Is a settlement agreement signed by less than all parties at the conclusion of a mediation enforceable? Every once in awhile, this question arises because one of the parties has attended by telephone and is not near a fax machine et cetera to sign the agreement and send it back. Up until now, I have been under the impression that all parties must sign for it to be enforceable.

            One of the appellate courts in California has now ruled that this is not necessarily so. In Provost v. Regents of the University of California, Case No. G043523 (filed 12/14/11),  (Provost v Regents ) Division Three of the Fourth Appellate District (sitting in Orange County) ruled, among other things, that the statute allowing for enforcement of settlement agreements (C.C.P.§664.6) “. . .does not require that the agreement be executed by every party to the action who benefits from it. . . .” (Id. at p. 10). Thus, while these non-signing parties may not enforce the agreement since they did not sign it, the agreement may still be enforced by those who did sign it. (Id. at p. 10).

            Plaintiff Glenn Provost was an anesthesiologist at the University of California Irvine Medical Center who sued both the Regents and two individual doctors for wrongful termination after he reported alleged illegal conduct by defendants.

            The parties attended mediation which, after several sessions, resulted in a stipulation to settle. Shortly thereafter, his counsel filed a notice of settlement of the entire case.

            But then, plaintiff began having second thoughts and refused to execute the final settlement documents. So, the Regents filed a motion to enforce the settlement pursuant to C.C.P.§664.6. Initially, the trial court denied the motion, agreeing with plaintiff that Regents had not actually signed the agreement since it was an in-house lawyer, rather than an “authorized corporate representative” that signed the agreement. But, in response to a writ application, the appellate court issued an order to the trial court to vacate its order of denial and reconsider. Upon reconsideration, the trial court granted the motion and entered a judgment enforcing the settlement.

            Plaintiff appealed on several grounds, all of which were rejected by the appellate court. First, he argued that Regents did not actually sign the agreement because it was signed by in-house counsel Carolyn Yee. The appellate court disagreed concluding that at all times Ms. Yee was acting as the party representative and not as an attorney, and was, in fact, represented by outside counsel. She had, in essence, been appointed as the “authorized party representative” of the corporation (i.e. Regents) and so was the duly authorized agent of Regents to execute the settlement agreement. The fact that she was in-house counsel was not relevant; nor was it relevant whether she was an officer. As long as she was a duly designated and qualified employee, she could sign the agreement. As the court noted:

 One can hardly expect an officer of Ford Motor Company or Wal-Mart Stores to participate in every settlement of every case, down to the smallest personal injury action, to be eligible to take advantage of the mechanism provided by Section 664.6 (Id. at p. 8).

            The appellate court next rejected Plaintiff’s argument that the agreement was not enforceable because the individual defendants did not sign it. Noting that the individual defendants were not seeking to enforce the agreement, the appellate court found these parties simply to be third party beneficiaries, holding that the settlement may be enforced by those signing it. (Id. at p. 10).    

            Plaintiff next argued that the settlement agreement was not enforceable because it was conditional upon the approval by Regents, and he revoked his acceptance before the Board of Regents actually approved it. The court found otherwise; that the Board approved it before plaintiff changed his mind. Thus, the court rejected this argument. (Id. at p. 11-12).

            Plaintiff also claimed duress and that he was coerced into signing the settlement because the mediator told him that Regents would have criminal charges filed against him if he did not sign then and there. Further, he alleged his own attorneys told him that he had little chance of winning at trial and if he did, he would recover only a minimal amount.

            The trial court refused to consider these assertions due to the mediation privilege found in Evidence Code §1119(a). That is, mediation confidentiality precluded any consideration of these allegations. The appellate court agreed, citing Cassel v. Superior Court (2011) 51 Cal. 4th 113, 136, (Cassel Opinion ) noting that “[t]here is no exception for “good cause”. (Id. at p. 16).

            This part of the opinion bothers me because the California Rules of Professional Conduct provides that it is unethical for an attorney to threaten present criminal charges to obtain an advantage in a civil dispute. (Rule 5-100). (Most states have a similar rule). (I also question the ethics of the mediator in relaying this alleged threat.) Thus, due to mediation confidentiality, the alleged unethical conduct of the Regent’s counsel (and the mediator whether as a mediator or as an attorney) will never be revealed or acted upon. The alleged violation if true, will go uninvestigated and unpunished. Perhaps, this is why some states have created an exception to mediation confidentiality for claims of professional misconduct or malpractice. (See Section 6 of Uniform Mediation Act adopted by 10 states and District of Columbia).

