Updated October 15, 2008

Paul Dubow Mediation Case Report 2005 to 2008

MEDIATION

Case List By Name

Campagnone v. Enjoyable Pools & Spas Service & Repairs, Inc. (2008) (Confidentiality – Conduct)

Fair v. Bakhtiari (2006) (Settlement Agreements - Enforceability)

Jeld-Wen, Inc. v. Superior Court (2007) (Court Order Compelling Mediation)

Lange v. Schilling (2008) (Condition Precedent to Recovering Attorneys Fees)

Lindsay v. Lewandowski (2006) (Binding Mediation)

In re Marriage of Kieturakis (2006) (Settlement Agreements - Waiver of Confidentiallity)

In re Marriage of Kieturakis (2006) (Marital Settlement Agreements - Presumption of Undue Influence)

Simmons v. Ghaderi (2006) (Settlement Agreements - Waiver of Confidentiallity)

Stewart v. Preston Pipeline, Inc. (2005) (Settlement Agreements - Waiver of Confidentiallity)

Stewart v. Preston Pipeline, Inc. (2005) (Settlement Agreements - Waiver of Enforceability)

Thottam v. Thottam, (2008) (Settlement Agreements - Enforceability)

Travelers Casualty and Surety Co. v. Superior Court (2005) (Coercion)

Travelers Casualty and Surety Co. v. Superior Court (2005) (Confidentiality - Waiver)

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Case List By Subject/Full Review

Attorney Fee Clause in Inadmissible Agreement

Rael v. Davis, 166 Cal App 4^th 1608, 1622-23, 2008 Cal App LEXIS 1457 (2008)-After a mediation, the parties entered into a settlement agreement, which contained an attorney fee clause. One of the parties attempted to enforce the agreement but it was ruled to be inadmissible because it was not signed by one of the parties. The prevailing party in that litigation attempted to enforce the attorney fee provision, arguing that the other side would have been able to do so had she prevailed. Hence he argued that she was judicially estopped from arguing that the attorney fee clause was not enforceable. The argument was rejected because the mediation confidentiality statute does not provide an exception for judicial estoppel.

Binding Mediation

Lindsay v. Lewandowski, 139 Cal App 4^th 1618, 1623-25, 43 Cal Rptr 3 846 (2006)-The parties herein entered into a “stipulated settlement agreement” which, inter alia, provided that Lindsay would pay Lewandowski $190,000 subject to certain terms which, if not agreed upon by the parties, would be subject to “binding mediation”. The parties could not reach agreement, the dispute was submitted to the “mediator” and he “ruled” in favor of Lewandowski. The mediator described “binding mediation” as a procedure where the parties, having reached impasse, submit proposed solutions to the mediator and he chooses one. Lindsay claimed that the agreement was unenforceable and the court agreed. There are significant problems with the concept of binding mediation. While there are recognized rules governing contractual arbitration (Code of Civ Proc 1280 et seq), contractual mediation (Evid Code 1115 et seq) and court connected mediation programs (Cal Rules of Court 1620 et seq), there are none for binding mediation. The courts cannot arbitrarily select which rules to apply because it would only inject more complexity and litigation into a process aimed at less. This ruling, however, does not preclude parties from agreeing that if a mediation fails, the dispute can be submitted to arbitration and that the person who served as the mediator can then serve as the arbitrator.

Coercion

Travelers Casualty and Surety Co. v. Superior Court, 126 Cal App 4^th 1131, 1143, 24 Cal Rptr 3d 751 (2005)-The court herein ordered the parties to participate in a “valuation hearing” after which, if no settlement was reached, it would issue a “valuation order” which would set forth the presumed settlement value of the case. The valuation order, inter alia, precluded the defendant’s insurers from forfeiting the defendant’s insurance policy if the defendant settled in the amount set forth in the valuation order without the insurers’ authority. The insurers appealed. The plaintiffs argued that, because the insurers had refused to participate in the mediation, a reversal would shift the state’s public policy from favoring settlements to favoring trials when insurers decide that it is in their best interests not to settle. The court disagreed. If the mediation confidentiality rules still apply even where a mediation participant frustrates a mediated settlement by arguably sanctionable conduct, then, by parity of reasoning, the principles favoring voluntary participation over coercion should apply to an insurer whose supposedly limited and recalcitrant participation makes it unlikely that its insured would be able to settle. Preventing or punishing such conduct is not the job of the mediator. Instead, it is best left resolved by the insurer and insured through an action for bad faith.

