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Mediation: Contract Confidentiality Protects Statements as Evidence in an Age Trial (Web)

In DeLuca v. Allied Domecq Quick Service Restaurants, No. 03-CV-5142 (JFB)(AKT), 2006 WL 2713944 (E.D.N.Y. Sept. 22, 2006) a New York federal district court backed alternative dispute resolution confidentiality by granting a defense motion seeking to bar a former Dunkin’ Donuts employee’s use of a mediation statement in a trial on the employee’s discrimination claim.

The court held that the parties’ mediation confidentiality agreement was broader than the protections afforded by the Alternative Dispute Resolution Act, and Federal Rule of Evidence 408. It refused to admit a statement made by defendant's associate general counsel during the mediation.

The federal court’s holding was based on U.S. Magistrate Judge James Orenstein’s report, which recommended granting the defense motion barring use of the mediation testimony.

Plaintiff DeLuca filed an age discrimination complaint before the U.S. Equal Employment Opportunity Commission against his former employer, Allied Domecq Quick Service Restaurants, which owns Dunkin' Donuts. Soon after the complaint, DeLuca applied to be a Dunkin' Donuts franchisee, but was denied around February 2003.

In March 2003, the parties attended a voluntary EEOC mediation on the discrimination complaint, for which they signed a confidentiality agreement. During the mediation, DeLuca appeared to suggest settlement if he was granted the franchise.

But according to the opinion by U.S. District Court Joseph F. Bianco, the defendant's associate general counsel, Jack Laudermilk, said, “We're not in the process of giving out franchises to people that are suing us or made complaints.”

When DeLuca filed suit in October 2003, he alleged discrimination–as well as a new retaliation count in connection with his franchisee application. The retaliation is the sole issue in this case; the plaintiff's employment discrimination claims were dismissed on summary judgment.

DeLuca, in support of his only remaining claim, chose to use the defendant lawyer's statement as evidence.

In response, the defendant filed a motion in limine to preclude the plaintiff from making use of the statement as trial evidence, arguing that Fed.R.Civ.P. 408 and the ADRA (5 U.S.C. §§ 571-57) protected such communications.

The district court and the magistrate judge agreed with the defendant. Relying on Scott v. Goodman, 961 F.Supp. 424, 437 (E.D.N.Y.1997), U.S. District Court Judge Bianco stated, “Significantly, although the ADRA and Rule 408 certainly protect ‘statements made in compromise negotiations,’ it is well-settled that ‘Rule 408 is inapplicable when the claim is based upon some wrong that was committed in the course of the settlement discussions.’”

The opinion cites Magistrate Judge Orenstein's recommendation noting the agreement’s language that “all matters discussed during the mediation are confidential . . . and cannot be used as evidence in any subsequent . . . judicial proceeding.”

The court, in addressing the plaintiff's argument that the agreement should be voided based on public policy or to prevent a manifest injustice, agrees with Orenstein's reasoning: Attorney Laudermilk “did not make the decision to deny plaintiff's franchise application, his boss Steven Horn made the decision,” notes the Bianco district court opinion.

“Further, both Laudermilk and Horn provided an explanation as to why (1) Laudermilk made the statement, and (2) plaintiff's franchise application was denied.”

As a result, the court concludes, there is no basis for voiding the parties’ explicit agreement.

Bianco’s opinion adopts Magistrate Judge Orenstein's recommendation that “relates to the exclusion of deposition testimony about Laudermilk’s statement at the mediation[,] as the opinion of [the] Court.”

--Ongmu Tshering, CPR Intern