Recently, I  came across the unpublished decision in Benesch v. Green, 2009 WL 4885215, Case No. C-07-3784 EDL (N.D. Cal.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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       On Thursday, November 12, 2009, the California Court of Appeal, Second Appellate District issued its opinion in Michael Cassel v. The Superior Court of Los Angeles County (Wasserman, Comden, Casselman & Pearson, LLP - Real Parties in Interest) Case No. B215215 (“Cassel”).
 

      The plaintiff, Michael Cassel, sued his attorneys, Wasserman, Comden, Casselman & Pearson, LLP, for legal malpractice alleging that the firm forced him to sign a settlement agreement for $1.25 million, an amount less than what he was willing to accept. 

       The issue on appeal was whether certain communications solely between Cassel and attorneys in the Wasserman firm, made outside the presence of the opposing party, or the mediator near or at the time the mediation was scheduled should have been excluded from use at trial. The trial court ruled that the communications were protected by mediation confidentiality (California Evidence Code §§1115 et seq.) and so excluded them from use at trial by Cassel. Accordingly, Cassel sought a preemptory writ of mandate directing the trial court to vacate its order and instead admit the communications as evidence against the Wasserman firm.
 

      The appellate court agreed with plaintiff: the communications were not covered by mediation confidentiality and so should be admitted as evidence at trial.
 

      The appellate court’s rationale was that Evidence Code §1119 limits admissibility of communications made “for the purpose of, in the course of, or pursuant to a mediation or a mediation consultation” with such communications being “. . .by and between participants in the course of a mediation or mediation consultation. . .” (Evid. Code §1119(a),(b) and (c)).
(Id. at p. 6).   
 

      Here, the communications were strictly between attorney and client: neither the opposing party,  its counsel nor the mediator was present. Further, the communications were not even made known to the mediator. As importantly, some of the communications occurred in the two days prior to the actual mediation session.

       In the appellate court’s view, the communications at issue simply did not occur within the confines of a “mediation” which it noted Evid. Code §1115 defines as “a process in which a neutral person or persons facilitate communication between the disputants to assist them in reaching a mutually acceptable agreement” (Italics added). (Id. at p.7). Thus, as the communications really had nothing to do with an actual mediation, the protective umbrella of “mediation confidentiality” could not be used to exclude their use at trial.
 

      As one might expect, there was a dissent to this opinion. Justice Perluss disagreed with the majority believing it to have interpreted Section 1119 too literally or too narrowly. The dissent noted that Evidence Code §1119 also covers statements or admissions made “for the purpose of” a mediation, and not   just in the course of “a mediation” ( Dissent at p. 2). Thus, in the dissent’s view, “private unilateral statements that are materially related to the mediation” would be covered by mediation confidentiality “even if they are not communicated to another party or the mediator and do not otherwise reveal anything said or done in the course of the mediation, itself.” (Dissent at p. 2 ).

       So. . .  once again the courts confronted the issue of disclosure versus mediation confidentiality but, this one time disclosure won. According to Professor Forrest S. Mosten, Adjunct Professor of Law, UCLA, the  score is now: Mediation Confidentiality-7; Disclosure-1.(See, california-confidentality-cases.)  Don’t be surprised to see this case appealed to the California Supreme Court.

       . . . Just  something to think about.

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      In August 2007,   I wrote a blog on a then newly issued Ninth Circuit opinion, Babasa v. Lenscrafters, Inc.,  498 F.3d 972 (9th Cir. 2007) (“Babasa”) in which the Court held that in order to determine whether removal jurisdiction existed under 28 U.S. C. §1446(b), mediation confidentiality would not attach to a letter written in preparation for  mediation  which explained the nature and extent of damages, and thus, the amount in controversy for purposes of determining federal jurisdiction under 28 U.S.C.§ 1332.

      In holding that the letter was admissible (even though created for mediation) in order to determine if the removal petition was timely filed (which the court held it was not),  the Court gave extremely short shrift to the principle of mediation confidentiality.

