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September 13, 2021 Dispute Resolution Magazine

Case Law Update

Court says Records of Talks on Amazon Headquarters are Excluded from Disclosure

Lindsey Anderson and Andrew Jordan

In September 2017, Amazon announced that it was scouting locations for a second headquarters, “HQ2.” Indianapolis submitted an initial response to Amazon’s request for proposals with the assistance of the Indiana Economic Development Corporation (IEDC). The city was then selected as one of 20 potential locations and asked to complete a confidential request for information. Amazon did not select Indianapolis, and communication between the company and the IEDC ceased. Subsequently Tax Analysts, a nonprofit quarterly, filed a written public records request to receive copies of the proposal and all records and communications related to the endeavor under the state’s Access to Public Records Act (APRA), which gives citizens the right to get information regarding the government and the official acts of public officials and employees and says that government officials have a responsibility to provide that information. The IEDC declined, citing that the records were created during negotiations and therefore excluded from disclosure. Tax Analyst responded that the documents did not qualify for that exemption because they contained the terms of a final offer of public financial resources. The trial court upheld the reasoning of the IEDC, and an appeal followed.

In Tax Analysts v. Indiana Econ. Dev. Corp., 162 N.E.3d 1111 (Ind. Ct. App. 2020), the Court of Appeals of Indiana upheld the lower court’s decision. In reviewing the applicable section of the APRA, the court noted changes made to the statute in 1991 that specifically “… protected records made during negotiations, as well as those created outside of direct negotiations that relate to the ongoing process. The court interpreted that change to indicate that the legislature no longer wished for all records of negotiations between the IEDC and commercial prospects to be available. Further, the court noted it could logically infer that the legislature envisioned situations in which negotiations did not result in an offer involving public resources. Put simply, a “final offer must mean something more than simply the last offer in a sequence of negotiations.” In closing, the court pointed to the presence of conditional language in both the description of the proposal process by Amazon, as well as in the two submitted proposals by the IEDC. This pointed to an ongoing process of communication, the court indicated, not a final offer of public financial resources.

Parties who Stay Away, California Court Rules, Can’t Contest Settlement

In Breslin v. Breslin, No. 2D. CIV. B301382, 2021 WL 1247885 (Cal. Ct. App. Apr. 5, 2021), reh’g denied (Apr. 20, 2021), the trustee of a decedent’s trust petitioned the probate court to determine beneficiaries. Potential beneficiaries received notice of the petition and the subsequent mediation order from the court. However, not all potential beneficiaries participated. At the mediation, the attending parties reached a settlement that excluded the nonparticipating parties as beneficiaries. The probate court approved the settlement, and an appeal followed.

The Court of Appeal, Second District, Division 6 of California affirmed the probate court’s decision, holding that a party receiving notice under this circumstance who fails to participate in court-ordered mediation is bound by the result. The appellants had contended they were improperly denied an evidentiary hearing and given improper notice. Further, they alleged that the trustee violated his duty to deal impartially with all beneficiaries. The court rebuked the challenge regarding an evidentiary hearing, as the parties waived the right to such a hearing by failing to participate in mediation. The court noted that the “… probate court’s mediation order would be useless if a party could skip mediation and challenge the resulting settlement agreement.” Similarly, regarding the potential issue of impartiality, the court noted that a party cannot refuse to participate and then complain they received nothing. Finally, the court discarded the notice claim due to the fact that the order clearly indicated that nonparticipating could be bound by an agreement reached during mediation.

