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Victoria Pynchon

As the co-founder of She Negotiates Consulting and Training, I offer my services as a keynote speaker, trainer and consultant....

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She Negotiates

She Negotiates

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More Ways to Commit Legal Malpractice as a Mediation Advocate

If you didn't already understand how to protect your mediated settlement agreement from challenge, you do now.

But wait a minute!  Is that what you want?  

What if your client entered into the agreement only because its opponent made a material misstatement of fact?  What if one of your co-defendants challenges your settlement agreement as not having been made in good faith, thus exposing your client to potential liability for indemnity or contribution?  Can you win the "good faith settlement" motion without the testimony of the participants in the mediation?  

In a comment on yesterday's post, Los Angeles mediator Joe Markowitz noted that:

Parties are entitled to walk out of a mediation with a whole range of outcomes, from a completed settlement agreement, to a term sheet, to an oral understanding, to a promise to think over the other side's last offer, to a promise to see the other side in court! As long as both sides understand what they are getting at the conclusion of the mediation session, there should be no basis for a malpractice claim for any of these outcomes. If the parties choose to use a term sheet with no language in it indicating that they have settled their case, they just need to understand that any party can renege on the deal after the mediation. In some cases, that may be what the parties want, to give them some time to think the whole thing over

Joe's comments put the emphasis in mediation advocacy back where it belongs -- on the fully informed assent of the parties and on the strategic plans of litigation counsel.  

So here's yet another way to commit legal malpractice as a mediation advocate:  don't fully understand the implications of mediation confidentiality on the final resolution of your client's dispute.  I'll just bullet point ways to protect yourself and your client below and ask others to chime in with their recommendations:

  • if your client is relying upon the veracity of its opponent's representation in entering into the deal, write that representation into the agreement or deal points, i.e., "Party A and Party B both understand that Party A is entering into this agreement based upon the following representation/s: ....................................  "  Then you can include any other language that makes sense in the context of the agreement.  You can provide that Party B's production of documents confirming its representations to Party A is a condition precedent to Party A's obligations under the settlement agreement.  If your client simply needs protection down the line in the event FACT X proves to be untrue, you can include a liquidated damage clause in the agreement or provide for an expedited means of resolving any dispute resulting from the falsity of FACT X ; or, you could provide that the falsity of FACT X will render the settlement agreement null and void; 
  • you could avoid the problems created by the strict enforcement of mediation confidentiality  by agreeing with your opponent (in writing!) that the neutral-facilitated settlement negotiation is not a mediation to be governed by Evidence Code section 1115 et seq. but a settlement conference governed by Evidence Code section 1152 et seq.  This option would be a useful one to a defendant who is settling the action separately from co-defendants who might bring a motion challenging the good faith of your settlement.  
  • Less drastically, you could simply include in your settlement agreement a provision by which the parties agree that the mediation confidentiality protections as codified in section 1119 will not apply in the event a co-defendant challenges the good faith of the settlement.  Remember that the mediator is considered incompetent to testify so that your waiver of mediation confidentiality in the event testimony is needed to oppose a challenge to the good faith of your settlement may not permit the mediator to testify at the hearing (or to offer a declaration in opposition to the motion) as well he or she -- a neutral party -- shouldn't.

You're a litigator.  There are probably hundreds of ways to skin this particular cat.  The keys are knowing and understanding the law of mediation confidentiality and thinking through all of the implications it might have on your clients' rights or interests down the line.  That's what we litigators do and we shouldn't abandon those strategic considerations just because we believe we're settling this case for good and it will never come back to haunt us or our clients again.

Remember, you are in control of the process.  If you don't like mediation confidentiality, tailor a confidentiality agreement to suit your circumstances.  You will, of course, have to "sell" your proposal to your opponent.  The  best time to do that might well be at the end of the mediation rather than at its commencement.  By that time, your opponent is pretty darn committed to the resolution of the lawsuit.  His client is already planning on ways he can more profitably spend his time and money other than on further litigation, attorneys' fees, and court costs.  The plaintiff is, I guarantee you, already spending the settlement monies or planning the celebration back at the office and wondering whether this might lead to the promotion he or she has been waiting for.

