The Ninth Circuit Reaffirms Federal Mediation Privilege

Once again, the Ninth Circuit Court of Appeals has held that pursuant to Federal Rule of Evidence 501, federal privilege law applies to a claim of mediation confidentiality in an action involving both federal and state law claims.

In In Re: TFT-LCD (Flat Panel) Antitrust Litigation, Case No. 14-15916 (filed September 1, 2016), the Ninth Circuit reversed the district court’s order denying plaintiff’s motion for summary judgment which sought to enforce a settlement agreement and remanded for further proceedings.

This anti-trust litigation was initiated by plaintiffs Sony Electronics, and Sony Computer Entertainment America, LLC (collectively “Sony”) against Defendant HannStarr Display Corporation (“HannStarr”) alleging price fixing. In an attempt to resolve the dispute, the parties engaged a mediator, who, initially, was unable to help the parties reach a settlement. He then made a mediator’s proposal via e mail.  Both parties accepted. However, Defendant HannStar refused to comply with the terms of the settlement agreement. So, Sony sued to enforce the agreement and moved by way of summary judgment to do so. The district court denied the motion holding that California’s Evidence Code sections on mediation confidentiality applied thereby precluding the admission into evidence of the settlement emails. The parties stipulated to a final judgment and this appeal ensued.  (Id. at 3-7.)

Initially, the Ninth Circuit went through the factual and procedural history of this case noting that originally, Sony sued HannStar and other defendants alleging both federal and state anti-trust and breach of contract claims (based on the latter’s refusal to abide by the settlement agreement). (Id.) After Sony concluded its anti-trust claims against the other defendants, it dismissed its federal claims against HannStarr, leaving only a state law breach of contract claim to be resolved.

As only a state law claim now existed against HannStar, HannStarr filed a motion to dismiss on the basis that the federal court no longer had jurisdiction. The trial court denied the motion, holding that as it still had federal diversity jurisdiction, it could retain the case.  Plaintiff Sony then moved for summary judgment to enforce its settlement agreement with HannStarr which the trial court, applying California’s law on mediation confidentiality, denied. It held that pursuant to Evidence Code section 1123(b), the e mail exchange which led to the settlement could not be introduced into evidence because the e mail exchange did not include the express words required by section 1123(b) that the agreement was “admissible”, “subject to disclosure”, “enforceable”, “binding” or “words to that effect.” (Id. at 6-7.)

Relying on Wilcox v Arpaio, 753 F.3d 872(9th Cir. 2014), the Ninth Circuit held that since the present litigation involved both federal and state law claims, and the settlement negotiations concerned both sets of claims, federal privilege law applied.  In Wilcox v Arpaio, Mary and Earl Wilcox filed civil rights and other claims against Maricopa County and several of its officials under both federal and state law. They alleged that their lawsuit had been settled through a county mediation program and so brought suit to enforce the settlement. The county argued that the emails with the county mediator were not admissible under Arizona’s law on mediation confidentiality. Plaintiff’s argued that federal privilege law applied. The Ninth Circuit agreed with plaintiffs noting that where both federal and state law claims are involved, ““federal common law generally governs claim of privilege.” “(Id at 7-8, 8.)

Although in this present case, the federal law claims had been dismissed, the Ninth Circuit determined that federal privilege law still applied, “[b]ecause, here, at the time the parties engaged in mediation, their negotiations concerned (and the mediated settlement settled) both federal and state law claims…” (Id. at 8-9.)

Consequently, the matter was reversed as the district court erred in applying California law and remanded back to the district court for further proceedings.

Chief District Judge Lynn dissented, noting that at the time Sony filed its motion for summary judgment to enforce the settlement agreement, only state law claims remained. Thus, California Evidence Code section 1123 (b) was the applicable statute and precluded admission of the e mail exchange and the settlement agreement. (Id. at 9.)

So, once again, the Ninth Circuit finds that a federal mediation privilege exists and applies it, but, does not really explain what it is. Hopefully, on remand, the district court will understand and apply this concept.

…. Just something to think about.

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By |2017-01-09T11:59:23+00:00September 2nd, 2016|Court Cases|0 Comments

About the Author:

Phyllis Pollack
Phyllis G. Pollack, Esq. the principal of PGP Mediation (www.pgpmediation.com), has been a mediator in Los Angeles, California since 2000. She has conducted over 1700 mediations. As an attorney with more than 35 years experience, she utilizes her diverse background to resolve business, commercial, international trade, real estate, employment and lemon law disputes at both the state and federal trial and state appellate court levels. Currently, she is the in­coming chair of State Bar of California’s ADR Committee. She has served on the board of the California Dispute Resolution Council (CDRC) (2012­2013), is a past president and past treasurer of the SCMA Education Foundation (2011­2013) and a past president (2010) of the Southern California Mediation Association (SCMA). Ms. Pollack received her BA degree in sociology in 1973 from Newcomb College of Tulane University and her JD degree from Tulane University School of Law in 1977. She is an active member of both the Louisiana and California bars. Pollack believes that it is never too late to mediate a dispute and recommends mediation over litigation as it allows the parties to decide their own solutions.