Do You Need Pro Hac Vice Admission to Represent a Client in Mediation?

In In re Anne Elder Kershaw, No. 2018-031 (S.V.I), the Supreme Court of the Virgin Islands affirmed the denial of a motion for pro hac vice admission based on the following facts. The non-Virgin Islands counsel in question filed a motion in the trial court to be admitted pro hac vice that was granted, but subject to the attorney taking a required oath. After the motion was granted, but before the attorney took the oath, she represented her client at a mediation in the Virgin Islands. The Court not only vacated the prior order granting the pro hac vice motion, it also referred the matter to disciplinary authorities, ruling that pro hac vice admission was required for any “practice of law” in the Virgin Islands, and that representing a client in mediation in the Virgin Islands, even in a private mediation, constituted the practice of law. Since the attorney had not yet taken the oath, the attorney was not yet admitted and therefore violated the local rules of ethics by participating in the mediation.

Lest you think this a quirk of Virgin Island law, cases from many other states are cited:

See In re Roswold, 249 P.3d 1199, 1208 (Kan. 2011) (“Without admission pro hac vice, out-of-state attorneys appearing in Kansas courts, or actively participating in pretrial proceedings such as depositions or mediations, would be engaged in the unauthorized practice of law in this state.”); In re Dox, 152 P.3d 1183, 1187 (Ariz. 2007) (attorney not admitted in the state engaged in the unauthorized practice of law by representing a party in a private mediation in that state); In re UPL Advisory Opinion 2003-1, 623 S.E.2d 464, 464-65 (Ga. 2005) (representing a client in settlement discussions is the practice of law); Cincinnati Bar Association v. Telford, 707 N.E.2d 462 (Ohio 1999) (same).

Guided Choice Dispute Resolution – A New Approach That Might Boost A Mediation’s Chances Of Success

The earlier a case can be settled the better. But what is the right moment to attempt a mediation?  While it is good to try to mediate as early as possible, some mediations fail because the parties find out they were not yet ready to have a meaningful settlement discussion.

Guided Choice is a process where the parties retain a mediator early in a dispute, but, at least initially, not to conduct a settlement discussion. Rather, after confidential conferences with each side, the mediator makes a determination as to whether the case is ripe for a settlement discussion. If not, the mediator determines what issues preclude having a productive settlement discussion, and proposes a procedure designed to get the parties to the right point as quickly as possible. This could involve getting certain discovery done up front, presenting a motion on a key issue to a judge or arbitrator, getting other parties involved, or having one or both sides prepare expert reports on damages. Once those tasks have been completed, a mediated settlement discussion can take place.

Think you can decide for yourself when mediation is appropriate? Probably. Would having a neutral involved be useful? Probably. If you would like more information on this cutting-edge ADR process, give me a call or take a look at this web site:  https://gcdisputeresolution.com/

Making Sure Your Mediation Settlement Is Binding

It is not uncommon in a complex case for the parties to reach a settlement during a mediation, reflected in a written, signed, settlement term sheet, but also intend to later draft and sign a more formal and comprehensive document. The law is clear that if the agreement reached during the mediation includes all the “material” terms, the settlement is binding, even if the parties intend to execute a more formal document. I have nonetheless always included language in mediation settlement agreements specifically stating that the document is intended to be binding, even though the parties intend to later execute a formal settlement agreement.

A court in California recently cited just such language in rejecting a challenge to a mediation settlement, Mullahey v. Feldman (Cal. App., 2018):

“Parties agree to be bound by the terms set forth herein, and agree that the terms shall be further reduced to writing in a more comprehensive and complete settlement agreement to be executed at a later date, but such further agreements shall not detract from or impair the enforceability of this Agreement.” The parties’ stated intent to enter into a more formal agreement at a later date does not preclude enforcement of the mediation agreement.

Language this this effect cannot make a truly unenforceable agreement (i.e. one lacking a material term) enforceable, but such language may well give that last needed push to get a court to enforce a settlement agreement in a close case.

An Interesting Mediation Clause

In Hughes Socol Piers Resnick & Dym, Ltd. V. G3 Analytics, LLC, No. 18 C 2114 (N.D. Ill. Aug. 28, 2018), Judge Aspen affirmed an arbitration award where the parties’ contract contained the following alternative dispute resolution clause:

Any disputes relating to this Agreement . . . will be resolved by alternate dispute resolution. Alternative dispute resolution means that you and our Law Firms agree to submit all disputes to an independent mediator mutually agreed upon. . . .