            But back to the opinion. Plaintiff also claimed that Regents fraudulently concealed evidence. Finding that plaintiff failed to provide evidence to support such claims, the appellate court rejected this contention.  (Id. at p. 17-18).

            Contrary to plaintiff’s final two arguments, the appellate court found that the settlement agreement was entire and complete; that is, not missing anything and that it was admissible. Reviewing the agreement itself, the appellate court found it contained the language required by Evidence Code §1123 to render it admissible.

            The decision is interesting due to its several holdings: (1) in-house counsel can execute settlement agreements as long as she is the duly authorized corporate representative; (2) not all parties must sign the agreement in order for those signing it to enforce it; and (3) arguments of coercion and duress (amounting to possible unethical conduct) are shielded by mediation confidentiality. This decision provides much to mull over!

            . . .Just something to think about! 

            I want to thank each of you for your support throughout the year and wish you a very Happy Holiday and a wonderful 2012- may it bring you and your family health, happiness prosperity and most of all, a peaceful resolution   to all of your disputes!

           My blog will return on January 6, 2012.

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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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         Once again, the California Supreme Court has held that the California statutes declaring that mediations are confidential proceedings mean exactly that: mediations are confidential, even at the expense of a potential legal malpractice action.

            In the latest of its decisions on this topic, on January 13, 2011, the California Supreme Court issued its opinion in Cassel v. Superior Court, Case No. S178914, (Cassel v. Superior Court) in which it reversed the appellate court that had crafted a judicial exception to the rule of mediation confidentiality embodied in California’s Evidence Code. Noting that the appellate court “. . .had crafted an unwarranted judicial exception to the clear and absolute provisions of the mediation confidentiality statutes (Id. at p. 3), the Supreme Court held that “. . .the statutes’ terms must govern, even though they may compromise petitioner’s ability to prove his claim of legal malpractice.” (Id.)

            In February 2005, Michael Cassel (petitioner) sued his former attorneys, Wasserman, Comden, Casselman & Pearson, LLP, a law firm, and certain of its members for breach of their professional, fiduciary and contractual duties (i.e. legal malpractice) while representing him in a dispute over the rights to the Von Dutch clothing label. (Id. at p. 4).

            In that underlying dispute, Von Dutch Originals, LLC (“VDO”) had sued Cassel for trademark infringement contending that Cassel did not have the rights to use the Von Dutch mark  abroad under the global master license. At a certain point, this litigation was scheduled for mediation. Prior to the mediation, Cassel and his attorneys discussed what position they would take: to give up the global master license to the Von Dutch label, Cassel would accept no less than $2 million. However, Cassel claimed that during the mediation, his counsel harassed and coerced him, even threatening to abandon him at trial, into accepting $1.25 million. After 14 hours of mediation ending around at midnight, Cassel, unable to think clearly and exhausted, accepted this sum. (Id. at pp. 4-6).

            Not at all happy about being coerced into this settlement, Cassel then sued his attorneys for legal malpractice. On the eve of trial, the defendant attorneys moved to exclude from coming into evidence at trial, all communications between Cassel and his attorneys that occurred during or related to the mediation pursuant to California’s Evidence Code Sections on mediation confidentiality. The trial court granted the motion.

            Cassel appealed the ruling. The appellate court reversed, holding that California’s statutes on mediation confidentiality “. . .do not extend to communications between a mediation participant and his or her own attorneys outside the presence of other participants in the mediation.” (Id. at p. 7). The appellate court, in crafting this judicial exception to mediation confidentiality, reasoned:

“The purpose of mediation confidentiality is to allow the disputing parties in a mediation to engage in candid discussions with each other about their respective positions, and the strengths and weaknesses of their respective cases, without fear that the matters thereby disclosed will later be used against them. This protection was not intended to prevent a client from proving, through private communications outside the presence of all other mediation participants, a case of legal malpractice against the client’s own lawyers. . .” (Id. at p. 7).

