Either as a participant in a media-tion or as the mediator, we have alllearned the cardinal rule that mediationsare confidential both in terms of thestatements and other communicationsmade during the mediation and theinformation the mediator keeps to her-self, not sharing it with the other parties.Many times a mediator has analogizedmediation confidentiality to the televi-sion ad, “What happens in Vegas, stays inVegas” to explain the sacrosanct nature ofmediation confidentiality.

But, are mediations really confiden-tial? While in theory, they are supposedto be, in court proceedings, they are not

always so. Although a review of both fed-eral and state statutes and case law indi-cates that mediation confidentiality is tobe strictly construed and applied, inpractice, this does not always occur.

California statutes and case lawCalifornia Evidence Code sections

1115-1128, inclusive, govern not onlymediation but also “mediation consulta-tions” (“...a communication between aperson and a mediator for the purposeof initiating, considering, or reconveninga mediation or retaining a mediator.”).

The core rule is set out in EvidenceCode section 1119 which provides three

different protections, all of which are tooccur “… for the purpose of, in thecourse of, or pursuant to, a mediation ormediation consultation.” Subsection (a)provides that “no evidence, or anythingsaid or any admission…” (i.e., oral com-munications) is admissible or discover-able while subsection (b) provides that“...no writing” is admissible or discover-able. Subsection (c) though is muchbroader by providing that “… all commu-nications, negotiations or settlement dis-cussions by and between the participantsin the course of mediation or a media-tion consultation shall remain confidential.”

Mediations are supposed to be confidential…but are they really?A look at the law of mediation confidentiality and why mediation,while confidential in theory, may not be so in reality

Phyllis G. Pollack

September 2015 Issue

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Thus, by this section alone, not only areoral and written communications inad-missible and not discoverable, they arealso confidential.

Unless waived, this confidentialitylasts forever. Section 1126 of theEvidence Code provides that inadmissi-bility and confidentiality remain “… tothe same extent after the mediationends.” No time limit is given. To theextent that a “… reference is made tomediation during a subsequent trial...” itshall be deemed an irregularity in theproceedings and a ground for a new trialunder Code of Civil Procedure section657. If the reference is made during anoncriminal proceeding, it will begrounds to vacate or modify the decisionin whole or in part. (Ibid.)

To waive mediation confidentiality,all parties − both the participants andthe mediator − must do so orally or inwriting. (Evid.Code, §§ 1122 and 1124.)And, to have any settlement agreementadmitted into evidence, it must containthe “magic words” that it is “admissible,or subject to disclosure” or “enforceableor binding” or “words to that effect.”(Evid. Code, § 1123.)

The California Supreme Court hasbroadly interpreted these statutes to thepoint of being a “near categorical prohibi-tion against judicially crafted exceptions tomediation confidentiality.” (Amis v.Greenberg Traurig, LLP, California Court ofAppeal, Second Appellate District, (CaseNo. B248447, issued March 18, 2015) slipopinion at 2.) Starting with FoxgateHomeowners’ Association v. BramaleaCalifornia, Inc. (2001) 26 Cal.4th 1, theCourt held that mediation confidentialityprecluded a party from seeking sanctionsagainst opposing counsel on the groundsthat the latter did not attend the media-tion in good faith thereby causing themoving party to incur approximately$24,000 in mediator and expert fees.Ruling that an exception to mediation con-fidentiality cannot be created to punishbad faith participation in mediation, theSupreme Court stated:

We do not agree with the Court ofAppeal that there is any need for judi-cial construction of sections 1119 and

1121 or that a judicially crafted excep-tion to the confidentiality of mediationthey mandate is necessary either tocarry out the purpose for which theywere enacted or to avoid an absurd result. The statutes are clear.

(Id. at 652-3.)Three years later in Rojas v. Superior

Court (2004) 33 Cal.4th 407, the Courtonce again refused to allow plaintiffs toobtain evidence during discovery thathad been “… prepared for the purposeof, in the course of, or pursuant to, amediation…” even though the plaintiffshad no other means of obtaining the cru-cial evidence. Again, the Court refused tocreate a judicially crafted exception for“good cause” to mediation confidentiality,noting that there is no “absurd result” tobe avoided here.

In Fair v. Bakhtiari (2006) 40 Cal.4th189, the Court again held that mediationconfidentiality precluded the admissionof a memorandum of understanding in amotion to enforce the settlement memo-randum because it did not contain the“magic words” of being binding, enforce-able, admissible or words to that effect asrequired in Evidence Code section 1123.

