Orlofsky ADR Services

Part II: Are there consequences to turning down an offer in mediation?

Attorney fees for turning down settlement offer in mediation ruling from courtI recently reported on a decision in which a defendant argued that a prevailing plaintiff’s statutory fee award should be limited based on the fact that the plaintiff eventually won at trial less money than had been offered by the defendant in mediation. The trial court rejected this because offers in mediation are privileged and confidential, and also because the offer in mediation was made without providing adequate information to the plaintiff.  
In Moshir v. Automobili Lamborghini America LLC, 2013 WL 693413 (D.Ariz. 2013), the court reached the opposite conclusion. Plaintiff had been demanding $85,000 to settle, but in a mediation, raised that demand to $135,000. The mediation not surprisingly failed, but shortly thereafter, Plaintiff accepted a settlement of $35,000 plus attorney’s fees in an amount to be determined by the court. In determining the amount of fees to award, the court had no problem eliminating all fees spent in the failed mediation, finding that, because of Plaintiff’s tactics in raising their settlement demand during the mediation, the mediation did not help further the resolution of the litigation. Plaintiff argued that the settlement negotiations were privileged under Rule 408 of the Federal Rules of Evidence. The court rejected this because the evidence concerning conduct during the mediation was not being used to prove or disprove the validity of the claim. What is curious is that no argument was made that the discussions during the mediation were privileged based on a privilege and confidentiality provision in a mediation contract. Most mediation agreements have a clause that is broader than Rule 408 and bars the use of any communications that take place during a mediation for any purpose. It is unclear if the parties did not have a mediation agreement, or it the Plaintiff failed to raise the issue.
I believe that under either the Illinois Uniform Mediation Act, or most standard mediation contracts, offers made during a mediation should not be admissible for this kind of issue. I also believe this would be the better result. While the Judge was clearly angry at Plaintiff’s overall conduct in the litigation, and rightly so, a fear that actions taken in mediation might affect a subsequent fee award could chill the desire of some parties to participate in a mediation.