adopted as true the notion that this document was admissible. Thus, the appellate court found there was no basis to estop defendants from claiming that this document is not admissible. (Id. at 9).
Finally, plaintiff asserted that defendants had waived their right to claim mediation confidentiality because of their repeated disclosure of mediation communications in the trial court. (Id. at 9). Again, the appellate court rejected this argument, noting that defendants had objected to the court’s consideration of the mediation-related communications, and that defendants disclosed such confidential information only after and in response to plaintiff’s initial submission of the settlement terms document to the court. That is, defendants made their disclosures solely in an attempt to demonstrate that the settlement terms documents was not admissible.
Further, because of the strong public policy in California protecting mediation confidentiality, the appellate court would not imply a waiver under the facts of this case.
As a consequence, the court of appeal affirmed the trial court determination to exclude the settlement agreement, finding it unenforceable under California Evidence Code §1123(b).
So. . . to quote Paul Harvey “And now you know. . . The Rest of the Story.”
