Party Competency in Mediation: An Ethical Brain Teaser (California State Bar, California Trusts and Estates Quarterly)
This article is in two parts. Part 1 describes a mediation session which involves ethical issues faced by both the attorneys and the mediator. Part two addresses those ethical issues. To get the most from this article, analyze the questions at the end of Part 1 before going on to Part 2.
Don is in his early 90s and was predeceased by his wife three years ago. Don’s physical and mental conditions have become frail. Don’s daughter, Hilline and son, Tim, have been in a struggle for control over Don’s wealth. Through their attorneys each has accused the other of adding himself/herself as a signer on some of Don’s bank accounts, of removing large sums of cash from these accounts and turning Don against the other sibling. Don has maintained contact with the attorney who prepared the family estate plan many years ago. Don’s accountant brought the information about the bank accounts to the estate planning attorney’s attention who then brought suit on behalf of Don against Hilline and Tim. The suit sought the return of all money each had taken, for financial elder abuse and to eliminate their exertion of undue influence over Don. After almost a year of litigation the parties agreed to mediate.
During the caucus with Don and his attorney, it appeared to the mediator that Don was responding appropriately from a social perspective, but may not have fully comprehended what was discussed. The mediator asked Don if he knew that his attorney claimed Hilline and Tim had added themselves as signers on some of Don’s bank accounts, had taken money from his accounts and that each had made an effort to turn Don against the other sibling. To the mediator, Don appeared confused. When Don was asked if he wanted to get the money back from Hilline and Tim, Don, eyes somewhat glassy but not vacant replied, “I just don’t want my children to squabble. I want to be able to talk with Hilline and Tim without feeling I’m betraying the other. I want to reconcile before it’s too late.”
The mediator then had an attorneys-only caucus during which each argued their claims and defenses. Don’s attorney demanded the return of money taken separately by Hilline and Tim and for damages for financial elder abuse. He insisted that each be removed as signers on Don’s accounts. Hilline and Tim’s attorneys denied all claims and wrongdoing.
The mediator then met only with Don’s attorney, explaining that he was not an expert on competency but was concerned that Don did not fully comprehend what was happening. He also mentioned his suspicion that Don may not appreciate what Hilline and Tim had allegedly done, i.e., adding themselves as signers on Don’s accounts and purportedly taking money from him. Whether Hilline and Tim had, in fact, taken money from Don’s accounts was aggressively disputed by their attorneys. The mediator discussed that what might appear to be in Don’s best financial interest – recovering the money and taking Hilline and Tim off the accounts – might perhaps not be what Don felt was most important. Don appeared to want reconciliation with his children. Don’s attorney pointed out that Don needed the money purportedly taken by Hilline and Tim for his living expenses.
The mediator pointed out that he was in as difficult a position as Don’s attorney, since he could not present a proposal on behalf of a party unless the attorney and party agreed on all the proposal’s terms. The mediator explained that it appeared to him that Don’s attorney was advocating that Hilline and Tim return all the money each had allegedly taken from Don. Yet, Don didn’t seem to care about the money and only wanted a future relationship with Hilline and Tim before it was too late. Because of these conflicting demands the mediator was unable to present a proposal until there was consensus between Don and his attorney.
Don’s attorney called Don’s accountant and learned that Don owned sufficient real property that could be sold or encumbered as needed to pay for Don’s ongoing expenses, even if none of the missing money was returned. Don’s attorney ultimately concluded it was in Don’s broader interest not to pursue Don’s financial claims against Hilline and Tim as long as other protections for Don were in place.
The mediator then met with Don and his attorney. The attorney explained to Don that, based on a conversation with Don’s accountant, Don could live comfortably without the money he believed Hilline and Tim had taken. If Don wanted, the law suit could be dismissed and the mediator could find out from Hilline and Tim separately if each might be interested in reestablishing a relationship with Don. Any reestablished relationship would be contingent on Hilline and Tim agreeing not to exert undue influence on Don and not to interfere in the relationship the other has with Don. In the mediator’s opinion Don appeared somewhat bewildered by these conditions.
The mediator met separately with Hilline and her attorney and Tim and his attorney. He explained that Don might agree to dismiss the claims against Hilline and Tim in exchange for a mutual release of all claims. He told them that Don wanted a normal relationship with both Hilline and Tim, separately, however there had to be an agreement between Hilline and Tim that neither would interfere in the other’s relationship with Don, that each would cooperate in removing themselves as signers on the bank accounts and that each must not exert undue influence over Don nor say anything bad about the other to Don.