In Simmons v. Ghaderi (2008) 44Cal.4th 570, the Court again strictlyapplied mediation confidentiality hold-ing that even though the defendant bothin discovery responses and in her ownmotion for summary adjudication haddiscussed what had occurred during themediation, her motion to preclude evi-dence about the mediation on the eve oftrial (and 15 months after the mediation)was timely. The defendant had notwaived mediation confidentiality by wait-ing until the eve of trial to first assert it.

Finally, in Cassel v. Superior Court(2011) 51 Cal.4th 113, the Court strictlyenforced mediation confidentiality in aprofessional negligence action (i.e., legalmalpractice) to preclude evidence of alldiscussions that occurred both in strategysessions between plaintiff and counsel justprior to the mediation, and during themediation both when the mediator waspresent and not present. As in its priorcases, the Supreme Court once again iter-ated:

…judicial constructions, and judiciallycrafted exceptions, are permitted onlywhere due process is implicated, orwhere literal construction would pro-duce absurd results, thus clearly violat-ing the Legislature’s presumed intent.Otherwise, the mediation confidentiali-ty statutes must be applied in strictaccordance with their plain terms.Where competing policy concerns arepresent, it is for the Legislature toresolve them.

(Simmons, supra, 44 Cal.4th at 582-583;Foxgate, supra, at 14-17.) (Id. at 124.)

The California appellate courts have,likewise, strictly enforced mediation con-fidentiality. In Eisendrath v. Superior Court(2003) 109 Cal.App.4th 351, mediationconfidentiality was invoked to precludethe use of statements that allegedly wereinconsistent with those made duringmediation. In Doe 1 v Superior Court(2005) 132 Cal.App.4th 1160, mediationconfidentiality was applied to precludethe use of written statements demonstrat-ing criminal conduct. In Wimsatt v.Superior Court (2007) 152 Cal.App.4th125, mediation confidentiality precludedthe use of direct evidence in a legal mal-practice claim. Most recently in Amis v.Greenberg Traurig, LLP, Court of Appeal,Second Appellate District, Case No.B248447 (March 18, 2015), mediationconfidentiality was invoked to precludeeven the use of indirect or inferential evi-dence in a legal malpractice action.However, in Lappe v. Superior Court of LosAngeles County (Murray Lappe, Real PartyIn Interest) (2014), 232 Cal.App.4th 774,the court held that mediation confiden-tiality would not shield financial disclo-sure statements submitted during a mari-tal settlement mediation since CaliforniaFamily Code sections 2100 et. seq.impose an independent, discrete duty tomake “full and accurate disclosure of allassets and liabilities.” (The CaliforniaSupreme Court denied review.)

The only conclusion that one mayreach from the above, is that, at least inCalifornia, mediation confidentiality is tobe strictly applied and broadly construed.

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Other states

With respect to other states, everystate in the union has one or morestatutes mandating mediation confiden-tiality; some more expansive than others.(See, California Law Review CommissionStudy, Relationship Between MediationConfidentiality and Attorney Malpractice andOther Misconduct−K-402, Memorandum2014-35 (August 28, 2014) for an exten-sive discussion and exhibit listing moststates’ statutes, and Memorandum 2014-24 (June 6, 2014) discussing the UniformMediation Act adopted in 11 states andthe District of Columbia. Other memo-randa discuss the mediation confidential-ity statutes of the remaining states.)

Federal statutes and case law In 1988, Congress enacted the

Alternative Dispute Resolution Actauthorizing arbitrations in federal casesand then amended it in 1998 to includealternative dispute resolution processesin general. 28 USC §§ 651-658 (2012).(Public Law 105-315, 112 Stat 2993(October 30, 1998).) Section 652(d)specifically states that, “… each districtcourt shall, by local rule, provide for con-fidentiality of the alternative dispute res-olution processes and to prohibit disclo-sure of confidential dispute resolutioncommunications.”

To accomplish this goal, the federalcourts have adopted local rules mandat-ing mediation confidentiality. For exam-ple, the United States District Court forthe Central District of California enactedLocal Rule 16-15 setting out the policy ofthe court re: settlement and ADR. LocalRule 16-15.8 provides that all mediationsconducted by a panel mediator are confi-dential. Its definition of “confidentialinformation” is seemingly more explicit ifnot broader than California’s. Not onlyare written and oral communicationoccurring “… for the purpose of, in thecourse of or pursuant to the mediationdeemed confidential information,” but,in addition, “... anything that happenedor was said relating to the subject matterof the case in mediation, any positiontaken, and any view of the merits of the

case expressed by any participant in con-nection with any mediation…” shall alsobe deemed “confidential information.”The court iterates this in paragraph 9 ofits General Order 11-10 (August 15,2011). Similarly, the Ninth Circuit Courtof Appeals mandates mediation confi-dentiality in its Circuit Rule 33-1.

