This article was also published by the American Bar Association’s Section of Litigation, Alternative Dispute Resolution Committee.
While mediation is intended to end disputes, there are unfortunately occasions when the mediation leads to an attempt to bring a new claim based on conduct that occurred during the mediation. In Hydroscience Technologies, Inc. v. Hydroscience, Inc., 2013 WL 1897149 (Tex.App.-Dallas 2013), the plaintiff claimed that there was an agreement made in a mediation to transfer certain shares of stock, and that the agreement had not been honored. Although the plaintiff was not a party to the mediation, the plaintiff contended that it was the intended recipient of the disputed shares. The written settlement agreement that resulted from the mediation, however, did not mention any transfer of shares, and so the plaintiff sought to introduce evidence of communications that took place during the mediation to prove the existence of an oral agreement.
Texas, like most jurisdictions, has a rule that communications that take place during a mediation are privileged and confidential and cannot be used in subsequent court proceedings. Plaintiffs, however, cited a prior case, Aviary v. Bank of America, N.A., 72 S.W.3d 779 (Tex.App.-Dallas 2002), in which the court had permitted the use of mediation communications to prove a claim that a bank had breached its fiduciary duty as the executor of an estate involved in a mediation while representing the estate in that mediation. The Hydroscience court distinguished Aviary because in the prior case the plaintiff sought to prove a “new and independent tort” that occurred between the plaintiff and plaintiff’s fiduciary in that mediation. In addition, the plaintiff was not seeking to obtain additional funds or in any way disturb the settlement that had been reached during the mediation. In contrast, the plaintiff in Hydroscience was trying to alter an agreement that had been reached in mediation. The Hydroscience court therefore held that the only instance in which mediation communications can be used to support a subsequent claim is if someone is seeking to assert a new and independent tort, “the pursuit of which would not disturb the settlement reached at the mediation proceeding.”
While the rule crafted in Hydroscience is based on the specific language of the Texas mediation statute, it reflects a principle that is present in the mediation rules and statutes of most states. Most states, for example, allow the use of mediation communications to prove a professional malpractice claim against a lawyer representing a party in mediation, which fits within the “independent tort” concept of the Hydroscience holding. The Hydroscience holding, therefore, reflects a fairly wide-spread and emerging rule on when mediation conduct can be the basis for a subsequent tort claim.