Q 1: National Ethical Standards: What are the applicable National Ethical Standards of Practice for a mediator, located in California, mediating a dispute likely to be litigated or in litigation in the substantive areas of Business, Construction, Employment and Real Estate Law?
A 1: There are a number of organizations that promote confidence in the mediation process by promulgating codes of conduct for mediators. The most widely recognized is The Model Standards of Conduct for Mediators , (“Joint Standards”) (1994). The Joint Standards are the result of a collegial initiative of three professional groups: the American Arbitration Association (AAA), the American Bar Association (Dispute Resolution Section) (ABA) and the Society of Professionals in Dispute Resolution (SPIDR, now known as Association for Conflict Resolution or ACR).
The Joint Standards have not been adopted by the State Bar of California or the California Judicial Council. Nevertheless, the adoption by the ABA, AAA, ACR and the US Navy, among many other prestigious national organizations, causes me to consider the Joint Standards the most widely recognized national standard governing the conduct of mediators. Many of the state and national organizations that have not adopted the Joint Standards, still use the Joint Standards as a primary source in drafting their own organizational standards.
In addition, attorneys are faced with a legion of potentially applicable National Ethical Standards when serving as a neutral Mediator. An attorney, or non-attorney, serving in court-connected mediation programs should familiarize himself or herself with the comprehensive discussions of ethics set forth in the National Standards for Court-Connected Mediation Programs (“Court-Connected Standards”) and the ABA’s Model Rules of Professional Conduct, particularly Rules 1.12 and 2.4, [Lawyer Serving as a Third-Party Neutral (2002)]
Attorneys who handle attorney-client disputes should review the ABA’s, Model Rules for Mediation of Client-Lawyer Disputes (1998) (“Attorney-Client Standards”). Also, mediators need to keep these rules in mind when it appears during mediation that the attorney and his or her client may be demonstrating by their conduct that a possibly unrecognized conflict of interest has arisen between the attorney and his or her client. At least four frequent conflict-of-interest situations that arise during mediations will be discussed later on in these FAQ’s at Q #19, 20, 21 and 22.
Useful discussions of appropriate ethical practices may be found in the ABA’s Ethics 2000 Report, the CPR-Georgetown Commission and Model Rule of Professional Conduct for the Lawyer as Third Party Neutral (2002) (Model Rule for Lawyer as Neutral Standards), although the latter has not been adopted by the ABA.
In addition, some states, but not the State of California, have adopted the Uniform Mediation Act (2001). The Uniform Mediation Act with its Prefatory Note and extensive Reporter’s Comments provides a useful catalogue of most of the ethical dilemmas facing mediators in a commercial environment. The Uniform Mediation Act, if passed in California, would generally weaken the California laws on Mediation Confidentiality. The Uniform Act’s broad list of “exceptions” to Mediation Confidentiality is set forth in the Uniform Mediation Act, Section 6 (a)-(d).
Q 2: California’s Ethical Standards: What are the applicable California Ethical Standards of Practice for a mediator, in court-connected programs, mediating a dispute likely to be litigated or in litigation in the substantive areas of Business, Construction, Employment and Real Estate Law?
A 2: Ethical standards in California for mediators in court-connected mediations involving commercial civil litigation are codified at California Evidence Code §§ 1115-1128 (2001) and California Rules of the Court Rules,1620-1640.8 (2003).
In addition, an attorney licensed in California is well advised to be familiar with the State Bar’s “California Rules of Professional Conduct” because it is likely that the “reasonable expectations” of mediation participants will be that a licensed attorney will abide by his or her professional commitment to the State Bar’s Rules of Professional Conduct – many of which do govern an attorney’s behavior when acting in a capacity other than as an advocate for a particular client.
Unlike attorneys, architects, building contractors, engineers, family therapists, real estate agents, mortgage brokers and a myriad of other professionals, there is no state wide regulatory agency that licenses and governs mediators, as mediation professionals. A mediator who is also licensed as an attorney, a building contractor, a real estate agent or a therapist, may very well have his or her activities as a mediator regulated by the profession in which that person is licensed.
In fact, there seems to be a consensus that when a mediator provides professional advice and counseling during the course of a mediation, the mediator should take care not to provide advice in areas in which the mediator is not licensed, because there is a growing risk of exposure to lawsuits for the unlicensed practice of a profession. Cal Business & Professional Code §6126. See ABA Dispute Resolution Section, Resolution on Mediation and the Unauthorized Practice of Law (2002) (herein, “UPL Standards”).
An experienced California professional on “legal ethics,” Robert L. Kehr observes: “The conduct of the lawyer/mediator must make it clear at all times that no legal services are being provided, and one can imagine situations in which the lawyer/mediator’s efforts to bridge a settlement gap might lead to statements to a party that sound an awful lot like the providing of legal advice. This seems to me to be a real danger to lawyers working as neutrals.”
For example, at least in theory, a human resource or employee relations director who serves as a neutral mediator in an employment dispute and provides tax advice and counseling to the employee may be considered to be engaging in either the practice of law or accountancy, or both -- two professions in which the mediator may not be licensed. The “Better Practice” in such a situation is not to provide such advice; but, instead, the mediator should consider recommending that the employee seek appropriate professional assistance.
Similarly, consider an attorney, experienced in construction defect litigation, serving as a mediator in a case that involves a AIA Contract with a Guaranteed Maximum Price that has attached as exhibits a Soils Report indicating unstable conditions on a hillside slope and Building Plans by an architect who has not considered the risks of hillside instability described in the Soils Report. The mediator is likely to be asked by one of the parties for a personal evaluation as to:
“Whether the General Contractor should be financially responsible for the $100,000 plus cost overrun because he should have anticipated in his bid that the extra cost of caissons being required based on the Soils Conditions described in the Soils Report?”
Many real estate attorneys will have sufficient experience to have an opinion, but offering up such an opinion in order to influence one or both of the parties in a construction defect case could expose the mediator to a legitimate claim that the mediator is offering professional advice in the licensed professions of civil engineering or geology without having a proper license.
The moral of the story is that the role of the mediator is to facilitate settlements, but it is not to offer a professional evaluation in an area in which a license is likely to be required, unless it is done with the express voluntary permission and understanding of all present of the limitations of the observation, and it is done in a non-coercive fashion. Joint Standards VI , Comments, par. 4 (“Mixing the role of a mediator and the role of a professional advising a client is problematic, and mediators should strive to distinguish between the roles. A mediator should, therefore, refrain from providing professional advice.”) And further, parties should routinely and expressly be encouraged to consult independent qualified professionals. CRC Rule 1620.3 Advisory Comment Committee par. 2, (2). . See also, Joint Standards VI , Comments, par. 4 .
If the opinion offered by the mediator on tax advice or civil engineering turns out to be dead wrong, but is relied upon to the detriment of one or both of the parties in entering into a settlement, the mediator may be exposed to professional liability claims. Of course, the former mediation participant bringing the lawsuit will have to find a way to overcome the shield of mediation confidentiality in the subsequent civil proceeding for “mediator malpractice”. See FAQ #30 and The Trouble with Foxgate and Rojas by Max Factor III at: http://www.mediate.com/articles/factorM1.cfm
Most attorneys in civil cases probably expect that the mediator selected will adhere to the Joint Standards . In addition, many mediators are affiliated with mediation organizations that also promulgate comparable ethical standards and certain minimum mediator qualifications. In California, AAMC, ADR Services, ARC, CDRC, IAM, JAMS and SCMA, among many other organizations of ADR professionals, endorse specific ethical standards and/or promote minimum standards of Mediator Ethics. Each organization’s standards are readily available on the Web.
Q 3: Standards for Licensees other than Attorneys: A) Is a mediator who is not licensed to practice law in California required, when mediating a business, employment or real estate dispute in litigation in California courts, to comply with the California Rules of the Court governing mediator conduct, CRC Rules 1620-1640.8 ? B) The applicable California mediation statutes, Evidence Code Sections 1115- 1128 and the fourteen (14) specialized mediation confidentiality laws listed in the Law Revision Commission Comments to Evidence Code section 1119 ? C) And the ABA’s Joint Standards ?
A 3: A) Yes; B) Yes: and C) Yes! Practically speaking, it is the reasonable expectation of mediation participants that, whether or not mediation participants are involved in a “court-connected program”, litigated disputes submitted to mediation are to be conducted consistent with the prevailing Standards of Conduct – national and state. At least in California, an attorney licensed in California is required to comport him/herself in an honest manner and in conformity with the minimum ethical standard of the Rules of Professional Conduct. B&P Code §6106.
Q 4: Mediator Honesty: What ethical standards govern whether, and to what extent, a mediator is supposed to be “honest”?
A 4: “Honesty is the best policy [for mediators]!”
What Do We Mean By Deception? John Cooley: “Deception has been defined generally as ‘the business of persuasion aided by the art of selective display,’ and it is effected by two principal behaviors: hiding the real and showing the false.” Jim Stark: “I define deception in mediation to include all intentional communicative acts, concealments and omissions by which a mediation participant – mediator, attorney or client – attempts to induce in other participants a belief at variance with his or her own beliefs.”
The “Joint Standards” and California law require a mediator to be truthful when disclosing information about his or her own advertising, competency, direct and indirect compensation and solicitation of clients, as well as truthful in disclosing fully any actual or potential conflicts of interest and/or bias.
However, there is no express requirement that mediators behave truthfully during the mediation when participating in the exchanges of information and in negotiating strategies.
