As many of you know I am especially critical of sanctions being used in the mediation context. For those of you who are unfamiliar, I was the alleged "bad boy" attorney representing Bramalea in the Foxgate v. Bramalea matter, which was recently decided by the Supreme Court. The unfortunate problem is that the Supreme Court also missed the mark in its decision by leaving a loophole open dealing with the issue of sanctions in the mediation context. It basically said that although the communications that take place at a mediation are confidential, the conduct is not and therefore may be part of a motion for sanctions following the mediation process.

I can assure you that the facts as outlined in the underlying appellate case, as well as the belief of the Supreme Court, who seemed to fall back on the facts as determined by the Appellate Court are far from the truth of what occurred at the mediation.

Before addressing the issue of sanctions, I would like to clarify the factual scenario so as to understand my reasons against the use of sanctions in the mediation context.

In the underlying Foxgate case, the mediator and special master were one and the same person. That person was chosen before my entry into the case. Being aware of Judge Smith (Ret) from his days as the presiding judge in Pomona, I was not pleased, but was willing to proceed with him as the mediator, although I did not think he was capable of handling this type of case, which was not limited to construction defect, but also involved insurance coverage issues, bankruptcy, statute of limitation problems, as well as alleged defect issues.

Concurrently there was a fight going on between Bramalea's former corporate counsel, who claimed themselves to be Cumis Counsel and the insurance carrier that asked us to come back into the case on behalf of Bramalea California Inc. I had always remained the sole counsel for Bramalea Limited of Canada, who was also in bankruptcy and subject to a stay from Canada. While this fight was going on between the corporate counsel and the insurance carrier, in a separate lawsuit in Orange County, apparently the corporate counsel divulged this internal fight to the mediator in his capacity as a Special Master and as the mediator. Within a few weeks of getting back involved in this case, Judge Smith threatened sanctions for failing to pay his upcoming mediation fees.

When our office was asked to modify the Case Management Order, in view of Bramalea Limited's reentry into the lawsuit based on a lifting of the stay, Judge Smith again threatened sanctions against my office for going around the alleged Cumis Counsel. In view of his second threat of sanctions and apparent bias within a matter of weeks, Judge Smith was asked to recuse himself as the mediator. This he refused to do. Concurrently a motion was heard in the Santa Monica court confirming that our office was the sole counsel for Bramalea Limited and co-counsel for Bramalea California Inc. The court ordered that Judge Smith had to deal with our office and recognize us as counsel.

In view of the actions and conduct of Judge Smith, who refused to recognize our office as counsel, and his continued apparent bias and prejudice, a formal motion was filed to have Judge Smith formally removed as mediator. This motion was denied and a Writ was taken to the Court of Appeal. This Writ was pending on the first day of the mediation.

Yes, I was late for the mediation, but that was because of a traffic incident on the Harbor Freeway which brought the freeway to a complete stop coming into downtown Los Angeles. This was followed by road closures around the area where the mediation was being conducted. However, I was in telephone contact every five minutes with the office of Hillsinger and Costanzo, where the mediation was being conducted from approximately 8:50 AM onward until about 9:15 AM. I actually was in the office and signed in by about 9:23 AM.

What is interesting to note is that I signed in about 3/4 of the way down the first sheet of paper and that over half of the remaining attorneys in the case arrived after I did for the same reasons that I had encountered on the road.

The next issue was the alleged claim that experts had to be present. The only order issued by the court required the attendance of the trial attorney and the insurance representatives with authority to settle at all sessions of the mediation. There was no court order issued or pending requiring the presence of experts.

In a letter issued by the mediator just before the mediation, he indicated that "experts should" be present. However, the mediator's schedule for the morning these events took place only asked for the trial attorney and the insurance representatives to be present. According to the Judicial Council, the term "should" is not an order, but is advisory in nature. Further, a mediator has no authority, unilaterally, to require anyone to be present. That authority is solely within the parameters of the court. A mediator cannot issue orders.

Bramalea was a self-insured entity up until 1989, when Zurich Insurance of Canada stepped in to insure Bramalea. The Foxgate development was built in 1983, six years before insurance coverage came into effect. As a result, Zurich had their insurance coverage counsel present with negotiating authority. However, the issue of coverage was to be addressed before repair methodology could be discussed. Further, in the construction area, our experience has shown that the first session of the mediation involves the plaintiff's experts educating the insurance representatives, not opposing counsel and experts who have already received all of the plaintiff's expert's reports.