      While this ruling disturbed me at the time, I did not research this apparent abrogation  of  this paramount principle of mediation until recently when a colleague requested that I write an article on the topic of mediation confidentiality in federal courts. The article will appear in the inaugural issue of The Federal Bar Association ADR Section’s Newsletter, The Resolver  appearing  in September 2009. (To get a sneak preview, click on the following: mediation-confidentiality

      What I learned from my research is that one must be extremely careful in federal court mediations.  While Congress, indeed, passed the Alternative Dispute Resolution Act of 1998, Pub. L. No. 105-315, 112 Stat. 2998 (105th Cong, 2nd Sess.)(October 20, 1998) codified at 28 U.S. C. §§ 651- 658, mandating, among other things, that each district and appellate court enact local rules providing for confidentiality in alternative dispute resolution processes, the courts interpret this mandate very narrowly. Quite often, they will not apply it when considering petitions for removal or when the issue involves information or documents gleaned during settlement discussions held  after the conclusion of the actual mediation session or to be used for purposes other than settlement.

      Moreover, a very few courts have created a common law “mediation privilege” which differs from “mediation confidentiality.”  As explained by United States District Judge Margaret Morrow in Molina vs. Lexmark International, Inc., 2008 U.S. Dist. Lexis 83014, 77 Fed. R. Evid. Serv. (Callaghan) 905 (C. D. Cal., September 30,   2008):

      “Confidentiality” refers to a duty to keep information secret while “privilege” refers to protection of information from compelled disclosure”…  Communications are confidential when the freedom of the parties to disclose them voluntarily is limited; they are privileged when the ability of third parties to compel disclosure of them, or testimony regarding them, is limited. (Citation omitted). Id. at 35.

      Because the policy in federal court is the “the public … has a right to every man’s evidence…” (Jaffee vs. Redmond, 518 U.S. 1, 9 (1996)), the federal courts tend to favor admitting evidence rather than excluding it whether the attempted exclusion is based on ‘mediation confidentiality’,  the federal common law “mediation privilege” or Fed. R. Evid. 408  or 501. These four principles create quite a tense interplay in the case law. Which one wins is determined solely and strictly on  a case by case basis.   
From my research and analysis, I learned that a party attending mediation in federal court must be extremely leery: “mediation confidentiality” in federal court is often oxymoronic.

      …. Just something to think about.

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       Sometimes, a party hesitates to settle her court case during a mediation because she is afraid that the other party will not honor the settlement agreement. If the other party does breach the agreement, what can she do about it?

       Well. . . at least in California, she can file a motion to enforce the settlement pursuant to Code of Civil Procedure (“CCP”) §664.6 which states:

      “If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement.”

       As the parties found out in Hines v. Lukes, California Court of Appeal, Second Appellate District, Case No. B199971 (Oct. 27, 2008), this simple motion procedure actually works.

       In Hines v. Lukes, supra, the parties – Noel Hines and Pat Lukes – were neighbors and owners of contiguous lots in the City of Los Angeles. Lukes owned an easement or a right to use  a triangular portion of the Hines’ property.
 

      According to a complaint filed by Hines against Lukes attaching the recorded easement document, the easement was “solely for ingress, egress and drainage.” Hines alleged that Lukes violated the easement by “permanently parking vehicles” there and “by placing trash bins, a dumpster, and waste in the easement area.” (Id. at 3.)
 

      Lukes countered by filing a separate civil harassment action and seeking an injunction, but dismissed this action. Lukes then countersued Hines (in Hines’ lawsuit) alleging that the easement could be used not only for ingress, egress and drainage, but for “general driveway purposes.”
 

      The trial court ordered the parties to attend a mandatory settlement conference. At that conference, Hines and Lukes were able to settle their differences.  In open court, with a court reporter duly transcribing everything, they orally agreed to a settlement stating the terms “on the record,” as lawyers would say.