In considering the ethics of truthfulness for attorneys participating in a mediation, many writers initiate their reasoning with a premise that certain “accepted deceptions” are the ethical norms for attorneys who abide by the ABA’s Model Rules for Professional Conduct, Rule 4.1. That Rule, after exhorting truthful communications, proceeds to carve out a wide swathe of acceptable deceptions in negotiations, the most salient of which are: (a) expressing misleading estimates of value or price; (b) making misleading statements of future settlement/litigation intentions; (c) failing to disclose voluntarily material adverse facts; (d) failing to disclose voluntarily material adverse case law; and (e) making a partial disclosure of a material fact, or identity of a witness, but not to the extent a fraud is being committed based on a belief that opposing counsel’s due diligence would reveal the truth. See Comment to Rule 4.1.
The ABA’s Model Rule 4.1 applies to an attorney acting when “representing” a client, and not when an attorney serves as a “neutral” – that is, as a Mediator.
It is a “Better Practice” for a mediator to adhere to a much higher standard: one that approaches “transparent truthfulness” at all times during the mediation process.
There are two clear exceptions to a mediator conducting him/herself with “transparent truthfulness”. First, a mediator must not breach the Duties of Mediation Confidentiality. A mediator who learns in private caucus from a plaintiff’s counsel that “plaintiff will accept as little as $75,000” may not ever disclose that fact -- directly or by indirect communication -- unless and until plaintiff’s counsel authorizes such a disclosure.
Similarly, if defense counsel indicates a willingness to settle for up to $75,000, but instructs the mediator to tell plaintiff that “the highest defendant will go today is $32,500”, then the mediator must communicate that defense offer without disclosing the knowledge of defendant’s willingness to offer more, except to the extent authorized by the defense.
It takes restraint and experience for a mediator to keep sacred confidential communications provided in private caucus, while still keeping the parties making concessions, creating options and believing that the mediator’s confidence in reaching a settlement is reasonable. Yet, it is a necessary skill set for a mediator to master!
Second, a common use of permissible mediator deception is the mediator’s use of some psychological chicanery to keep one or more of the parties from “Snatching Defeat Out of the Jaws of Victory”.
Let’s call these somewhat deceptive strategies: “Reframing for Persuasive Effect” or “Peacemaking Skills.”
More often than not, some psychological deception, immaterial to the substantive interests of the parties, may be necessary to bridge an impasse or to create movement or a sign of goodwill. One familiar example is that of the “Mediator’s Proposal”, designed to overcome the psychological barrier of some parties that any offer coming from the other side should be rejected, even if it is well within what had previously been described as an acceptable range. See FAQ #26.
Other examples include a mediator using flattery about one party’s leadership or courage, emphasizing family values or common interests the mediator has discovered between truly disparate parties, and/or minimizing the significance of truly offensive prior personal attacks in order to foster a willingness to move from an otherwise fixed position.
A party who is ready to settle, underneath the bravado of “Impasse” and “Final Offer,” will usually find something in the mediator’s flattering assessments of a party’s leadership abilities, character and generosity of soul that will bring the negotiations to a mutually satisfactory resolution.
It is my belief that it is the “Better Practice,” and the reasonable expectations of sophisticated counsel, that a mediator will use his or her “Peacemaking Skills”, rather than relying on the Deception of “White Lies” or “Noble Lies”. Peacemaking Skills include:
(a) “Coaching” parties in negotiating strategies in order to improve communications and respect for each other; (b) Encouraging a party to thoughtfully examine whether taking an intransigent position based upon “Principle” is in that party’s long-term interest; (c) Identifying with each party a broader set of interests that may be satisfied through a collegial settlement that includes “co-operation” with the other parties involved in the dispute; (d) Assisting an attorney in becoming aware of his or her selfish “ego needs” to beat or intimidate the other party, which “ego needs” conflict with the client’s expressed interests; and (e) Diffusing, as appropriate, emotional states so that rational decision-making is able to prevail over decisions governed primarily by feelings of Anger, Revenge, Intimidation and/or an Unreasonable Sense of Loss.
There is a third area which some mediators recognize as an “Accepted Deception”. It is the use of the “Noble Lie”.
Of course, most sophisticated counsels recognize that because the mediator controls the flow of information in private caucus, there is necessarily some level of consensual deception that everyone agrees to by engaging in negotiation through “private caucusing”. Christopher Moore states “The Mediation Process: Practical Strategies for Resolving Conflict (1986), at page 269: “The ability to control, manipulate, suppress or enhance data, or to initiate entirely new information, gives the mediator an inordinate level of influence over the parties.” And the exercise by the mediator of such “information influence” is likely to result in the mediator presenting something other than the whole and balanced truth to shake up and create movement from a seemingly intransigent party.
Examples of “Noble Lies” which undermine a participant’s ability to Self-Determine by making an “informed choice” include a Mediator representing:
(a) “Defendant is so angry about your charge of Fraudulent Concealment, which he is prepared to spend on defense costs his entire self-liquidating insurance policy of $250,000, unless you drop the Fraud charge and publicly apologize for attacking his character!” [When – in fact - the defendant carrier has authorized the mediator to settle within policy limits, but implicitly promised the mediator that the insurance carrier uses mediators who can save it money.] (b) “I am authorized by plaintiff to give you my evaluation of the impeachment testimony I heard in a telephone call during the private caucus. I believe that, if true, defendant will not be found credible at trial! [When – in fact - the plaintiff’s counsel has advised the mediator that plaintiff had just spoken to her strong impeachment witness, who now was wavering about testifying for fear of losing his job.] (c) “I believe the plaintiff is so emotionally outraged that unless he wins Big, he will carry on a dreadful program of adverse public attacks on your company’s business practices! [When – in fact – plaintiff has advised the mediator in private caucus that he carries no grudge and will agree to make a confidentiality agreement in exchange for the defendant making a settlement offer in the dollar range the mediator has indicated privately is a reasonable compromise.]
Simply put, the danger of the “Noble Lie” and the “White Lie” is that it uses Deception to undermine a decision-making process based on Impartiality and Self-Determination.
A good working definition of the “Noble Lie” is a deception which is “designed to shift and re-configure the thinking of disputing parties, especially in the conflict and confusion, and to foster and further their co-operation, tolerance and survival”. Robert Benjamin, “The Constructive Uses of Deception: Skills, Strategies and Techniques of the Folkloric Trickster Figure and their Applications by Mediators, 13 Mediation Quarterly 3, 15-16 (1995) and John W. Cooley, “Defining the Acceptable Limits of Deception in Mediation at mediate.com (articles).
Using the mediation tactic of the “Noble Lie” is not a “Better Practice”, and use of the “Noble Lie” is not ethical unless the mediation participants believe that the “Core Value” of Mediation is “Settlement” and not Voluntary and Informed Self-Determination.
Q 5: Additional Professional Standards of Ethics: When a mediator handling a real estate dispute is a Realtor and/or qualified in California as a real estate licensee or a general contractor, is the mediator bound by the national standards for Realtor’s or the Ethical Standards for real estate licensees or for general contractors under applicable California laws and regulations, as well as the state and national ethical standards for the conduct of mediators?
Similarly, when a certified public accountant acts as a mediator, is the accountant required to make decisions and conduct himself or herself in accordance with the Standards of Professional Conduct of the AICPA?
And, is an MAI real estate appraiser bound to follow the MAI Standards of Conduct when offering a personal evaluation during a mediation ?
A 5: Many mediators belong to national organizations such as a Realtor; or many mediators are certified and/or licensed as a CPA following the AICPA Standards, or as an architect following A.I.A. Standards. Each of these national organizations have Code(s) of Ethics and/or Standards of Practice, which are readily available on the Web.
Non-attorney mediators also include psychiatrists or licensed therapists in any number of specialties from counseling for the recently disabled to counseling individuals who have suffered recent trauma, such as sexual harassment in the workplace or unexpected termination from a job after 20 or more years of employment with the same company. Most therapist-mediators are familiar with, and probably rely upon, the Model Standards for Family and Divorce Mediation (2000).
One would expect that a Realtor, a CPA, an MAI Appraiser, a Therapist and an Architect would each follow the published ethical standards of their profession. Nevertheless, ask before making the final selection of a mediator, because following both “specialty specific” standards and California’s standards may materially affect the mediation process.
Questions re: Handling Mediators’ Actual and Potential Conflicts of Interests Which Do Not Involve Compensation, Fees or Gifts
Q 6: Initial Disclosures of Conflicts: Prior to a mediation commencing, to what extent should a mediator fully disclose the extent of each of his or her personal, professional and/or financial relationships to each of the parties, to their counsel and to the substantive facts in the case to be mediated ?
A 6: Disclose fully, prior to the mediation. As Sara Adler, a prominent national mediator and arbitrator has opined: “If it crosses your mind to wonder if “it” should be disclosed – Disclose!”
Moreover, the duty to disclose is a continuing one covering past, present and currently expected (future) interests, relationships and affiliations of a personal, professional or financial nature. This area is clearly governed by CRC Rules 1620.5 and 1620.9, of particular assistance are the Advisory Committee Comments to each CRC Rule.
The “Joint Standards” II (Impartiality), III (Conflicts of Interest) and VIII (Fees), including the Comments section, appear to be comparable, but somewhat less detailed than the California rules. However, the Joint Standards may more strongly require disclosure and permission for acts subsequent to a mediation which may raise a legitimate concern about the mediator’s impartiality at the time of the earlier mediation.
