Mediation Case Law Updates

Do You Interview Potential Mediators? If So, Here’s A Helpful Resource.

Do you interview potential mediators to determine, among other factors, their style of mediation? If so, here’s a link to an article that goes beyond the overly simplistic “evaluative” and “facilitative” categories to examine some of the different approaches mediators can take: https://www.mediate.com/articles/lande-unified-conceptual.cfm. The article is short, on point, and might give you some ideas for how to question your next potential mediator.

Are Your Mediation Communications Confidential?

The Illinois Uniform Mediation Act provides that, with narrow exceptions, communications in a mediation are privileged and, if the mediation agreement so provides, confidential. Since most mediation agreements provide that all mediation communications are confidential, it would appear that, on the surface, comments made in a mediation are protected against most attempts to use them outside of the mediation.

However, in Thiems v. United Fire & Cas. Ins. Co. (S.D. Ill. March 26, 2021), the plaintiff sued their insurance carrier based on conduct in a prior lawsuit, and the plaintiff sought to admit into evidence remarks by a mediator during a mediation in that underlying lawsuit. While the court barred the discovery based on relevance, it made this curious statement:

“The Court agrees with Plaintiff that neither the Illinois Uniform Mediation Act’s provisions regarding confidentiality (710 ILCS 35 et seq.) nor the Mediation Agreement between the parties in the underlying case have application in this case – litigation between United Fire and its insured, Thiems.”

The notion that the UMA does not apply in subsequent litigation because the parties in the later litigation differ is by no means settled law. Compare, Accent Delight International Ltd. et al v. Sotheby’s et al, (S.D.N.Y. 2020) (applying a heightened burden on the party seeking the discovery of mediation materials from a prior lawsuit). How courts rule on this varies, depending upon the applicable state law, the language of the mediation agreement, and many other factors. What Thiems shows, however, is that the applicability of mediation privilege and confidentiality in a subsequent case raises complex legal issues.

Practice ramifications: A full discussion of the law on the confidentiality of mediation materials in subsequent litigation requires a much lengthier discussion. The recent Thiems decision, however, shows that the law is complex and therefore somewhat unpredictable. This might lead the lawyer participating in a mediation where there is a chance of a subsequent lawsuit raising issues about what happened in that mediation to be cautious about the kinds of remarks made during the mediation. Such caution, however, might decrease the mediation’s chance of success. Counsel will therefore need to weigh the benefits of protecting a client from the potential use of mediation communications in some theoretical future piece of litigation against the benefits of doing everything possible to make the current mediation successful.

Do You Need This Language in Your Mediated Settlement Agreement?

In Choksi v. Choksi (Tex. App. 2020), the Texas court of appeals examined the impact of the following language in a mediated settlement agreement:

“This binding mediated settlement agreement is not subject to revocation and is not appealable.”

The parties no doubt inserted this language in an effort to thwart a “buyer’s remorse” situation where one party tries to back out of a settlement, which is just what eventually happened.  The plaintiff refused to honor the agreement, arguing in response to a motion to enforce that it was entered into under duress and was based on a mutual mistake of fact.  “Buyer’s remorse” is a problem that seems to arise on occasion in mediated settlements, likely because they are often reached at the end of a long and tiring day of negotiation.  So, how did the two concepts in this clause – non-revocability and non-appealability – fare, and should lawyers consider including those in mediated settlements?

Non-revocability:  While the court rejected plaintiff’s arguments that the agreement was based on duress and mutual mistake of fact, the court did not rely in any way on the non-revocability language, nor could it.  If an agreement is based on duress or mutual mistake of fact, no valid agreement was ever formed, so the non-revocability language would fail, along with the rest of the contract.

Non-appealability:  The appeals court pointed out that the particular language at issue made no sense because settlement agreements are not appealable.  What the parties could have done, it held, but had not, was waive the right to appeal a judgment enforcing the settlement agreement.  Thus, at least in theory, a mediated settlement agreement could provide that the parties waive their right to appeal any judgment entered on the settlement agreement, which would shorten the process triggered by a party that tried to challenge the settlement agreement.

