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State and Federal Mediation Protections in 'Bad Faith' Hearings

by Victoria Pynchon
June 2007

From Settle It Now Negotiation Blog

Victoria Pynchon

Just when you say the mediation privilege would prevent the parties from disclosing such matters as settlement authority and the activities of party representatives, along comes an out-of-state federal opinion that makes you glad you live and practice in California.

(photo:  Silence is Golden by Memme)

Although the District Court in Bauerlein v. Equity Residential Properties Management Corp.Slip Copy, 2007 WL 1521606D.Ariz.,2007.May 22, 2007 refused to award the costs of an unsuccessful mediation against parties whose representatives left the mediation "early" there was nary a word spoken about confidentiality of the proceedings.

Arizona and Federal Protections for Confidential Mediation Communications  

It's not that Arizona doesn't have such a privilege.  We understand that A.R.S. § 12-2238 recognizes as privileged and confidential "[c]ommunications made, materials created for or used and acts occurring during a mediation." (emphasis added).

Nor do the federal courts lack protections for mediation communications.  Under 28 U.S.C.A. § 652(d), mediations conducted pursuant to federal court ADR programs are required to be protected by local rules, which "provide for the confidentiality of the alternative dispute resolution processes and to prohibit disclosure of confidential dispute resolution communications." 

Therefore, whether protected by federal or state law, you would have expected that the parties accused of conducting themselves in "bad faith' would have objected to the introduction into evidence of one or all of the following mediation communications and activities:  

  • the identity of carrier representatives attending;
  • when and why those representatives left the mediation; 
  • the mediator's or the parties' explanation of the reason for the representatives departures, i.e., because there was a "vast divergence of the estimates of the value of the claims"
  • why one party put no money whatsoever on the table (because it was essentially judgment proof as a Taiwanese corporation without any U.S. holdings")
  • the mediator's statement to at least one of the carrier representatives that the case would not settle "based on the parties' individual evaluations of the claims because they were too far apart and had too divergent estimates of the value of their claims"
  • the mediator's approval of the carrier representatives leaving the mediation so long as counsel was left with authority to settle the claims.

Mediator Predictions

I don't know what shocks me more.  That these disclosures were made with no objection or that the mediator "predicted" the case would not settle before the parties "officially" reached impasse.  These predictions invariably affect the negotiations and should be made rarely if at all.  

Just as importantly, attorneys mediating their disputes should familiarize themselves with the laws applicable to the confidentiality of the proceedings -- particularly when they're in federal court where the applicable law is not as certain as it is in the state courts.  See the following commentaries on the federal Northern District of California Olam opinion (largely disapproved in California) here and here.   

It's my experience that most attorneys are completely unaware of the scope and nature of the mediation privilege under which they are operating.  If we don't want this inexpensive "alternative" procedure to become a breeding ground for litigation over party mediation tactics, then we should make sure we learn, and follow, the applicable mediation protections, privileges and guidelines less we stumble into disclosures that need not be made.   See Disputing Irony, a Systematic Look at Litigation about Mediation

Biography


Attorney-mediator Victoria Pynchon is a panelist with ADR Services, Inc. Ms. Pynchon was awarded her LL.M Degree in Dispute Resolution from the Straus Institute in May of 2006, after 25 years of complex commercial litigation practice, with sub-specialties in intellectual property, securities fraud, antitrust, insurance coverage, consumer class actions and all types of business torts and contract disputes.  During her two years of full-time neutral practice, she has co-mediated both mandatory and voluntary settlement conferences with Los Angeles Superior Court Judges Alexander Williams, III and Victoria Chaney.  As a result of her work with Judge Chaney in the Complex Court at Central Civil West, Ms. Pynchon has gained significant experience mediating construction defect litigation.  Ms. Pynchon received her J.D., Order of the Coif, from the U.C. Davis School of Law. 



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Website: www.settlenow.com

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