More On Mediation Confidentiality
California Law Revision Commission Revisits Mediation Confidentiality At Its October 8, 2015 Meeting.
I have previously posted about efforts to permit the introduction of evidence currently protected by mediation confidentiality. See my posts of August 30, 2015, and September 11, 2015.
The California Law Revision Commission met on October 8, 2015, to address the issue again. As of the date of this post, I have not been able to find minutes or a video recording of the meeting. However, I am informed that the CLRC has decided to proceed with drafting legislation to remove current confidentiality protections when misconduct is alleged as to a lawyer acting in the role of advocate (as opposed to a lawyer acting as a mediator). An earlier decision to draft legislation allowing in mediation communications when attorney mediator misconduct is alleged has apparently been reversed. The ongoing proceedings of the CLRC on mediation confidentiality may be followed at: http://www.clrc.ca.gov/K402.html
Another Look at Mediation Confidentiality: Does It Serve Its Intended Purpose?
Eric van Ginkel, mediator, arbitrator, and adjunct professor for the Strauss Institute for Dispute Resolution, has published an article in Vol. 32, No. 8, September 2014, Alternatives to the High Cost of Litigation, a monthly publication of the International Institute for Conflict Prevention and Resolution. The article provides a framework for analyzing the purpose of mediation confidentiality by considering the varieties of mediation confidentiality, the interests of the mediator, the parties, and non-parties in preserving confidentiality, and the need for confidentiality before and after a settlement is reached. Prof. van Ginkel is a fan of the Uniform Mediation Act, which he describes as “approaching Nirvana” compared to the California mediation statute. A summary of his article is available on-line at pages 4 to 7 of a recent memo prepared by the CLRC.
COMMENT: Much of the debate concerning whether to legislate exceptions to mediation confidentiality circles around whether a bright-line confidentiality rule that may be harsh in an individual case by excluding evidence of malpractice or duress nevertheless offers widespread and beneficial effects by facilitating candor, trust, and low transaction costs.
When things good sideways in mediation, we are tempted to look only backwards at the confidentiality rules, and ask ourselves how a different confidentiality rule could right the wrong. When we ask ourselves about the beneficial effects of mediation confidentiality, we generally have a different perspective: we are looking at the benefits of candor, trust, and low transaction costs before the problem occurs in the individual case. “The practical challenge is to learn to see [ex ante] argument every time it’s available: to learn to think the ex ante way when a case is full of cues tempting everyone to only look backwards.” See Ward Farnsworth, The Legal Analyst: A Toolkit for Thinking About the Law (University of Chicago Press 2007), p. 6. Interestingly, Prof. van Ginkel notes: “To date, no study has been undertaken that would give us the empirical data that connects success in mediation proceedings with the availablity of a form of confidentiality protection.” We have insights into the value of mediation confidentiality, and a dearth of empirical evidence.
Arbitration, Class Actions, Waiver: DIRECTV v. Imburgia Arguments Heard By Supreme Court On October 6, 2015
ScotusBlog Analyzes Oral Argument Under Caption, “Justices have scorching criticism for California court’s refusal to enforce arbitration agreement, but debate their authority to correct it.”
Columbia Law Professor Ronald Mann has authored both an October 2, 2015 preview of arguments in DIRECTV v. Imburgia and an October 7, 2015 analysis of the oral arguments.
In his preview, Professor Mann leads: “If I start by telling you that DIRECTV includes an arbitration clause in agreements with its customers and that the California Court of Appeal in this case declined to order arbitration, it would be understandable if you immediately stopped reading and clicked back to look for another post: how far do you have to read to expect that my post is going to tell you that the Court is likely to reverse the California court and hold the agreement enforceable?”
In DIRECTV, the arbitration provisions contain a poison pill: “if the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire [arbitration provision] is unenforceable.” What does “law of your state” mean?
The parties entered into the agreement when the Discover Bank rule applied in California, invalidating class action waivers, and before that rule had been overturned by AT&T v. Concepcion.