Q 7: Continuing Duty: Is there a continuing duty of disclosure if matters arise during a mediation which may give rise to an actual or potential conflict of interest, such as the possibility of future business if the mediation is successful or the discovery of some past business relationship that was not apparent at the commencement of the mediation?
A 7: Yes.
Two (2) “Better Practices” to minimize instances of belated discovery, during a mediation, of a prior professional or financial interest or affiliation are: one, prior to the mediation, ask each mediating participant to review with care the mediator’s resume to determine whether there are any likely prior contacts or relationships with one of the mediation participants; and two, expressly ask each party and counsel if they are aware of possible prior professional or financial interests, relationships or affiliations that the parties or counsel may have in common with the mediator.
In the “small world” we live in, there are likely to be situations in which paths have crossed. Discovering and discussing those situations prior to beginning the process of mediation is likely to increase the confidence and trust the parties and counsel repose in the mediator’s impartiality.
It is also helpful to ask participants why you were selected as mediator. All mediation participants should know that a mediator was chosen because an accountant or investment advisor that the party has is also the mediator’s investment advisor or accountant? And, if one party advises a mediator he was chosen because he previously handled a similar matter for the predecessor company that is a defendant in this mediation, all parties should be advised.
Disclose. Disclose. Disclose. This is Life, not a Game to create settlements!
Questions re: Mediators’ Compensation, Fees and Gifts to or from Mediator
Q 8: Written Disclosure: Should a mediator always require a written agreement with the parties of any fees, costs or charges to be paid to the mediators by the parties?
A 8: No, but written disclosure is required. CRC 1620.9 (b); and a written agreement is a “Better Practice.”
The CRC prohibits mere oral disclosure of mediator fees, by requiring that “the mediator must disclose to the parties in writing any fees, costs or charges to be paid to the mediator by the parties.” CRC 1620.9 (b) Nevertheless, California’s Rules of the Court also indicate that a “good practice” is to put mediation fee agreements in writing and “strongly encourages” mediators to do so. Apparently, the CRC makes a distinction between written disclosure of all fees to be paid by the parties and a written agreement as to all fees to be paid by the parties. CRC 1620.9, Advisory Committee Comment.
The Joint Standards VIII also require only oral disclosure of the mediator’s compensation, fees and charges to the parties, but also require such fees and charges to be both “reasonable” and consistent with “the rates customary in the community.” The Joint Standards also indicate that the “Better Practice” in reaching an understanding about fees is to set down the arrangements in a written agreement.
Q 9: Contingent Fees: May a mediator offer or accept a fee agreement which is contingent on the result of the mediation or the amount of the settlement? Is it ethical to encourage business by having a fee schedule which announces any of the following?
(a) “I only charge Mediation Fees, currently $5000 per day, if the parties reach a settlement, so there is Absolutely No Mediation Fee unless I Settle Your Case;” or (b) “I only charge Mediation Fees, currently $5,000 per day, if the parties to the lawsuit are satisfied. Any dissatisfied litigant will receive a full refund of monies paid by or for that litigant.” Just let me know within 10 days of the conclusion of the Mediation.” (c) “Half-Off my Daily Mediation Fee of $5000 if your case does not settle at or within 10 days of the Mediation.” A 9: No, as to (a) and (c). Possibly, Yes as to (b).
According to the Joint Standards VIII, comment 2, “A mediator should not enter into a fee agreement which is contingent upon the result of the mediation or amount of the settlement.” Similarly, California’s Rules of the Court prohibit “Contingent Fees.” CRC 1620.9 (c) provides: “The amount or nature of a mediator’s fee must not be made contingent upon the outcome of the mediation.” And further, CRC 1620.8 (c)(1) states that “In marketing his or her mediation services, a mediator must not…promise or guarantee results.”
Based on a literal reading of these rules, it would appear that the solicitations for business identified as (a) and (c) above are clearly prohibited mediator conduct. However, it could be argued that the marketing of mediation services on a “satisfaction guaranteed or your money back” basis may not be an ethical violation, although virtually every mediator believes such solicitation is not a “Better Practice,” regardless of whether it is specifically prohibited; and I agree that California’s “public policy” in favor of settlement of litigated cases should not be used to compromise a mediator’s perceived neutrality.
Q 10: Acceptance by Mediators of a Referral Fee: May a mediator accept a fee for a referral of a matter to another mediator or to any person, such as an expert to be used by one or both of the parties during mediation?
A 10: No, under the Joint Standards ; but California law simply requires disclosure with the concomitant risk of a mediation participant withdrawing as a result.
According to the Joint Standards VIII, comment 4, “A mediator should not accept a fee for referral of a matter to another mediator or to any other person.”
California does not have a similar prohibition for those mediators who do not choose to follow the Joint Standards.
Accepting a referral fee appears ethically permissible under California law. However, in our judgment the “Better Practice” is not to request or accept any referral fee from an individual or law firm or any person or entity that has been or may be a future mediation participant.
For example, sometimes, an opportunity arises for a mediator to refer a possible client to an attorney who is a specialist in a particular area of employment, environment, intellectual property or real estate.
It would be natural to make a referral to an attorney that a mediator has seen in mediations as an advocate and who has demonstrated exceptional strong skills. But, if the mediator were to accept a referral fee from that legal specialist, then the mediator would be required under the CRC to disclose that financial arrangement, and may even be required to withdraw upon objection by a mediation participant. CRC Rule 1620.5 and CRC Rule 1620.9.
The “Better Practice” is to make referrals of three (3) or more professionals without taking any referral fee and to be prepared to disclose that practice, also, on a case by case basis to avoid the appearance of a lack of impartiality. CRC Rule 1620.9 (9) Advisory Committee Comment, par. 2.
Q 11: Payment of a Referral Fee by Mediators: May a mediator pay a fee for a referral of a matter from another mediator or pay a referral fee to any other person, such as an expert to be used by one or both of the parties during a mediation ?
In other words, Is it ethically permissible in California for a mediator to solicit business by offering a referral fee to accountants, attorneys, architects, appraisers of real estate, family therapists, ministers of various faiths (although the referral fee would probably be called a “charitable contribution or donation), psychiatrists, and a broad variety of professionals from “A to Z,” in exchange for these professionals referring clients who have disputes to a specific mediator?
A 11: Generally, No, but possibly Yes, on a case by case basis.
Whenever the referral fee might reasonably raise a question about the mediator’s impartiality on a particular mediation, the payment of a referral fee to solicit or express appreciation for new business is prohibited. CRC Rule 1620.9 (d). (“a mediator must not at any time solicit or accept from or give to any participant or affiliate of a participant any gift, bequest, or favor that might reasonably raise a question concerning mediator impartiality.”)
It may be that Full Disclosure of a Referral Fee, or an Annual Gift to repeat customers, is sufficient to satisfy all mediation participants that the mediator is, and remains, “neutral and “impartial”.
Moreover, before, during, and in some cases even after a mediation has concluded, a mediator should not, without the consent of all participants to the mediation, establish a professional relationship with any of the parties in a related matter, nor should the mediator subsequently establish a professional relationship with any of the parties in an unrelated matter, if such a relationship may raise legitimate questions about the integrity of the earlier mediation process. Joint Standards III, CRC 1620.5 (b) (1), CRC 1620.9 (d) and Advisory Committee Comments to both CRC Rules.
The Joint Standards, however, do not prohibit a payment by the mediator of a referral fee for the receipt of mediation business. The language of Joint Standards VIII [“A mediator shall fully disclose and explain the basis of compensation, fees and charges to the parties”] is consistent with the full disclosure of any referral fees paid by a third party by the mediator to a third party.
Questions re: Ethical Tension between Party Self-Determination and Mediator Impartiality
Q 12: Voluntary and Involuntary Diminished Capacity to Mediate: What are the ethical and legal responsibilities of a mediator when a participant shows up and the mediator determines the participant is not able to meaningfully participate due to drug use, alcohol, diminished mental capacity or a physical disability which would make meaningful participation improbable, unless provided a reasonable accommodation?
A 12: Clearly, mediation must be suspended or terminated or the mediator withdraws, rather than proceeding when a party has voluntarily diminished his or her capacity from a contemporaneous consumption of drugs or alcohol such that the participant cannot meaningfully participate in the negotiations. Joint Standards VI, Comments (“A mediator shall withdraw from the mediation or postpone a session if the mediation is being used to further illegal conduct or if a party is unable to participate due to drug, alcohol, or other physical or mental capacity”).
Yet, the California standards appear more permissive, in that the determination to suspend or terminate the mediation is discretionary, rather than mandatory. CRC 1620.7 (i) (2) and (3).
However, the Joint Standards do not address the more common situations in which a participant to the mediation has a physical or mental disability that is covered by The Americans with Disabilities Act, at 42 U.S.C. Section 12101, et. seq.
In each such instance, a mediator has the responsibility to address the disability and have a dialogue about whether and how a reasonable accommodation may permit the disabled participant to go forward and participate meaningfully in the mediation process. Assuming that a reasonable accommodation exists, in most cases, the reasonable accommodation must be paid for by the mediator.
In others situations, either the disabled person or the other party (often an employer of the disabled person) may voluntarily choose to absorb the cost of a family surrogate, a heath care aide or a computer assisted translation. Simply put, the mediator has an ethical and legal responsibility to place the disabled person in a position that is comparable to that of a mediation participant who is not disabled, except in those rare situations in which such an accommodation is not reasonable.