Before going on to Part 2, consider these questions: What ethical issues does Don’s attorney face? What ethical issues do Hilline and Tim’s attorneys face? What ethical issues does the mediator face? What are the alternative solutions for each?
Cautionary note: this article is not intended to be an all inclusive treatise on the ethical issues presented. It is intended to start a conversation about the issues. Readers are invited to comment to the authors.
When the competency of a party to a mediation is in question, what are the obligations of the attorneys and mediator? Does Don’s attorney have an obligation to disclose or not disclose Don’s questioned competency to the other attorneys and/or the mediator? Who is representing Don’s best interests? Does Don have capacity to engage counsel? Is a settlement agreement signed during mediation enforceable if one of the parties lacks competency? What steps might be taken to better ensure the enforceability of the settlement agreement?
If Don’s attorney later claims Hilline or Tim allegedly breached the settlement agreement, do Hilline and Tim have a defense of unenforceability by claiming that Don lacked capacity to enter into a written agreement at the time of the settlement? What risks do each of the attorneys and mediator have?
What if, months later, the value of Don’s assets sink and he goes to another attorney who believes it would have been in Don’s best interest to recover from Hilline and Tim what they had allegedly taken? What did discovery in this case reveal as to what was taken? How did that amount compare with Don’s remaining assets? Some attorneys might not be comfortable forcing Don into selling or encumbering real estate or other assets to allow Don to maintain his quality of life,because doing so would constrict his financial flexibility and limit his options in the event of, for example, an economic downturn or a major health issue. Might Don’s first attorney be a future target by Don? Why didn’t Don’s attorney discover earlier there were other financial alternatives available than bringing a lawsuit against Don’s own children?
Should Hilline and Tim join in a petition to approve the settlement and appointment of a guardian ad litem for Don, or take their chances without such petition? What claims could Hilline and Tim bring against their attorneys? If Don later retains a new attorney who believes there are recoverable claims against Hilline and Tim, could they have a claim against their initial attorneys for exposing Hilline and Tim to potential future claims by negligently advising them to enter into an unenforceable settlement?
If the mediator has been asked by all counsel to be facilitative and not evaluative or proactive, may/should the mediator do nothing?2 If the mediator has been asked to be proactive should the mediator suggest taking a recess to obtain a psych evaluation before going further? Should the mediator stop the mediation and urge a psych evaluation? How does mediation confidentiality impact these issues?
Discussion of Issues
Don’s Counsel’s Perspective and Risks
The critical preliminary and initial driving issue for Don’s attorney is Don’s capacity. Before any law suit is brought, before any mediation and even before the engagement letter with the client, the attorney should confirm his client’s capacity.
Don’s attorney has an ethical obligation to make sure Don has capacity to participate and be bound.3 If there is any question as to Don’s capacity, the attorney should suggest to Don that he voluntarily submit to a geriatric psychological evaluation. If Don does not agree to a psych eval, his attorney might suggest to Don that he petition the court for the appointment of a guardian ad litem to represent Don. Don’s attorney cannot commence a proceeding against his own client.4 In this way, Don’s attorney does not reveal confidential client information and takes steps to protect Don. There is no obligation on the part of Don’s attorney to disclose his client’s condition of capacity to other attorneys. The GAL has the ability to seek a psych eval for Don, and if it is determined that Don lacks capacity, to step into his shoes to negotiate in mediation and participate in future law suits to enforce or defend claims relating to Don’s estate. If Don refuses a psych eval and petitioning the court for a GAL and if the attorney has any doubts, he should consider not representing Don.
After it has been determined that Don has capacity, the attorney can more comfortably represent Don in legal proceedings, including a mediation or a suit representing Don’s interests.
If Don’s attorney has not protected himself by insuring that Don has capacity, the siblings have a defense to enforcement against them of any settlement agreement reached during mediation or otherwise. Likewise, Don’s attorney takes the risk that a later appointed Conservator may come after him for the money not recovered from the children.
Concerns about Don’s assets sinking in value after settlement only arise if Don does not have capacity at the time the settlement agreement is signed. If Don’s attorney does not immediately determine Don’s capacity, the attorney is taking on unnecessary risk. If the settlement agreement is signed by someone who lacks capacity, the agreement is not enforceable, unless a GAL or conservator has first been appointed.