       After the parties finished putting the settlement “on the record,” the court stated that it understood that the terms would be put into writing but that “. . .the settlement is enforceable as of now.” (Id. at 4.)
 

        As may be guessed, the parties did not live up to the terms of their agreement. Hines filed a motion for entry of judgment pursuant to the oral agreement made in open court, arguing that Lukes had “. . .failed to resurface her portion of the driveway in neutral-colored concrete within one year after the settlement as required by the settlement.” (Id. at 5.) Hines also contended that Lukes refused to participate in mediation. (Id.)

       The court ordered the parties to mediation and continued the hearing on the motion for several months.
 

      Eventually, when the motion was heard, the court, again, suggested the parties attend mediation, only to be told that the parties did attend mediation but Hines walked out. The court continued the hearing, encouraging the parties to resolve their differences. (Id. at 7.)

       At the continued hearing, the court again suggested that the parties attempt mediation as required by the settlement agreement, but was reminded that Hines had walked out of the previous mediation.

       Consequently, the trial court was confronted with deciding the issues. Noting that it did not have jurisdiction to go into the substance of the matter or to re-mediate the dispute, but only had jurisdiction to enforce the terms and conditions of the settlement, the trial court did just that -  in the form of a judgment, it set out the terms of the settlement with which Lukes had not complied ordered her to do so.

       Lukes appealed the judgment, contending that the trial court did not consider her opposition, that Hines had waived the right to enforce the settlement by not invoking this procedure sooner and that Hines had also prevented her performance of her settlement obligations. 

       The appellate court affirmed, noting that this statute – CCP §664.6 – “provides a summary procedure to enforce a settlement agreement by entering judgment pursuant to the terms of the settlement.” (Id. at 11.) Under this statute, “. . . [t]he court retains jurisdiction to enforce a settlement . . . even after a dismissal, but only if the parties requested the retention of jurisdiction before the dismissal. Such a request must be made in a writing signed by the parties or orally before the court.” (Id. at 11-12.)

       The court further explained:

      “A court ruling on a motion under Code of Civil Procedure section 664.6 must determine whether the parties entered into a valid and binding settlement (citation.) A settlement is enforceable under section 664.6 only if the parties agreed to all material settlement terms (citations.) The court ruling on the motion may consider the parties’ declarations and other evidence in deciding what terms the parties agreed to. . . . If the court determines that the parties entered into an enforceable settlement, it should grant the motion and enter a formal judgment pursuant to the terms of the settlement (citation). . . .” (Id. at 12.)

       Thus, at least in California, (and no doubt in other states as well), a settlement agreement can be enforced using a streamline procedure. Thus, a party’s fear – about entering into a settlement because the other party may not honor it – can be quickly allayed as long as the agreement: (1) is valid and binding; (2) either is in writing signed by all parties or is entered into orally before the court; (3) requests the court to retain jurisdiction to enforce its terms under CCP §664.6 (or similar statute) even after dismissal; and (4) provides that it may be enforced under CCP §664.6 (or similar statute).
 

      So. . .the next time you are confronted by a settlement agreement and find yourself wondering what will happen if the other side does not honor it, check to see if these four elements are in it. If they are – at least in California – you will probably have an agreement that can be enforced by a court. If they are not – then perhaps you should suggest to the drafter of the agreement that it be revised to include these terms.

       . . . Just something to think about.

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       An interesting decision was issued the other week by the Second District of the California Court of Appeal on mediation confidentiality. Reading it left me with the impression that the appellate panel was result oriented or using “legal realism” rather than simply applying the governing law to the facts to lead it to the logical, mechanical and deliberative conclusion. (“formalist approach”.) (See “Blinking On The Bench: How Judges Decide Cases” – February 28, 2008 blog.)

