Mediation: Quasi-Judicial Immunity Protects Provider from Breach of Contract Claims (Web)

In an unpublished opinion, Simpson v. JAMS/Endispute LLC, No. A110634, 2006 WL 2076028 (Cal. Ct. App. 2006)(www.courtinfo.ca.gov/opinions/nonpub/A110634.PDF), California's First District Court of Appeal held that a national mediation provider was immune from liability for the way mediation was being conducted, where the appellant claimed that no representatives from the other party attended the mediation, and the mediator did not properly conduct the procedure.

A unanimous appellate panel affirmed a trial court decision granting a demurrer in the case in favor of JAMS, based in Irvine, Calif. On appeal, plaintiff/appellant Allen R. Simpson argued that the trial court erred in sustaining the demurrer.

This case arose out of an estate matter. Before setting a trial date, the San Francisco County Superior Court ordered mediation in Simpson's dispute with Bank of America--Simpson v. Bank of America, No. CGC 402367 (2001)--pursuant to the pertinent section of the Civil Procedure Code.

Simpson's attorney selected the Jams’ V. Gene McDonald, a former San Mateo County, Calif., judge, as mediator. The opinion states that Simpson alleged that his attorney, Thomas Best, did not prepare him for the process. The first session was between Best and mediator McDonald, during which time Simpson sat outside the meeting room for more than an hour, according to the opinion. Simpson contended he had never seen or spoken with a representative from the bank during the mediation.

He alleged that when he joined his attorney and the mediator, the mediator immediately told him that he would not be successful in bringing the matter to trial, and that he should "cut his losses short and settle."

Simpson further alleged that "mediator McDonald continued to voice his opinion on the merits of the case, comparing the suit to a criminal matter in which the police commence an investigation without cause, but discover a dead body in the trunk and succeed in obtaining a conviction."

Then the mediator is alleged to have conveyed the bank's settlement offer, which Simpson refused to accept. He contended, according to the opinion, “that he entered the mediation action with three causes of action, but that when he left, he had none.”

Therefore, Simpson asked JAMS to refund his mediation fees. JAMS credited Simpson $450 out of the $2,400 total, making clear there would be no further adjustment. Simpson filed a complaint against JAMS alleging that JAMS breached its contract with Simpson.

JAMS demurred to Simpson's action and also filed a special motion, contending that Simpson's complaint failed to state a cause of action, and could not be amended to state a cause, because of the absolute quasi-judicial immunity and the litigation privilege in California’s Civil Code Section 47, subdivision (b).

When asked by the trial court how he could amend his complaint if the demurrer was granted, Simpson said “he would plead that the breach of contract was that there wasn't an actual mediation based on the concept of mediation, . . . and that is that mediation is meant to meet with more than one party and just to deal with that.”

The court sustained JAMS's demurrer. Simpson appealed.

[Recently, the California's Second District Court of Appeal, in Morgan Phillips Inc.v. JAMS/Endispute, et al., 2006 Cal. App. LEXIS 911 (Cal. Ct. App. 2006), reached an opposite conclusion in an analogous case. It concluded that arbitral immunity would not protect the arbitrator from suit when the arbitrator withdraws without justification from an arbitration proceeding, without giving an arbitral award, after evidence and argument have been offered.] [The Second District ruled that such conduct constituted "complete nonperformance" in an arbitration.

[A “Recent News” writeup of Morgan Phillips is available on this Web site by searching the “arbitration” cases using the archive function.]

In the case at hand, the appeals court disagreed with Simpson's claim for a breach of contract, reasoning that quasi-judicial immunity extends to JAMS as a provider, and precludes breach of contract actions, except in rare situations where the mediator “completely fails” to conduct a mediation.

The court concluded that the mediator did not completely fail to do his job. Rather, he did not conduct the mediation in the fashion that Simpson conceived of, according to the panel.

On appeal, Simpson argued for the first time that the mediator had not filed a statutory “statement of nonagreement.” But even if Simpson did not waive such a claim by failing to include it in his complaint, the mediator's alleged failure to file a statement of nonagreement does not convert the mediation into a complete nonperformance. Simpson was not injured by the mediator’s failure to file the statement.

Simpson also asserted that he was forced into mediation by the court. The appeals court stated that the same immunity applied in both private and court-ordered mediation.

Simpson further contended that there was no proof whether a bank representative was present for the 2003 mediation; that he was not given the opportunity to meet with the bank face-to-face in the mediation; and that it was inappropriate that only the lawyers met.

None of Simpson's contentions, however, touched on the quasi-judicial immunity. The Court of Appeal concluded that mediation was not a rigid process, and could encompass any nonadjudicatory dispute resolution process involving a third party.

The mediation turned out to be an evaluative mediation–which the panel termed a “voluntary settlement conference”–where parties usually are represented by attorneys, and the mediator, akin to a settlement judge, is much more active in attempting to settle the case. Moreover, the mediator often advises the parties on merits of the case and settlement value.

As a result, the panel sustained the demurrer.

-- Zoltan Elek, CPR Intern