August 6, 2018

by Dennis Law

Confidentiality in the context of settlement and mediations is not always as straightforward as is often thought. And confidentiality in the context of settlement is not the same as confidentiality in the context of mediation.

Rules of confidentiality for traditional settlement negotiations, including court mandated settlement conferences, are contained in a different set of codes than is the case for mediations. Generally speaking, a higher level of confidentiality applies to mediations, but there are exceptions to both sets of rules that should be understood. This article will provide a general overview to both areas of confidentiality.

A. Settlement Negotiations — Offers of Compromise
Confidentiality protection in settlement negotiations comes from Evidence Code Section 1152. Section 1152 states that evidence of a compromise or offer of compromise is inadmissible to prove liability for loss or damage.  The protections of Section 1152 extend to conduct and statements made in negotiation of an offer.  C&K Engineering v.  Amber Steel (1978) 23 Cal.3d 1, 13. These protections apply to any offers of compromise, including court-mandated settlement conferences and private communications between counsel.

But Section 1152 only protects against offers of compromise being used to prove liability for the claim that is the subject of the offer. It may not prevent the use of offers of compromise for other purposes, and such offers may be discoverable, even if they are not admissible.  Covell v. Superior Court (Drasin)(1984) 159 Cal.App.3d 39, 42;Ca. Practice Guide Civil Trials and Evidence, Rutter Group, 8:2813, citing Truestone, Inc. v. Simi West Industrial Park (1984) 163 Cal.App.3d 715, 725. While Section 1152 is grounded on a strong policy of precluding evidence of offers of compromise and the negotiations surrounding such offers, the scope of its confidentiality protection is somewhat limited.

You will find from the discussion below that confidentiality in mediations is more expansive, but it too has limitations.

B. Confidentiality in Mediations

As to mediations, confidentiality protections come from Evidence Code Sections 1115 -1128 and 703.5Section 1119(c) states that “all communications, negotiations, or settlement discussions by and between participants in the course of a mediation shall remain confidential” (emphasis added).  Section 1119(a) states that no evidence of anything saidduring the course of mediation is “admissible or subject to discovery.”  And disclosure of such evidence may not be compelled in any proceeding in which testimony may be compelled.  Section 1119(b) states that “[n]o writing . . .  prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible or subject to discovery, and disclosure of the writing shall not be compelled. . . .”  In addition, Section 703.5 states that a mediator is not competent to testify in anycivil proceeding as to anystatement or conduct at mediation, subject only to some very limited exceptions related to contempt and criminal conduct.

The scope of confidentiality in mediation is quite broad, and it protects virtually anything that is said, done or produced, regardless of the purpose for which disclosure is sought. And it applies to all participants, not just the parties and their attorneys.  Ca. Practice Guide Civil Trials and Evidence, Rutter Group, 8:2831.20.  But keep in mind that there are specific statutory exceptions.¹

1) Statutory Exceptions

Here are some of the notable statutory exceptions:

a. Written Settlement Agreement  Evidence Code Section 1123 provides for the disclosure of a written settlement agreement prepared and executed in the course of mediation. It would be virtually impossible to enforce a settlement if the written agreement could not be disclosed to the court.  To be disclosable, the written agreement must expressly state that it is (1) admissible or subject to disclosure, or (2) enforceable, binding or words to that effect (see Evidence Code Section 1123). And the agreement must be signed by the parties.² To emphasize, the written agreement must contain express language conforming with Section 1123 in order to be disclosable.

b. Evidence Otherwise Admissible Evidence Code Section 1120 provides an exception for evidence that was presented as part of mediation, if the evidence is otherwise admissible in a court hearing or trial. Should such material otherwise be admissible, it continues to be admissible even though it was referred to in mediation.

c. Express Agreement Waiving Confidentiality Evidence Code Section 1122 states that a communication or writing that is made during mediation is disclosable if all mediation participants agree in writing to the disclosure. This exception allows parties to clarify the confidentiality classification of particular communications or writings.