Condition Precedent to Recovering Attorney Fees

Lange v. Schilling, 163 Cal App 4^th 1412, 1418, 78 Cal Rptr 3d 356 (2008)-The real estate contract in this case contained the standard clause that allowed the prevailing party to recover its attorney fees provided that it agreed to mediate before suit was filed. The plaintiff buyer was unable to locate the seller and thus filed suit without making a mediation demand. Upon filing suit, the buyer hired an investigator who located the seller within 16 days. The buyer then made an offer to mediate to the seller, but there was no response. The jury awarded the buyer $13,875 in damages and the court granted his application for $113,000 in legal fees on the ground that his failure to demand mediation was excused by his inability to locate the seller. The award of attorney fees was reversed. The buyer could have readily complied with the mediation requirement simply by hiring the investigator, learning the seller’s whereabouts, and mailing an offer of mediation before filing the complaint. The buyer argued that his offer to mediate after locating the seller constituted substantial compliance with the requirement. But the doctrine of substantial compliance is not applicable. The requirement to offer mediation before suit was designed to encourage mediation at the earliest possible time. This provision would become meaningless if a party were allowed to recover attorney fees by making a request for mediation after litigation has begun and then claiming substantial compliance.

Confidentiality-Conduct

Campagnone v. Enjoyable Pools & Spas Service & Repairs, Inc., 163 Cal App 4^th 566. 2008 Cal App LEXIS 808 (2008)-Plaintiff recovered $2.4 million from defendants in a jury trial in a product liability case. Defendants appealed and the parties agreed to mediate the dispute under the Court of Appeal’s mediation program. The excess carrier for one of the defendants failed to appear at the mediation in violation of a court rule requiring representatives of insurers with full settlement authority to appear. Plaintiff moved for sanctions in an amount of the attorney fees that he expended at the aborted mediation. The insurer argued that the plaintiff’s motion violated mediation confidentiality rules. The argument was rejected. The confidentiality rules do not prohibit a party from advising the court about conduct during mediation that might warrant sanctions. The failure to have all persons or representatives attend court ordered appellate mediation, as required by local rule, is conduct that a party, but not a mediator, may report to the court as a basis for monetary sanctions. (However, the motion was denied because defendant’s counsel had failed to notify the insurer about the mediation and there was no explicit court rule requiring that he do so. The court stated that, in the future, counsel are on notice that they must advise a carrier about the mediation.)

Confidentiality-Waiver (Section 1121)

Travelers Casualty and Surety Co. v. Superior Court, 126 Cal App 4^th 1131, n. 18, 24 Cal Rptr 3d 751, n. 18 (2005)-Although Section 1121 states that no report by the mediator may be filed unless “all parties to the mediation” agree, that provision cannot be read narrowly to include only parties to an action, and exclude participating insurers. The provision must be given a common sense reading that is consistent with the Legislature’s apparent approach and which will not lead to an absurd result. In light of the Legislature’s apparent purpose of extending some aspects of mediation confidentiality to participants such as insurers, not just the parties to the action, the phrase “parties to the action” as used in Section 1121 shall include such participants.

Court Order Compelling Mediation

Jeld-Wen, Inc. v. Superior Court. 146 Cal App 4^th 536, 543, 53 Cal Rptr 3d 115 (2007)-The essence of mediation is its voluntary nature. Thus, a case management conference order requiring the parties in complex cases to attend and pay for mediation over the party’s express objection is contrary to this principle and conflicts with the statutory scheme pertaining to mediation.