(For additional discussion about the Breslin case, see the On Professional Practice feature in this issue of Dispute Resolution Magazine)

Plaintiffs Seeking Material in Art Case Mediation Must Show Great Need

In Accent Delight, Accent Delight International Ltd. v. Sotheby’s, No. 18-CV-9011 (JMF), 2020 WL 7230728 (S.D.N.Y. Dec. 8, 2020), the US District Court of the Southern District of New York evaluated whether a party seeking to discover materials relating to a private confidential mediation must satisfy a heightened standard of need. The plaintiffs in this case accused Sotheby’s, one of the world's largest brokers of fine and decorative art, jewelry, and collectibles, of assisting an art dealer, Yves Bouvier, in a scheme to defraud the plaintiffs of approximately $1 billion by over-inflating prices when purchasing a world-class art collection. This collection included a Da Vinci original, Salvator Mundi. Knowing that Sotheby’s had settled separate litigation with the original sellers of Salvator Mundi by way of private confidential mediation, the plaintiffs moved to compel disclosure of materials related to that mediation.

The District Court held that a heightened standard, as outlined in the case In Re Teligent, should and does apply to private mediations in which there was an explicit promise of confidentiality. Further, the court noted that whether or not the precedent in Teligent alone compels the conclusion, the heightened standard should apply to private mediation. In this case, the court found, that standard simply was not met. The mediation material concerning one transaction in the overall case does not establish special need by itself that results in unfairness. Additionally, the need for the evidence did not outweigh the need to maintain confidentiality, as the plaintiffs were already privy to the theory of Sotheby’s case against the Da Vinci sellers from a publicly filed declaratory judgment. The court explained that the party seeking discovery of confidential mediation communications must show more than “mere relevance to a pending action.” The court also pointed to concerns that not applying the standard to private mediation could lead to less use of private mediation and possibly to participants being less frank in the process. That, the court found, could impact the entire court system, which relies on mediation to encourage settlement and reduce unwarranted litigation.

Silence, VT Court Rules, is Not Acceptance of Binding Arbitration

In Knaresborough Enterprises, LTD v. Dizazzo, the Vermont Supreme Court determined that silence from a party does not constitute agreement under the Vermont Arbitration Act (2021 VT 1 (Vt. Jan. 8, 2021). The case involved a property dispute over the right to an easement. The  parties were set to go to trial but settled in advance. In the settlement, both parties agreed to the same terms, but the attorney for Dizazzo was not able to present their view on the arbitration agreement in court due to an unrelated interruption. The final agreement included the arbitration provision, despite the attorney for Dizazzo’s unsuccessful effort to discuss it during the court hearing.

Later, under a new claim, Knaresborough filed a motion to compel arbitration based on the earlier settlement agreement. The attorney for Dizazzo had not been able to accept or reject the arbitration provision in the original court proceedings, and Knaresborough took this silence to constitute an acceptance to the arbitration clause in the settlement agreement. The court held that this silence did not constitute a waiver of rights and agreement to arbitration. The court concluded there was not sufficient discussion on the arbitration clause and the parties ultimately did not agree to it, and therefore arbitration could not be compelled.

In Maine, Mediation Outline Submitted to the Court Should be Unsealed

In a long history of claims between two parties, the District Court of Maine determined that mediation documents submitted to the court should be opened to public access and unsealed.

Mckenzie v. Brannan (2:20-CV-00262-JAW, 2020 WL 6647106 (D. Me. Nov. 12, 2020) involved an outline from a previous meditation attempt and was labeled “For Mediator’s Eyes Only” on the cover. Later, during another court proceeding, the document was submitted to the court but never cited within the case. The Maine Attorney General moved for the document to be sealed in the record since it was confidential information from mediation. The other parties, however, wanted public access to the document and did not support the document being sealed.

The court that determined the outline should be unsealed because it was part of a judicial record and there is a presumption of public access to court records. Without a compelling reason for confidentiality, the court found, documents submitted to the court should be accessible to the public. While documents from settlement agreements normally overcome the presumption of public access, in this case, the court said, the document was pertinent to the current case and did not contain any information that would substantially harm one party. 

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Lindsey Anderson and Andrew Jordan

Authors

Lindsey Anderson and Andrew Jordan are law students at the University of Oregon School of Law and serve as law student editors for Dispute Resolution Magazine

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