These exceptions to confidentiality are solelystatutory, meaning that there are no judicial exceptions to confidentiality in the context of mediation.  Simmons v. Ghaderi(2008) 44 Cal.4th570, holding that the judicial principles of equitable estoppel and implied waiver cannot be applied to create a confidentiality exception beyond those allowed by Evidence Code Section 1115, et seq.

2) Evidentiary Exclusion vs. Privilege.

The confidentiality provisions of these Evidence Code sections raise issues of evidentiary exclusion.  The statutes, and the cases interpreting them, speak in terms of whether evidence is admissible, or whether it is excluded due to its confidential character. The rule has notbeen characterized as a privilege, but a rule of exclusion.   Simmons v. Ghaderi, supraat 588. Although the principle of confidentiality is stated in very broad and absolute terms, the statutory scheme does not clearly define remedies other than evidentiary exclusion.  One can reasonably conclude that the creation of an unqualified rule of confidentiality would, in combination with other judicial remedies, give rise to remedies such as injunction and damages, but this is not found in the statutes and supporting case law is limited.

So, while the confidentiality protections afforded to mediations can be securely relied upon to determine whether evidence is admissible or inadmissible, they are less clear in determining whether information can be disclosed in a non-judicial proceeding such as disclosure to the public or the press. To account for this uncertainty, where there is a concern regarding public disclosure, the parties may want to expressly agree that the rules of confidentiality contained in the Evidence Code extend to prohibit public disclosure as well.

3) What Is Mediation?

There is one final point to address regarding the scope of confidentiality for mediations; namely that it only applies to mediations.  The Evidence Code provides a clear definition of mediation. It is defined as a process in which a neutral person facilitates communication between disputants to assist them in reaching a resolution.  Evidence Code Section 1115(a). Mandatory Settlement Conferences are specifically excluded from the definition of mediation.  Evidence Code Section 1117(b)(2) . Negotiations between counsel not involving a neutral third party are obviously not mediation.

Although what is or is not mediation may generally be obvious, it is sometimes less obvious when mediation starts and ends and what is or is not a part of mediation.  For example, are telephone conferences between the mediator and counsel which take place before and after mediation a part of the mediation?  And what about communications when the mediator is not present?

Evidence Code Section 1119(a) does not limit confidentiality just to statements and writings during the “course of” mediation.  Section 1119(a) uses the phrases “for the purpose of” and “pursuant to”.  Convening telephone conferences between the mediator and counsel before the actual mediation begins may not be discussions during the course of mediation, but they are for the purpose ofand pursuant tomediation and such conversations should be confidential.

As to post-mediation discussions, one should look to the description of when mediation ends in Evidence Code Section 1125 .  In general, Section 1125 states that mediation ends; (a) when the parties execute a written settlement agreement that fully resolves the dispute, (b) when the mediator or a party provides written notice of termination, or (c) when there is a ten (10) calendar day lapse in communications with the mediator.  Ongoing discussions that extend beyond the “end” of mediation, as defined by Section 1125, would appear not to be covered by the confidentiality provisions that are generally applicable to mediations.  If confidentiality of post-mediation discussions is desired, then the parties should execute an agreement extending the mediation.

Summary

In some, and perhaps most, cases, confidentiality can be a very important issue. There may be concerns with the admission of evidence at trial or another legal proceeding. There may be concerns with disclosure to third persons and perhaps the public at large.  Different situations will generate different concerns and different resolutions.  Whether you are embarking on negotiating an offer of compromise, or participating in mediation, it will be helpful to have an understanding of the fundamentals of confidentiality.

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[1]   SB 954 is currently pending in the legislature, and it would add an additional exception related to malpractice claims.

[2]   The signature is necessary in order to allow for disclosure, not necessarily enforceability.  The courts have distinguished these two requirements.  In Stewart v. Preston Pipeline (2005) 134 Cal.App.4th1565, 1583-1585, the court held that for purposes of disclosure, a settlement agreement could be signed by a party’s attorney and still be disclosable, even though the signature of an attorney is insufficient to enforce a settlement agreement under Code of Civil Procedure Section 664.6.

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