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September 08, 2016 Articles

Questions Every Litigator Should Ask about Mediation Confidentiality

By Rachel K. Ehrlich and Emily E. Garrison

Litigators use mediation to facilitate the exchange of information, flesh out and narrow issues, and resolve matters expeditiously. To limit the risk associated with achieving these benefits, most participants agree to be bound by “mediation confidentiality,” which promotes candor and thus facilitates mutually beneficial solutions. Sometimes the mediator or a court supplies the confidentiality agreement, and sometimes a state’s mediation statute makes the mediation automatically confidential. Litigators, focused on resolution of the dispute at hand, may not contemplate the consequences of mediation confidentiality. But they should. Litigators need to understand what mediation confidentiality may not protect and how mediation confidentiality agreements may affect future proceedings. Here we address key questions to consider before your next mediation.

What Protections Are Provided in My Jurisdiction?
The rules for mediation confidentiality vary among jurisdictions. Some jurisdictions have strict rules protecting the confidentiality of mediation communications and materials. In California, for example, the stringent confidentiality provided by Evidence Code sections 1115–1128 has been repeatedly upheld. Section 1119 states that neither “evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation” nor any document “prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation” is admissible or subject to discovery. Disclosure of such evidence cannot be compelled by any noncriminal proceeding, whether it be arbitration, administrative adjudication, or a civil lawsuit. The same section further provides that “[a]ll communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation shall remain confidential.”

Other jurisdictions provide less protection for mediation communications and submissions. For example, the Indiana Rules for Alternative Dispute Resolution afford mediation the same Rule 408 protections as evidence of a settlement offer or its acceptance, which “is not admissible to prove liability for or invalidity of the claim or its amount” but may be admissible “when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.” See Ind. R. Evid. 408 (incorporated by reference in Ind. A.D.R. R. 2.11). The Indiana rules protect mediators from compelled disclosure of matters discussed during mediation, treating them as privileged, and confidentiality requirements may not be waived by the parties. The Indiana Supreme Court has held that these rules apply only to mediations that take place after a suit has been filed in Indiana. See Vernon v. Acton, 732 N.E.2d 805, 808 n.5 (Ind. 2000).

The Uniform Mediation Act (UMA), adopted in 12 jurisdictions (Hawaii, Idaho, Illinois, Iowa, Nebraska, New Jersey, Ohio, South Dakota, Utah, Vermont, Washington, and Washington D.C.) and under consideration in two more jurisdictions (Massachusetts and New York), strikes a balance between protecting mediation communications and preventing parties from using mediation to cloak otherwise discoverable/admissible evidence. Specifically, the UMA protects “mediation communications,” defined as “a statement, whether oral or in a record or verbal or nonverbal, that occurs during a mediation or is made for purposes of considering, conducting, participating in, initiating, continuing, or reconvening a mediation or retaining a mediator.” UMA § 2. It creates a privilege against disclosure that may be claimed by the mediator, mediation parties, or even nonparty participants. UMA § 4. That said, the privilege may be waived in certain circumstances, and there are several exceptions to confidentiality, including for communications reflected in an agreement signed by all parties to the agreement; communications available under the Freedom of Information Act or pursuant to the Open Meetings Act; communications used in a claim of professional misconduct or malpractice against a mediator, party, participant, or representative of a party; and communications involving threats to commit violence or a crime or used to plan, attempt, or conceal a crime. UMA §§ 5–6. And a party cannot shield evidence that would otherwise be discoverable or admissible, merely by using it in mediation. UMA § 4(c).

Differing protections among jurisdictions only complicate this task, because litigators need to pay careful attention to how specific categories of documents are classified in their particular jurisdiction. For example, briefs or statements submitted to the mediator, oral statements in the mediation, and letters between the parties are confidential and privileged under the UMA as well as in California and most other non-UMA jurisdictions. Exhibits that were created specifically for the mediation (e.g., a chart) and exhibits to briefs that are otherwise discoverable are not privileged under the UMA (although the fact that such exhibits were used in the mediation may be privileged). But they may receive different treatment in other states, such as California. Adding a further wrinkle, be aware that multiple jurisdictions’ rules or laws may apply, where, for example, a matter is pending in federal court based on diversity jurisdiction, see, e.g., Milhouse v. Travelers Commercial Ins. Co., 982 F. Supp. 2d 1088 (C.D. Cal. 2013), aff’d, 641 F. App’x 714 (9th Cir. 2016), or a case involves actions and potential tortfeasors in multiple jurisdictions.

The patchwork of laws and rules that govern confidentiality of mediation—from state statutes to state agency rules to state and federal court local rules—requires careful consideration before agreeing to mediate. Think about the protections that are needed for the particular action and what may be provided under potentially applicable laws and rules.

The Mediation Confidentiality Provisions Were Breached: Now What?
Consider the following: after a matter does not settle in mediation, someone submits evidence citing statements made during mediation. This violates mediation confidentiality, but what recourse is available? Courts hesitate to go further than finding evidence inadmissible. The decision in Higbie v. United States, 778 F.3d 990 (Fed. Cir.), cert. denied, 136 S. Ct. 37 (2015), is instructive. There, the confidentiality clause provided: “Any documents submitted to the mediator(s) and statements made during the mediation are for settlement purposes only.” Id. at 992. The court nonetheless denied monetary damages for breach, explaining that the plaintiff failed to show that the mediation agreement could be fairly interpreted to contemplate money damages because nonmonetary relief (i.e., exclusion) was available. Id. at 995.