Yet another way to commit legal malpractice (and how to avoid it) tomorrow!


Comments (2)

Read through and enter the discussion by using the form at the end
Joe Markowitz - September 17, 2009 12:41 AM

Thanks for the plug, Victoria. If I'm understanding this post correctly, which I'm not sure I am, I would make the following comments: Contracts, including settlement agreements, should generally contain an integration clause, which would make evidence of misrepresentations inadmissible. But even if you combine an integration clause with representations and warranties, thus giving your client the opportunity to set the agreement aside in the event the warranties and representations turn out to be false, I'm not sure that you would be entitled to introduce evidence of anything that occurred at the mediation or settlement conference to prove the falseness of the representations and warranties.

Also, if you had heard something at the mediation that made the reps and warranties false, it would not really make sense (and would verge on bad faith) to include the representations and warranties in the first place. I think representations and warranties are reserved for the situation where you are taking the other sides' word for something You include the representation and warranty to protect your client from the possibility that you will learn something in the future that demonstrates that the representation was false, which would then give your client the opportunity to void the agreement.

So I'm not sure there are too many occasions where anyone would want to allow for evidence as to what took place at the mediation. To open up that can of worms usually doesn't do either side any favors.

Vickie Pynchon - September 17, 2009 1:33 AM


Thanks again for dropping by and commenting. In this post I'm simply raising potential problems that can arise if mediation advocates do not understand the consequences of mediation confidentiality.

I was once consulted by a lawyer who wished to use mediation confidences to support his motion to confirm a mediated settlement as having been made in good faith. Of course mediation confidentiality would prevent him from doing so, and, perhaps, rightly so. I mention the problem here only because that conversation gave me pause and I thought to share it with my readers so that they might reach the best strategic decision for his their clients when settling one defendant out of many.

As to representations and warranties, I have heard many representations of material fact made in the course of a mediation resulting in a settlement agreement that is memorialized only by a "term sheet." Under current case law, if the "magic language" of section 1123 is recited, the term sheet is highly likely to be enforced and the party to whom the representation was made will be frustrated in its attempt to insert the agreed upon conditions precedent in the final formal agreement if its opponent behaves dishonorably.

In one mediation over which I presided, the parties settled two lawsuits with the understanding that the settlement of each lawsuit was a condition precedent to the settlement of the other. The Plaintiff's principal was not present at the time the cases were settled "on a recommended basis." The Defendant's principal signed both terms sheets at the close of the mediation.

The term sheets did not mention the condition precedent because it was late and the attorneys wanted to leave the "details" to the following day.
The Plaintiff later attempted to enforce Settlement A (which it signed) and avoid Settlement B (which it refused to sign).

Although I was able to reconvene the mediation and "re-settle" both actions, had I not be able to do so, counsel's failure to include the condition precedent in both term sheets could have caused his client damage that might have formed the basis for a malpractice action.

I am not suggesting in any of these posts that counsel take any particular course of action. Nor am I suggesting that mediation confidentiality be compromised. I am simply laying out the "parade of horribles" so that counsel will consider the potential consequences of the all too common practice of concluding a deal with term sheets and leaving "the details" for a later date.

There ARE attorneys, particularly those representing policy holders in coverage actions, who believe mediation is the refuge of scoundrels, permitting insurance companies to engage in bad faith settlement practices under a cloak of secrecy. To them I have suggested that they take control of their fate by holding a "settlement conference" instead of a "mediation." See my post on that topic here: http://www.negotiationlawblog.com/2008/08/articles/mediation/dont-like-mediation-confidentiality-hold-a-settlement-conference-instead/

Again, thanks for your thoughts. They help me clarify my own and I hope they will help "our" readers clarify theirs.


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