In the event the parties are unable to resolve their disputes through mediation, the parties agree that the mediator shall require the parties to submit their disputes to an independent arbitrator selected by the mediator. The mediator will have the right to appoint himself as arbitrator in that proceeding. The parties shall be bound by the decision of the arbitrator and such decision shall be final and not subject to review except as to the issue of malfeasance or bias on the part of the arbitrator. (emphasis added)

The interesting part is the power given to the mediator to appoint an arbitrator, and even to appoint him or herself to this role. Having the mediator appoint the arbitrator would seem both wise and non-controversial as it would save the parties the hassle of going back and forth on lists of potential arbitrators. Giving the mediator the power to appoint him or herself as the arbitrator, however, while it would likely provide some additional incentive to settle during the mediation, might also cause the parties to be less candid with the mediator during the mediation, making a settlement more difficult. A most interesting and creative ADR clause!

Litigation Arising Out of Mediation

It’s unfortunate, but not surprising, and definitely ironic, that with the increased use of mediation, people will sue for conduct that occurred during a mediation. One recent example is Doe v. JAMS Inc., (2nd Cir. 2018), in which a partner in a prominent New York law firm sued for discrimination and retaliation and included an allegation that conduct by a representative of the defendant law firm during a mediation session constituted unlawful retaliation. Another recent example is Dauber v. Fargey, (D.Or. 2018), in which the plaintiff attended a mediation that failed, fired her lawyer, attended a second mediation with a new lawyer that succeeded, and then sued the first lawyer for malpractice, alleging that his failure to properly prepare for the first mediation caused unnecessary delay and expense in resolving her claim.

Both of these cases, however, illustrate the difficulty in bringing claims based on conduct in mediation, which is probably a good thing. Both decisions concern discovery disputes where the defendant asserted, with some success, that documents sought by the plaintiff were protected by the mediation privilege, which exists by statute in Illinois and most states. While the mediation privilege has limitations, it can often be a significant obstacle to presenting evidence of misconduct that allegedly took place in a mediation.

Sanctionable Bad Faith In A Court-Run Mediation

In Koehn v. Tobias, 866 F.3d 750 (7th Cir. 2017), the Seventh Circuit upheld the imposition of a monetary sanction against the defendants for conduct in a mediation, even though Defendants prevailed at trial. Here’s what happened:

Round One: In a mediation before the Magistrate Judge, Defendants made a final offer of $75,000. Plaintiff rejected that offer, so the case didn’t settle.

Round Two: In response to a question about the status of settlement in a teleconference with the Court, defense counsel stated that their last settlement offer was approximately $150,000 and that Plaintiff had rejected that. Plaintiff’s counsel said they’d never heard the $150,000 number and that, based on this new number, a second settlement conference might be productive.

Round Three: Based on that teleconference, a new mediation was scheduled before the Magistrate Judge. However, Defendants only offered approximately $75,000 at this new mediation, which Plaintiff declined, and the mediation did not produce a settlement.

Round Four: At the end of the case, after Defendants prevailed at trial, the court entered a monetary sanction against Defendants because they were aware that the $150,000 figure was the only reason for the second mediation. While the Court noted that Defendants were not obligated to offer any number in settlement, “by changing their position so drastically without any indication that they intended to do so, Defendants did not participate in the settlement conference in good faith.”

Sabotaging Mediation Constitutes “Unclean Hands”

The facts are a bit extreme, but the legal principle is quite interesting. While plaintiff and defendant were in the middle of a California-based no-holds-barred legal battle, plaintiff reported defendant to criminal authorities in Oregon, which led to the issuance of an arrest warrant in Oregon. The Oregon police, however, were reluctant to arrest the defendant in California.

When a court-ordered mediation was scheduled in the related bankruptcy pending in California, plaintiff’s counsel induced the Oregon authorities to have the defendant arrested during the mediation. Indeed, plaintiff’s counsel was texting the Oregon authorities, from the judge’s chambers, during the mediation, about defendant’s exact location.  When the defendant was arrested in the middle of the mediation, the judge conducting the mediation was furious because, as explained in Baek v. Halvorson (In re Halvorson) (Bankr.C.D.Cal., 2018), the plaintiff had no intention of actually mediating the case, but was rather was using the mediation as a means of having the defendant arrested.