Marital Settlement Agreements-Presumption of Undue Influence

In re Marriage of Kieturakis, 138 Cal App 4^th 56 41 Cal Rptr 3d 119 (2006). Plaintiff filed suit to set aside a marital settlement agreement that was entered into following a mediation on the ground that she did so under duress. She refused to waive confidentiality, although defendant was willing to do so. The trial court held that there was a presumption of undue influence against the defendant where the terms of the marital settlement agreement favored him and that the only way by which he could rebut the presumption would be to force the mediator to testify. The court held that there was no undue influence after hearing the mediator’s testimony. On appeal, the court ruled that requiring the mediator to testify was error but it was harmless. Because of the requirement for mediation confidentiality, the presumption of undue influence must yield where a marital settlement agreement is achieved through mediation.

Settlement Agreements-Enforceability

Fair v. Bakhtiari, 40 Cal 4^th 189, 199-200, 51 Cal Rptr 3d 871 (2006). A settlement agreement entered into at the conclusion of a mediation session that simply stated that any disputes that arose thereunder would be resolved by arbitration before JAMS was not enforceable under Section 1123(b) of the Evidence Code. In order to satisfy Section 1123(b), a settlement agreement must include a statement that it is “enforceable” or “binding” or words to that effect. The statute leaves room for various formulations. However, arbitration clauses, forum selection clauses, choice of law provisions, terms contemplating remedies for breach, and similar commonly employed enforcement provisions do not qualify an agreement for admission under Section 1123(b).

Stewart v. Preston Pipeline, Inc., 134 Cal App 4^th 1565, 1579-80, 36 Cal Rptr 3d 901 (2005). Plaintiff filed suit arising from injuries suffered in an automobile accident. Defendants moved for summary judgment on the ground that plaintiff had executed a settlement agreement at the conclusion of a mediation that stated, inter alia, that the agreement was enforceable under Code of Civil Procedure 664.6. Plaintiff argued that the agreement was not enforceable because 1) it was signed by defendants’ counsel, not defendants and 2) there was no mutual consent because he had not read the agreement and did not understand it. Although the Supreme Court had held in Levy v. Superior Court, 10 Cal 4^th 578, 41 Cal Rptr 2d 878 (1995) that a settlement agreement had to be signed by the litigants in order to be enforceable under Section 664.6, that statute was not the only means by which a settlement agreement could be enforced, and that other more cumbersome means could be used, such as a motion for summary judgment. There was mutual consent because defendants and their insurer had authorized the attorney to sign the agreement and plaintiff had manifested his consent by signing it. A party who fails to read a contract but nevertheless signs it cannot later rescind the agreement, absent fraud or knowledge by the other party of the alleged mistake.

Thottam v. Thottam, 165 Cal App 4th 1331, 1339-41, 81 Cal Rptr 3d 856 (2008)-Three siblings agreed to a mediation to resolve how the property of their late mother would be distributed. At the outset of the mediation, the siblings signed an agreement which stated that everything that transpired during the mediation would be confidential “except as may be necessary to enforce any agreements resulting from the meeting”. During the mediation, a chart was prepared which listed the properties in dispute and indicated to whom the particular property would be distributed. It was initialed by each sibling. No other document purporting to be a settlement agreement was executed. Subsequently, two of the siblings brought suit against the third alleging that no settlement had been reached and seeking return of rents that the defendant had retained on a property purportedly distributed to him according to the chart. The court rejected the defendant’s attempt to introduce the chart, asserting that it was not admissible under the Evidence Code. The Court of Appeal reversed. The parties had agreed that agreements resulting from the mediation were not confidential. It was irrelevant that the purported settlement occurred subsequent to that agreement. The chart contained the elements of a settlement agreement. Although it was not admissible under Evidence Code 1123(a) and (b) because it did not state that it was “enforceable and binding or words to that effect”, it was admissible under Section 1123(c) because that restrictive language was not contained in that part of the statute.

Rael v. Davis, 166 Cal App 4^th 1608, 1620, 2008 Cal App LEXIS 1457 (2008)-Plaintiff entered into a settlement agreement following the mediation of a dispute over the distribution of her husband’s assets upon his death. Plaintiff’s husband and his children by a prior marriage were also parties. One of the children failed to sign the settlement agreement. The husband failed to change his will to include the terms of the settlement and, upon his death, plaintiff sued his estate and the children for breach of contract. Plaintiff conceded that the party who had not signed the agreement was not bound by it, but argued that since the husband signed it, the that portion of the agreement could be severed and enforced because plaintiff and her husband were “relevant parties”. This argument was rejected. Before a term must be severed and enforced, the agreement must be admissible. Moreover, the exceptions enumerated in Section 1123 require the signature of the settling parties, not the relevant settling parties.