In those cases invoking the diversityjurisdiction of the court (28 U. S. C.§1332 (2012)), a U.S. District CourtJudge may well apply the state’s statutespertaining to mediation confidentialitypursuant to Federal Rules of EvidenceRule 501 which, in part, provides thatthe state’s law on privileges shall apply“… in civil actions and proceedings, withrespect to an element of a claim ordefense as to which State law supplies therule of decision.” See, for example theunpublished decision of Benesch v. Green,2009 WL 4885215 Case No. C-07-3784EDL (N.D. Cal., Dec 17, 2009) in whichthe district judge relied wholly onCalifornia statutory and case law in rul-ing on mediation confidentiality.

However, in those cases in which thefederal question jurisdiction of the court(28 U.S. C. §1331(2012)) has beeninvoked (with or without state law claims)or where the issue is one of procedure,then a federal court may or may notapply a common law mediation privilege.In Babasa v. LensCrafters Inc., 498 F.3d972 (9th Cir. 2007), the court ignoredmediation confidentiality in decidingwhether removal jurisdiction had beenproperly invoked, noting that, as theissue was whether diversity jurisdictionexisted − a federal procedural issue –federal law, not state law applied.

Yet, in Wilcox et al v. Arpaio et al, 753F. 3d 872 (9th Cir. 2014), the NinthCircuit recognized that a federal com-mon law mediation confidentiality privi-lege exists but side-stepped the issue ofapplying it by arguing that the partieswaived it as both sides argued only theapplication of Arizona’s mediation privi-lege laws and did not reference this com-mon-law privilege. Further the NinthCircuit noted that in the matter before it,the same evidence related to both federaland state law claims. As a result, federal

common law on mediation confidentialityand not state law, would govern.

Presently pending in the NinthCircuit is another case on mediation con-fidentiality. In Craig Milhouse and PamelaMilhouse v. Travelers Commercial InsuranceCompany, 982 F.Supp 2d 1088 (C.D. Cal2013), plaintiffs sued their insurer forbreach of contract and bad faith followingthe latter’s alleged delay in paying plain-tiffs for the total loss of their home andits contents stemming from a fire. Before filing suit in state court, the partiesattended mediation; the matter did not settle. Plaintiffs sued in state court; defen-dant removed to federal court. Duringthe trial, counsel for the insurer ques-tioned witnesses about what had occurredduring the mediation. The trial courtallowed the evidence to be introduced.Citing prejudicial error, plaintiffs filed amotion for new trial. In its order denyingplaintiffs’ motion, the district court judgeheld both that plaintiffs’ counsel hadwaived mediation confidentiality and,even if not waived, “due process”demanded that the insurer be allowed toput on evidence that it had not acted inbad faith.

Due process demanded that theCourt allow the jury to hear the testi-mony regarding the parties’ mediationstatements.The Milhouses argued extensively at

trial that Travelers, “unreasonably orwithout proper cause, failed to pay ordelayed payment of policy benefits.”(Citation omitted) More specifically,the Milhouses contended thatTravelers acted in bad faith by refusingto settle their claims.For the Milhouses, the case was one

about a despicable insurance companythat had a policy of not fairly and rea-sonably cooperating with its insuredsto settle their claims after a tragic loss.They now argue the Court erred byallowing the jury to hear the parties’mediation statements. The Milhousesare wrong. Travelers needed to presentthe parties’ mediation statements toprovide a complete defense of itsactions and to avoid paying millions of

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dollars in bad faith and punitive dam-ages for wrongfully refusing to settlethe Milhouses’ claim. (Id. at 1108.)… It was entirely proper for Travelersto present the parties’ mediation state-ments to the jury. The evidence pre-sented at trial clearly demonstratedthat Travelers did not settle theMilhouses’ claim because of the posi-tions that were taken during and afterthe mediation by the Milhouses andtheir attorney. The jury therefore need-ed to hear all about what happenedduring and after the mediation so itcould determine whether Travelers didin fact act unreasonably, maliciously,fraudulently, or oppressively by refus-ing to settle the Milhouses’ claim. Toexclude this crucial evidence wouldhave been to deny Travelers’ of its dueprocess right to present a defense. (SeeCassel v. Superior Court (2011) 51Cal.4th 113, 119 (“We must apply theplain terms of the mediation confiden-tiality statutes to the facts of this caseunless such a result would violate dueprocess, or would lead to absurd resultsthat clearly undermine the statutorypurpose.”) (Emphasis added.)….”

