In January 2011, in Cassel v. Superior Court (2011) 51 Cal 4th 113 (“Cassel”), the California Supreme Court once again iterated that mediation confidentiality absolutely precludes the admission of anything that occurred during the mediation, in any subsequent litigation. Thus, as in Cassel, where a party alleges that his counsel committed legal malpractice during the mediation, that party is precluded under California’s mediation confidentiality statutes (Evidence Code §1119 et seq.) from seeking any sort of redress for the alleged professional negligence and/or breach of fiduciary duty purportedly committed by her counsel during the mediation.

            Once again, this conclusion was emphasized in a recently unpublished California appellate court decision – Gossett v. St John, Wallace, Brennan & Folan, Second District Court of Appeals of California, Division Eight, Case No. B222502 (May 12, 2011). (Thank you to my colleague Alec Wisner for highlighting this case!). Plaintiff Charles Gossett is a 50 percent shareholder, Chief Official [sic] Officer and Chairman of the Board of CRG Marine Laboratories, Inc. (“CRG”). In 2007, CGR retained a law firm – St. John, Wallace, Brennan, & Folan (“SWBF”) – to advise CGR on employment issues.

            In 2008, one of CRG’s employees, Mark Baker, claimed that CRG owed him unpaid commissions. The parties agreed to mediate.

            At the mediation, CRG’s attorney John St. John took a very passive approach, remaining silent through most of the mediation. Eventually, the parties reached a settlement. St. John produced a settlement agreement that he had prepared in advance of the mediation but had not discussed with Gossett. After Baker modified the agreement and signed it, St. John looked it over and told Gossett to sign it. Gossett skimmed it and signed it. At the time, Gossett did not realize that, he, individually, would be liable for the payment to Baker if CRG did not pay the settlement amount. He realized this only after he requested another attorney review the agreement after the mediation.

            Consequently, Gossett sued SWBF for legal malpractice alleging several alleged errors and omissions by SWBF during the mediation including failing to advise him of his individual liability. SWBF filed a motion to dismiss contending that all of the alleged errors and omissions occurred during the mediation and thus under Cassel v. Superior Court, supra, and California’s mediation confidentiality statutes – Evidence Code §1119 et. seq. – the case must be dismissed: any evidence of what occurred during the mediation is absolutely inadmissible.

            The trial court agreed, granting the motion to dismiss, and the appellate court affirmed.

            Cassel v. Superior Court, supra, is the latest in a long line of rulings from the California Supreme Court holding mediation confidentiality to be inviolate. In light of this latest ruling, efforts are being made to create an exception to mediation confidentiality that would allow for such legal malpractice actions to be brought.  Recently, the Beverly Hills Bar Association (“BHBA”) adopted Resolution 10-06-2011 (RESOLUTION ) which would amend Evidence Code Section 1120 by creating an exception to mediation confidentiality by allowing for disclosure and permitting the use of attorney-client communications made during mediation in a subsequent State Bar Disciplinary action, an action for legal malpractice and/or an action for breach of fiduciary duty. 

            During the upcoming California State Bar Convention in September 2011, the Conference of California Bar Associations will discuss the BHBA resolution and vote whether to approve it. If approved, a legislative sponsor will then be sought for introduction into the California legislature for consideration.

            In Cassel, the Court felt constrained to rule as it did stating:

“We express no view about whether the statutory language, thus applied ideally balances the  competing concerns or represents the soundest public policy. Such is not our responsibility or our province. . . . 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.136.)

            Many within California will watch the Conference of California Bar Associations to see if it adopts the Beverly Hills Bar Association’s Resolution. In all probability, I and many others suspect that it will do so.  Assuming our collective suspicions are correct, the next issue is whether our legislature will take up the invitation of our Supreme Court to reconsider the issue. To state the obvious, it is a very topical, much debated  issue full of complexities on both sides. (For example, while 11 jurisdictions have adopted the Uniform Mediation Act  containing this exception (see, section 6(a)(5)) in varying forms (including District of Columbia, Idaho, Illinois, Iowa, Nebraska, New Jersey, Ohio, South Dakota, Utah, Vermont and Washington), others view it as a “slippery slope”.) Should the legislature take it up, there will be much in the press about it. Stay tuned for the next installment on mediation confidentiality in California.