The question, as presented by DIRECTV’s petition for writ of certiorari to the Supreme Court is: “Whether the California Court of Appeal erred by holding, in direct conflict with the Ninth Circuit, that a reference to state law in an arbitration agreement governed by the Federal Arbitration Act requires the application of state law preempted by the Federal Arbitration Act.”
Thus, DIRECTV’s position is simply that the California courts flaunt federal law and preemption.
In contrast, Imburgia argues that this is a simple matter of contract interpretation: whether the reference to “the law of your state” refers to the rule in Discover Bank, or to the state of the law in California after Concepcion. Imburgia argues that contract interpretation should be left to state judges, and if the contract drafted by DIRECTV is ambiguous, then the well-known rule that ambiguous contracts are interpreted against the drafter must apply.
Prof. Mann concludes, “[I]t seems unlikely that five of the Justices will vote to affirm the California decision. But do we know exactly how they’ll explain their decision? For that I suppose we’ll have to wait a few months yet.”
PAGA: Ninth Circuit Holds That Waiver Of Employee’s PAGA Claims Cannot Be Enforced
Panel Holds the Federal Arbitration Act Did Not Preempt The California Rule Announced In Iskanian.
By a 2-1 majority, a Ninth Circuit panel has reversed a district court’s order that had granted an employer’s motion to compel arbitration of claims and dismissed claims for civil penalties under the Private Attorney General Act of 2004 (PAGA). Sakkab v. Luxottica Retail North America, Inc., No. 13-55184 (9th Cir. Sept. 28, 2015). Thus, the majority agreed with the rule in Iskanian v. CLS Transportation Los Angeles, LALC, 59 Cal.4th 348 (2014), barring the waiver of representative claims under PAGA. The majority reasoned that the Federal Arbitration Act and Concepcion do not preempt the rule in Iskanian, because the California rule barring waiver of PAGA claims is a “generally applicable” contract defense preserved by the FAA’s section 2 savings clause. Waiver of PAGA claims is barred, “regardless of whether the waiver appears in an arbitration agreement or a non-arbitration agreement.”
However, the majority noted: “The California Supreme Court’s decision in Iskanian expresses no preference regarding whether individual PAGA claims are litigated or arbitrated.” Thus, while reversing the order below, the Ninth Circuit panel also remanded to the district court to decide where the plaintiff’s representative PAGA claims should be resolved.
Judge N.R. Smith, dissenting, believes that Concepcion/FAA preemption should apply, that the FAA’s “liberal federal policy favoring arbitration” should have been followed, and that not enforcing the PAGA waiver provision crimps the parties’ ability to contract to the arbitration provision chosen.
COMMENT: In Concepcion, a Supreme Court majority has accepted an arbitration provision that results in waiver of class actions. In Sakkab, the Ninth Circuit panel majority distinguishes between class actions and PAGA actions that are representative actions akin to qui tam actions in which the plaintiff acts as a proxy for the state. Whereas class actions are not necessarily well-suited to arbitration, because an arbitrator may not be troubled to deal with the due process rights of third parties, a PAGA representative action involves obtaining penalties for the benefit of the state and the plaintiff, making it unnecessary to protect absent employees’ due process rights.
I recently authored an article entitled, “Can Private Attorney General Actions Be Forced Into Arbitration?” that appeared in California Litigation, Vol. 28, No. 2, 2015. You can find it here. By remanding to the district court to decide whether the PAGA claims should be litigated or arbitrated, Sakkab clarifies that whether PAGA claims can be forced into arbitration is not the same question as whether PAGA claims can be waived. Sakkab only holds the PAGA claims can’t be waived, leaving it to the district court to decide how the claims will be tried.
Mediation Confidentiality Statutes: An Experienced Mediator Comments On The California Law Revision Commission’s Proposal To Create An Exception To Mediation Confidentiality
Mediator Jill Switzer Comments On The Recent Proposal Before The California Law Revision Commission To Loosen Mediation Confidentiality Statutes.
