Assemblyman Wagner at the request of Assemblyman Gorrell has introduced Assembly Bill 2025. AB 2025 seems superficially innocuous as it creates an exception to the mediation confidentiality statute that exempts mediation communications between attorneys and their clients in a subsequent attorney malpractice action. The ramifications of this exception are, however, profoundly dangerous. For this reason, the California Dispute Resolution Council has registered its strong opposition to AB 2025.

The proposed legislation is based on the belief that depriving of a litigant of the right to sue his or her attorney because of alleged malpractice arising from a mediation is unfair. Under the Cassel decision, conversations between attorneys and their clients during mediation are barred from admission at trial by the mediation confidentiality statute. Thus, the confidentiality statute effectively prevents a client from suing his or her attorney for malpractice arising from advice given during the mediation.

But the proposed remedy is even more unfair. An attorney who is being sued for malpractice arising from a mediation could only defend himself or herself through his or her testimony or perhaps the testimony of any associates who were present at the mediation if the proposed legislation were enacted. However, the mediator, the adverse party, the adverse party’s attorneys, and any other participant in the mediation could not be witnesses to the extent they were present during relevant conversations. While everything within the context of the mediation — the offers and counter offers, the information exchange, and the mediator’s impressions, opinions, questions, and framing — all become highly relevant facts, this evidence is barred under the present statute and would continue to be barred under the proposed legislation. Such testimony, if admitted, might support the defense. In addition, such testimony would be more powerful than the testimony of the plaintiff and defendant in the malpractice suit because the witnesses are presumably independent.
 
The only way to cure this unintended consequence would be to allow the admission of testimony by the mediator and opposing counsel and parties. It is not hard to see how a court could expand the statutory exception with judicial gloss to prevent an unfair result. It would be but one further judicial step to destroy the concept of confidentiality in any case were there was any claim of an unfair result.

Furthermore, is this really a serious problem in California? Confidentiality is a factor in every single mediation, while claims of malpractice arise out of very few mediations. The proponent of the legislation, the Beverly Hills Bar Association, has no empirical data showing how many attorney malpractice cases arise from advice given in mediation. Probably there are very few such cases. Thus, the risk to weakening mediation confidentiality is far greater than the risk of unfairness in a handful of potential cases. This is bad legislation and bad policy.

Survey Results

65% of the survey respondents believe that CDRC should oppose AB 2025. 10% believed CDRC should support AB 2025. 15% believed CDRC should support AB 2025 if modified. 10% had no opinion.

Cultural Artifacts “Mediation” –
An Example of the Misunderstanding of the California Legislature

The ADR community sometimes wonders about the need for constant vigilance and the relevance of the Calfiornia Dispute Resolution Council. Unfortunately, most members of the California Legislature are not attorneys. Only one member, Bill Monning (D-Monterey) is a mediator. Thus, what is glaringly simple and obvious to ADR users and practitioners is beyond the ken of the average legislator. Here is an example.

Assemblymember Wagner, the same member that introduced AB 2025 this year, authored AB 1023, which was enacted last year. The billl amended Section 8016 of the Health and Safety Code by, among other things, providing for “mediation” of disputes over the repatriation of cultural artificacts and requiring the “mediator” to render a decision within seven days. Assemblymember Wagner apparently did not understand that mediators have no power to render any kind of decision under any circumtances. Like many, he has confused the “-tions”: litigation, arbitration, and mediation. This statute now confounds arbitration with mediation and makes no sense. CDRC is looking to correct this error by terming the process Assemblyman Wagner calls “mediation” something else. This kind of error creeps into legislation each year. Without CDRC, these errors accumulate to erode the robust and rich ADR environment in Calfiornia.

Since Cassel: Following the Cassel decision, the California Conference of Bar Associations (“CCBA”) adopted a resolution which would amend Evidence Code Section 1120, by adding to the very narrow exceptions to confidentiality set forth therein, an exception that would allow the admission, in an action for legal malpractice or breach of fiduciary duty, or a State Bar disciplinary proceeding, of communications directly between a client and his or her attorney during mediation if professional misconduct or negligence forms the basis of the client’s allegations against the attorney. That resolution has now been introduced in the California Legislature as AB 2025.