            . . .Just something to think about!   

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The other week, I attended an information packed 3 hour training session on how to mediate disputes with high-conflict people (aka “difficult” people). It was given by Bill Eddy, LCSW, Esq., President and Co-founder of High Conflict Institute based in Scottsdale, Arizona (www.HighConflictInstitute.com.)  To say the least, it was interesting.

High-conflict people include those that: (1) may be rigid and uncompromising; (2) have difficulty accepting loss; (3) are unable to reflect on their own behavior; (4) allow their emotions to dominate their thinking; (5) are preoccupied with blaming others; (6) avoid responsibility for solving their problem; and (7) depend on others to solve their problems for them. In sum, they lack self-awareness, are unable to adapt and blame others. They include persons with various personality disorders such as narcissism, borderline, paranoia, antisocial and histrionic.

As explained by Mr. Eddy, all of this boils down to our brains, and more specifically, our right side vs. our left side. The left side of our brain is the “logical brain”. Generally we are conscious of what this side of our brain is up to. It controls language and verbal skills, our ability to organize things, our orientation to details, and our ability to analyze and to seek systematic solutions. In short, it is our “rational” side controlling our positive emotions such as calm and contentment.

On the other hand, the right side of our brain is our “emotional” side governing relationships. It usually operates at our “unconscious” level and is responsible for our creativity, art, intuition, non-verbal skills (or lack thereof), facial recognition and in sum, our “gut” feelings! It also controls our negative emotions such as fear and anger.

In extremely simple terms, a “high-conflict” person is operating from the right side of her brain which houses the “fight or flight” response and other modes of fast defensive thinking such as an all or nothing mindset, emotional reasoning, and jumping to conclusions.

Consequently, in order to get anywhere with a high-conflict person, one must get her to move away from her right brain and into her left brain. To do this, Mr. Eddy suggests a process composed of four skills: bonding, structure, reality testing and consequences.

By bonding, Mr. Eddy suggests that we use empathy, attention and respect (E.A.R.) with the high-conflict person. Acknowledge (although not necessarily agreeing) that she is upset and let her know that you care; connect with her feelings.

In terms of structure, rather than allow the high-conflict person to continuously and continually vent, ask her to turn her complaint into a proposal. A high-conflict person needs a lot of structure; so focus her on the future, rather than the past, and ask for proposals. Have her make lists, again to provide structure.

In addition, provide reality testing, acknowledging that one may never know the full and complete story but that decisions can be made without knowing everything there is to know.

Most importantly, (Mr. Eddy emphasizes) one must reinforce the notion that the dilemma is hers; how does she want to resolve it? Keep the burden on her, rather than allowing her to dump it on you and getting you to resolve her problem for her. Keep putting it back on the high- conflict person.

Finally, Mr. Eddy explains, educate the high-conflict person to the consequences: help her connect the dots between her behavior and its consequences; between cause and effect. Focus on the positive consequences.

In going through this process with high-conflict people, Mr. Eddy suggests that we use a calm, confident, firm voice and body language. He also suggests that as long as the high-conflict person is engaging her right brain, that we stay away from logic. Logic simply does not work in times of stress. Rather, communicate with the high-conflict person in the way that  you want her to relate to you. Studies have shown that people “mirror” behaviors. For example, if I lean forward to show deep interest, the other person will subconsciously mirror my  body language by leaning forward as well.

As you can see, quite a lot of information was packed into this training. The challenge will be not only to try to remember all of these tips but to implement them  the next time they are needed. I will definitely have to engage my left brain to accomplish this!