Examples of reasonable accommodations are legion. For example, a person who is deaf may need a computer assisted translation or someone to sign, or both. A mildly retarded litigant should be invited or encouraged to have the participation of a qualified surrogate. CRC 1620.7, Advisory Committee Comments See, Lessons from the Bioethics Field, Ellen Waldman, July 2003 and other articles on “Capacity to Mediate” posted at www.mediate.com/adamediation.
It is inappropriate and unlawful for a mediator to minimize the importance of compliance with ADA standards.
Q 13: “Relative Incompetence of Participant or Legal Counsel”: How important is the Principle of Self Determination by the Parties and Impartiality of the mediator, when each of the participants have “legal capacity;” however, the relative incompetence of a particular party or the relative incompetence of a party’s attorney to enter into a reasonable agreement results in both a negotiation process and a proposed settlement that is substantively unfair when evaluated by community standards of what is in the range of a fair outcome?
A 13: This question and several of those that follow in this section of the FAQ’s raise an important question as to “The Role of a Mediator.” These critical issues that are best resolved by a mindful mediator who (a) checks in frequently with the mediation participants as to what type of facilitation is desired and (b) remains keenly aware of the ethical tensions created when one or more “uninformed participants” are making binding decisions upon themselves. The following FAQ’s are a modest attempt to address a very complicated and “personal” issue of the often competing values of “what is just” and “what is impartial” conduct by a mediator.
Consider Joint Standard I (“A Mediator Shall Recognize that Mediation is Based on the Principle of Self-Determination by the Parties.” …. “A mediator cannot personally ensure that each party has made a fully informed choice to reach a particular agreement, but it is good practice for the mediator to make the parties aware of the importance of consulting other professionals, where appropriate, to help them make informed decisions.”) and Joint Standard II ( “A Mediator Shall Conduct the Mediation in an Impartial Manner.” …. “A mediator should guard against partiality …. based on the parties’ …performance at the mediation.”). Similarly, CRC 1620.5 (“A mediator must maintain impartiality towards all participants at all times”) and CRC 1620.7 (b) (“A mediator is not obliged to ensure substantive fairness of an agreement reached by the parties.”). [Emphasis added throughout prior paragraphs]
The Twin Goals of Voluntary Self Determination and Impartiality, if rigorously applied to every mediation, will inevitably create many situations in which substantively unfair outcomes result. Some, if not most, substantively unfair outcomes would become significantly less onerous or unfair were the mediator to intervene proactively during the mediation process.
Yet, Joint Standards VI , Comments, par. 4 advises that “Mixing the role of a mediator and the role of a professional advising a client is problematic, and mediators should strive to distinguish between the roles. A mediator should, therefore, refrain from providing professional advice.”
This is an area most often honored in theory, but not in practice.
Imagine conducting a mediation in which it is readily apparent that a substantively unfair settlement is likely to result because one of the parties to the negotiation and proposed settlement is clearly an individual :
(a) who is far less skilled at negotiation, or (b) who has insufficient financial means to become informed about the relevant facts and/or applicable law, or (c) who is unquestionably less able emotionally or intellectually to make a reasoned and informed decision about the settlement of the dispute, or (d) who is poorly represented by a counsel or a family member that is acting in his or her own self interest rather than that of the party.
The next several questions and answers will consider “The Role of the Mediator” and circumstances in which it is possible for a mediator to be both ethical and engage in a “Better Practice” of taking a more proactive role to mitigate the danger of a substantively unfair or relatively unfair settlement.
Q 14: Proactive Involvement in Suggesting Substantive Options: Should a mediator proactively make inquiry during a mediation about the types of provisions that customarily belong in a settlement agreement, and raise those issues in the mediation prior to the parties reaching an oral settlement so that important (according to most experienced attorneys) party protections are not left out in the final written document ?
For example, in an employment mediation in which the mediator observes the plaintiff is not represented by knowledgeable counsel, should a mediator ask about such essentially “legal matters” as: The tax treatment of any of the monies that are to be paid? The value to the employer of a confidentiality clause? The possibility of payment of attorneys fees in a workers compensation action, rather than as part of the civil suit? The value to the employer of a one year covenant not to solicit certain employees or certain customers?
Is the employment mediator ever constrained to exploring “Value Added Options” such as: an apology, a well written letter of recommendation rather than the typical confirmation of “dates of employment only,” an employer-paid educational program to assist in occupational retraining or skills, a continuing consulting agreement so that medical benefits or pension benefits may be retained, assistance by a knowledgeable person in finding a job with a competitor, a continuing right to state that employment is continuing for a specific period of time in order to avoid the appearance of senior personnel appearing unemployed, etc.?
A 14: Mediators disagree on how much proactive questioning is within the framework of a “Better Practice.” However, being proactive without the permission of the mediation participants may cause either the withdrawal of a participant or of the mediator when one mediation participant requests that the mediator not do so.
A mediator should inform all participants from the outset of the “nature” of the mediation process, the “procedures” to be used and the “roles” of the mediator and the other participants. Subject to the rules of Impartiality and Self-Determination, a mediator may provide information or opinions that he or she is qualified by training or experience to provide. CRC Rule 1620.7 (c) and (d) particularly the Advisory Committee Comments to subdivision (c) and (d)
The Joint Standards also allow a mediator to “provide information about the process, raise issues, and help parties explore options.” Yet, the same Joint Standards I draw a distinction between encouraging parties to become more fully informed by consulting other professionals, and the mediator proactively insuring the parties are fully informed. The Joint Standards and California’s Judicial Council Rules clearly prefer the alternative of recommending appropriate professional advice be obtained by each mediation participant.
Remember, telling an inexperienced plaintiff counsel or an uninformed client about likely adverse tax consequences of a proposed settlement in which the attorneys fees paid directly to plaintiff’s counsel may, and probably will be, taxed as income to the plaintiff may very well “blow” the proposed settlement. Is doing so, unbeknownst to opposing counsel, in private caucus consistent with remaining a “neutral” and being “impartial?”
It is clearly not an ethical problem if a mediator has checked in with both counsel and received express permission to pass on suggestions as to a variety of options and alternatives, as well as their possible effect on the respective parties’ interests.
The difficult ethical issue is when the more experienced counsel expressly asks the mediator not to be proactive in raising customary alternatives or frequently considered options because of a belief by the more experienced counsel that less experienced opposing counsel will be less effective in representing his or her client if the mediator is not proactive in educating opposing counsel by exploring options and their likely effect on the parties’ interests.
CRC Rule 1620.3 (c) provides that “A mediator must…refrain from coercing any party to make a decision”; however the Advisory Committee Comments seem to go much further: “[E]xamples of conduct that violate the principles of voluntary participation and self determination include …providing an opinion or evaluation of the dispute in a coercive manner or over the objection of the parties….” (Emphasis added). Moreover, CRC Rules 1620.5 (d)-(f) requires a mediator to withdraw if one of two parties object to the mediator’s conduct as failing to be “impartial,” but allows the mediator to continue a mediation in which there are more than two parties, if in the mediator’s discretion the mediator believes himself or herself to be maintaining impartiality.
Q 15: Proactive Intervention by Being Evaluative Over Parties’ Objections: Does the Prohibition on Being Evaluative “over the objection of the parties” [Advisory Committee Comment to CRC Rule 1620.3(c)] apply when ONLY ONE of the parties objects to a mediator providing an experienced professional opinion or evaluation, or just when ALL of the parties object?
If it only applies when ALL parties object, there is no problem. A mediator both abides by the parties reasonable expectations and expressed preferences, or the mediator discloses his or her insistence on particular preferences and style and withdraws, if requested to do so.
Clearly, the Joint Standards III provides that a mediator must withdraw before or during the mediation in the event there is a conflict of interest to which any party to the mediation objects on the grounds that it “might create an impression of possible bias.” From this Standard, one may infer that when the Joint Standards are applied in a multi-party mediation to conduct which gives rise to “an impression of possible bias,” a mediator is required to withdraw, unless that party’s objection is not withdrawn after the matter is discussed.
Yet, it is equally clear that the California Judicial Council did not intend that the mediator in a multi-party mediation be required to withdraw upon the belief of just one of the several parties that the mediator is not “impartial,” unless the mediator is actually unable to maintain impartiality with reference to the balance of the mediation participants or continuation “would jeopardize the integrity … of the mediation process.” CRC Rule 1620.5 (f)
Therefore, may a mediator who feels a strong ethical belief that his or her impartiality remains intact provide a proactive opinion or a proactive evaluation in a “private caucus” when just ONE of the opposing counsel in a multi-party mediation has objected to the mediator’s proactive opinions or evaluations in an earlier “joint session?”
Clearly the “preferred practice” is for the mediator to disclose first to the objecting counsel and to the objecting party that the mediator intends to be proactive notwithstanding one party’s objection. This affirmative disclosure permits the objecting party to withdraw voluntarily from the mediation in a multi-party mediation. Moreover, in two-party mediation, the mediator is required to terminate the mediation upon receiving a clear objection to the mediator’s style by just one of the two parties. See FAQ #27, CRC Rule 1620(e).
There are mediators who are simply unwilling to tolerate a negotiated settlement that reflects a “power imbalance in knowledge and experience” between opposing counsel which results in a negotiated settlement that the mediator considers so substantively unfair that it is contrary to the mediator’s own values system. See CRC Rule 1620.5 (a) and CRC 1620.7 (i) (3) and Joint Standards II and VI. Such mediator must take care to remain silent about the underlying substantive basis for his or her withdrawal because of the requirement that Mediation Confidentiality remain intact. CRC Rule 1620.7 (j)
Q 16: Proactive Intervention to Correct a Substantively Unfair Settlement Proposal [as opposed to proactive intervention at earlier stages of negotiation, Question 15]: When, if ever, should a mediator advise one side or the other that the proposed settlement agreement the parties are about to write up appears to be based on a misunderstanding of the applicable law? Or, a misapprehension of what type of factual evidence, were a trial to have occurred, is likely to be admissible?
