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Mediations Are Supposed To Be Confidential... But Are They Really?

by Phyllis Pollack
December 2014

PGP Mediation Blog by Phyllis G. Pollack

Phyllis  Pollack

Either as a participant in a mediation or as the mediator, we have all learned the cardinal rule that mediations are confidential both in terms of the statements and other communications made during the mediation and the information the mediator keeps to herself, not sharing it with the other parties. Many times a mediator has analogized mediation confidentiality to the television ad, "What happens in Vegas, stays in Vegas" to explain the sacrosanct nature of mediation confidentiality.

But, are mediations really confidential? While in legal theory, they are supposed to be, in court proceedings, they are not always so.

A review of both federal and state law on the topic seems to indicate that mediation confidentiality is to be strictly construed and applied. For example, with respect to the federal courts, Congress enacted the Alternative Dispute Resolution Act initially in 1988 to authorize arbitrations and then amended it in 1998 to include alternative dispute resolution processes in general. 28 USC §§ 651-658. (Public Law 105-315, 112 Stat 2993 (October 30, 1998).) Section 652(d) specifically states that, "... each district court shall, by local rule, provide for confidentiality of the alternative dispute resolution processes and to prohibit disclosure of confidential dispute resolution communications."

To accomplish this goal, the federal courts adopted local rules mandating mediation confidentiality. For example, the United States District Court for the Central District of California enacted Local Rule 16-15.8 stating that mediations conducted by a panel mediator are confidential. The court iterates this in paragraph 9 of its General Order 11-10 (August 15, 2011). Similarly, the Ninth Circuit Court of Appeals mandates mediation confidentiality in its Circuit Rule 33-1.

While some may dispute its existence, some federal courts have relied on a federal common law mediation privilege to uphold mediation confidentiality. Most recently, the Ninth Circuit Court of Appeals in Wilcox et al v. Arpaio et al, 753 F. 3d 872 (9th Cir. 2014) (Case no. 12-16418- June 2, 2014) recognized that a federal common law mediation confidentiality privilege exists but side-stepped the issue of applying it by arguing that the parties waived it as both sides argued only the application of Arizona's mediation privilege laws and did not reference this common law privilege.

Further, the Federal Rules of Evidence may also be applicable. In some instances, Rule 408 (regarding settlement discussions) will be the relevant rule while in other instances, Rule 501 (providing that in cases under the diversity jurisdiction of the court, as to claims and defenses, the state law supplies the rule on privilege) will be important.

With respect to state law, every state in the union has one or more statutes mandating mediation confidentiality; some more expansive than others. (See, California Law Review Commission Study, K-402, Memorandum 2014-35 (August 28, 2014) for an extensive discussion and exhibit listing most states' statute(s) and Memorandum 2014-24 (June 6, 2014) discussing the Uniform Mediation Act adopted in 11 states and the District of Columbia. Other Memoranda discuss the mediation confidentiality statutes of the remaining states.) In California, Evidence Code sections 1119- 1128 set out very stringent confidentiality rules that have been vigorously enforced by the California Supreme Court. (See, (See, Cassel v. Superior Court (2011) 51 Cal. 4th 113 (cassell opinion.pdf) and its progeny.)

In addition, the parties usually sign a mediation confidentiality agreement agreeing that all communications occurring within the mediation remain confidential.

So, with all of this statutory and contractual protection, mediations should be confidential. However, a yearly analysis of cases in court regarding mediations conducted by James R. Coben, Professor and Senior Fellow, Dispute Resolution Center at Hamline University School of Law shows quite the contrary. Both in a law review article and in a recent webinar sponsored by the Section of Dispute Resolution of the American Bar Association, Professor Coben demonstrates that quite frequently, mediations have been the subject of hearings in court, and confidentiality has been ignored.

Professor Coben found that with each passing year, more and more cases have dealt with mediations. For example, in 2002, there were only 301 cases; by 2006 this number had more than doubled - there were 677 cases. In 2013, there were 802 cases.

At the same time, the trend has been a decrease in state court cases but an increase in federal court cases. In 2003, of the 335 cases, 87 of them or 26% of the cases were in federal court while 248 or 73% were in state court. Ten years later, in 2013-- of the 802 cases, 444 of them or 55% of the cases were in federal court and 358 or 45% were filed in state courts.