. . .Just something to think about!

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            One good thing about mediation is that the parties are free to change their minds on any issue as many times as they want during a mediation. . . until they sign a settlement agreement. Once  an agreement is signed, the settlement is extremely difficult, if not impossible, to unwind.

            Earlier this month, the Winklevoss Twins (of Facebook fame) found this out the hard way. In The Facebook, et al. v. Narendra, Case No. 08-16745, the Ninth Circuit Court of Appeals refused to let them back out of a settlement they made with Facebook and Mark Zuckerberg. (Facebook vs Narendra)

            As has been widely publicized, the Winklevoss Twins and Divya Narendara (“Twins”) claim that Mark Zuckerberg stole the idea for Facebook and so sued both Facebook and Zuckerberg in Massachusetts. Zuckerberg and Facebook counter-sued in California adding ConnectU as a defendant and alleging that these defendants stole data and tried to steal users.

            The federal District Court in California eventually dismissed the Twins due to a lack of jurisdiction but then ordered the parties to mediate their dispute.

            Prior to the mediation, the parties signed a Confidentiality Agreement stipulating that

 “. . . all statements made during mediation were privileged, non-discoverable and inadmissible “in any arbitral, judicial or other proceeding.” ” (Slip Opinion at p. 4902).

            After a day of negotiations, the parties signed a handwritten, one and a third page “Term Sheet and Settlement Agreement” (“Term Sheet”). Therein, the Twins agreed to give up ConnectU in exchange for $20 million in cash and $45 million in shares in Facebook (now estimated to be worth about $200 million.)  (See, Los Angeles Times April 21, 2011 article.)

            However, the negotiations fell through during discussions on the final deal documents. Facebook filed a motion to enforce the settlement. ConnectU opposed the motion arguing that the Term Sheet was not enforceable as it lacked material terms and was procured by fraud. The trial court found the Term Sheet to be enforceable and ordered completion of its terms.

            The Ninth Circuit agreed, affirming the trial court’s order. As part of the settlement, Facebook was to acquire all of ConnectU’s shares in exchange for cash and a percentage of Facebook’s common stock. To accomplish this, the attorneys drafted more than 130 pages of documents typically required to finalize an acquisition. 

            On appeal, the Twins argued that if the terms set out in these voluminous acquisition documents were “required” and “typical”, then they should have been included in the Term Sheet; because they were not, it is unenforceable.

            The Ninth Circuit rejected this argument finding that the Term Sheet complied with the requirements of California contract law.

            Next, the Twins argued that Facebook misled them as to the value of its stock. An internal valuation prepared to comply with the federal tax code put the value at $8.88 per share. In contrast, the Twins claimed they were led to believe that the value was four times as much and so were defrauded.

            The Court rejected this argument noting:

       “The Winklevosses are sophisticated parties. . . . They engaged in discovery, which gave them access to a good deal of information about their opponents. They brought half-dozen lawyers to the mediation. Howard Winklevoss – father of Cameron and Tyler, former accounting professor at Wharton School of Business and an expert in valuation – also participated. A party seeking to rescind a settlement agreement by claiming [fraud] under the circumstances faces a steep uphill battle (citations omitted). Id. at p. 4906.

            Finally, the Ninth Circuit addressed the issue of mediation confidentiality, but only superficially. It agreed that the trial court was correct to reject the proffer of certain evidence by the Twins about what was said and not said during the mediation, in light of the Confidentiality Agreement signed by the parties. The Ninth Circuit though did not delve into a discussion of mediation confidentiality, its purpose and importance. It simply concluded:

“. . .The Winklevosses are not the first parties bested by a competitor who then seek to gain through litigation what they were unable to achieve in the marketplace. And the courts might have obliged, had the Winklevosses not settled their dispute and signed a release of all claims against Facebook. With the help of a team of lawyers and a financial advisor, they made a deal that appears quite favorable in light of recent market activity. See Geoffrey A. Fowler & Liz Rappaport, Facebook Deal Raises $1 Billion, Wall St. J., Jan. 22, 2011, at B4 (reporting that investors valued Facebook at $50 billion – 3.33 times the value the Winklevosses claim they thought Facebook’s shares were worth at the mediation). For whatever reason, they now want to back out. Like the district court, we see no basis for allowing them to do so. At some point, litigation must come to an end. That point has now been reached.”

