Between Scylla and Charybids: The Mediation Privilege and Legal Malpractice Claims

I attended a mediation earlier this month in a real estate case. I won’t say more through because . . . well . . . it’s confidential.

The confidentiality of mediations and of settlement discussions generally – the idea being that parties are more likely to resolve their differences if they can speak honestly and frankly with one another without fear that their words or actions can later be used against them in trial – has long been a hallmark of California law.

But that may not be the case for long. In 2012, the California State Legislature directed the California Law Review Commission (“Commission”), the state agency responsible for recommending reforms to California law, to review and make recommendations regarding the relationship between California’s laws which make mediation discussions confidential and attorney malpractice. And it appears that the Commission will be reaching a recommendation soon.

The Rub

So, here’s the rub between mediation confidentiality and attorney malpractice: Under California law, all communications, negotiations, or settlement discussions by and between participants in a mediation are confidential, are not subject to discovery and are inadmissible at trial. However, the mediation privilege has also been used as a shield with some success by attorneys in legal malpractice actions in which former clients have claimed that their attorney engaged in malpractice by improperly advising (or, as is more often the case, failing to properly advise) the client during mediation.

It’s like the Greek mythology of Scylla and Charybdis, with the Commission being asked to navigate the treacherous waters between preserving the mediation privilege on one hand while preventing its use as a shield in legal malpractice actions on the other.

Whether the Commission can address the few bad apples in the legal profession while protecting the rest of us and our clients is to be seen.

Navigating Through Uncharted Waters

In July of this year, following two years of study, the Commission announced that it had completed its background investigation and would start the process of preparing a tentative recommendation. Among the potential courses charted by the Commission, from direct to (really) indirect, included:

1. Creating an exception to the rule: Creating an exception to the mediation privilege for “attorney malpractice and other misconduct.”
2. Modifying the scope of the rule: Modifying the mediation privilege to allow it to be waived; requiring an attorney to waive the mediation privilege in the event a legal malpractice or State Bar disciplinary action is brought against him or her; or allowing a party to seek disclosure of a confidential mediation communication through a special showing that the need for disclosure outweighs the interest of maintaining confidentiality.
3. Retaining the rule but requiring certain disclosures: Requiring that an attorney disclose to their client that anything said or done during a mediation is confidential; requiring attorneys to provide a statutory disclosure form to clients before mediation; requiring mediators to provide participants with a statutory disclosure form; or requiring parties to view a video on mediation confidentiality before the start of a mediation.
4. Other potential recommendations: Limiting mediations to no more than 8 hours per day; modifying the burden of proof in cases involving legal malpractice in the context of mediation from negligent misconduct to willful misconduct; allowing participants to bring a support person to mediation and enacting a post-mediation “cooling-off period”; developing a mediator regulation system and requiring mediation to take place within 30 days of when a lawsuit is filed.

For a complete list of potential recommendations see the Commission’s Memorandum 2015-33.

The Course Charted by the Commission

At its August 7, 2015 meeting, the Commission voted to chart a direct course and recommend an exception to the mediation privilege which would:

1. Create an exception for claims against attorney-representatives and attorney-mediators: Create an exception to the mediation privilege for mediation communications, whether made during or in connection with a mediation, in cases involving claims of legal malpractice or professional misconduct against an attorney serving as a representative of a party or an attorney serving as a mediator.
2. Use of in camera preliminary hearings: Adopt a procedure for use of an “in camera” (i.e., private) preliminary hearing for purposes of determining the type and extent of alleged malpractice or misconduct, which could be declined in the discretion of the judge hearing the case. However, what is unclear, is if a judge declines an in camera hearing whether it means that all otherwise confidential information would be discoverable and admissible or whether it means that no confidential information would be discoverable or admissible (this is a huge difference!).
3. Other features: Not surprisingly, the exception would be recommended as an amendment to the Evidence Code which includes the current mediation privilege. In addition, while the exception could be used to pursue legal malpractice or professional misconduct claims, it could not be used to unwind or otherwise invalidate a settlement reached during mediation. And, finally, unlike the American Bar Association’s Uniform Mediation Act, which restricts the use of mediation communications in malpractice and misconduct cases to evidence used solely to prove or defend against such claims, the Commission would more broadly allow all evidence relevant to the alleged malpractice or misconduct.

Conclusion

While the final recommendation adopted by the Commission will almost certainly go through some fine tuning, some believe that the Commission’s chosen course already goes too far. For myself, I’ll just note that the direction the Commission has indicated it will be taking raises a number of interesting questions including:

1. How far will the exception apply? To pre-mediation communications? To post-mediation communications?
2. Can mediators be subpoenaed to testify or produce documents in support of or against an attorney who is alleged to have engaged in legal malpractice or professional misconduct?
3. Can other participants in a mediation be subpoenaed to testify or produce documents in actions alleging malpractice or misconduct (I am assuming here that attorney-client communications between a participant and their attorney-representative would continue to be privileged)?
4. If mediation communications are determined or deemed to be discoverable and admissible, whether in an in camera hearing, or because a judge declines to hold an in-camera hearing as discussed above, are attorney-client communications made outside of mediation inadmissible to rebut those mediation communications?
5. Can an opposing party in a mediation (or anyone for that matter) use mediation communications discovered or admitted in an underlying malpractice or misconduct case in a subsequent action against the party who brought or initiated the malpractice or misconduct claim (or, again, against anyone for that matter)?

Like to weigh in? You can subscribe to the Commission’s reports here and write to Barbara Gaal, the Commission’s staff attorney for this study, at bgaal@clrc.ca.gov.