ADR Case Updates
California Supreme Court Protects Mediation Confidentiality (Again), 02/02/2011
A more detailed summary and analysis is below:
In Cassel v. Superior Court (Wasserman, Comden, Casseleman & Pearson, LLP), (Jan. 13, 2011) 2011 WL 102710, Plaintiff attended a fourteen-hour mediation with his counsel in a federal trademark and copyright lawsuit that he had brought. The case settled at mediation for $1.25 million. Later believing that he settled for too little, Plaintiff then sued his former attorneys for malpractice claiming his attorneys forced him to accept the settlement against his wishes.
As the malpractice action proceeded to trial, defense counsel brought a motion in limine seeking to exclude the private conversations during the mediation between just Plaintiff and his counsel. Ruling that the communications were protected by the mediation confidentiality statutes in Evidence Code sections 1115 et seq., the trial court granted the motion and ruled that the conversations were inadmissible. A divided appellate court overturned the order holding that the attorneys could not use mediation confidentiality as a shield against the malpractice action.
Reversed. Absent an express waiver of confidentiality, "all communications, negotiations, or settlement discussions" made for the purpose of mediation are confidential and inadmissible under Evidence Code section 1119, in order to encourage open and frank discussions, an essential requirement to effective mediation and settlement.
Section 1119 does not limit itself to just statements made to the mediator, or in front of the other party. Private statements between the client and counsel developing strategy during the mediation are "for the purpose of, in the course of, or pursuant to a mediation" and, thus, protected. While noting the appellate court's concern that mediation confidentiality might shield lawyers from well-founded malpractice actions, the mediation confidentiality statutes are clear and absolute, must be strictly applied, and are not subject to judicially crafted exceptions, even when competing public policies may be affected.
This decision demonstrates the California Supreme Court's unwavering and jealous protection of mediation confidentiality. Except in very rare circumstances, the Court has repeatedly come down on the side of confidentiality (see, Simmons v. Ghaderi (2008) 44 Cal. 4th 570, 580; Fair v. Bakhtiari (2006) 44 Cal. 4th 189, 194; Rojas v. Superior Court (2004) 33 Cal. 4th 407, 415-415; and Foxgate Homeowner's Assn. v. Bramalea California, Inc., (2001) 26 Cal. 4th 1, 13-14, 17).
In Villa Vicenza Homeowner Association v. Nobel Court Development, LLC, (Jan. 11, 2011, Fourth District, Div. One), 191 Cal. App. 4th 963, Defendant converted an apartment building into condominiums, and included an arbitration clause in the declaration of covenants, conditions, and restrictions that it recorded requiring buyers and Plaintiff to arbitrate any claims against the developer. After Plaintiff filed a construction defect suit, Defendant moved to compel arbitration based upon the CC&R's. The trial court denied the motion, and Defendant appealed.
Affirmed. CC&R's cannot be used as a means for creating any continuing contractual rights between the developer and HOA or individual owners. CC&R's are equitable servitudes under Civil Code Section 1354. They do not constitute a contract to non-owners, such as Defendant developer, to provide continuing and irrevocable benefits. Here, the CC&R's could only be amended unilaterally by the homeowners. Such a unilateral right to amend is inconsistent with the proposition that CC&R's create contractual obligations in favor of non-owners. Therefore, the arbitration provision in the CC&R's was not a binding term, and the trial court correctly denied Defendant's motion to compel.
In MKJA, Inc., v. 123 Fit Franchising, LLC, (Jan. 4, 2011, Fourth District, Div. One), 191 Cal. App. 4th 643, Plaintiff filed suit against Defendant alleging fraudulent inducement in entering into health club franchising agreements. Defendant filed a motion to stay the action under Civil Code Section 1281.4, asserting that the franchising agreements at issue included arbitration provisions, and that a petition to compel arbitration had been filed, and later granted, in Colorado. After the court stayed the action, Plaintiff sought to lift the stay, claiming that it had attempted to initiate arbitration, but determined that costs would be prohibitive. The trial court lifted the stay, and declared the arbitration provisions unenforceable.
Reversed. Under Section 1281.4, a court in which litigation is pending is required to stay the action until arbitration is conducted in accordance with the order to arbitrate so as to protect the jurisdiction of the arbitrator until arbitration is resolved to prevent such proceedings from being ineffective. Once a stay is granted, the court's jurisdiction is narrow. Further, a party's inability to pay the costs of arbitration was not grounds on which a trial court may lift a stay of litigation imposed pursuant to Section 1281.4. Therefore, the trial court improperly lifted the stay.
The opinions are posted at: http://www.courts.ca.gov/opinions.htm.
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