Late Summer ’05 Intellectual Entertainment: Brief Survey of Current Non-California Cases On Issues of Mediation Confidentiality, Ethics and Public Policy
Edited by Judith Stalk
How do other jurisdictions treat critical mediation issues of mediation confidentiality, ethics of disclosure of policy limits, and the public policy of the same person serving as mediator and special master? Do the recent cases discussed below give us a glimpse into the future of mediation, or a look into the past?
After a failed mediation, plaintiff’s counsel interviewed one of defendant’s key witnesses without defense counsel present. During the interview plaintiff disclosed to the witness the defendant’s position taken at the mediation. Is plaintiff’s disclosure subject to sanctions? How does a recent U.S.D.C. case in Maine address this question? Would the 9th Circuit come to the same or a different conclusion? Sheila Frank v. L.L. Bean Inc., U.S.D.C., dist Maine, June 23, 2005, 2005 U.S. Dist. LEXIS 13833.
Plaintiff employee alleged that her former supervisor, who was not a current employee, failed to take reasonable steps to address the alleged sexual harassment of the plaintiff and that the former supervisor began to harass her. Plaintiff argued that the defendant employer was vicariously liable for the former supervisor’s harassing conduct. Plaintiff’s counsel conducted an interview with the former supervisor without the defendant employer’s knowledge, during which plaintiff allegedly disclosed the defendant employer’s position taken at a confidential mediation. A local U.S.D.C. Rule provides, in part, “All ADR processes are confidential. Thus, no disclosure shall be made to anyone, including any judicial officer not serving as a neutral in the matter, of any confidential dispute resolution communication that in any respect reveals the dispute resolution positions of the parties or advice or opinions of neutrals.”
The court observed “By revealing L.L. Bean’s settlement position to a potentially key witness in an attempt to convince the witness of the strength of her case, Frank not only violated the rule, but violated it in a way that strikes at the heart of the rule’s purpose. Parties will not feel free to engage in candid settlement talks if they fear that their positions can be later used in attempts to turn witnesses against them.
The Fourth Circuit has suggested factors to be considered for analyzing the appropriateness and severity of sanctions in a case where confidential settlement information is disclosed: (1) whether the mediator explained the extent of the confidentiality rules, and the clarity of such explanation; (2) whether the parties executed a confidentiality agreement; (3) the extent of willfulness or bad faith involved in the breach of confidentiality rule; (4) the severity or adverse impact of the disclosure on the parties or the case; and (5) the severity or adverse impact of the disclosure on the mediation program.
The Court concluded, “disclosure of the confidential information also has consequences for the mediation program, since disclosure of confidential settlement positions in an attempt to influence witnesses will deter future parties in settlement negotiations from engaging in candid negotiations.” Though the Court found four of the five criteria had been met, the court also concluded defendant had failed to show it had been materially prejudiced by the disclosure. The Court ordered plaintiff to pay $1,000.
During a mediation, to what degree are the policy limits of insurance coverage required to be accurately disclosed, and what are the consequences to defense counsel for failure to accurately disclose? This recent case addresses the view from Connecticut. Is this similar or dissimilar to the view in California? Statewide Grievance Committee v. Kennelly, Sup. Ct. Conn., Feb. 25, 2005, 2005 LEXIS 572,
Petitioner, an agency of the Connecticut state bar association, brought an action on a complaint by plaintiff in the underlying case against respondent, an attorney for the defense in the underlying case, based on violation of state rules of professional conduct. The allegations of false statements and dishonesty are based on misrepresentations made by respondent at a dinner conference of attorneys and the complainant on the eve of mediation, in attempt to reach a settlement, and the failure of the respondent to provide the mediator the accurate policy limits during the mediation.
At the dinner and during the mediation, respondent indicated $680,000 had been paid by his client carrier for defense costs, leaving $320,000 available under the policy for payment of any settlement or judgment. In fact $310,000 had been expended on defense costs, and respondent did not disclose this. Though respondent did disclose to the mediator there was additional money available under the policy, he did not give an accurate number, nor did the mediator ask. Based on the information before the mediator, the mediator recommended the defendant in the underlying case pay $400,000. Though that number was agreed upon, the underlying case failed to settle at the mediation for other reasons.
The court opined, “If the misrepresentation of the actual balance left on the liability policy is a material fact, it is clear that respondent, by clear and convincing evidence, violated the [rules of professional conduct]… In settlement discussions it becomes important if not critical that accurate disclosures of insurance coverage and limits be disclosed because that insurance is a key factor in determining the prospect of a judgment being satisfied… While it appears incredible that the amounts claimed as defense costs by respondent were actually and reasonably incurred, the parties and the [mediator] apparently relied on this representation and it appears that this misrepresentation, at least in part, contributed to the failure of the mediation.
Though the Grievance Committee [of the state bar] recommended a three-month suspension, the Committee recognized that the respondent was young and inexperienced. The court reprimanded the respondent for his violations.
However, a considerably different conclusion was reached in a California case which addressed similar issues. See California Dredging Company v. Insurance Company of North America, (1993), 28 Cal. App. 4th 1618; 22 Cal. Rptr. 2d 461, 1993 Cal.App. LEXIS 911.
Public policy of the same person serving as mediator and special master:
How does Kansas view the appointment of the same person as mediator and special master? Differently than in California? Schuf v. Schuf, Kansas Ct. of Appeals, March 4, 2005,33 Kan. App. 2nd 665; 107 P.3d 1237; 2005 Kan.App. LEXIS 182.
Plaintiffs, son and daughter-in-law, appeal from a judgment for father and mother. The judgment was based on findings and recommendations of a master at a second trial following a failed mediation conducted by the same person serving as master. The judge at the first trial appointed a senior judge both as mediator and as master, as provided for under Kansas statutes. No objection was made by any party to this order until after the master’s report was filed. The court adopted the master’s report as its judgment. The issue before the court of appeals: ” did the trial court err in appointing a master and ordering that person to also serve as a mediator?”
The court of appeals observed “At the outset we agree that there are perils to having a master also serve as a mediator… In order that mediation be successful, disclosures of strategic strengths and weaknesses need to be shared by the parties with the mediator so that a knowledgeable evaluation can be made in the course of trading offers and counteroffers. When a mediator is asked to step out of this role and assume the impartial role of a master, his or her knowledge of the case would be based in part on these confidential communications, which would have the potential to taint impartiality. The better practice is to avoid such a dual appointment and to preclude any person who serves as a mediator from being assigned to any subsequent role as a fact finder or master in the same case.” None the less, though an objection by the appellees “would have been proper at the time of the appointment, upon the start of mediation, or at trial before the master, . . . there is no specific prohibition in the statute against dual service as a mediator and fact finder or master. Moreover, Kansas statute exempts persons required to report information ‘in order to comely with orders of a court’. Finally, we view the absence of any specific objection to the dual appointment as a waiver of such confidentiality, which is specifically permissible under Kansas statute… Notwithstanding our disapproval of the dual appointment of the same person as mediator and master as not being the better practice, the lack of a timely and specific objection requires that we affirm the [trial] court on this issue.”
(There is more than meets the eye in this case. This was the tragic tale of a family owned business in which all parties lived under the same roof on the family farm. Litigation started in 1992 with an eviction action brought by the parents. This appellate opinion was filed March 2005.)
A question to California attorneys: would the outcome have been different in California? Consider Foxgsate Homeowners’ Association v. Bramalea California, Inc., (2001) 26 Cal. 4th 1; 108 Cal. Rptr.2d 642; 2001 Cal. LEXIS 4233. In addition, the statutory scheme in California is considerably different from Kansas.