And if that was not enough, all of Bramalea's experts were on call to appear once the coverage issues were handled.

Somewhere along the way, the plaintiff attorney in the Foxgate case took the word "should" and elevated [it] to an order. The appellate court decided to use a dictionary rather that the definition provided by the Judicial Council in addressing the use of terminology in relation to its orders and rules. The unfortunate problem is the Supreme Court failed to address the issue at all even though it was one of the issues put before the Court for review and determination.

The mediation was in fact canceled by the plaintiff attorney. He had reached an alleged agreement with the corporate counsel for Bramalea, which had just been removed from the Foxgate case. That agreement was that Bramalea would turn over all of its experts to the plaintiff. As the trial counsel now in charge of the case for all of the Bramalea entities, I indicated to plaintiff attorney that it would not occur and it was up to him and his experts to prove their case. That in fact is what caused the plaintiff attorney to cancel the mediation since he was not prepared to address this with his own experts.

However, by the time the motion was filed and heard, as well as the appeal, the factual scenario changed and suddenly, I and my clients were made out to be the bad guys. This is even with the declarations on file and part of the record by Jonathon Sher, the other counsel that appeared on behalf of the insurance carrier.

With this factual scenario, we were still ordered to pay sanctions, not because of anything done wrong, but rather, in the words of Judge Curry, because we had been a little too hard on Judge Smith on the recusal issue.

Unfortunately, given the present status of our judiciary, it is frightening what the courts can and will do to accomplish their ends. A perfect exemplification is the tangent that the Appellate Court took to create an exception to the Confidentiality rules. Fortunately, the Supreme Court brought the Appellate Court back into the realm of reality. At least for the moment.

Mediation and sanctions are like fire and water. They are not compatible. Mediation is to be a forum to bring parties together to seek resolution. With the possibility that a party may be sanctioned at the whim of the court, because counsel didn't like the way opposing counsel acted during the mediation defeats the purpose of mediation. Suddenly mediation is nothing more than another litigious meeting in the staircase to trial.

Actions must be taken to preclude the possibility of sanctions from occurring in the mediation context. This should be a safe haven for the parties, their attorneys and the participants. One might argue that it is like seeking sanctuary in the churches in the Middle Ages. Courts and counsel have been presented too many opportunities to seek sanctions for so many other things that one out of every two motions now filed in the court carry with it a sanctions request. Mediation involvement should not be part of the sanctions checklist.

If the courts wish to control the settlement process, keep the cases in the Settlement Conference context, where there are specific rules to control the settlement process with appropriate financial penalties for failing to comply with the rules.

There are no rules for mediation. Mediation happens based on the ebb and flow of events which make up the dynamics of the mediation process. This process is helped or harmed by the mediator. This ability to [help] requires more than minimal qualifications of a mediator and is a real necessity. Being a judge, a lawyer, doctor or Indian chief does not make a mediator. A good supervisor in a hard-working industrial setting is a far better mediator than a judge retiring from the bench with 20 years of experience of ordering people to do things with the threat of sanctions.

In the settlement context sanctions cannot be issued under the Triplett v. Farmers case. Why should mediation be any different? What makes mediation more appropriate for sanctions than a court-ordered, Judicial Council-ruled event?

Obviously my position is sanctions and mediation cannot function together. Mediation should be a safe haven short of criminal conduct. Otherwise, if the court wants controls and the parties want the ability to seek sanctions, then keep the process in the Settlement Conference realm which has its own rules. Keep sanctions out of mediation at all costs.

These type of situations often result in a request by the aggrieved counsel to the mediator to report the perceived "bad faith" conduct to the court. Although the mediator must inevitably decline this request, it is an understandable one. After all, if counsel has done a thorough job preparing for the mediation, he or she will have spent time preparing a mediation brief and in meeting with the client(s) in preparation for the mediation. In addition, experts may have been communicated with, or even requested to attend. In short, a significant incurrence of fees and costs has occurred in preparing for and attending the failed mediation.

Mediations are voluntary, and stipulations for mediation are generally entered into by the counsel and their clients with certain expectations. It is generally expected that all necessary parties will be present, as well as any necessary insurance company or client representatives whose consent or authority is necessary to resolution of the issues in dispute. Counsel are strenuously advised to include provisions regarding required attendance in these stipulations.