Unintended consequences of rash action: At first blush, the CCBA’s proposal seems to be attractive. The Cassel decision basically eviscerates the ability of a citizen to sue his or her attorney for malpractice committed during the course of a mediation. That sounds unfair. But all that the proposal does is to shift the burden of unfairness from the plaintiff in a malpractice suit to the defendant attorney. Bear in mind that what is set forth in a complaint for malpractice is merely an allegation. The allegation may be false. But the attorney is barred from introducing the testimony of precipient independent witnesses who might support the attorney’s case. For example, if Mr. Cassel made statements when he signed the settlement agreement indicating that he was doing so voluntarily or made other statements that were contrary to the allegations in his complaint, these statements may have been heard by the mediator, the adverse party, and/or the adverse party’s attorney. Yet such testimony by these individuals would remain inadmissible under the CCBA proposal because Evidence Code Section 703 makes a mediator incompetent to testify and Section 1119 bars the admission of most other communications that occur during a mediation.

More prudent action: The unfairness issue of course could be resolved by amending Sections 1119 and 1120 further, as well as Section 703, to allow for the testimony of the mediator, adverse party, adverse party’s attorney, and any other participant in the mediation in this type of situation. But is that a practical result? The history of the confidentiality provision suggests that it is not.  The confidentiality provision originally appeared in Evidence Code Section 1152 et seq. These statutes contained certain exceptions to the doctrine of confidentiality, such  as one that permitted an insured to sue its carrier for bad faith in the course of settlement discussions.  Those exceptions opened the door for courts to create further exceptions in order to do justice to parties whom they perceived to be adversely affected by the confidentiality provisions. The drafters of Section 1119 realized that if exceptions continued to be crafted to the concept of confidentiality, mediation parties would have no idea whether something said or produced in the mediation would ultimately be deemed by a court to be subject to an exception to confidentiality and eventually the  doctrine of confidentiality would apply only to a limited number of situations and would be of no significance. The drafters thereupon made the hard but better choice that there shall be only very narrow and precise exceptions to confidentiality.

As a consequence of the strong language in Section 1119, the California Supreme Court has consistently rejected exceptions to confidentiality suggested by the lower courts. See Foxgate Homeowners Association v Bramalea California, Inc., 26 Cal 4th 1 (2001); Rojas v Superior Court, 33 Cal 4th 407 (2006); and Simmons v Ghaderi, 44 Cal 4th 570 (2008). In Foxgate, a mediator was prevented from reporting to a court that an attorney for a party had acted in bad faith during a court connected mediation. In Rojas, tenants suing the owner of a dilapidated apartment complex were prevented from introducing revealing photographs of the premises because the photographs had been produced in connection with the mediation of a lawsuit not involving the tenants. In Simmons, a plaintiff who accepted and relied upon an oral settlement offer by the defendant’s insurer made during a mediation was prohibited from enforcing the settlement because the defendant had refused to sign the settlement agreement.

Conclusion: One could argue that each of these three decisions prevented a legitimate issue from being adjudicated and that the result may have been unfair, just like the Cassel result may have been unfair. But confidentiality is an element in every mediation. The situations that occurred in Cassel and the other three cases occur in only a very limited number of disputes and they were allegations, not facts. Parties need to be assured that the mediations in which they participate are confidential and that the peace that they buy when they resolve the dispute should not be disturbed by further litigation. AB 2025 must be rejected.

Cassel then sued his attorneys for legal malpractice, alleging that the attorneys “forced” him to accept $1.25 million, rather than the higher amount he sought. In this regard, he contended, among other things, that, during the mediation, his attorneys threatened to withdraw from representing him on the eve of trial if he did not agree to settle the case under the auspices of a reduction in their fees. 