What were the issues raised in these cases? Out of the 735 cases filed in 2012-- 272 of them or 37% involved the enforcement of the settlement agreement, 103 cases or 14% involved mediator fees, 66 cases or 9% involved confidentiality, 37 cases or 5% involved sanctions, and 22 cases or 3% involved ethics. Again, in 2013­­-- 9% or 73 cases involved confidentiality.

With respect to confidentiality alone, between 1999 and 2005-- there were 601 cases filed in which oral mediation communications were offered into evidence. Notably, the idea of mediation confidentiality or privilege was not even raised in 462 of them or in 76%!

In addition, during this same time period, in 125 cases, the mediator testified and again, in 85 of them or 68% of them, the notion of privilege was not even raised.

The area that mediation confidentiality seems to be ignored quite a lot has been class action settlements. Mediators have quite frequently submitted declarations attesting to the quality of the bargaining process and fairness of the settlement. Quite frequently, the federal and state courts have relied on the reputation of the mediator as evidence that the mediation process was fair, and did not involve fraud or collusion, ignoring any objections of any class members who were not at the mediation. For example, in 2013-- there were 83 cases involving class action settlements in which the involvement of a private mediator, if not her affidavit submitted to the court, played a role in the court determining that the bargaining was at arm's-length and not collusive.

Professor Coben cites three examples of cases heard in the California U.S. District Courts in 2013:

•(1) In Re MRV Communications Inc Derivative Litig. , No. cv-08-03800 GAF (MANX), (a derivative action) arising in the Central District of California on June 6, 2013- the mediator's declaration was quoted in the process of approving the settlement; on page 11 of the Memorandum and Order approving attorney fees, the district court states:

"...And the mediator in the case concurs, urging that "the separately negotiated attorneys' fees and expenses agreement was negotiated in good faith and is fair and reasonable and within the range of fees paid in similar shareholder-derivative cases.""

•(2) Johansson-Dohrmann v. CBR Systems, Inc, 12 cv -1115- MMA (SD Cal. July 24, 2013) again quoting a mediator declaration in several different places in the process of approving the settlement;

"the settlement is . . . fair and reasonable to all parties and provides significant benefits to the Settlement Class." ( Page 8 of Order) and

"It was clear from the briefs and the discussions during the mediation that the parties and their counsel had a thorough understanding of the facts and law as well as the risks and uncertainties pertaining to the litigation." (Page 10 of Order)

That the parties "vigorously negotiated their respective positions," and that the settlement was the "product of arm's-length and good faith negotiations." (Page 10 of Order)

(3) Moore v. Verizon Communications, Inc. No. c-09-1823 SBA (ND Cal. August 28, 2013,) noting that the mediator "unreservedly" recommended the settlement. (Page 15 of Order) Here, the mediator submitted a 10 page declaration in support of the settlement.

While these cases do involve showing the fairness of class action settlements, there appears to be nothing in the mediation confidentiality statutes authorizing such as an exception. And while the parties may have waived confidentiality, many of the statutes require an express waiver in writing; rather than an implied waiver or simply ignoring the issue altogether as seems to have occurred here. See, for example California Evidence Code sections 1118 and 1122.

So... are mediations confidential? Not always- it depends on what's at stake!

... Just something to think about!

Biography


Phyllis Pollack with PGP Mediation uses a facilitative, interest-based approach. Her preferred mediation style is facilitative in the belief that the best and most durable resolutions are those achieved by the parties themselves. The parties generally know the business issues and priorities, personalities and obstacles to a successful resolution as well as their own needs better than any mediator or arbitrator. She does not impose her views or make decisions for the parties. Rather, Phyllis assists the parties in creating options that meet the needs and desires of both sides.  When appropriate, visual aids are used in preparing discussions and illustrating possible solutions. On the other hand, she is not averse to being proactive and offering a generous dose of reality, particularly when the process may have stalled due to unrealistic expectations of attorney or client, a failure to focus on needs rather than demands, or when one or more parties need to be reminded of the potential consequences of their failure to reach an agreement.



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