In court-mandated or monitored mediation, the court generally requires the presence of all parties and necessary individuals at to mediation. See California Rules of Court, Rule 1634 and San Luis Obispo County Local Rule of Court, Rule 9.07. In my experience, the Santa Barbara County Superior Court CADRe program and the San Luis Obispo Superior Courts both utilize stipulations and orders which are signed by all counsel, mandating the attendance of parties and any persons necessary to have full authority to resolve the dispute.

So when counsel arrives at a mediation without proper and necessary parties, it is understandable that the other parties and their counsel are upset. Nonetheless, a mediator is precluded from reporting any such failure of the proper parties to attend or deal in good faith to the court, due to the confidentiality provisions of Evidence Code Sections 1115 -1128. To hold otherwise would impinge upon the mediator’s position of neutrality and impartiality, which is essential to the sanctity, as well as the success, of the mediation process. The legislature recognized this priority in enacting Evidence Code Section 1121, which precludes a mediator from providing any report to the court other than one which states whether or not an agreement was reached at mediation, unless all parties expressly agree to the contrary. Evidence Code Section 703.5 also states that a mediator is generally incompetent to testify at any subsequent proceeding.

This position has recently been confirmed by the holding of the Supreme Court in Foxgate Homeowners’ Association, Inc., v. Bramalea California, Inc., et al (July 2001) 26 Cal. 4th 1, 108 Cal Rptr 2nd 642, 25 P.3d 1117. In Foxgate, a large construction defect case, the appointed special master pursuant to a Court Management Order, also sat as mediator. He ordered a mediation at which all counsel were ordered to attend with their experts and insurance representatives. When the counsel for the defendant/cross-complainant developer showed up late, without any experts, and took a "no liability" position, the mediation was aborted. The mediator subsequently filed a report with the court advising that the acts of this particular counsel had not complied with the order and had used obstructive bad faith tactics, to the detriment of the mediation process. Ultimately, the Supreme Court held that the trial court could not properly consider the report of the mediator/special master, which supported a request for sanctions.

It must be pointed out that Evidence Code section 1121 does not preclude attorneys from bringing a motion for sanctions, supported by the declaration of counsel and/or the parties, where the parties required to be in attendance do not appear. The motion will simply have to be made without the supporting declaration or report of the mediator.

Where the issue is not attendance, but whether the persons who attended the mediation had the necessary settlement authority or acted in good faith, a motion becomes more problematic. As stated by Lee Jay Berman, a well-known mediator with the American Arbitration Association and former director of the Santa Barbara CADRe program, "There is a legitimate question when it comes to ‘settlement authority’ and ‘good faith’. It is not my job [as mediator] to say that if XYZ Insurance Company puts $5,000.00 on a case and the plaintiff wants $500,000.00, that one of the parties (or both) are acting in bad faith. It may reflect their honest opinions of the case or their ability to prevail or defend the case at trial. The mediation process will lose all effectiveness if it tries to deny a party that right."

Not only is the mediator precluded from being involved in such a dispute over the "bad faith" efforts or positions of a party at mediation, but so are counsel in most situations. Evidence Code section 1119 in essence prohibits the admission into evidence of anything said or done during the course of a mediation. Since arguably the only way it can be determined whether a participant had the necessary settlement authority or was acting in good or bad faith at a mediation is to base it upon their statements, position and conduct at the mediation, it seems unlikely that such a motion would have much potential for success.

With proper advanced planning, all of these issues can be addressed. First, counsel should enter into a signed agreement or stipulation for mediation that mandates the presence of the necessary persons at the mediation. Preferably, these persons should be identified in advance and listed by name and/or position.

When persons are to be made available telephonically, then this should be addressed in advance, in the stipulation or order, and not dropped like a bomb for the first time at the mediation hearing. A clause in the stipulation stating that the failure of one of the necessary parties to appear will result in a breach of the stipulation, and providing a right to seek fees and costs incurred by the other parties, will provide a contractual basis for relief, in addition to other remedies.

Finally, when the mediation is agreed to at a court hearing, make sure that a stipulation is signed at court by all, and that the court orders the proper parties to attend. Notice of this ruling should be given since case management conferences and status conferences do not always have court reporters present.