On August 30, 2015, I posted that on August 7, 2015, the California Law Revision Commission directed staff “to begin the process of preparing a draft of a tentative recommendation that would propose an exception to the mediation confidentiality statutes (Evid. Code sections 1115-1128) to address ‘attorney malpractice and other misconduct.’”
Jill Switzer, an experienced mediator who has been a member of the State Bar for nearly 40 years, has communicated her thoughts to the California Law Revision Commission about the recent proposal. She has graciously given me permission to publish her probing comments on my blog. Her comments reflect her personal views, and are not the views of any organization, committee, or business with which she may be affiliated. I welcome any comments that my readers have about this topic. Here are Jill Switzer’s comments:
1. The general concept is to propose an exception to the mediation confidentiality statutes that would address “attorney malpractice and other misconduct.” What other misconduct does this contemplate? What would that be? Since the attorney mediator is not acting as a lawyer for purposes of conducting the mediation, .e.g not giving legal advice, there’s no attorney-client relationship, what would the Commission see as misconduct by the attorney mediator?
2. The exception should apply “…regardless of whether the alleged misconduct occurred during a mediation.” So, does this mean that it would apply to the convening stage, any/all pre and or post mediation communications, telephone calls, etc.? How would that even arise, especially since the clients are not involved in the convening, the pre/post mediation communications that the lawyers and mediators may have?
3. I carry mediator malpractice insurance (in an abundance of caution), which, right now, is very reasonable because mediators don’t get sued. That will certainly change. Rates will go up and if mediators are indeed brought into litigation as defendants or cross-defendants, the rates may well skyrocket. So, I will have to raise my rates to cover the increased insurance costs. Great, try explaining that to parties and counsel who think my rates are too high as they are.
4. What if I have insurance and the defendant lawyer doesn’t? On the deep pocket theory, plaintiff’s counsel will either sue me at the outset, or the defendant will cross-complain against me for indemnity. I thus become the “deep pocket.” Will I need to ask the counsel participating in the mediation whether he/she carries insurance? Should I ask for a certificate of insurance to satisfy that inquiry? Since malpractice insurance is on a “claims made” basis, what if the attorney has insurance at the time of the mediation, but does not have it at the time the claim is made? What if my carrier decides to settle based on nuisance value, etc., costs of defense, etc? I have a deductible I have to pay, regardless of whether I’m in for a penny or in for a pound in the litigation.
Putting the mediator in the mix is going to prompt some mediators, such as me, to start looking for something else to do. I’m not going to go bare, but I’m also not going to be the “fall gal” for an attorney’s alleged malpractice. I refuse to be a guarantor.
5. Even if I know nothing, I wasn’t in any caucuses where counsel and client were discussing the pros and cons of resolution, which is where the claimed malpractice occurred, I’m going to get dragged in. I am going to have to prove a negative. No plaintiff’s counsel is necessarily going to take my word that I wasn’t present without my being deposed. Unless and until the plaintiff’s counsel then decides that there’s “no there there,” and defense counsel sees that there is no basis for a cross-complaint against me, I’m stuck.
6. Whose job will it be to advise the clients that there’s no mediation confidentiality? Shouldn’t that be the attorneys’ job? If they don’t advise in advance of the mediation, does it then become my job to advise the clients in the mediation that there’s no confidentiality? Do I demand proof from the attorneys that they have so advised? How many cases would settle without mediation confidentiality?
7. After the mediation, unless I’m continuing my efforts to resolve the matter, I shred all notes, briefs, and/or any correspondence post-mediation. If there’s now the possibility of being sued, how long do I have to keep those? Do I have to keep them at least one year post legal malpractice possibility? When does that statute start running? If I don’t, am I liable for spoliation? How do I determine whether I think the resolution (or non-resolution as the case may be) may lead to a malpractice claim and thus require document retention?
