Mediation: Confidentiality Takes a Hit in a California Appeals Court (Web)

In Simmons v. Ghaderi, 143 Cal.App.4th 410 (Sept. 27, 2006)(also available at http://www.courtinfo.ca.gov/opinions/documents/B180735.PDF ), a California state appeals court may have weakened mediation confidentiality protections.

A 2-1 decision held that the protection afforded by statute may be impliedly waived when a party litigates for 15 months on the mediation facts without raising confidentiality law, and those facts were never disputed.

The Simmons parties attended a July 2003, mediation, to try to settle a medical malpractice case filed by the plaintiffs against defendant Dr. Lida Ghaderi. The defendant authorized her insurer in writing to settle the case under terms including the following: “I understand and agree that this consent to settlement may only be revoked in writing. This consent to settlement shall remain in full force and effect unless and until written revocation of my consent to settlement is received” by the doctor’s medical malpractice insurer, which was part of the mediation.

The insurer offered the plaintiffs a $125,000 settlement, an amount that Ghaderi had authorized. The plaintiffs accepted.

While the mediator was preparing the settlement agreement, the insurer told the doctor--who had been waiting but wasn’t present when the plaintiffs received the offer in a caucus--that settlement had been reached.

But the doctor orally revoked her authorization to settle--although she could only do so in writing--and left the mediation. The insurer did not sign the settlement agreement either.

A week later, Gharedi revoked in writing her authorization to settle.

The plaintiffs amended their medical malpractice complaint to include a cause of action for breach of the oral settlement contract and moved the case to trial court. After hearing both parties’ arguments focused on the existence of an oral agreement to settle the case between the plaintiffs, and the insurer acting as the defendant’s agent, the trial court severed the breach of contract cause of action and ordered it tried first.

Ghaderi’s trial brief, in October 2004, argued for the first time that the Evidence Code prevented the plaintiffs from introducing any evidence of the oral settlement agreement reached at the mediation. The issue had not been introducing in the many motions and arguments over the settlement agreement in the 15 months since the plaintiffs believed an agreement was struck.

The trial court concluded that a valid, enforceable contract had been entered into before Ghaderi's withdrew her consent.

In an 18-page opinion, Second Appellate District, Division Three Associate Justice H. Walter Croskey, who was joined by Presiding Justice Joan D. Klein, agreed. The opinion affirmed the trial court, over a lengthy dissent by Associate Justice Richard D. Aldrich.

The Court of Appeals first addresses when an oral agreement existed. It concluded that the insurer was authorized to make the offer accepted by the plaintiff. The doctor’s written authorization was the basis of the insurer’s ability to enter into a valid oral contract to settle. “Dr. Ghaderi's subsequent revocation of her consent was both irrelevant and ineffectual,” according to the majority opinion (emphasis is in the original).

On the mediation confidentiality issue, the Court quotes California Evidence Code Section 1119, which notes that “No 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 is admissible or subject to discovery, and disclosure of the evidence shall not be compelled, in any . . . civil action . . . in which pursuant to law, testimony can be compelled to be given.”

Croskey’s opinion emphasizes fact that the disclosure of the evidence had not been compelled, and that defendant Ghaderi litigated for 15 months on mediation facts that were undisputed.

Ghaderi, therefore, could not invoke mediation confidentiality protections. The opinion states, “Only when it appeared that the trial court’s determination was going against her did Dr. Ghaderi then argue that the mediation confidentiality statutes put the undisputed facts beyond the court’s reach.”

Croskey also provides an equitable analysis. “For Dr. Ghaderi to now assert mediation confidentiality,” the majority states, “is an impermissible exaltation of form over substance.”

 In conclusion, Croskey writes, “We simply hold that once a party voluntarily declares certain facts to be true, stipulates that she does not dispute them and extensively litigates the legal effect of such facts, she is estopped to later claim that the court must disregard those facts based upon a belated assertion of mediation confidentiality.”

Associate Justice Aldrich vigorously opposed this reasoning in a 38-page dissent. He analyzed the confidentiality statutes, cases, and comments by the state’s Law Revision Commission. “Evidence code section 1119 is an expansive limitation on the admissibility of evidence emanating from mediations,” he wrote. “It ‘prohibits any person, mediator and participants alike, from revealing any written or oral communication made during mediation.’”

Aldrich then quotes Evidence Code Section 1123, which addresses when written settlement agreements emanating from mediation are not made inadmissible. This section permits admission only when the parties’ agreement expressly provides that the writing is admissible, or the agreement provides for enforceability. Here, the “parties did not expressly agree in writing or orally that the agreement could be disclosed and there were no issues of fraud, duress, or illegality,” the dissent notes.

It also notes that by “focusing on estoppel, the majority in essence is attempting to create a new exception to the comprehensive scheme. This cannot be done.”

Citing Foxgate Homeowners' Assn., Inc. v. Bramalea California Inc., 26 Cal.4th 1 (2001), and Rojas v. Superior Court, 33 Cal.4th 407 (2004)–and noting that the majority confuses an implied waiver of the mediation confidentiality statutes with estoppel--Aldrich explains that “the Supreme Court pronounced that mediation confidentiality is to be strictly enforced, even in situations that on the surface might beg for flexibility.”

--Victoria Brassart, CPR Intern