Orlofsky ADR Services

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.