Since bankruptcy is an equitable proceeding, the court held a trial on whether plaintiff’s conduct constituted unclean hands. The court set the following legal standard:

Although parties entering into mediation pursuant to a court order would seem to have relatively few duties, certainly one of those duties is to refrain from taking action that is expected or reasonably could be expected to cause the collapse of the mediation prior to its conclusion in the ordinary course (i.e., action that this Court has referred to as sabotaging the mediation). To phrase it differently, if a court orders parties into mediation, it is hardly a stretch to conclude that such parties incur an obligation to refrain from taking actions that ruin or reasonably could be expected to ruin the mediation.

Based on this, the court had little difficulty concluding that plaintiff acted with unclean hands by arranging the arrest of the defendant during the mediation. The court then struck virtually every claim plaintiff was pursuing in the bankruptcy.

This is obviously an unusual factual scenario, but the legal principle may have broader application: Acting in bad faith in a court ordered mediation can have serious substantive consequences in the litigation.

What Are the Best Techniques a Mediator Can Use?

A recent ABA task force did a comprehensive review of studies examining whether the following mediation techniques were helpful or harmful:

  1. pressing or directive actions or approaches;
  2. offering recommendations, suggestions, evaluations, or opinions;
  3. eliciting disputants’ suggestions or solutions;
  4. addressing disputants’ emotions, relationships, or hostility;
  5. working to build rapport and trust, expressing empathy, structuring the agenda, or other “process” styles and actions;
  6. using pre-mediation caucuses; and
  7. using caucuses during mediation.

The conclusion, perhaps not surprisingly, is that all of these techniques, in the right case, case be helpful, but some can be harmful if not used appropriately, which reinforces what you probably already knew: Pick a skilled mediator who knows all the techniques and has the savvy to know when to use them.*

Do you have an opinion on whether any of the seven listed mediator techniques are helpful or harmful? If so, let me know, as I’d be delighted to hear from you.

* Here’s the full report: REPORT OF THE TASK FORCE ON RESEARCH ON MEDIATOR TECHNIQUES

Can You Sue a Mediator?

In Chodosh v. Trotter, No. 70952-53 (Cal.App. 2017), Plaintiffs alleged that a mediator affiliated with JAMS said during a mediation that Defendant’s offer was “a gift,” and if Plaintiff did not accept, the mediator would report to the judge presiding over the case that Plaintiff was the reason for the failure to settle.  Plaintiffs further alleged a connection between the mediator and the presiding judge because shortly after the alleged “threat” the judge left the bench and joined JAMS.  Despite the alleged “threat,” Plaintiffs did not accept the settlement, but based on those facts filed a multi-count complaint against the individual mediator and JAMS.  This is, to my knowledge, one of the first serious attempts to craft a claim against a mediator.

The claim was dismissed for multiple reasons, including the fact that mediation communications are privileged, and therefore there could be no admissible evidence of the mediator’s alleged misconduct.  Without going into detail about this and the many other reasons that led the dismissal, it is clear from the lengthy decision that most claims against mediators will fail.  The court treated the mediation as quasi-judicial proceeding and had no interest in any of Plaintiffs’ various legal theories.

In my view, the important take-away from this decision is that parties should be extra diligent in working with prospective mediators to ferret out any possible conflicts of interest.  If evidence of a perceived conflict emerges later on, it is likely that there will be no claim or other remedy for the party that feels aggrieved by the mediator’s conduct.

Can Conduct In a Mediation Be Tortious?

In Aung v. GEICO, MP/ 9:17-cv-856 (D.S.C. 2017), plaintiff was injured in an auto accident where the driver of the other car had very limited insurance. Plaintiff obtained a judgment against the other driver for over $500,000, but GEICO, her underinsured motorist carrier, paid only $50,000 of that judgment. Plaintiff sued both GEICO and the individual GEICO adjuster that worked on the case.

One part of plaintiff’s claim alleged that, in a mediation, defendants made an unreasonably low settlement offer of $2,500. Plaintiff further alleged that the individual GEICO adjuster attended the mediation without having the appropriate settlement authority as required by a local court rule. This failure to have the requisite settlement authority, plaintiff alleged, unnecessarily prolonged the litigation.

Defendants argued that the only remedy for the violation of a local court rule would be the imposition of sanctions by the judge presiding over the case. The trial court, however, disagreed, ruling that there was at least a possibility that this conduct, the failure to have appropriate settlement authority at a mediation, might support a negligence claim. It should be noted, however, that the issue arose on a motion to remand to state court, and defendants, therefore, had the heavy burden of showing that there was “no arguably reasonable basis for predicting that state law might impose liability.”