The SCMA Newsletter, missing in action for more than a year, will soon find its way into the mailbox of all SCMA members.  

For this we owe thanks to Board Members and/or authors Lisa Klerman, Phyllis G. Pollack, Dorit Cypis, Nikki Tolt, Ed Davis, President Jan Frankel Schau and the invaluable administrative skills of Linda Cain.

I provide here a teaser from Phyllis Pollack's and my article A Mediator's Dilemma, exploring mediation ethics in the context of an illegal counterfeiting operation.  

How many of us have been in this situation? We’re mediating a fairly run-of-the-mill business case – a fight over the sale of an import business. During the course of the mediation, it slowly begins to dawn on us that the parties are bargaining over the value of a business that trades in counterfeit Louis Vuitton and Gucci handbags. Is this the moment when we ask ourselves, if I’m carrying a pricey Prada, should I push the parties out of my pad?

But that’s the Carrie Bradshaw question.

The mediator’s questions go more like this: as a neutral mediator, do I have a duty to: (a) chastise the parties for engaging in illegal conduct; (b) recuse myself to avoid participating in the creation of an illegal agreement; or (c) inform the parties that any settlement reached might not be enforced?

Before answering these difficult questions, consider the recent case of Hye Young Yoo v. Sue Jho (Calif. Court of Appeal, 2nd Dist).

Yoo, the purchaser of a counterfeit handbag business, sued the seller after investigators confiscated the counterfeit goods, which naturally caused the business to fail. Yoo wanted some or all of her money back and the trial Court (wearing black polyester) agreed -- to the tune of $103,250.

Not surprisingly, the appellate court, slightly more Manolo Blahnik but nevertheless also sporting Ace Uniforms, reversed, holding that when it comes to illegal contracts “the law will leave the parties as it finds them.” Id. In Yoo, leaving the parties the way the Court found them meant some pretty good times for the defendant. She stole Gucci and LV designs, sold them to (unsuspecting?) customers and made a cool $400K at a time when she was likely looking over her shoulder for the law to close in.

So, what’s a neutral mediator to do?

For the tentative resolution, click here.