Settlement Agreements-Waiver of Confidentiality

In re Marriage of Kieturakis, 138 Cal App 4^th 56 41 Cal Rptr 3d 119 (2006)-If a party seeks to set aside a settlement agreement achieved as the result of a mediation on the ground of fraud or duress, then such party will be compelled to waive confidentiality if it wishes to proceed, which could mean that the suit could fail if the other side refuses to waive confidentiality

Simmons v Ghaderi, 44 Cal 4^th 570, 584-588, 80 Cal Rptr 3d 83 (2008)-Defendant executed a consent form that authorized her insurance carrier to offer plaintiffs $125,000 at a mediation. The carrier made the offer and the plaintiffs accepted. Before the settlement agreement could be executed, defendant advised the carrier that she withdrew her consent and she left the mediation. Plaintiffs filed suit for breach of contract. Defendant filed a declaration admitting that she gave consent to the carrier and that the offer was made but asserting that it was withdrawn after it was made and her attorney later stipulated to these facts. Initially, the defendant did not argue that the settlement agreement was inadmissible pursuant to Evidence Code 1119 but she did so fifteen months after the suit commenced. The trial court ruled in favor of plaintiffs. On appeal, the Court of Appeal affirmed, holding that defendant, by asserting what transpired in the mediation during the Superior Court proceeding, was estopped from raising mediation confidentiality. The Supreme Court reversed. It found that judicially created exceptions to mediation confidentiality are limited to cases where the doctrine is outweighed by due process considerations or where all the parties waive confidentiality. It declined to add estoppel as a judicially created exception and added that mediation confidentiality cannot be waived by conduct. Finally, in response to plaintiffs’ argument that a ruling in favor of defendant would lead to an absurd result and that therefore the Court could find implied waiver, the Court held that inadmissibility of the oral agreement under the circumstances of this case was an intended consequence of the statutory scheme, and thus not an absurd result.

Settlement Agreements-Waiver of Confidentiality by Attorney

Stewart v Preston Pipeline, Inc., 134 Cal App 4^th 1565, 1579-80, 36 Cal Rptr 3d 901 (2005). Plaintiff reneged from a settlement negotiated during a mediation and sued defendants. Defendants moved for summary judgment, citing a settlement agreement that plaintiff had executed which contained the necessary words for waiver provided in Evidence Code 1123. Plaintiff argued that the settlement agreement was not admissible because the statute required the contract to be signed by the “parties” before waiver was effective and in this case, defendants’ counsel, but not defendants, had signed the agreement. The Court held that confidentiality had been waived. The word “party” can refer to counsel as well as litigant. An attorney may bind a client with respect to procedural matters but cannot do so where the action is viewed as impairing the client’s substantial rights or the cause of action itself. A document waiving mediation confidentiality is not one that impacts the substantial rights of the party litigant. It is clearly procedural in nature---it is a strategic stipulation allowing for the admissibility of certain evidence.

Rael v. Davis, 166 Cal App 4^th 1608, 1620-21, 2008 Cal App LEXIS 1457 (2008)-After a lengthy mediation, a settlement was apparently reached and a settlement agreement was drawn. However, one of the parties failed to sign the agreement. A party who had signed the agreement attempted to enforce the settlement agreement against the others and argued that it was admissible because the non signing party’s attorney had executed the agreement, citing Stewart v. Preston Pipeline, Inc. The attorney testified that the parties had agreed that the agreement would be enforceable only if all the parties signed. The court found Stewart to be distinguishable. There, the party seeking to exclude the agreement and avoid its enforcement was the plaintiff who had personally signed it, along with the confidentiality waiver. Moreover, the defendants who sought to enforce the agreement did not suggest that their counsel lacked authority to bind them.

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