My conclusion:  I don’t think either prong of this provision is likely to be of much value in thwarting a case of buyer’s remorse.  A better approach, I think, is to provide that should a party need to go to court to enforce the settlement agreement, the losing party must pay the prevailing party’s attorney’s fees and expenses.

What To Do When Parties Attribute Bad Faith Motives To Each Other

Nearly all mediations involve parties that view the same facts in a very different light.  But in a great many mediations, the parties go further:  they are convinced the other side is not taking its position in good faith, but rather is knowingly lying or engaging in some nefarious scheme.  It is, for example, all too common in a commercial mediation to walk into one caucus room and be told that the other side knows it is lying on a particular point, and they walk in the other caucus room and hear the identical assertion. 

Why is this phenomenon so common?  I think this is due, in part, to the fact that when there are strong emotions underlying a position, the parties just cannot believe someone can hold a contrary position in good faith.  Another factor may be that parties unconsciously seek to quell doubts about their own position by convincing themselves the other side is not only wrong, but also acting in bad faith. 

Whatever the cause, the view that an opponent is acting bad faith can be a serious impediment to settlement.  It is much more difficult to make concessions and reach a middle ground with someone acting in bad faith.  You would be giving some ground not just to an opposing view, but to someone acting immorally.  It is also harder to shed feelings of insult, anger and other emotions if you believe the other person is intentionally causing those feelings. 

 So how do you deal with this?  There is no magic bullet, of course, but I suggest two contradictory approaches, each of which can be effective in the right situation:

1. Point out the extreme nature of a party’s belief.  I have summarized a party’s view in this way:  “So you believe that every single thing that the other person has said is all a complete lie, and they are really executing a scheme to do ________.”  Sometimes putting it in such stark terms can jolt someone into recognizing at least some good faith on the other side.
2. Point out why this makes settlement so much more inviting:  I have summarized a party’s view on the other’s bad faith, and said:  “Is this a person you want to keep fighting or going to court against?”  Sometimes the recognition of how awful they consider the other person can cause a party to think they need to settle the issue and be done, or to decide that they don’t want to risk fighting this person in court. 

While, as I said above, there is no magic bullet, I don’t think it advisable to try to avoid it or sugar coat it the issue of bad faith.  If people believe the other person is acting maliciously, that belief needs to be listened to and reality tested so that people can honestly confront the nature of their dispute.

A New Twist on a Contractual Mediation Requirement

Arbitration clauses are increasingly common in both commercial and consumer contracts, and some of those clauses now require that the parties mediate before commencing an arbitration.  Such a clause can be beneficial because, while parties all know the advantages of an early settlement, many litigators view an early request for mediation as tantamount to an acknowledgment of the weakness of their position.  A contractual mediation requirement enables early settlement discussions without triggering this real or perceived problem.

One problem with such mediation clauses, however, is that they can be difficult to enforce.  The remedy for a violation of such a clause might be nothing more than a stay of the arbitration pending completion of a mediation, and just asking for such a remedy might trigger the “fear of showing weakness” concern the clause was intended to eliminate.

In Makeen v. Woodstream Falls Condo. Ass’n (In re Makeen), B.A.P. (10th Cir. 2020), the court noted that the mediation clause at issue provided for $25,000 in liquidated damages if a party failed to comply with the mediation requirement, a provision that would seem to single-handedly eliminate any enforcement issues for a mediation requirement.  The court did not, however, deal with whether the liquidated damages provision was enforceable, and Illinois, like virtually all jurisdictions, has specific requirements for such clauses to be enforceable.

My takeaway:  Given that that a liquidated damages provision will not likely cause any harm, and that it also has a fair shot at being enforceable, it would seem worthy of inclusion in many contractual mediation provisions.

Covid Update:  If you’ve been wondering whether to mediate by Zoom or any other video platform, take the leap.  Parties and mediators are getting increasingly comfortable with this procedure and finding similar rates of settlement.