Mediation confidentiality: a wall against malpractice claims or a sieve?

Mediations give the litigants a confidential forum to discuss, with the aid of a neutral mediator, the pros and cons of settling and the terms of settlement. But does that confidentiality bar malpractice claims by parties who experience "settlers' remorse" and blame their counsel? The answer may be changing in California.

Confidentiality may not be as much a "given" as we assume:

* There is an ongoing study by the California Law Revision Commission (CLRC) regarding whether a "malpractice exception" should be inserted in the state's otherwise ironclad mediation confidentiality statutes, especially Evidence Code Section 1119.

* There can be disputes as to which set of mediation confidentiality rules apply in federal court cases.

* Mediations in other states involving one or more California parties may not be subject to California's confidentiality rules.

Even if California's strong confidentiality statutes are not amended, counsel should not take for granted that everything communicated with a client in connection with a mediation will be sacrosanct. Below are some protective steps that can be taken.

The Law as It Is

California's mediation privilege laws are primarily found in Evidence Code Sections 1115-1128. The key section for purpose of this discussion is Section 1119, which merits a close reading:

"Except as otherwise provided in this chapter:

"(a) No evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible or subject to discovery, and disclosure of the evidence shall not be compelled, in any ... noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given.

"(b) No writing, as defined in Section 250, that is prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation, is admissible or subject to discovery, and disclosure of the writing shall not be compelled, in any ... noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given.

"(c) All communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation shall remain confidential."

That is about as airtight as it can be as to communications among participants in the course of mediations. Thus, you would not expect to see evidence of those communications in a malpractice case against an attorney, whose former client alleges that counsel failed to adequately explain the settlement terms or coerced the client to agree to the settlement.

The California Supreme Court seems to agree. In Cassel v. Superior Court, 51 Cal. 4th 113 (2011), the unanimous court held that Section 1119 leave no judicial wiggle room to create a malpractice exception, though Associate Justice Ming Chin, concurring, questioned whether the Legislature had fully thought this through: "This holding will effectively shield an attorney's actions during mediation, including advising the client, from a malpractice action even if those actions are incompetent or even deceptive."

A settlement is supposed to end a dispute, not be Act I in a play of two or more civil actions. California's strong public policy favoring settlements in civil cases creates other barriers to malpractice suits. Courts have set the highest possible civil standard of proof in "settle and sue" cases, in which a former client sues his counsel after a settlement: proof "to a legal certainty." Filbin v. Fitzgerald, 211 Cal. App. 4th 154 (2012). In a mediated settlement, the Legislature has added an exclusionary rule against plaintiffs discovering or introducing mediation-related evidence in trying to meet their burden.

The Law as It May Be

After the Cassel decision, the Legislature directed the CLRC to review certain of the mediation statutes, including Section 1119, in light of Cassel and other case law. The CLRC's review, termed "Study K-402," remains unfinished, but the current staff memorandum suggests an in camera review by a judge at the beginning of a "settle and sue" case following a mediated settlement. Memorandum 2016-18, dated April 4, 2016, states that the commission "tentatively decided" that an exception to Section 1119 "should utilize an in camera screening process," but that it "has not yet fleshed out any details[.]" All materials regarding Study K-402 are available at http://www.clrc.ca.gov/K402.html for review.

At its April 2016 meeting, the CLRC directed staff to assess "whether there is any constitutionally permissible method of in camera screening or quasi-screening that a judicial officer could use as a filter at the inception of a legal malpractice case based on mediation misconduct (an early way to eliminate claims that have no basis and should not result in public disclosure of mediation communications)." In response, staff Memorandum 2016-29 noted the pragmatic issues of whether the proposed screening system should address the discovery of mediation communications or their admissibility, and, in any event, whether the evidence can legally be shielded from public inspection.

Commentary

For those of us who mediate cases with regularity, thus saving the judicial system and our clients from unnecessary trials, the more important question is: Should we be amending the statutes at all? Is the incidence of coerced settlements so great that we should essentially scrap mediation confidentiality? Should every mediated settlement be subject to potential judicial scrutiny based on who-said-what swearing contests, rather than enforcing written settlement agreements under the standards that already exist?

If there is written evidence, outside the mediation communications, of fraud in the inducement, undue influence, or failure to reflect the settling parties' real intent, we already have equitable remedies to deal with those circumstances.

We don't need to open the door "just a crack" to let judges rule on whether a malpractice case has a factual basis beyond who-said-what. If it does, the mediation evidence isn't necessary and should remain undiscovered. If it doesn't, the case is ripe for dispositive motions or a discovery or trial judge's rulings to restrict the evidence.

On March 24, 2016, the California Judges Association officially opposed the CLRC proposal, stating, "[I]t is the California Judges Association position that there exist no valid reasons, including the very rare claim of malpractice by an attorney during the mediation process, to justify an abrogation of the existing statutory confidentiality of the mediation process. It is simply too valuable to the civil court system in our state as a matter of public (and effective) policy to sacrifice that confidentiality." In a rational world, that would put an end to the discussion.

Attorneys on both sides of the aisle should agree that settlement finality has become essential to our practice, and that malpractice insurance premiums should not be boosted by tampering with a law that works just fine, thank you. We all know how litigious litigants can be.

I encourage the reader to express his or her opinion to the CLRC.

Meanwhile, Outside California State Courts

The mantra that most mediators recite at the beginning of each mediation, "Everything we say here is confidential," isn't necessarily so.

Whatever the CLRC and Legislature do with Section 1119, there are already reasons to be attentive to mediation confidentiality rules. Rule 408 of the Federal Rules of Evidence is not specially designed for mediations, and the district courts have adopted mediation rules that are not uniform. For example, the Central District of California's Local Rule 16-15.8 requires confidentiality only for mediations conducted by mediators on the court's panel.

It is an open issue whether a mediation in a federal case pending in California is subject to the state's mediation statutes. An unpublished 9th U.S. Circuit Court of Appeals case, Millhouse v. Travelers Insurance, 13-56959, (Feb. 23, 2016), did not need to decide the issue, finding that the parties had failed to timely raise it.

Outside California, twelve states have adopted the Uniform Mediation Act (UMA), with adaptations. That leaves 38 states with their own unique statutory or judicial formulations. The CLRC's staff has helpfully compiled a multi-state survey of mediation laws (Memorandum 2014-35, dated Aug. 28, 2014), and state implementations of the UMA (Memorandum 2014-24, dated June 6, 2014).

Steps to Consider

Apart from checking the applicable rules, you can preserve the closure that mediated settlements are intended to bring to parties and counsel in other ways:

* Stipulations. If there is any doubt as to the controlling law on confidentiality, the parties can stipulate in writing on the subject.

* As I suggested in non-mediated settle-and-sue cases, a confirming letter or email reiterating to the client the reasons favoring the settlement, and that the client agreed, may be in order if there is a reason to believe the client will get cold feet.

* Of course, the best protection is for clients to enter mediations with realistic expectations, based on written communications by counsel of the facts and of counsel's opinions.

Mediations were rarities when I began practicing law. Today they are commonplace, but we shouldn't take them for granted. We should protect the advantages they bring to our clients and the efficiency that they bring to the civil justice system.

Louie Castoria is a partner in Kaufman Dolowich & Voluck LLP's San Francisco office and director of the firm's Western Region Professional Liability Practice Group. He chairs a committee of the Professional Liability Defense Federation, and is certificated as a California mediator.