            The California Supreme Court disagreed:

“Judicial construction and judicially crafted exceptions, are permitted only where due process is implicated, or where literal construction would produce absurd results, thus clearly violating the Legislature’s presumed intent. Otherwise, the mediation confidentiality statutes must be applied in strict accordance with their plain terms. Where competing policy concerns are present, it is for the Legislature to resolve them.” (Citations omitted). (Id. at p. 11).

            Adhering to is previous decisions on this topic – Simmons v. Ghaderi (2008) 44 Cal 4th, 570, 580 (simmons_v_ghaderi); Fair v. Bakhtari (2006) 40 Cal 4^th 189, 194; Rojas v. Superior Court (2004) 33 Cal 4^th 407, 415-416; and Foxgate Homeowners’ Ass’n v. Bramalea California, Inc. (2001) 26 Cal 4^th 1, 13-14  ( Foxgate)- the Supreme Court held that the confidentiality provisions must be strictly construed and applied; no judicially crafted exceptions are permitted, even in the face of competing public policy concerns (Id. at p. 2) such as a client’s ability to sue his former attorneys for malpractice. Once again, the court noted that if this strict policy is to change, it must be with the legislature:

“Of course, the Legislature is free to reconsider whether the mediation confidentiality statutes should preclude the use of mediation – related attorney – client discussions to support a client’s civil claims of malpractice against his or her attorneys.” (Id. at p. 29).

            So, once again, the court has made it clear  that any communications that is made “for the purpose of, in the course of, or pursuant to, a mediation. . .” (California Evidence Code §1119) is confidential and remains so even for the purpose of proving a claim for legal malpractice. (Id. at p. 31).    

            While this ruling was expected (given the court’s prior rulings on the subject), is it a good thing for mediation confidentiality to trump claims of alleged legal malpractice? I don’t know as I can readily see both sides of the issue. But, I do agree with the court that it is an issue that the Legislature should address. But given California’s budget crisis, I doubt it will be anytime soon. California must first get its fiscal house in order.

            . . .Just something to think about!

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            On Monday, November 1, 2010, the California Supreme Court heard argument in Cassel v. Superior Court (Wasserman, Comden Casselman & Pearson, LLP – Real Parties in Interest), Case No. S178914. Therein, plaintiff Michael Cassel alleged legal malpractice against his former attorneys, Wasserman, Comden Casselman & Pearson, LLP, for allegedly forcing him to settle a case during mediation for an amount less than was acceptable. On the eve of trial, the defendant attorneys filed motions seeking to prevent certain communications from being admitted into evidence on the grounds that these communications occurred during a mediation and so were covered by mediation confidentiality. The trial court agreed, ruling that the conversations solely between attorney and client outside the presence of the mediator would be excluded by mediation confidentiality.

             The California Court of Appeal (Cassel opinion) directed the trial court to vacate its order, determining that conversations solely between an attorney and his client during mediation but outside the presence of the mediator are not covered by mediation confidentiality.

            The issue is now up to the California Supreme Court: when an attorney and client discuss things privately during a mediation but outside the presence of the mediator, are such conversations admissible in a subsequent legal malpractice suit or are they precluded under the rubric of “mediation confidentiality”?

            I raise this issue because my mediation the other day brought this issue front and center. It was a “lemon law” case; however, the defendant, for the first time, at the mediation, raised the spectre that plaintiff had been committing insurance fraud and quite possibly was now committing “lemon law” fraud. As plaintiff’s counsel  had no warning that this was an issue, she was caught by surprise. Naturally, when she talked to her clients about it, they denied it. (Realistically – who is going to admit that he/she has been filing fraudulent claims with insurance companies and/or filing fraudulent lawsuits?)

            This surprising information at mediation put the plaintiff’s attorney in a difficult position: being bound by the Rules of Professional Conduct, she cannot knowingly participate in a fraud on the courts. So, should she stop the mediation and do some independent checking and due diligence? Or, should she continue with the mediation and advise her clients to settle for the very minimal amount being offered by the defendant manufacturer (which believed this case to be fraudulent). And, if she does continue with the mediation and the matter settles for minimal value, is she opening herself up to a subsequent legal malpractice action as in Cassel because she advised her client to settle for a lot less than the case was “worth” without independently investigating the “fraud” claim and determining whether it had merit?

