Earlier this year, I posted a blog about a U. S. District Court case, Craig Milhouse and Pamela Milhouse v. Travelers Commercial Insurance Company (Case No. SACV-10-01730-CJC (ANx), C.D. Cal.), in which the court held that a “due process” exception applies to mediation confidentiality. Plaintiffs sued defendant for insurance bad faith. During trial, defendant sought to and was allowed to introduce statements made during mediation to defend itself against such claims. The trial court allowed in such evidence, finding that due process required that the defendant be allowed to present its defense.
As one might suspect, the matter was appealed and cross- appealed to the Ninth Circuit Court of Appeals (Case Nos. 13-56959 and 13-57029). The opening briefs have been submitted and present an interesting juxtaposition on the nature of mediation confidentiality in California.
In their Opening Brief, the Milhouses argue that the mediation confidentiality rule set out in California Evidence Code Section 1119(a), (c) “… is not a mere evidentiary rule; it is a substantive right of privilege conferred by the California legislature” ( Id. at 20- 21), noting that the California Supreme Court has consistently interpreted this statute very broadly, continually holding in case after case that “‘… there are no
They then note that under the diversity jurisdiction of the court, (pursuant to Fed. R. Evid. 501), the state law of California applies here. (Id. at 21-22.)
In contrast, in its Opening Brief, Travelers Commercial Insurance Company (“Travelers”) argues that “… mediation confidentiality established by California Evidence Code Section 1119 is not a ‘privilege'” (Id. at 39) as it does not appear in the section on “Privileges” in the California Evidence Code. Thus, Fed. R. Evid. 501 governing “privileges” in federal court is not applicable. Rather, Travelers argues, Fed. R. Evid. 408, governing the admissibility of statements made during settlement negotiations, is the applicable rule. While that rule provides generally that statements made during settlement negotiations are not admissible, Travelers points out that the rule also states that such statements are admissible “when offered for a purpose other than proving or disproving ‘the validity or amount of a disputed claim’ including, without limitation, ‘negating a contention of undue delay.'” (Id. at 40.) Thus, Travelers contends that the statements made during the mediation are admissible as they are being offered not “…either to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction” (Fed. R. Evid. 408), but to negate a claim of bad faith on its part. ( Travelers brief.pdf)
So, is mediation confidentiality a rule of substantive law or one solely of admissibility? More importantly, do these arguments lose sight of the forest for the trees in that mediation confidentiality (no matter how it is labeled) serves an important function; to allow the parties to say what they are really thinking so that the matter can be resolved? We all know from our own experience that as long as we dance around a subject and not be candid or honest about what is really upsetting us, we don’t resolve the matter; rather, it simply festers and grows worse. The purpose of mediation confidentiality is to provide the disputing parties with a “safe harbor” by telling them that their deep dark secrets in terms of what is really disturbing them will not only stay within the confines of the mediation session, but will also stay within the confines of the mediator unless the party gives her permission to reveal it to the other side. In order to confide in someone, a party must feel that she can trust that person. That is what “mediation confidentiality” provides; that level of trust needed to resolve the conflict.
I can only imagine how much trust I will garner if I have to tell parties at the beginning of a mediation that their secrets may or may not be safe within the confines of the mediation or with me…. depending on what a judge later decides. If I am required to tell the parties that mediation confidentiality is limited, I do not see myself settling too many cases nor do I see myself even conducting too many mediations. It will be time for me to find another job!
Stay tuned for further developments in these appeals.
… Just something to think about.
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