Mediation Case Law Updates

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.”

Why Mediations Fail

Cecilia Morgan, an experienced mediator in Texas, polled 249 mediators to find out why, in their opinion, mediations fail.  Here, in reverse order, is what they said (read the full article on Why Mediations Fail):

Do You Need An “Integrated” Agreement At The End Of A Mediation?

Court Holds That A Mediation Is Not A “Suit.”

In Sanders v. The Phoenix Ins. Co., No. 15-2539 (1st Cir. 2016), an insured was aware of a potential claim, so he notified his carrier. Although no lawsuit had been filed, the insured agreed to mediate the potential claim and invited his carrier to attend the mediation. The carrier refused to attend, and then denied coverage for the settlement that was reached at the mediation. The court upheld the denial of coverage because the policy limited the duty to defend and indemnify to “suits,” not “claims,” and a mediation is not the equivalent of a lawsuit. Mediation, the court ruled, is different from a lawsuit because it is an informal, ad hoc, proceeding, that the insured voluntarily chose to participate in.

This ruling appears to be correct based on the language in the policy, but it is unfortunate because it will require parties to initiate litigation in order to trigger insurance coverage under policies with this kind of language.