(Id. at 1108-1109.)Seemingly, the trial court “judicially

crafted” a due process exception to medi-ation confidentiality.

Plaintiffs have appealed, arguingthat as this matter involved state lawclaims only, pursuant to Federal Rules ofEvidence, rule 501, California statutoryand case law must be followed. In con-trast, the insurer has cross-appealedarguing, among other things, that thismatter is governed by Federal Rules ofEvidence, rule 408 permitting evidenceof settlement discussions to be admittedfor reasons not directly relating to liabili-ty, as for example, “… negating a con-tention of undue delay.” (Fed. Rules.Evid. rule 408(b).) (See, Ninth CircuitCourt of Appeals Case Nos. 13-56959and 13-57029.)

As of this writing, the matter hasbeen fully briefed and awaits oral argu-ment and/or decision.

Agreements

In addition, the parties usually signa mediation confidentiality agreementagreeing that all communications occur-ring within the mediation remain confi-dential.

Professor Coben’s study

So, with all of this statutory and con-tractual protection, mediations should beconfidential. However, a yearly analysis ofcases in court regarding mediations con-ducted by James R. Coben, Professor andSenior Fellow, Dispute Resolution Centerat Hamline University School of Lawshows quite the contrary. Both in a recentwebinar sponsored by the Section ofDispute Resolution of the American BarAssociation, and in a law review article,Professor Coben demonstrates that quitefrequently, mediations have been the sub-ject of hearings in court, and confidentiali-ty has been ignored. (See, ABA Section ofDispute Resolution, The Ethics of MediatorTestimony: Tales from Recent Federal and StateCase Law by James R. Coben, Professorand Senior Fellow, Dispute ResolutionInstitute, Hamline University (September2014 webinar); Coben, James R. andThompson, Peter N., Mediation LitigationTrends: 1999-2007, 1 World Arbitration andMediation Review 396 (No. 3) (2007).)

Professor Coben found that with eachpassing year, more and more cases havedealt with mediations. For example, in2002, there were only 301 cases; by 2006this number had more than doubled – to677 cases. In 2013, there were 802 cases.

At the same time, the trend has beena decrease in state court cases but an increase in federal court cases. In 2003,of the 335 cases, 87 of them or 26 per-cent of the cases were in federal courtwhile 248 or 73 percent were in statecourt. Ten years later, in 2013 − of the802 cases, 444 of them or 55 percent ofthe cases were in federal court and 358or 45 percent were filed in state courts.

What were the issues raised in thesecases? Out of the 735 cases filed in 2012− 272 of them or 37 percent involved

the enforcement of the settlement agree-ment, 103 cases or 14 percent involvedmediator fees, 66 cases or 9 percentinvolved confidentiality, 37 cases or 5percent involved sanctions, and 22 casesor 3 percent involved ethics. Again, in2013 – 9 percent or 73 cases involvedconfidentiality.

With respect to confidentiality alone,between 1999 and 2005 – there were 601cases filed in which oral mediation com-munications were offered into evidence.Notably, the idea of mediation confiden-tiality or privilege was not even raised in462 of them or in 76 percent.

During this same time period, in125 cases, the mediator testified andagain, in 85 of them or 68 percent ofthem, the notion of privilege was noteven raised.

The subject of their testimonyincluded: • Attendance• Who did the negotiating • The terms of the settlement • The mental and physical health of theparties • The reasons why a settlement was notreached • Who drafted the settlement, admissionsand/or statements made against interest • The content of the discussions, includ-ing releases, policy limits, attorneys’ fees,guarantees, valuations and authority• With respect to class actions − thequality of the bargaining on behalf of theclass members and the quality of the set-tlements

In short, almost every topic thatmight arise during mediation was in anaffidavit.

What Professor Coben also found,was that the simpler the statute, the morethe litigation. California Evidence Codesection 1119 has 163 words and section1122 has 176 words. Yet in 2003, of allthe appellate decisions filed anywherewithin the United States on the issue ofconfidentiality, California parties filed 27percent of them. In 2009 − the percent-age was 63 percent.

