Experts at Mediation: A Two-Edged Sword

From the Blog of Phyllis G. Pollack.

Sometimes, a party may have her expert participate in a mediation by being physically present and/or preparing a report for use at the mediation. If the matter does not settle, the question then arises whether mediation confidentiality precludes the use of the expert and/or her report at trial; is she precluded from testifying? Is her report inadmissible at trial?

These issues confronted the Court of Appeals in New Mexico in Warner v. Calvert, Docket No. 29,674 (decided February 9, 2011) (Slip Opinion). (I want to thank my colleague Alex Wisner for bringing this case to my attention!) It was an interlocutory appeal of the trial court’s order appointing Judith Wagner as an expert witness and determining that her valuation report – prepared for purposes of mediation – may be admitted at trial. The defendants took issue with these rulings and so appealed.

In the underlying litigation, the plaintiffs John Warner and Nina True each claimed that they were entitled to money damages as well as stock in the defendant corporations, North American Pizza Solutions, Inc., a New Mexico corporation, and Albuquerque Pizza Solutions, LLC, a limited liability company. Warner and True alleged that they had loaned money to John Phillips to build and operate these companies, with these loans being secured by Phillips’ stock in the companies. In addition, Phillips had allegedly assigned his equity interests in these companies to Warner and True.

The court ordered the parties to mediate. At the first mediation, the parties realized they needed additional information to evaluate settlement. As a result, the parties retained Ms. Wagner to value the companies and the stock and then prepare a report “for the purposes of mediation.” It was clear that Ms. Wagner’s report was for use at mediation.

After Ms. Wagner prepared and submitted her valuation report, the parties reconvened the mediation. Ms. Wagner did not attend the mediation although her report was used during the mediation. The mediation did not result in a settlement, and so the case was set for trial.

Plaintiff John Warner then filed a motion to appoint Ms. Wagner as an expert witness at trial which the court granted. The trial court also ruled that her valuation report could be admitted at trial. The defendants appealed, contending that New Mexico’s newly enacted mediation statutes precluded both Ms. Wagner appearing as a witness and her valuation report being admitted at trial.

The Court of Appeals – noting that Ms. Wagner was a “non-party participant” in the mediation as defined by Section 44-7B-2(F) (Statute) (even though she was not physically present) – held that although Ms. Wagner was not precluded from testifying at trial per se, the scope of her testimony may well be limited: “under New Mexico’s mediation statutes, Ms. Wagner will not be able to disclose any mediation communications unless some exception applies.” (Id.) (Exceptions)

However, the court found that her valuation report constituted a mediation communication because it was a written statement that was “made for purposes of considering, conducting, participating in . . . a mediation.” Section 44-7B-2(B).(Statute) Thus, the court concluded that it was not admissible at trial and that no exception applied that would allow otherwise.(Confidentiality) The court thus rejected the contention of appellants that although the valuation report constituted a mediation communication, it should be admissible because the documents underlying the report were discoverable and admissible.

While the statutes in New Mexico appear to be quite similar to, (if not almost identical to) those of the Uniform Mediation Act and thus different than those enacted in California, the result in California would most likely be the same. In Rojas v. Superior Court, (2004) 33 Cal. 4th 407, the California Supreme Court held that materials prepared for use at mediation were not discoverable as they were protected by mediation confidentiality in California Evidence Code §1119. (Expert testimony was not an issue.)

Thus, while experts can prove quite valuable in settling a case at a mediation, careful thought must be given about whether to use them for this purpose. Pursuant to “mediation confidentiality” statutes, should the case not settle, the expert’s subsequent use and value to the dispute may be severely limited.

. . . Just something to think about.

                        author

Phyllis Pollack

Phyllis Pollack with PGP Mediation uses a facilitative, interest-based approach. Her preferred mediation style is facilitative in the belief that the best and most durable resolutions are those achieved by the parties themselves. The parties generally know the business issues and priorities, personalities and obstacles to a successful resolution as… MORE >

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