Enforcing a Mediation Confidentiality Provision

In Tellis v. LeBlanc, (W.D. La. 2020), in the course of litigating a motion to strike a jury demand, the defendant cited facts it had learned in a prior unsuccessful mediation about the nature of the plaintiff’s case. The plaintiff moved for sanctions based on defendant’s use of that information because the communications in the mediation were supposed to have been privileged and confidential.  The court agreed that the use of the information was improper, but found no evidence that the defendant had acted in bad faith, and therefore denied the request for sanctions. The court noted that the disclosure was made for no purpose other than to highlight a position asserted in a brief, and that there was no effort to prejudice the plaintiff in any improper way.

Takeaway: While assuring privilege and confidentially in a mediation, either contractually, by court rule, or by statute, is essential, it can be difficult to obtain a remedy if one party subsequently violates the confidentiality of the mediation.

Interesting side-note: In the background section, the court noted that the magistrate who conducted the mediation ordered the parties to submit confidential statements before the mediation containing a “bottom-line settlement proposal.”  I have never encountered this, and feel it could well create an obstacle to successful a negotiation.  If anyone has seen this technique used in a mediation, I’d love to hear whether it was helpful or not.

What Can You Do With New Facts Learned In Mediation?

In Homes v. Navigators Specialty Ins. Co. (E.D. Tex., 2019), the plaintiff filed a complaint, six months later the parties mediated unsuccessfully, and a week later the plaintiff sought to amend the complaint to add new parties.  The court denied the motion to amend in part because the plaintiff delayed seven months before seeking to amend when the plaintiff had all the necessary information at the time the case was first filed.

While this holding is fairly straightforward, in its discussion the court noted that had new facts supporting the amended complaint first been learned in the mediation, the amendment might have been timely, because leave to amend was sought only a week after the mediation had concluded. Although not discussed by the court, this poses the challenging question of whether it is allowable to use facts learned in a mediation to amend a pleading, given the confidential and privileged status of all mediation communications.

The answer to this question is far from clear and might vary from state to state. In Illinois, for example, the Illinois Uniform Mediation Act provides that mediation communications are privileged, which means they cannot be used as evidence. This, however, only precludes using a new fact learned in mediation to prove an allegation; it may not be a bar to using a fact learned in mediation to merely allege a new claim.

My standard mediation contract, like those of many other mediators, has the parties agree that mediation communications are confidential and can only be used to resolve the lawsuit. Would a court hold that such a contract precludes amending a pleading based on facts learned in a mediation?  Would a court find that amending a pleading was a breach of such a contract and strike the pleading?

While the law is unclear, from a policy perspective using something learned in a mediation to amend a pleading runs contrary to the goal of enabling parties to talk freely in a mediation without fear of statements later being used against them. My takeaway is that one should be thoughtful before revealing a new fact to the other side in mediation, because it is not clear whether any such fact could or could not be used to make a new allegation. One suggestion would be to disclose the fact in confidence to the mediator, in caucus, and discuss the pros and cons of revealing that fact to the other side.

Is A Mediation A “Lawsuit?”

In Ill. Tool Works, Inc. v. Ace Specialty Ins. Co., 2019 Ill. App 181945 (1st Div. 2019), the plaintiff received a letter threatening a lawsuit (a copy of a proposed complaint was attached), but inviting the plaintiff to participate in a mediation to resolve the matter. The plaintiff accepted the invitation and the matter settled. The defendant insurer then refused to pay the costs of the mediation because the policy provided that the insurer owed a defense only for “suits.” The court agreed, noting that a mediation, by itself, is not a “suit.” The court further noted that the policy had other provisions that referenced “claims,” which is a broader term than “suits,” implying that had the policy provided a duty of defense for “suits and claims,” the mediation would have been covered.

The result itself is not surprising. It is hard to argue that a letter threatening a lawsuit is an actual lawsuit. The important takeaway, however, is that if you choose to mediate a case before a lawsuit has been filed (a great way to save your client time and money), make sure to check any applicable liability policies before doing so.

Require Mediation Before Arbitration

Parties are increasingly including a mediation provision in their contractual arbitration clauses, requiring an aggrieved party to mediate before filing an arbitration. Although one might wonder about the success rate of mediations that take place when a party is forced to do so by contract, any settlements achieved so early in the process result in enormous cost savings. It would seem, therefore, that the downside of a contractual mediation requirement – a wasted day in an unsuccessful mediation – would be outweighed by even the slim chance of being able to settle before litigation is filed.

Courts have typically enforced contractual mediation clauses, dismissing arbitration claims if the party bringing the claim has failed to exhaust a contractual mediation requirement. Rodriguez v. Tex. Leaguer Brewing Co. (Tex. App., 2019), however, involved an interesting twist on this issue. The plaintiff ignored the contractual arbitration clause and filed a court case. When the defendant responded by moving to dismiss, arguing that the case should be sent to arbitration, the plaintiff argued that the defendant could not enforce the arbitration clause because it had failed to request a mediation. The plaintiff argued that mediation was a condition precedent to arbitration, and having failed to meet that condition precedent, the defendant could not enforce the contractual arbitration requirement.

The court was not impressed with plaintiff’s argument:

when the agreement requires the parties to mediate before arbitration, a party who proceeds first to litigation waives the right to mediation and cannot assert the mediation provision as a condition precedent to arbitration. … Because the Rodriguezes filed suit without first seeking mediation, they have waived their right under section 9.4 to insist on mediation before arbitration….

My takeaway: The plaintiff was in an untenable position when it tried to enforce a mediation requirement after having itself tried to sidestep the entire mediation/arbitration process by running to court. But absent egregious circumstances like this, contractual mediation requirements are enforceable, and also seem quite sensible.

Does It Make Sense To Use Two Mediators?

Using two mediators, generally referred to as the “co-mediation,” is fairly common in community mediation organizations, but less common in commercial cases. Using two mediators in a commercial case is more likely an option in larger value cases that justify the cost of hiring two mediators, but if all parties can agree to use that approach, it can provide a real boost to the process.

There are certain specific uses of co-mediation, such as multi-party cases, where the co-mediators can deal with more than one party at a time, or cases calling for multiple areas of expertise. But the primary advantage is much simpler: two mediators can generate twice the number of ideas and approaches for getting past an impasse. In complex cases you typically put together a team of lawyers, in part to bring the necessary brain power to deal with a challenging situation. Mediations, while shorter in duration, can nonetheless post challenging problems for the mediator, and with the right pairing, two can be a stronger force than one.

I have personally done a handful of co-mediations, and found it to be a very powerful tool because there were two minds observing the parties, two minds listening to what was being said, and two minds searching for ways to move forward.

If you’ve got a thorny case where settlement would be very beneficial, but you think the odds are against it happening, perhaps that would be the time to consider using a co-mediation approach. Here’s an article if you are interested in exploring this further:
https://crs-adr.com/wp-content/uploads/06JuneADRf.pdf.