            In sum, signing on the dotted line means that the matter is  truly over!

            . . .Just something to think about!

 Postscript:  A couple of weeks ago I wrote a blog entitled “An American Hero” about Kenneth Hughey who had been a POW in Vietnam at the Hanoi “Hilton”. Recently, I received an e-mail from a reader who, as a young boy, wore a bracelet with Ken’s name on it as part of America’s effort to support our Vietnam POW’s. He kept the bracelet all these years and offered to return it to him. Ken wrote him an e-mail, accepting the offer. Wow!… the wonders of the internet!

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            A colleague, Elizabeth Bader, wrote a very interesting article discussing the link between psychology and mediation entitled The Psychology of Mediation: Issues of Self and Identity and the IDR Cycle, 10 Pepperdine Dispute Resolution Law Journal 183 (2010).  In it, Ms. Bader shows the reader that the identity of self about which we all learned in psychology class plays a much more important role in negotiation and mediation than we think.

            In simple terms, Ms. Bader delves into rudimentary child psychology, explaining how initially an infant sees himself and his mother as one and the same with ongoing “mirroring” by the mother. Thus, the infant is in a narcissistic phase as the infant has “a sense of omnipotence derived largely from the sense that he shares in his mother’s powers” (Id. at p. 186). Eventually, the infant begins to enter the “terrible twos” in which he “… begins to discover that “contrary to his earlier narcissistic sense of omnipotence, he is, in fact, a very small person in a very big world.” ” (Id. at p. 187). The child is in conflict: he wants to be independent but needs his mother’s help about which he is in denial.

            Finally, the child does develop an independent self and “develops the capacity to internalize an image or representation of mother in his mind.” (Id.) So, while his mother may not be physically present all the time, she is still in the toddler’s mind’s eye.

            Ms. Bader argues that a mediation has this same cycle! Initially, the parties enter mediation with “overconfident expectations” (Id. at p. 204). Ms. Bader explains that the overconfidence is actually a type of grandiosity and thus may be correlated to narcissism, or “inflated positive views of the self” just as with an infant:

“One chooses to experience an idealized sense of one’s negotiating possibilities (and implicitly one’s self) in part as a defense to the sense of vulnerability and anxiety attendant upon participation in negotiation and mediation.” (Id. at p. 205).

           Then comes the offer or first counter-offer. The initial stage of narcissistic inflation hits a bump in the road, resulting in deflation and disappointment. Ms. Bader argues that the mediator’s response becomes crucial here: by showing respect to the parties, the mediator addresses the psychological issue of sense of self of each party. By mirroring and validating each party, the mediator assists each party to become less defensive and thus assists each party to traverse the stage of deflation (or the child’s equivalent of the “terrible twos”).

            Ms. Bader continues:

“Painful as it may sometimes be, as the negotiation continues, the parties begin to acquire greater resilience and more information about the other side’s interests and positions. They also begin to learn just what in their own previously over confident assessment are unrealistic.” (Id. at p. 208).

            Slowly, each party begins to acknowledge not only the strengths but also the weaknesses of her position. Each obtains a more reality based view of the matter and slowly grows into settlement, thus entering the third stage – realistic resolution.