A 16: Probably, never, assuming “legal capacity” to contract and the actual presence, or informed opportunity, of each of the parties to have their own legal counsel.
Although, it would be permissible to intervene proactively and upset a tentative settlement in the unlikely event the mediator received the express permission of each and every party that is agreeing to settle the dispute that each would like to learn of the mediator’s opinion as to whether the settlement is substantively fair based on the mediator’s evaluation of the facts and applicable legal principles the parties relied upon in reaching a settlement.
A mediator may ask questions to confirm that the settlement reached is voluntary and that it is understood by each party.
More often than not, an apparently unfair settlement is the natural consequences of unequal resources. Sometimes one party is so much more financially able that the other party will never obtain a fully just result, but a reality check results in the unbalanced settlement still being mutually desirable to the litigation alternative proceeding without a settlement. Often the less advantaged party’s attorney will expressly disclose during private caucus to the mediator the less advantaged party’s desire for a merciful settlement, rather than for a continuation of the litigation.
Sometimes, one counsel is far more experienced in negotiation skills or competent in the specific subject matter in dispute than the other; and this relative imbalance of attorney competency results in an apparently unjust settlement. A mediator should not proactively intervene other than to suggest in private caucus to counsel and to the disadvantaged party that adding a more experienced counsel may further assist in making an informed decision. Of course, this is a good way to increase the likelihood that the less experienced counsel will not select you as a mediator in future mediations.
Sometimes, an attorney has a conflict-of-interest with his or her own client and the client is apparently unaware of the conflict. This issue is discussed in FAQ #19-22.
Q 17: Proactive Intervention to Protect Persons Not Present at the Mediation: When, if ever, should a mediator advise one side or the other that the proposed settlement agreement the parties are about to write up appears likely to cause significant harm to a third party that is not present at the mediation?
A 17: The “Better Practice” is to do so first in private caucus; and subsequently, in joint session if all disputing parties at the joint session wish to discuss the matter further.
This is really a question of a mediator’s personal moral code. California law appears by implication to condone a negotiated settlement agreement in a mediation which is likely to cause significant harm to third parties not represented in the mediation. CRC Rule 1620.7 (i) lists as one of three grounds for “Discretionary Termination”, rather than “Mandatory Termination”, the circumstance that “Continuation of the process would cause significant harm to any participant or a third party.”
Q 18: Proactive Intervention to Prevent Harm from Ongoing Illegal Conduct or to Society’s interests: What should a mediator do if a mediation is being used to further illegal conduct, such as blackmail or illegal dumping of toxic wastes?
A 18: California law and the Joint Standards appear to diverge somewhat on the ethical procedure to be taken.
Under California law, it appears that a mediator may choose to condone such conduct if it is an integral part of the mediation! This conclusion is derived by implication from CRC Rule 1620.7 (i) (1) which lists as grounds for “Discretionary Termination,” rather than Mandatory Termination the circumstance in which the mediator suspects that “the mediation is being used to further illegal conduct.” And from Evidence Code Sections 1119 and 1120, which provide a very broad umbrella of confidentiality for communications made in furtherance of the mediation process, but do prevent “parties from using mediation as a pretext to shield material [and communications] from disclosure.” Evidence Code Section 1120 Advisory Committee Comment, par 1.
However, a mediation process is not a safe place to plan or to commit most crimes. Under Evidence Code §1119-1120, CRC Rules and California Rules of Professional Conduct, discussions of criminal conspiracies arising during a mediation process are generally considered as confidential if there were a reasonable expectation of privacy and it was integral to the negotiations occurring at the mediation; nevertheless, it is an attorney’s duty to try and dissuade the parties from such illegal conduct. And, if the attorney’s efforts fail, it is generally the attorney’s responsibility to withdraw and keep confidential the alleged illegal conduct, rather than facilitate the illegal activity. B&P Code §6068(2), California Ethics Opinion 1981-58. California Rules of Professional Conduct, Rules 3-210, 3-600, 3-700.
Interestingly, the Joint Standards VI requires a mediator to withdraw from mediation if “the mediation is being used to further illegal conduct.” I would expect that most mediators will probably follow the ABA’s Joint Standards in this regard. The Uniform Mediation Act permits disclosure to the authorities of such conduct. However, in California, under some circumstances, a mediator will probably be required to maintain the confidentiality of a mediation communication that is integral to the mediation, and in so doing, the mediator’s silence will permit the continuance of the illegal conduct! Evidence Code §1119.
One may reasonably ask why a physician or a psychiatrist has a legal duty to report certain ongoing criminal conduct discovered during a professional relationship and learned in confidence, but that a mediator in court connected civil cases that do not deal with family law must remain silent. The answer probably is as simple as California law favors private mediated settlement agreements and is willing to condone participant threats of exposing private conduct or of another participant’s agreements to be silent about past illegal dumping of toxic wastes in order to facilitate a mediated settlement. These principles may be tested by the California Supreme Court’s decision in Rojas v. Superior Court (2002) 102 Cal.App.4th 1062. The Trouble with Foxgate and Rojas: When Should Public Policy Interests Require that Mediation Confidentiality in California be subject to Certain Common Sense Exceptions? www.mediate.com/articles/factorM1.cfm
Personal Opinions, rather than Specific Ethical Advice, concerning Conflicts between an Attorney and his/her Client.
Q 19: Attorney-Client Conflict of Interest Arising From Underlying Transaction: Should the mediator intervene proactively when the mediator observes an apparently unrecognized conflict of interest between the attorney for one party and his or her client?
A 19: Yes, it is a “Better Practice”. Although some mediators will not do so because it is perceived to interfere with the participant’s fundamental right of self determination, including the right to trust their chosen attorney without interference or comment from the mediator.
Moreover, some mediators are reluctant to raise the issue of an unrecognized conflict between an attorney and his or her client because the mediator may threaten his or her ability to obtain repeat business from the attorney who must handle questions from the mediator concerning the possibly undisclosed conflict of interest.
There are four (4) common situations in which a mediator may believe that a client is, as a practical matter, unaware legal counsel representing that client may be conducting himself or herself as if a conflict of interest exists. These are dealt with in this FAQ #19 and the three that follow: FAQ’s #20, 21 and 22.
The first situation is when an attorney representing a client at mediation also represented that same client in the underlying transaction that gave rise to the current litigation that is in the process of being mediated.
The attorney may have concluded that his or her prior representation was below the standard of care and possibly resulted in some or all of the cause of the problems that gives rise to the current litigation. In such cases, the conflicted attorney will often denigrate the reliability of statements or positions of opposing counsel that, if accepted as legally correct or factually accurate, would be likely to reveal that the conflicted attorney had failed to protect adequately the client in the underlying litigation.
Most attorneys in retrospect come to believe that a clause could have been added or modified to the earlier agreement or their own conduct as a legal advisor could have minimized or eliminated the alleged liability or damages. So, it is helpful to explore these areas with potentially conflicted legal counsel in order to ensure that these matters have been discussed with his or her client. Otherwise, either inadvertently or intentionally, the conflicted counsel may be unable to evaluate accurately and to inform fully his or her client about adverse material facts or adverse material defense that arise from the lapses by the conflicted counsel in the earlier representation of the underlying action.
I have personally observed conflicted attorneys who minimized the difficulty of proving fraud in matters in which the attorney had failed to undertake the type of “due diligence” that would have prevented the alleged fraud from ever being relied upon.
Similarly, I have observed attorneys who minimized the danger of a “statute of frauds” defense in situations in which there was some partial performance, such as investment in some real property improvements, apparently because the attorney could have avoided the defense by advising a written documentation to make enforceable a Lease of more than twelve (12) months. Other examples are legion.
Every mediator should watch out for the possibility of a conflicted attorney under such circumstances; and as a matter of “Good Practice,” the mediator should raise these possible conflicts in private caucus with the attorney. Further, as a matter of “Good Practice,” the mediator should satisfy himself or herself that the mediator’s client has been informed fully of the potentially conflicted counsel’s challenge and possible disability. More often than not, conflicted counsel will permit an open discussion in private caucus about the possible conflicts so that the matter is resolved without permanently alienating the potentially conflicted counsel.
Q 20: Hourly Fee Conflicts: Should the Mediator proactively intervene when it appears an attorney, likely to be “paid by the hour”, is exhibiting conduct consistent with having a fee-related conflict of interest with his or her client?
A 20: The second common conflict of interest between attorneys and clients is well known to most clients, but still may have an unexpectedly strong effect on the negotiation process unless it is openly discussed in private caucus with the possibly conflicted attorney and his or her client.
It is often quoted that Peter Ustinov was not speaking of just wine when he opined, “No wine should be drunk before its time.” Many an hourly attorney seems to believe that “No case may be settled before its time.”
Such attorneys may insist on seemingly needless discovery, and even more expensive needless discovery motions.
Others insist on filing a Motion for Summary Judgment, or in the alternative For Summary Adjudication on matters in which there is no possibility that every meaningful cause of action will be summarily and finally determined. Frequently, the cost of such attorney explorations cannot exceed the value to the client because the motions will not meaningfully dispose of the ultimate issue of damage exposure, since some liability is almost certain.