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In contrast, fewer than 20 cases dis-cussing confidentiality were filed in the11 states and District of Columbia thatadopted the Uniform Mediation Act (approximately 7500 words).

The area where mediation confi-dentiality seems to be ignored quite alot has been class-action settlements. Asthese are often filed under the diversityjurisdiction of the federal court (28 U.S.C. §1332 (2012)), pursuant to FederalRules of Evidence, rule 501, state lawshould apply. (See, Class Action FairnessAct of 2005, 28 USC §§1711-1715(2012) (Public Law 109-2, 119 Stat 5(Feb 18, 2005).)

Mediators have quite frequentlysubmitted affidavits attesting to thequality of the bargaining process andfairness of the settlement. Quite fre-quently, the federal and state courtshave relied on the reputation of themediator as evidence that the media-tion process was fair, and did notinvolve fraud or collusion, ignoring anyobjections of any class members whowere not at the mediation. For example,in 2013 – there were 83 cases involvingclass-action settlements in which theinvolvement of a private mediator, ifnot her affidavit submitted to the court,played a role in the court determiningthat the bargaining was at arm’s-lengthand not collusive.

Professor Coben cites three examplesof cases heard in the California U.S.District Courts in 2013: (1) In Re MRV Communications Inc Derivative Litig., No. cv-08-03800 GAF(MANX), (a derivative action) arising inthe Central District of California onJune 6, 2013, the mediator’s declarationwas quoted in the process of approvingthe settlement; on page 11 of theMemorandum and Order approvingattorney fees, the district court states:

…And the mediator in the case con-curs, urging that ‘the separatelynegotiated attorneys’ fees andexpenses agreement was negotiatedin good faith and is fair and reason-able and within the range of feespaid in similar shareholder-deriva-tive cases.’

(2) Johansson-Dohrmann v. CBR Systems,Inc, 12 cv-1115-MMA (S.D. Cal. July24, 2013) again quoting a mediatordeclaration in several different placesin the process of approving the settle-ment;…the settlement is . . . fair and rea-sonable to all parties and providessignificant benefits to the SettlementClass. (Page 8 of Order) and It was clear from the briefs and the

discussions during the mediationthat the parties and their counselhad a thorough understanding ofthe facts and law as well as the risksand uncertainties pertaining to thelitigation. (Page 10 of Order)That the parties “vigorously negoti-

ated their respective positions,” andthat the settlement was the “product ofarm’s-length and good faith negotia-tions.” (Page 10 of Order)(3) Moore v. Verizon Communications,Inc. No. c-09-1823 SBA (N.D. Cal.August 28, 2013) noting that themediator “unreservedly” recommend-ed the settlement. (Page 15 of Order)Here, the mediator submitted a tenpage declaration in support of thesettlement.Interestingly, in these cases, none of

the judges really discussed the reasoningbehind crediting the mediator’s declara-tion. They just did so on the basis thatthe mediator was experienced, able,independent, nationally recognized,respected, prominent, well versed in therelevant law and other like conclusions.

In short, they were good people and thatwas all that mattered.

While these cases do involve showingthe fairness of class-action settlements,there appears to be nothing in the medi-ation-confidentiality statutes authorizingsuch as an exception. And while the par-ties may have waived confidentiality,many of the statutes require an expresswaiver in writing; rather than an impliedwaiver or simply ignoring the issue alto-gether as seems to have occurred here.(See, California Evid.Code, §§ sections1118 and 1122.)

Conclusion

Like everything else in life, when itcomes to mediation confidentiality, theo-ry and practice sometimes diverge. Whileboth the legislatures and courts through-out the United States have made it clearthat mediation confidentiality is to berespected and enforced, in any given sit-uation, this rule of confidentiality and/oradmissibility may be disregarded or, noteven raised. This may occur even if theparties have signed a mediation confi-dentiality agreement. There, too, boththe parties and the court may ignore it.

So … while in theory, mediations areto be confidential … in practice, thebuyer should be aware. Unlike Las Vegas,“it” just may not stay there.

Phyllis G. Pollack, Esq. (email: Phyllis@pgpmediation.com) is the principal ofPGP Mediation (www.pgpmediation.com),and has been a mediator in Los Angeles,California since 2000. She has conductedapproximately 1400 mediations involvingbreach of warranty, employment, business, realestate and other matters. Currently, she is theChair of the State Bar of California’s ADRCommittee and is a past president (2010) ofthe Southern California Mediation Association(SCMA).

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