The Eastern District of Pennsylvania reached a different conclusion where the mediation confidentiality provision provided that the parties “underst[oo]d that discussions during the mediation session are confidential and will not be used during subsequent proceedings” and “therefore, agree[d] not to call the mediator as a witness in future proceedings.” Bethlehem Area Sch. Dist. v. Zhou, No. CIV.A. 09-03493, 2012 WL 930998, at *1 (E.D. Pa. Mar. 19, 2012). The court awarded nominal damages of $1 and permitted evidence of actual damages at trial in connection with breach of mediation confidentiality. Id. at *5.

The consequences of a breach of confidentiality could be clarified by the parties from the outset—for example, by expressly providing for liquidated damages. But consider the impact that requesting such clarity may have on other parties’ desire to move forward with mediation.

Related Disputes and Nonparticipating Parties: What Is Protected?
When a matter developed primarily in mediation settles, the confidentiality provisions that governed the mediation may mean that little or no otherwise admissible evidence regarding that dispute exists. This may create issues in related disputes, such as disputes about contractual indemnity issues, insurance coverage, or malpractice arising from the mediation.

Consider the following hypothetical scenario: early in a construction defect lawsuit, the contractor and subcontractors that built an apartment building settle with the allegedly injured tenants of that building. During the mediation leading to the settlement, the parties exchanged documents, discussed case theories, and ran damages allocation models. None of this evidence became part of the litigation record. After the settlement, a dispute arises between the contractor’s insurer and the subcontractor’s insurer. What happens to the evidence that was developed during the course of the mediation but that is not part of the mediation record? Mediation confidentiality provisions can present serious proof problems in such related disputes. While the risk is particularly great in California and other states with strict mediation confidentiality statutes, even disputes following mediations governed by the UMA are not immune to the risk.

In Rojas v. Superior Court, 93 P.3d 260 (Cal. 2004), the California Supreme Court highlighted the evidentiary consequences of mediation confidentiality in a subsequent, related case. There, contractors/subcontractors settled in mediation a construction defect case brought by the owner of an apartment complex. The settlement agreement stated in part that “throughout this resolution of the matter, consultants provided defect reports, repair reports, and photographs for informational purpose which are protected by the Case Management Order and Evidence Code §§ 1119 and 1152, and it is hereby agreed that such materials and information contained therein shall not be published or disclosed in any way without the prior consent of plaintiff or by court order.” Id. at 262. Thereafter, the tenants sued the complex’s owner and construction entities alleging, among other things, health impacts from the construction defects. Because the tenants were not parties to or participants in the mediation of the underlying construction defect matter, they had no ability to influence the scope of its mediation confidentiality. Nevertheless, the tenants were denied discovery of materials prepared for the mediation, including photographs of alleged defects. The California Supreme Court concluded that the items were not discoverable because they were “prepared for the purpose of, in the course of, or pursuant to [the] mediation” in the underlying action. Id. at 265.

While Rojas highlights the potential evidence-related consequences of a strict mediation confidentiality provision, litigators should keep in mind that communications that might be otherwise protected may be admissible for limited purposes in future disputes, including:

  • Suits about lawyer and/or mediator misdeeds. See, e.g., Alfieri v. Solomon, 365 P.3d 99, 116 (Or. 2015) (holding that communications between a mediating party and her attorney outside of the mediation proceeding were not “mediation communications,” even if integrally related to a mediation, and could be used in a subsequent malpractice action). But see Cassel v. Superior Court, 244 P.3d 1080, 1087 (Cal. 2011) (holding that mediation-related discussions were inadmissible in a subsequent malpractice action against attorneys, even if those discussions occurred in private, away from any other mediation participant).
  • Suits about insurance coverage and bad faith. See Sharbono v. Universal Underwriters Ins. Co., 161 P.3d 406, 419 (Wash. Ct. App. 2007) (holding that the trial court properly admitted mediation evidence not offered for the purposes of liability but to prove state of mind); Mutual of Enumclaw v. Cornhusker Cas. Ins. Co., No. CV-07-3101-FVS, 2008 WL 4330313, at *3 (E.D. Wash. Sept. 16, 2008) (holding communication about insurance coverage unprotected because it was unrelated to the mediated dispute).
  • Circumstances where information has been shared with a nonparticipating insurance carrier. See Cont’l Cas. Co. v. St. Paul Surplus Lines Ins. Co., 265 F.R.D. 510, 530 (E.D. Cal. 2010) (finding an insurer that did not participate in mediation of the underlying case could not claim that information shared with it by the insured and the insured’s counsel about what occurred at the mediation is privileged).

There is not a one-size-fits-all solution to addressing potential issues surrounding mediation confidentiality. Parties should consider the ideal mediation confidentiality provisions and compare those to the provisions that will likely apply to the dispute absent an agreement by the parties to the contrary (if one is permitted).

Finally, while this article has tackled some of the key questions associated with confidentiality, litigators also be should cognizant of other mediation confidentiality pitfalls—such as the consequences of a party’s copying the mediator on communications to attempt to cloak them in privilege, or the separate but related risk of waiving privilege by sharing documents or information with a mediator. These issues can be tricky to discern and resolve, but they are nonetheless an important part of the mediation process. They should be considered by litigators as they evaluate whether and under what terms to mediate their clients’ disputes.

Keywords: litigation, woman advocate, mediation, ADR, confidentiality, privilege, mediation confidentiality

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