Still others will make absurdly low estimates of how much money it will cost to take the litigation through trial or through trial and appeal, in order to keep the client happily paying his or her hourly fee until it is too late.
It is a common, and legitimate, litigation strategy to run up legal costs in order to cause an opposing party with limited financial resources or limited financial gain or limited emotional commitment to accept a more favorable settlement proposal. Yet, it is often an over used strategy that frequently turns out to be much more beneficial to the hourly attorneys than to the litigants.
Discussing this conflict openly with legal counsel and his or her respective client at first in private caucus is usually constructive. Personally, I use a kind of Socratic game with the hourly counsel, usually conducted with permission in front of his or her client.
It usually goes something like: (in private consultation with the attorney) May I discuss openly with you and your client the anticipated costs and fees your client faces in this litigation? Assuming a “Yes” answer, I proceed in private caucus with the attorney and client.
If a “No” answer, I proceed in private dialogue with just the attorney; and thereafter, deal with the matter after the attorney and I have come to a tentative conclusion in our attorney’s fees and cost dialogue.
Would you describe the anticipated number of days that will be spent on responding completely to all written discovery? The number of days to be spent in propounding all written discovery and subsequent discovery motions, assuming the answers are not complete? The number of days in deposition for all non-expert witnesses and the number of days in preparation for each such deposition? The number of days in deposition for expert witnesses and the days of preparation for each deposition? The number of days expended in summarizing the depositions and the written discovery and organizing it for trial? The number of days in preparing the trial brief? The number of days expended in preparing and reviewing Exhibits for trial of each of the litigants and stipulating to their admissibility or not? The number of witnesses to be testifying at trial? The number of days expended in communicating and preparing each witness for trial testimony? The number of days to prepare and to agree upon Jury Instructions? The number of days to prepare and respond to Motions in Limine? The number of days to prepare voir dire, conduct a mock trial or other special preparation tactics for trial? The number of days at trial etc.? The out of pocket cost of each of the costly items such as expert witness fees, duplication costs for trial, deposition costs, trial transcript costs, if deemed desirable, etc.?
Then, we price each item of work out on an hourly basis and we cost out each anticipated out-of-pocket expense. We reach a consensus as to the likely total fees and likely total out-of-pocket costs. Then, ask the attorney if he or she will guarantee that the actual fees and costs will not exceed that anticipated number, say $75,000. Almost always there will be an answer of “No.”
Then ask the attorney if he or she will guarantee the total fees and costs will not exceed 150% of the total, say $112,500. Usually, there is still an answer of “No.”
I increase the total maximum fees and costs until the attorney is ready to say: “Yes, I will guarantee my law firm’s fees and costs will not exceed $XXX,XXX.00.” Ask the attorney if he or she is willing to provide this information and guaranty to the client so that the client may consider this new and possibly significant information.
Once the client and attorney have a “guaranteed” reality check as to what actual fees and costs might be, it is much easier for the client to eliminate the risk of being misled by an overly optimistic attorney who is charging on an hourly basis.
Handled respectfully, overwhelmingly attorneys are ultimately pleased that their clients are fully informed about the full range of fees and costs in a litigated dispute.
Q 21: Contingency Fee Conflicts: Should the mediator proactively intervene when it appears a contingency fee based attorney exhibits conduct inconsistent with his or her client’s interests?
A 21: Yes, the third area in which conflicts commonly arise is the “contingency fee” case.
Most clients understand the obvious conflicts. An attorney who is worried about chances of success will be “bad mouthing” his or her client’s chances of prevailing for any number of pretext. On the other hand, an attorney who feels there is a chance for an unusually favorable result will discourage a settlement that provides only a modest premium for the “big win,” although the client is not really willing to risk the slight chance of receiving little or no recovery.
In my experience, clients do not uniformly realize when a “contingency fee” attorney may be urging settlement on a case that is expensive to try or is a low damage case. Clients do not always consider that the expenditure of additional attorney time and attorney money may not be justifiable to the attorney on a “contingency fee” basis, although it may be beneficial to the client.
Also, some attorneys unwittingly, or possibly intentionally, discourage non-monetary remedies when it appears it will reduce the amount of money that plaintiff would otherwise demand for settlement. Hence, offers of continuing employment, or job retraining, or continued benefits through a consultancy arrangement, or offers of telephone calls to assist in a hiring by a competing employer, or a deferred compensation arrangement or of employment of expensive new employee programs or letters of recommendation that are tradeoffs for monetary damages may be discouraged, although each is in the plaintiff’s interest.
One way to explore this conflict between attorney and client is to ask the client: “What amount of money would be satisfactory to you [the client], if paid immediately?” Then, ask the attorney, privately: “What amount of money would be satisfactory to you [the attorney], if paid with certainty and immediately?” More often then one might imagine this provides sufficient information for a mediator to resolve what otherwise seems to be an impasse over money.
One way or another, I am convinced it is a “Better Practice” to always explore any situation in which the conduct of the client’s attorney suggests to the mediator that the attorney may be laboring under a conflict of interest with his or her client, including one of the aforementioned conflicts.
Q 22: Attorney who Trashes His/Her Own Client: What ethical obligations does a mediator have in private caucus, that excludes the attorney’s client, when an attorney strongly urges the mediator that the attorney would really like the mediator to do an aggressive “reality check” with his or her client because the attorney believes that his or her client is being unreasonable about his or her chances of prevailing?
A 22: California has not adopted the ABA’s Model Rules of Professional Conduct, but the following discussion raises important ethical issues for a California practitioner to consider. In preparing these FAQ’s, I was surprised to learn an attorney who trashes his client’s judgment abilities as a witness or chances of winning privately to the mediator is likely to be in violation of both Model Rules of Professional Conduct, Rule 1.6 and Rule 2.1, unless the attorney has previously advised his client, and received informed consent from the client, of the attorney’s intentions to reveal information about his own client.
Rule 1.6 requires informed consent in advance, each time an attorney discloses, even in a confidential communication to a mediator, information that has been learned by the attorney in confidential communications with his client! ABA Model Rules of Professional Conduct 2002, Rule 1.6. See, ABA Section of Dispute Resolution, Dispute Resolution Ethics: A Comprehensive Guide, Chapter III p 46-47 (2002).
On the other hand, some leading practitioners disagree. See: John W. Cooley: “Mediator & Advocates Ethics” in Dispute Resolution Journal, February, 2000:
“A lawyer may not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation (MR 1.6)…. For example, lawyers routinely share confidences of clients with a mediator – with or without the client’s explicit authorization. This convention is widely accepted because the mediator has an ethical duty to keep such information confidential if instructed to do so. Even though the mediator cannot disclose such information to the other side, the mediator can use such confidential information to suggest solutions to the parties that would not be discovered through the parties’ direct communication. Of course, a lawyer must honor his client’s requests not to disclose particular information to a mediator.”
Rule 2.1 requires an attorney to be entirely candid with his client, even when an honest assessment is likely to be one that his client may be “disinclined to confront”. The first paragraph of the ABA’s Model Rule of Professional Conduct Rule 2.1 states:
“A client is entitled to straightforward advice expressing the lawyer’s honest assessment. Legal advice often involves unpleasant facts and alternatives that a client may be disinclined to confront. In presenting advice, a lawyer endeavors to sustain the client’s morale and may put advice in an acceptable a form as honesty permits. However, a lawyer should not be deterred from giving candid advice by the prospect that the advice will be unpalatable to the client.” (emphasis added)
This situation of an attorney trashing his or her own client occurs most often when a mediator adopts the somewhat common practice of meeting privately with each counsel, in person or telephonically, before a mediation to ask the classic question: “How can I help you and your client in today’s mediation?”
One simple way to avoid the dilemma of criticizing an attorney’s ethics when the attorney is trying in good faith to assist his own client is to follow the procedures set out in the Judicial Council’s CRC Rule 1620.7 (c) and (d) and Advisory Committee Comments. This includes “at or before the outset of the mediation the mediator must provide all participants” …”an explanation of the mediation process which should include a description of the mediator’s style of mediation.” Also “at or before the outset of the first mediation session,”…the mediator must indicate if he or she may choose to engage in reality checks by “communicat[ing] what the law is or how it applies to the subject of the mediation, provided the mediator does not also advise any participant about how to adhere to the law or on what position the participant should take in light of the [mediator’s] position.”
Additionally, if the mediator’s style permits, as many do, the mediator must advise all participants that as mediator he or she may “discuss a party’s options, including a range of possible outcomes in the ad judicatory process” …and “offer a personal evaluation of or opinion on a set of facts as presented….”
At the time of these preliminary discussions, the mediator should obtain the express permission of each participant that he or she is accepting the mediator’s style, as described. Further, each mediation participant is to be advised that the principles of Voluntary Participation and Self-Determination are so important that - at any time - the mediation participant may ask the mediator to cease providing options, insight or information or may even choose to simply terminate participation by leaving the mediation room and going home or to a movie!
If this simple process of informing the mediation participants and gaining their initial consent is obtained, many of the ethical dilemmas discussed in these rules will not be significant to the mediator because the responsibility for objecting to providing information or objecting to doing a reality check or objecting to any mediator proactive behaviors will largely be shifted, for the balance of the mediation sessions, to the affected mediation participants.
