A California Second Appellate District panel last month applied California Evidence Code § 1119 and found that a settlement agreement reached in mediation was inadmissible because one of the settling parties did not sign the agreement.
The panel dismissed the plaintiff's action to enforce the agreement against a party that did sign the agreement.
Section 1119 is the state's ADR confidentiality statute, barring admission or discovery of mediation writings.
The Court found that documents prepared for mediation purposes are generally inadmissible. But settlement agreements reached through mediation and signed by the settling parties are usually exempt from this general rule, under California Evidence Code § 1123.
In Rael v. Davis, 166 Cal. App. 4th 1608 (Cal. Ct. App. Sept. 28, 2008)(available at
http://www.courtinfo.ca.gov/opinions/documents/B197971.PDF ), the settlement agreement wasn't formed, so the mediation materials were inadmissible, and therefore couldn't be enforced, nor could portions be severed and enforced against signing parties.
In Rael, plaintiff/appellant Cruz Cardenas Rael filed suit against David M. Davis, executor for the estate of her deceased husband, Tony G. Rael Jr., alleging a breach of a settlement agreement signed in mediation, because the husband failed to amend his will according to the agreement terms before he died. She alleged that Davis didn’t abide by the terms of the settlement agreement in his executor role.
Tony Rael died in 2003, but before his death, his son Mark Rael initiated a legal proceeding for conservatorship. The Court ordered the parties to participate in a mediation on distributing Tony Rael’s assets after his death. Cruz, Tony, and Tony's children--all from his prior wife who predeceased him, including Mark Rael--participated.
Four mediation sessions followed. Mark was not physically present at the last of the four, where an agreement was signed by the parties. Mark subsequently refused to include his signature on the agreement. The trial court found no settlement was reached and ordered the conservatorship action to proceed to trial.
In this action, Cruz argued that Tony's obligations under the mediation agreement were severable and separately enforceable, and that Mark's signature was unnecessary as to those obligations.
The trial court found that the mediation agreement's admissibility was a threshold issue to be decided before the issue of enforceability. The Second District, Division Four Court of Appeal, in Los Angeles, agreed.
Section 1123 provides that “if the agreement is signed by the settling parties” and the agreement either provides that it is admissible or subject to disclosure or has "words to that effect"; that it is enforceable or binding or has words to that effect; that all parties "expressly agree in writing" or orally to its disclosure, or the agreement is used to show fraud, duress, or illegality that is relevant to a disputed issue, then the agreement may be admissible.
The Court focused on the words, “settling parties,” and interpreted Section 1123 to require the signature of all settling parties, not the “relevant” settling parties, as the plaintiff proposed. Because Mark did not sign the agreement and was a settling party, there was no binding agreement, and the agreement therefore was inadmissible. Therefore, the court could not look at the agreement and decide whether it was separately enforceable against the defendant.
While the panel decision rests mainly on the confidentiality issue, it also is important to note that the appeals court accepts the trial court's finding of facts and is applying a de novo standard of review only to the statute.
The trial court in this case made an extensive investigation and accepted parol evidence from seemingly everyone involved in the mediation, including the attorneys that were present. It concluded that the defendant, and all of the other settling parties that signed the agreement, understood and intended for the agreement to only be binding if and when Mark included his signature as well.
Those facts seem to be relevant to § 1123's focus on the settling parties, which is the key to the threshold issue of admissibility, and ultimately the issue of enforceability of an agreement against individual signatories.
This case leaves open the question of “Who is a settling party?” under the statute. Is it all of the participants in a mediation? Or can parol evidence be introduced to prove that a settlement was made, between all settling parties, but did not include all participating parties?
–Gordon Sung, CPR Intern