Before trial, the attorneys moved in limine to exclude evidence of conduct and conversations between them and Cassel that occurred while preparing for and at mediation. The trial court granted the motion. The California Court of Appeal, Second Appellate District, issued a writ reversing the trial court’s in limine order, ruling that evidence of conversations during the mediation were admissible in the malpractice trial. Effectively, this opinion created a judicial exception to Evidence Code section 1120.

Supreme Court decision in Cassel: The California Supreme Court granted review, and on January 13, 2011, issued Cassel v. Superior Court, 51 Cal.4th 113 [119 Cal.Rptr.3d 437] (2011). The Supreme Court reversed the Court of Appeal decision, ruling that the appellate ruling created an impermissible judicial exception to the clear language of the mediation statutes. According to the Supreme Court, “the obvious purpose of the expanded language is to ensure that the statutory protection extends beyond discussions carried out directly between the opposing parties to the disputes, or with the mediator, during mediation proceedings themselves.” (Cassel, supra, 119 Cal.Rptr.3d at 449.) The Supreme Court also rejected arguments that confidentiality was a privilege that could be waived. Thus, the Supreme Court again, consistent with previous decisions, ruled the mediation confidentiality inviolate. (See, e.g., Simmons v. Ghaderi, 44 Cal.4th 570, 580 (2008); Rojas v. Superior Court, 33 Cal.4th 407,422 (2004); Foxgate Homeowners’ Assn. v. Bramalea California, Inc., 26 Cal.4th 1, 13-14 (2001); Wimsatt v. Superior Court, 152 Cal.App.4th 137, 163 (2007)).

Precipitous action in response to Cassel: In the summer of 2011,  the Beverly Hills Bar Association decided to sponsor a resolution at the 2011 Conference of California Bar Associations to overturn the effect of the Cassel decision. The resolution, which was adopted at the Conference in September 2011 proposes the following amendment to Evidence Code section 1120:

 RESOLVED, that the Conference of California Bar Associations recommends that legislation be sponsored to amend Evidence Code section 1120 to read as follows:

 § 1120

(a) Evidence otherwise admissible or subject to discovery outside of a mediation or a mediation consultation shall not be or become inadmissible or protected from disclosure solely by reason of its introduction or use in mediation or a mediation consultation.

(b) This chapter does not limit any of the following:

(1) The admissibility of an agreement to mediate a dispute.

(2) The effect of an agreement not to take a default or an agreement to extend the time within which to act or refrain from acting in a pending civil action.

(3) Disclosure of the mere fact that a mediator has served, is serving, will serve, or was contacted about serving as a mediator in a dispute.

(4) The admissibility of communications directly between the client and his or her  attorney, only, where professional negligence or misconduct form the basis of the client’s allegations against the client’s attorney.

(Proposed new language underlined, language to be deleted stricken)

The Conference of California Bar Associations is seeking a member of the California Legislature to carry this bill.

The California Dispute Resolution Council  Board of Directors, at its January meeting, discussed this proposed exception to mediation confidentiality at length.

In my personal opinion (not the official view of CDRC): The proposed change to the mediation confidentiality statute is deeply troubling for several reasons. First, what is the limit of the exception? Will clients or lawyers be entitled in fairness to discover and offer evidence of other witnesses in order to buttress their side of a “he said-she said” dispute, thereby effectively eliminating mediation confidentiality if legal malpractice is alleged? Second, despite Evidence Code section 703.5 making mediators incompetent to testify, should mediators bear the cost of retaining counsel, fighting subpoenas, and defending against clearly impermissible attempts to compel their testimony? Finally, where is the empirical data that shows a compelling need to disclose conversations when measured against the thousands of mediations that occur yearly in California? In other words, is this not a solution in search of a problem that is not significant enough to warrant a major departure from long standing California public policy?

Before taking a position on this proposal, the CDRC seeks your opinion. I invite you to take a 5 minute survey here to tell us what you think: CDRC Cassel Survey.

I also invite you to contact me or any member of the board of directors with your thoughts. I can be reached at pres@cdrc.net.

Doug Noll

President, California Dispute Resolution Council