Questions Dealing with Conflicts Between Mediator Honesty and Effective Negotiating Styles
Q 23: Mediator Expressing a False Personal Evaluation as to Opposing Side’s Intentions in order to “Facilitate” Agreement: During a mediation, should a mediator ever agree to assist one side by making, as if it is the mediator’s own belief, a specific negotiating proposal from that side (e.g. “I believe that the most the defendant will ever offer is $150,000, and if that offer is not accepted in ten minutes, we are leaving.”) to the other side, if the mediator believes the defendant will actually offer more?
A 23: No.
It is a good idea for a mediator to be much more honest!
A mediator should not intentionally misrepresent a fact, a law or even a statement of intention as true, when the mediator believes it to be false. And, except in the special situation of a “Mediator’s Proposal”, a mediator should not agree to communicate a defendant’s offer or a plaintiff’s demand as if it were the mediator’s suggested offer or demand.
The “Better Practice” is to identify correctly an opposing side’s proposal as coming from that side, particularly when the proposal contains an ultimatum or a threat.
After all, the party receiving the proposal is always able to ask the mediator if the mediator believes the defendant’s $150,000 offer is really the defendant’s last best offer. And, depending on the mediator’s style, the mediator may choose to respond with his or her good faith belief on the veracity of the defendant’s ultimatum and/or a suggested counter offer that will test the firmness of the defendant’s “final offer”.
An even “Better Practice” than permitting either side to make an ultimatum to the other side, is for the mediator to either “coach” the offering party to make an offer which does not contain an implicit threat or to obtain permission to make “a Mediator’s Proposal.” Of course, the “Mediator’s Proposal” is only likely to be consistently effective if done with the permission of the party, and possibly both parties, when impasse has truly been reached and the usual methods of “breaking impasse” and restarting substantive discussions have failed.
Q 24: Feigning Difficulty in Obtaining Negotiating Concessions: When a mediator goes into private caucus and quickly receives a reasonable demand from the plaintiff’s side, is it appropriate for the mediator to take several extra minutes with the plaintiff’s side discussing their children, sports and exchanging war stories so that when the mediator commences private caucus with the defendant’s side, the mediator may proclaim, “It took me so long because I really had to beat up on Plaintiff and his counsel to make him give me a reasonable demand.” ?
A 24: Clearly, this is dishonest conduct by the mediator.
To some, it falls into the “White Lie” category, but the fact there are social conventions that permit “White Lies” does not make the use of the “White Lie” by the mediator an ethical practice. Yet, many participants actually expect such conduct by a mediator.
Some mediation courses include the suggestion that to create the appearance of neutrality, it is a good idea to spend roughly equal amounts of time with each party when in separate caucus. Spending roughly equal time in private caucus with each party can be done without the mediator using false statements to create a false impression that the length of time in private caucus is directly related to the difficulty the mediator had in obtaining concessions. Hopefully, the mediator will be disposed to be a little more honest and not return to the other side with a false proclamation. Yet, most of us engage in the conduct of dallying a bit with a side in private caucus when we feel the negotiation will be expedited to a sensible resolution by creating the impression, without making a false proclamation, that it has been difficult to get movement from the opposing side.
Actually, as often as not, a mediator can engage in a series of fast visits in “separate caucuses” orchestrating a Mediation Dance that would be called “Rock and Roll”, rather than “Rock Around The Clock.” Both mediator techniques can work depending on the style of the mediator and the expectations that are created with the parties and their counsel.
Sometimes simply stating to each side after both sides have made, respectively, “a reasonable demand” and “a reasonable offer”, “This negotiation can be moved along very quickly.” “Both counsel seem to know the Mediation Dance and are well skilled.”
By making such encouraging observations, the mediator often creates an environment in which parties do move very quickly to a middle ground, often without ever experiencing impasse, until the parties are well within an “Edgeworth box” in which exchanges between the parties create a number of outcomes which are more or less in the range of satisfactory outcomes in terms of the parties’ real life long-term interests.
Q 25: In Separate Caucus, Making Conflicting Evaluations to the Parties for the Greater Good of Moving the Parties towards Settlement: Is it ever appropriate for a mediator “to shade” an opinion or evaluation making conflicting evaluations in “private caucus” of potential risks and rewards on the merits of the dispute, the relative competencies of the respective advocates or witnesses, or the character of the parties or counsel, in order to facilitate a settlement by either: (a) currying the trust of one or both sides, or (b) creating greater uncertainty in the minds of one or both sides? In other words, is it O.K. to misdirect and mislead one or both sides in order to encourage a psychological environment in which a settlement is more likely to occur?
A 25: No, if “Shading an Evaluation” means engaging in a Deception as defined by Cooley and Stark on FAQ #4. Yet, it is ethical on a case by case basis as part of a process of “reality testing”.
“To shade” an evaluation so that it goes beyond “reality testing” and creates false impressions is unethical. However, “reality testing” is common; and it is a mediator tactic that frequently contributes to settlement.
The issue is whether such mediator tactics serve to make the parties less informed about a material fact or a relevant law and are, therefore, conducive to creating an environment in which one or more parties may settle based on misinformation or mis-impressions. When this happens, the parties may be settling on terms which are not as favorable as would have occurred with a “honest mediator”.
The ethical breach caused by a mediator occurs when implied “direction” and possibly misleading “misinformation” through “shaded evaluations” results in one of the parties being effectively “coerced” by material misdirections or omissions of material facts in violation of the fundamental principles of a Voluntary and Informed Self-Determination by the parties at a mediation. Joint Standards I and II, CRC§1620.3.
On the other hand, often the mediator’s statements of misdirection or the withholding of information serves a sanguine purpose such as to raise the level of discussion from unhelpful threats or ad hominem attacks, to a more fruitful exchange of options or information. This negotiation skill is one a mediator is expected to understand and use, ethically.
Q 26: “Mediator’s Proposal”: May a mediator offer as his or her own “Mediator’s Proposal” a proposal that is truthfully framed in private caucus by one of the litigants, and is essentially identical to a proposal the litigant would have made, but for the willingness of the mediator to represent the proposal as his own “Mediator’s Proposal”?
A 26: Yes.
Technically this may be misleading, but it is a generally accepted, proactive practice and preferred by most mediation participants.
The concept of a “Mediator’s Proposal” is one that is generally acknowledged in CRC§1620.7(d) Advisory Committee Comment.
The Advisory Committee Comment states:
“Subdivision (d). Subject to the principles of impartiality and self-determination, and if qualified to do so, a mediator may (1) discuss a party’s options, including a range of possible outcomes in an adjudicative process; (2) offer a personal evaluation or opinion on a set of facts as presented, which should be clearly identified as a personal evaluation or opinion; or (3) communicate the mediator’s opinion or view of what the law is or how it applies to the subject of the mediation, provided that the mediator does not also advise any participant about how to adhere to the law or on what position the participant should take in light of that opinion.”
The “Better Practice” in making a “Mediator’s Proposal” is to first check in with each party to the dispute in order to ask whether it is that party’s desire that they wish to hear the “Mediator’s Proposal”. Of course, a party that does not wish to hear the “Mediator’s Proposal” should either be placed in a separate room or have a right to withdraw. Parties who wish to hear a “Mediator’s Proposal” should have the right to do so, recognizing that other litigating parties may withdraw if there is an objection to the mediator going forward and making his or her proposal.
As a general rule, a mediator’s proposal is most effective when the following limited situations occur: (a) the mediation has reached an impasse and discussions have broken down between one or more of the litigants; (b) the “Mediator’s Proposal” appears likely to be an improvement to one or more of the parties perceived BATNA; and (c) the “Mediator’s Proposal” will be at least a likely basis for further discussion, and even agreement, for each and all of the remaining parties.
A “Mediator’s Proposal” is often helpful because it overcomes a very real psychological barrier to voluntary settlements between disputing parties. Often one party simply will not trust or respect that an opposing litigant will make a “reasonable offer” or even a “desirable offer”. Because of this lack of trust and respect that does occur between intense adversaries, the party receiving a “desirable offer” from an adversary may suspect that there is some “unseen trick”, or that the party making the offer knows something that would explain to the party receiving the offer why the offering party has suddenly become so apparently “reasonable”.
This psychological process of devaluing the offer of an adversary is known as “reactive devaluation”. It is a well-documented barrier to parties in a dispute recognizing when one party has made a cognitively reasonable and fair offer. Lee Ross and Constance Stillinger: “Barriers to Conflict Resolution, 7 Negotiatian Journal, 389, 394-5 – (1991); Lee Ross: “Reactive Devaluation in Negotiation and Conflict Resolution” pp26-43 (Kenneth J. Arrow et al, Editor, 1995); and M’nookian & Ross: “Introduction to Barriers to Conflict Resolution” pp15-16 (Kenneth Arrow et al, Editor, 1985).
By simply re-casting a litigant party’s “reasonable offer” as if it is that of the mediator – that is a “Mediator’s Proposal” – the other disputing party is largely freed from the emotional burden of always distrusting what the adversary says or does. The “Mediator’s Proposal” de-escalates the emotional overlay and allows a more cognitive-based discussion.
Questions concerning Mediator Decision Making that can Lead to Withdrawal
Q 27: Standards for Mediator: Withdrawal: Under what circumstances is a mediator required to withdraw and terminate an ongoing mediation; and when doing so, what type of precautions must be taken?