            Ms. Bader suggests that the mediator, herself, travels through these same three cycles during a mediation; initially an overconfidence in being able to settle the matter (i.e. narcissistic inflation); then hitting the impasse and with it a fear of failure or not “performing” (i.e. deflation) and then – if the mediator is able to “let go” of her self image as the “great” mediator and is able to get the parties also to “let go” of their egos and self identity, the mediator enters the third and final stage of realistic resolution. (Id. at p. 209.)

            In sum, Ms. Bader urges that a mediation goes through the stages of early childhood development: narcissistic inflation, deflation and then realistic resolution or IDR for short. (Id. at p. 184).

            Quite a lot to chew on. . . .!

            . . . Just something to think about!

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            I finally had the opportunity to read the book my colleague Victoria Pynchon, J. D., LL.M, recently published, A is for Asshole – The Grownups’ ABCs of Conflict Resolution (Reason Press 2010) and discovered that I should have read it much sooner as it is delightful!

            The chapter that struck me the most is entitled “L is For Lawyer”. In it, Ms. Pynchon recites the story of being asked to mediate a probate dispute even though she knows absolutely nothing about probate law. It took some moments for Ms. Pynchon to understand that the family members caught up in the will contest were not concerned with their “legal” rights; they wanted to find a resolution that was “right” for them. They were not concerned about the “relevant” facts but about the “irrelevant” ones – the emotional, financial and other non-legal issues that had to be considered in order to repair and heal the family relationships.

            As Ms. Pynchon points out:

“ “Irrelevant” facts and principles sometimes run contrary to the law, and are often more personally compelling. These irrelevancies often lie at the heart of a client’s insistence to pursue litigation; of his decision that it is not worth further expense or of his hesitancy to accept an offer rather than go to trial. These emotional responses and value choices are often the key that unlocks the door of resolution, not a barrier to the dispute’s conclusion.” (Id. at p. 80).

            These words rang so true with me because I had recently conducted a mediation in which one party was concerned solely with the “relevant” facts (that is, the law) while the other party was concerned with the “irrelevant” facts, (that is, the psychological impact of what she was being asked to do). It involved a deed of trust worth several millions of dollars. On a motion for summary judgment, the trial court ruled that the trust deed did not cover the real property in question. Thus, the deed of trust was worth zero dollars! The deed of trust holder appealed and even though she knew that there was a strong likelihood that the appellate court would affirm the ruling of the trial court, she simply could not walk away from several millions of dollars; she had to be paid something! The psychological impact (that is, the “irrelevant “facts) was too great.

            On the other side, the property owner who had won the summary judgment motion insisted on using only “relevant” facts (that is, the law) in the mediation. Although she knew there was a small likelihood that the appellate would reverse and remand the matter back to the trial court for more motions and a trial (and thus more expense), she refused to address the emotional, psychological and most importantly, the financial impact to the deed of trust  holder of losing several millions of dollars. The property owner absolutely refused to pay one penny to the deed of trust holder, adamantly standing on her “relevant” facts and completely discounting the time and expense that she will incur should the appellate court reverse the trial court’s grant of summary judgment so that the matter ends up in the trial court once again. She insisted that the trust deed holder simply “walk away” from everything.

            So, as you can guess, the matter did not settle. Although the “irrelevant” facts ran contrary to the law (according to the judge who decided the summary judgment motion in favor of the property owner), they are more important to the trust deed holder than the “relevant” facts Similarly, the “relevant” facts were the only thing important to the property owner. Try as I might, I was unable to nudge one or the other onto the playing field of the other party.

            What is going to happen? These parties will probably spend a lot of time and money going round and round on this . . .  and in the end. . . neither will be happy; their “day in court” will be a letdown and may be missing some “justice”. What is legally “right” is not always “fair” and what is “fair” is not always legally “right.”

            It is so true that often times, the “irrelevant” facts – are more important than the “relevant” facts. While the “legal” issues are important, it is the psychological, emotional, financial and personal issues that often control a dispute. If these can be resolved, more times than not, the dispute can be resolved.

            . . . Just something to think about! 

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