Children’s Counsel’s Perspective and Risks
The attorneys representing Hill and Tim need to know that the person they are negotiating with or against can enter into a binding and enforceable agreement. To assure any settlement agreement is binding on Don or his estate, these attorneys need to see Don’s psych eval, or confirm that a GAL or conservator has been appointed on Don’s behalf, or know that the court has approved the settlement agreement. In this regard, the attorneys for Hill and Tim may join in a petition for approval. Without knowledge of the above, Hill and Tim are at risk. In addition their attorneys are at risk of a claim against them by Hill and Tim.
Risks common to all counsel
Lurking in the back of the minds of all attorneys who represent parties in mediation is the risk of being sued by the client for malpractice allegedly committed during the mediation. Imagine a client who agreed to settlement during mediation. Having second thoughts, as clients frequently do after tortuous rumination, the client then sues his attorneys for malpractice, alleging that as a result of “bad advice, deception and coercion, the attorneys, who had a conflict of interest, induced him to settle for a lower amount than he had told them he would accept, and for less than the case was worth.” This is in fact what happened in Cassel v. Superior Court, 51 Cal. 4th 113 (2011). The foregoing quote is from Cassel. The Supreme Court concluded that in a claim by a client against his or her attorney for malpractice allegedly committed during a mediation, communications between attorney and client during mediation are not admissible pursuant to mediation confidentiality (Evidence Code section 1119 et seq.) and there is no exception in a malpractice claim by a client against their attorney. The Supreme Court did acknowledge the conflicting policy concerns of mediation confidentiality and the client’s right to sue his or her attorney. Those policy concerns are now being considered by the California Law Revision Commission. Beware.
Mediator’s Perspective and Risks
The mediator’s most important responsibility is to maintain all communication as confidential5. Communications may include the mediator’s impressions and what the mediator sees and hears. Some mediators may take the position that the integrity of the mediation process takes precedence. This philosophy may motivate them to disclose the questioned competency of a party to all attorneys so that the attorneys might reach consensus on how to proceed. Other mediators might conclude, first and foremost, to maintain the confidentiality of all communication received from a party or his/her attorney. This means only sharing any perception or belief about a party’s competency if the attorney representing the party agrees it may be disclosed to other attorneys. These mediators would probably take the position that they should not attempt to encourage Don’s attorney to reveal Don’s questioned competency. However, a thorough discussion of the ethical issues and alternative solutions between the mediator and Don’s attorney would be highly advisable.
- Copyright 2016 by Paul Fisher and Neil Solarz
- Facilitative mediation is a style of mediation in which the mediator assists the parties with their communication and negotiation and does not interject his/her opinion or evaluation about the issues in the dispute. An evaluative mediation style is one in which the attorneys invite the mediator to express an opinion concerning the issues or possible outcome of the conflict in trial. Included within an evaluative style is the question of how proactive do the attorneys want the mediator to be in order to assist the attorneys and parties to reach a resolution.
- California has no rule specifically addressing the obligation of an attorney who represents a mentally impaired client. The authority that does exist is contained in ethics opinions. See e.g., San Diego Bar Ass’n, Ethics Op. 1990-3 (1990) (the lawyer “must” satisfy herself that the client is both competent and free from undue influence or fraud)
- Cal. Formal Op. 1989-112 (1989) (“Although the attorney may feel that it is in the client’s best interest to do so, it is unethical for an attorney to institute conservatorship proceedings contrary to the client’s wishes, since by doing so the attorney will be divulging the client’s secrets and representing either conflicting or adverse interests. However, should the client’s conduct interfere with or unduly inhibit the attorney’s ability to carry out the purpose for which the attorney was retained, withdrawal may be appropriate.”)
- Mediation confidentiality in California is governed by Evidence Code sections 703.5 and 1115 through 1128, among other code sections and numerous appellate cases. Mediation confidentiality is briefly summarized as: no written or oral communication made by any party, attorney, mediator, or other participant in any mediation may be used for any purpose in any pending or future proceeding unless all parties, including the mediator, so agree. This requires the mediator to not share any information, including verbal or written communication, observation of body language, facial expression, emotion or other observation from meetings with one side of a conflict with another side of a conflict. It is the confidential nature of mediation which allows parties and attorneys to have an open and at times honest communication with the mediator without fear the mediator will disclose any of the communication with any other party or counsel. Without confidentiality the parties and counsel have no reason to trust that the mediator will not share the communication or information. The communication of all information with the mediator allows the mediator to help the parties and counsel to resolve the conflict. Without confidentiality the mediation is not likely to succeed. Confidentiality is a prerequisite to mediation.