            As a result of the defendant attorney springing this information on the plaintiff attorney for the first time at mediation, the plaintiff attorney spent quite a lot of time discussing the issue with her client and figuring out what to do next; the defendant and her client sat around twiddling their thumbs.

            In the end, the matter settled for a minimal amount. However, the whole thing left a very bad taste in the plaintiff’s attorney mouth to the point that she requested that I suggest to defense counsel not to engage in such tactics again; if defendant has such game – changing information in the future, she should share it before the mediation so that plaintiff’s counsel can conduct her due diligence, investigate and determine the merits and thereby protect herself from a potential malpractice suit when the settlement amount is lower than expected as in Cassel.

            I wholeheartedly agree. This is clearly one of those situations in which one must view the events in the shoes of opposing counsel. If the parties want the settlement to be durable, they must make sure that it is not based on “surprises.” (Needless to say, the plaintiff could also sue to rescind this settlement based on the legal malpractice of her attorney.) “Surprises” simply do not lead to good settlements.

            Besides,. . . parties need time to “process” new information and so to spring “surprises” at mediation makes it difficult, if not impossible, to reach a resolution, or, at least one, that is not extremely distasteful to all concerned.

            . . .Just something to think about!   

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       According to the Second Appellate District of the California Court of Appeal, mediation confidentiality does not and will not protect attorney-client communications. In Porter v. Wyner, Case No. B211398 (April 8, 2010), (Porter v. Wyner )this appellate court held that communications between an attorney and a client during a mediation are not protected by mediation confidentiality.

       In light of the California Supreme Court’s repeated pronouncements that mediation confidentiality must be given broad application without exception, I question how long this decision will remain valid. I strongly surmise that it will be short lived.
 

      But, back to Porter v. Wyner. 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, the defendants’ attempts to keep out all of the attorney-client communications made during the mediation on the grounds that they were protected by mediation confidentiality, 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 the waiver argument made by the Porters.
 

      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 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 4th 570. (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.
 

      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. (Id. at p. 16.) The appellate court reasoned that communications between an attorney and client are not the type of communications that the legislature had in mind when it provided the cloak of confidentiality to all evidence or anything said or admission made “for the purpose of, in the course of or pursuant to” the mediation process (California Evidence Code §1119). Rather, the appellate court opined that the open, candid and frank exchange promoted by the cloak of confidentiality applies to parties or disputants themselves: they are the ones who filed or responded to the lawsuit. In the appellate court’s view, the mediation is conducted to resolve the differences between the disputants or plaintiff and defendant, and not between an attorney and his client who is one of the parties. Thus, to the appellate court, communications between an attorney and his client cannot be considered to be “in the course of or pursuant to” a mediation. Otherwise, all attorney-client communications from time immemorial would be potentially covered by this privilege, which to the appellate court makes no sense. (Id. at p.11-15).
 

      Further, the appellate court reasoned that mediation confidentiality should not trump Evidence Code §958 which waives the attorney-client privilege when breach of the attorney’s obligation to his client is at issue. ( Section 958 states:” There is no privilege under this article as to a communication relevant to an issue of breach, by the lawyer or by the client, of a duty arising out of the lawyer-client relationship. “)

The appellate court reasoned that if mediation confidentiality were applied, this Evidence Code section would be a nullity: an anomalous situation would be created. (Id.)
 

      The appellate court also believed that to allow attorney-client communications to be cloaked with mediation confidentiality would have a chilling effect on the use of mediations. It would preclude clients from pursuing any remedy against their own counsel for any alleged malpractice that may have occurred during the mediation process. (Id.)

       As noted, it will be very interesting to see how the California Supreme Court responds to this decision. Thus far, the Second Appellate District is batting way below the “Mendoza line” on this issue: that is, in every instance in which the California Supreme Court has reviewed the Second Appellate District decision not upholding mediation confidentiality, the Supreme Court has reversed, holding, repeatedly, that mediation confidentiality means just that: confidential with no exceptions. I strongly suspect that this decision, too, will not help the appellate court’s batting average!

       . . .Just something to think about.

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