       In the Estate of Thottam (Case No. B196933 – August 13, 2008), three siblings engaged in mediation to determine how to distribute the estate and certain assets from a trust created by their mother, Thresiamma Thottam. The siblings were co-trustees and beneficiaries of the trust.

       At the commencement of the mediation, the siblings signed a mediation and facilitation confidentiality agreement by which, in part, they agreed that:

      “all matters discussed, agreed to, admitted to, or resulting from” the mediation would “(1) be kept confidential, and not disclosed to any outside person (excluding spouses), (2) shall not be used in any current or future litigation between us (except as may be necessary to enforce any agreements resulting from the Meeting), and (3) shall be considered privileged and, as a settlement conference, non-admissible under the California Evidence Code in any current or future litigation between us.” (Id. at 3.)

      All three siblings and the mediator signed the agreement.

       During the mediation, a chart was prepared containing three columns. Along the left-hand side margin each asset was listed – be it real estate or otherwise. Across the top were three columns; one for each sibling, identified by his/her first initial. As the negotiations progressed, the chart was then filled in to show which sibling received which asset. At the end of the session, each sibling signed and dated the top of the chart in the column bearing his/her initial and also initialed each entry in the column.

       Well . . . as may be expected, when one of the siblings – Peter – sought to draft a more formal agreement to memorialize the chart, he was met with resistance. Eventually, the matter ended up in litigation (and eventually at trial).

       During a deposition, Peter sought to use the chart to which his sister Elizabeth, the deponent, objected urging that mediation confidentiality precluded its use. The then trial judge agreed with Peter, finding that mediation confidentiality did not apply to the chart.

       But, it was another judge who actually tried the case. When Peter sought to use the chart during trial, Elizabeth again objected based on mediation confidentiality. This time, the judge agreed with Elizabeth ruling that it was inadmissible. Unlike the previous judge, the trial judge did not accept the argument that any mediation confidentiality was waived pursuant to the provision in the agreement stating that confidentiality would apply “. . . except as may be necessary to enforce any agreements resulting from the Meeting.” (Emphasis added.)
 

      Given the recent pronouncement of the California Supreme Court that once again strictly enforced mediation confidentiality and applied it quite broadly - in Simmons v. Ghaderi (August 8, 2008 blog) - one might well speculate that the appellate court panel would agree with the trial judge. Surprisingly, it did not – it reversed and remanded.

       The appellate panel determined that the agreement between the siblings that all matters discussed or agreed to in mediation “(2) shall not be used in any current or future litigation between us (except as may be necessary to enforce any agreements resulting from the Meeting”) was an enforceable agreement even though made prior to any settlement being reached. The appellate court decided that California Evidence Code §1123(c) requires neither that the express agreement in writing permitting disclosure be contained in the settlement agreement itself nor that it even be made at or after the time the settlement agreement is entered into. According to this appellate panel, there is no timing requirement in terms of allowing disclosure vis-à-vis entering into a settlement as a result of mediation.
 

      Consequently, the appellate court determined that Peter should have been able to use the chart at trial to prove his case. As the chart was crucial to his case, he suffered a miscarriage of justice and a different result would have been probable had this error not occurred. That is, without the use of the chart, Peter lost at trial; if he could have used the chart, he probably would have won. Thus, the appellate court reversed and remanded for a new trial. Peter would now have his “day in court.”

       As I said, this is a strange decision: it places more importance or a higher priority on Peter having his “day in court” and “fairness” to Peter than on mediation confidentiality. The appellate court makes this a priority even in the face of the Supreme Court’s recent (July 21, 2008) recognition in Simmons v. Ghaderi that “the legislature chose to promote mediation by ensuring confidentiality rather than adopt a scheme to ensure good behavior in the mediation and litigation process. . . .” (Id. at 22.)
 

      Courts sure are strange and unpredictable! But I am not telling you anything new. I won’t be surprised if this decision is appealed and/or engenders more litigation. This is why it is always better to settle!

       . . . Just something to think about.