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.