In defense of mediation confidentiality 

Years ago, I mediated a legal action for sexual harassment by a medical professional brought by his very attractive and much younger female assistant. The case settled quickly, despite the defense lawyer's conviction that the evidence suggested the two were having a consensual affair and there was no basis for liability. 

The initial demand was $1 million. The initial offer was $5,000. Within three hours, the doctor had agreed to pay his former mistress $100,000 - in cash, in 10 days.

The doctor's lawyer thought it was a good deal, and apparently so did the doctor. What the doctor did not know then was that his assistant had failed to timely exhaust her administrative remedies, so the case might have been defeated altogether on demurrer. Although I was told that by her lawyer, I was asked not to reveal it to the doctor. 

The case settled, the parties shook hands, and I closed the file. There was never an action for legal malpractice, although the doctor certainly may have had a claim.

This is not a unique story. Lawyers and their clients settle lawsuits in mediation for myriad reasons that are outside the scope of the law. And that is as it should be; that's why it's called alternative dispute resolution. 

In the harassment case, the doctor was motivated by his genuine affection for his former employee, but equally by his concern about what this lawsuit would do if it continued to drag on during his marital dissolution - which was inevitably going to soon follow.

But now, as the Daily Journal has previously reported, the California Law Revision Commission has voted to recommend legislation that would remove confidentiality protections from mediation when misconduct is alleged. The idea is for confidentiality protections to have an exception for legal malpractice and State Bar disciplinary proceedings. In such cases, evidence of communications between lawyer and client during mediation would be subject to discovery and may become evidence in future legal proceedings. Mediators would also be allowed to testify about misconduct. 

Attorneys need latitude to give human advice, not just legal advice, at the mediation. They need to know that once they lay out the upside and downside of accepting or making an offer, their clients cannot second guess that advice and later sue their own attorney for malpractice. The remedy for the client is to refuse to settle the lawsuit, not to settle and then sue for bad advice. If they are not sure the deal is good or bad, their remedy is to refuse to settle.

Proponents of this change say that for the protection of the public, clients must be able to rely upon evidence arising in mediation to show that their lawyers committed malpractice. But there are few mediated cases in which the difficult conversation does not take place between lawyer and client, when the lawyer recommends a settlement above or below what they anticipated, but which still makes sense for many reasons in the larger context of the client's life - e.g., emotional and financial wherewithal, costs, timing and certainty.

If clients are invited to second guess this advice and bring subsequent lawsuits for malpractice after they have settled their underlying claims, the prospect of destabilizing and undermining the finality of every settlement looms large. It is an unacceptable risk. The potential of finality almost always outweighs the prospect of the future trial when the parties can arrive at a mutually acceptable figure for damages.

Some of what mediators do is to keep confidences about the conflict before them. While they may highlight the downside for the obstinate client on the one side, they might never have the need to go down that road on the other side. They may also be asked to withhold information, and many cases settle even without all of the important information being discovered. Indeed, that is precisely why many cases settle.

Without some legislative protection that says that neither the mediator nor the lawyers are going to be sued over maintaining these confidences, one of the principle strategies for settling cases is lost. Lawyers must be able to trust that their motivation for settlement is kept confidential from the other side. They need to be able to trust that their mediator is working for them as well as the other side, and that their mediator is not there as the police chief to make sure that everybody knows everything before reaching an agreement about anything.

Consider, for example, a wage and hour case where the plaintiff has clear wage violations amounting to $15,000, including penalties and attorney fees of $25,000. Even if the plaintiff is the prevailing party, he may not get an award of attorney fees if that case has been filed in superior court because the amount in controversy is under the jurisdictional limit. The case has a worst case scenario value of $15,000. If the defense counsel misses that issue and recommends his client pay $20,000 to settle because he will undoubtedly spend more than that defending the action, should the mediator be required to testify in a subsequent lawsuit against that lawyer for giving bad advice?

The failure to spot that issue and seize upon it could be malpractice. But why should the courts open up a subsequent lawsuit when the marketplace allowed for a willing buyer and a willing seller to reach an agreement in a negotiated transaction?

California courts are juggling too many lawsuits with too few courtrooms to hear them. They have endorsed mediation as a way to resolve a great percentage of the cases that get filed without the need to go to trial. If, as many anticipate, lifting the confidentiality in mediations creates a chilling effect, then fewer cases would go to mediation and courts would be ever more crowded. Add to that the specter that in every case where the parties are later dissatisfied with the mediated result, a potential malpractice action will be filed, and you've got the recipe for chaos.

One of the great benefits to mediation is that the process can embrace human issues together with legal ones. The process is not confined to the hard evidentiary rules nor must the ultimate result conform to the likely outcome at trial. We have all seen the benefits of genuine and sincere communication, a heartfelt apology, a promise of future engagement in business or interpersonally that would not ever occur in trial.

If the rules of confidentiality are lifted so that clients can sue their lawyers for legal advice given during mediation, it misses the big picture of what really happens in mediation. While there may be solid legal defenses, as in the initial example of the physician and his paramour, his decision to pay her $100,000 was one not made out of law, but out of love. Isn't there room for the possibility that not all wrongs need to be remedied in the end?

Jan Frankel Schau is a full-time neutral with ADR Services Inc. in Los Angeles. You can reach her at or (310) 201-0010.



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