A 27: A mediator is required to decline to serve or to withdraw from a mediation under three statutory circumstances under California law: (1) The mediator cannot maintain impartiality towards all participants in the mediation process; (2) Proceeding with the mediation would jeopardize the integrity of the Court or of the mediation process; and (3) in a two party mediation, if any party objects to the mediator after the mediator makes disclosures or discusses a participant’s question or concern regarding the mediator’s ability to conduct the mediation impartially. CRC Rules 1620.5 (e) and (f). Joint Standards VI , par 6 and 7
Interestingly, CRC Rule 1620 (i) identifies three situations in which the mediator has the discretion to withdraw, but is not required to do so. At least some of these situations would otherwise seem to fall under the descriptions of required withdrawal under the prior discussion. The three discretionary withdrawal situations are that the mediator suspects (1) the mediation is being used to further illegal activity, (2) a participant is unable to participate meaningfully in negotiations or (3) continuation of the process would cause significant harm to a participant or a third party. Possibly, the difference between subsections (e) and (f) which requires mandatory withdrawal and (i) which permits discretionary withdrawal is the difference between a well formed belief that a participant is incapacitated from drugs or alcohol and a mediator’s good faith “suspicion” that such a circumstance exists and precludes meaningful negotiations.
In both situations, the mediator is strongly advised by CRC 1620.7 (j) that the mediator must affect his or her withdrawal “without violating the obligation of confidentiality and in a manner that will cause the least possible harm to the participants.”
Q 28: Performing Adjudicatory Functions: May a mediator perform in an ad judicatory function such as a special master in a partition action or a discovery referee or an arbitrator in a med-arb proceeding concerning the same subject matter and same parties as an underlying earlier or ongoing mediation?
A 28: As a practical matter, this happens on a not infrequent basis.
In labor and employment matters, the mediator will want to review the “rules” of the “National Academy of Arbitrators’ Code of Professional Responsibility”.
In addition, two of the most important cases involving Mediation Confidentiality, Foxgate and Rojas, each involve situations in which a single individual served as a mediator and as a discovery referee in a construction dispute. Many times, parties to mediation gain such confidence in a mediator that the mediator is selected as a discovery referee on key issues or even as an arbitrator in a med-arb process.
Both the Joint Standards and the CPR Georgetown Commission on Ethics and Standards in ADR, Model Rule for the Lawyer as Third Party Neutral (2002) clearly condone such processes with the full and informed consent of each of the mediation participants. The Joint Standards VI also caution the mediator that when accepting an additional role (such as acting as an arbitrator), there will be an increase in the mediator’s responsibilities and obligations, some of which may be governed by differing standards.
CPR Georgetown Commission Model Rule 4.5, Definitions, Evaluative , p7 provides: “…the third party neutral may engage in some evaluative tasks, such as providing legal information, helping parties and their counsel assess likely outcomes and inquiring into the legal and factual strengths and weaknesses of the problem presented. By agreement of the parties or applicable law, mediators may sometimes be called upon to act as evaluators or special discovery masters, or to perform other third party neutral roles.” And, Definitions, Med-Arb , p8 : “A procedure in which the parties initially seek mediation of a dispute before a third party neutral, but if they reach impasse, may convert the proceeding into an arbitration in which the third party neutral renders an award.”
On the other hand, there is a well taken belief by many academic scholars and practicing mediators that when a mediator also serves in an ad judicatory role, that the mediator’s ability to effect the substantive outcome of a litigated dispute violates both fundamental principals of Impartiality and of Self-Determination, even in situations in which parties give their express consent.
Moreover, it is quite possible that a mediator who is serving as an arbitrator with the same parties may inadvertently or involuntarily rely in making his or her decision on information that was learned by the mediator during a confidential session, thus violating the laws relating to Mediation Confidentiality, Evidence Code Section 1119-1122.
While a mediator may serve in an adjudicative role which is one that is often convenient and less expensive for the participants, this adjudicative role may lead to some unanticipated disputes, such as have occurred in the recent Rojas case, presently before the California Supreme Court.
Under California law, there is an apparent split of authority on this issue. Evidence Code Section 1121 appears to permit a mediator to act as an arbitrator or discovery referee in the same matter by carving out an exception to a mediator’s strictly neutral role in that a mediator may make an ad judicatory report to the Court “[When] all parties to the mediation expressly agree otherwise in writing, or orally in accordance with Section 1118.” See also Section 1122.
However, the Law Revision Commission Comments to Section 1121 contradicts the statutory exception, as follows: “Rather the focus is on preventing coercion. As Section 1121 recognizes, a mediator should not be able to influence the result of a mediation or adjudication by reporting or threatening to report to the decision maker on the merits of the dispute or reasons why the mediation failed to resolve. Similarly, a mediator should not have authority to resolve or decide the mediated dispute, and should not have any function for the adjudicating tribunal with regard to the dispute, except as a non-decision making neutral.”(Emphasis added)
The Comments go on to affirm the right of the parties to expressly permit additional information to the ad judicatory tribunal, but it is probably wise to be aware of the Law Revision Commission’s “dicta” and be very careful about obtaining detailed waivers before a mediator agrees to any ad judicatory role, such as commonly occurs in construction defect cases and real estate disputes that may have a single mediator and Special Master or Fact Finder Referee for the Court.
Q 29: Too Evaluative: When does a mediator’s proactive questioning or urgings for a participant to make additional concessions cross the line and become an unethical practice violating both the fundamental principles of Impartiality and Self-Determination?
A 29: Please see FAQ #28. As a practical matter, assuming the participants are competent and represented by counsel, a mediator may look directly to the mediation participants to inform the mediator as to whether his or her style has “crossed the line” into conduct that is “coercive”, partial (rather than impartial), or conflicts with a participant’s fundamental right to Voluntary Self-Determination of the outcome of the mediation. Nevertheless, the ethical mediator may not rely on waiting for a mediation participant’s objection to define “the floor” of ethical practices. Instead, a mediator should recognize that whenever he or she feels offering an opinion occurs to the mediator to be violating mediator “Impartiality”, or “party Self-Determination”, it probably is!
One Final Practical Question on Mediator Malpractice
Q 30: Interaction between the “Shield of Mediation Confidentiality” and “Mediator Malpractice”: Under what circumstances, in California, may the “Shield Protection” of Mediation Confidentiality created by Evidence Code Sections 1119, et. seq. and CRC Rule 1620.4 be pierced in order for one or more of the mediation participants to bring an action of Mediator Malpractice?”
A 30: Justice is unlikely to regard kindly a “Wayward Mediator” who breaches a primary Statutory Duty to a “mediation participant,” when the “Wayward Mediator” moves to strike all allegations supporting a Breach of Duty and Causation based on the shield of Mediation Confidentiality created by Evidence Code §§1119, 1126.
The Joint Standards permit mediation parties to waive confidentiality without the mediator’s consent; and further, the Joint Standards provide that “confidentiality” may be set aside if required by law “or other public policy.” Thus, Joint Standards V establishes the rights of the parties to make their own rules with regard to confidentiality, which said rules the mediator is required to respect. And further, the Joint Standards appear to permit any party to use “public policy” reasons as a basis for setting aside “mediation confidentiality.” Therefore, a party aggrieved by a Wayward Mediator would presumably be able to testify in court in a “mediation malpractice” case against a mediator without being muzzled by Mediation Confidentiality provisions in the Joint Standards.
California law differs substantially. The California Evidence Code Section 1122 (a) (1), and the 1997 Law Revision Comments thereto, unconditionally require the express consent of the mediator, before any mediation participant may disclose a mediation communication described as “confidential” under Evidence Code Section 1119. Therefore, a mediator would presumably be able to ask a court to strike any pleading and exclude any testimony of a mediation participant, when such pleading or testimony had been statutorily protected as “confidential” pursuant to Evidence Code Section 1119.
Interestingly, the one (1) reported California case on “mediator malpractice” does not discuss the right of the mediator to bar a mediation participant’s testimony pursuant to Evidence Code Sections 1119 and 1122 (a) (1). In that case, the “mediator” is alleged to have failed to disclose fully an existing conflict of interest. David Furia vs Hugh N. Helm III (2003), Cal. App.4th (No. A100102. 1st District, Division 3. August 29, 2003). The evidence against the attorney was deemed admissible by the Court, based on an alleged waiver of attorney-client privilege, without ever discussing in the judicial opinion that the evidence was necessarily “confidential” in that it was a document expressly prepared for the purpose of the mediation.
Is it possible that the issue of mediation confidentiality was never raised by the mediator being sued for malpractice in that it is not discussed in the court’s opinion? However, it is surprising that an appellate court would have failed to notice the applicability of so significant an evidentiary exclusion, when – as a matter of “public policy” – Mediation Confidentiality may not be waived without the consent of every participant, including that of the mediator. Evidence Code §§1122, 1126.
Second, CRC Rule 1622 requires the establishment of “procedures for receiving, investigating, and resolving complaints against the mediators who are on the court’s list…”, and provides further:
“(b) the court may reprimand a mediator, remove a mediator from the court’s panel or list, or otherwise prohibit a mediator from receiving future mediation referrals from the court if this mediator fails to comply with the rules of conduct for mediators…”
Thus, the California Judicial Council promulgated CRC Rule 1622, effective January 1, 2003, to provide methods of sanctioning mediators for inappropriate conduct which may have occurred during or in connection with a court-annexed mediation.
One must make the reasonable inference that California courts which have already implied at least three exceptions to Mediation Confidentiality, may very well carve out a “fourth” exception to require a fiduciary (such as a mediator) to be responsible for damage caused by that fiduciary’s misconduct (i.e., “mediator malpractice”). See Foxgate Homeowners Association vs Bramlea California, Inc. (2001) 26 Cal 4 1, 15; The Trouble with Foxgate and Rojas by Max Factor III at: http://www.mediate.com/articles/factorM1.cfm .