8. This proposal is only going to increase litigation and its attendant costs, which is what mediation is supposed to alleviate. Mediation is a voluntary process, so the parties can leave at any time, and I’ve had that happen. Mediation is supposed to be a way to resolve disputes in an efficient, cost-effective manner. Why is there the assumption that the client got hosed by its lawyer in mediation and was forced to settle? There are going to be many cases of "settlor’s remorse,” clients who think that they can leverage a better deal by suing for malpractice.
9. If we lose mediation confidentiality, then there’s no point to mediating. Just have everything handled as an early settlement conference, MSC, or ENE by a judicial officer and ditch mediation altogether. Given the sorry financial state of the courts these days, I’m sure that they’ll be delighted to have even more work than they already have.
This proposal takes the sledgehammer to the gnat approach. If the clients don’t want to be bound by confidentiality and thus retain the option of a potential legal malpractice claim, then they shouldn’t mediate, but please don’t eviscerate what works for a great many to satisfy just a few.
Waiver: Fourth District, Div. 3 Agrees That Petition To Arbitrate “In The Middle Of Trial” Comes Too Late
Party Wishing To Enforce Right To Have Settlement Agreement Interpreted By Arbitrator Ought To Have Sought Enforcement Before Same Issues Were Submitted To Court For Adjudication On The Merits.
The underlying dispute in Kurtin v. Elieff, G049556 (4/3 Sept. 2, 2015) (Rylaarsdam, Aronson, Fybel) (unpublished) was a messy partnership buyout and accounting. After a bifurcated trial, grant of a partial new trial, appeal, and remand, Elieff petitioned for arbitration, “seeking the arbitrator’s ‘interpretation or clarification’ of aspects of the settlement agreement, prior to the partial retrial.” The trial court denied the petition, concluding the right to arbitrate had been waived, a ruling now affirmed on appeal: “Elieff has, in effect, petitioned for arbitration in the middle of trial. Such a petition is untimely as a matter of law.”
The arbitration clause was unusual, because it expressly gave the arbitrator – the famed Tony Piazza — the power to add or rewrite provisions in the parties’ settlement agreement if needed to save the contract from unenforceability. However, the unusual nature of the arbitration agreement did not mean that the right to arbitrate could not be waived by deeply engaging in litigation. Furthermore, the issue invoked by the petition to arbitrate was the power to interpret the agreement, not the arbitrator’s ability to amend it – and interpretive issues had already been presented to the trial court.
“Given the undisputed evidence that Elieff waited until after this case was tried, a judgment was entered, an appeal was decided and the case was remanded for a partial retrial before filing his petition,” wrote the Court, “we have no trouble concluding there was no error.”
NOTE: On June 28, 2012, I posted about an earlier phase of the Kurtin/Elieff dispute. This is a long-running dispute. Kurtin filed suit against Elieff in 2007, in connection with Elieff’s performance under an earlier settlement agreement.
Department Of Corrections: Say Whaaat? SingerLewak v. Gantman, Certified For Publication Yesterday Morning, No Longer Certified By Yesterday Afternoon
Court of Appeal’s Jurisdiction To Authorize Publication Expired.
Just yesterday, in the preceding post, I reported the Court of Appeal, Second District, Division 8, had authorized publication of SingerLewak v. Gantman, a case offering an excellent discussion of the so-called “public policy exception” that, when it is found it exist, allows for judicial review of an arbitral award.
By the end of the day, however, the following case docket entry appeared:
Pursuant to California Rules of Court, rule 8.264(b)(1), the court’s opinion became final on August 28, 2015. The court’s order filed August 31, 2015, granting certification to publish the opinion is hereby vacated as improvidently issued. Forthwith, the court will comply with the provisions of California Rules of Court, rule 8.1120(b) regarding publication of the opinion upon order of the Supreme Court.
As Arte Johnson would say, “Very interesting . . . but not very funny.”
Rule 8.1120(b) provides: “If the rendering court does not or cannot grant the request before the decision is final in that court, it must forward the request to the Supreme Court with a copy of its opinion, its recommendation for disposition, and a brief statement of its reasons. The rendering court must forward these materials within 15 days after the decision is final in that court.”
I’ll let you know what happens.