California Mediation and Arbitration

Mediation: Fourth District, Division 1, Affirms Trial Court’s Determination Defendant Agreed to “Binding Mediation”

Court of Appeal Concludes Binding Mediation Need Not Be An Oxymoron, Distinguishing Lindsay v. Lewandowski

     The trial court enforced a settlement agreement, under Cal. Code Civ. Proc. section 664.6, resulting in a binding mediation award in favor of plaintiffs.  Defendant appealed, contending that it never agreed to resolve the dispute through “binding mediation”, that the agreement was uncertain, and that binding mediation is not among the constitutionally and statutorily permissible means of waiving jury rights.  Bowers v. Raymond J. Lucia Companies, Inc., Case No. D059333 (4th Dist. Div. 1 May 30, 2012) (McConnell, P.J., author) (certified for publication).

     The Court of Appeal affirmed.  Though “binding mediation” may at first blush seem like an oxymoron to you and to me, here, there was “substantial evidence” from which the trial court could determine what the parties intended by way of alternative dispute resolution.  The evidence included a transcript of counsels’ comments to an arbitration panel, which was informed of the settlement, and a written settlement agreement with a written amendment.  Despite the somewhat unusual use of the term “binding mediation,” it was apparent that the parties chose a mediator, that they mediated, that the framework involved each party submitting their “last and final offer which shall be some amount between $100,000 and $5,000,000”, and that “[t]he mediator shall then be empowered to set the amount of the judgment in favor of Plaintiffs against [Defendant] by choosing either Plaintiffs’ demand or Defendants’ offer, such binding mediator judgment to then be entered as a legally enforceable judgment . . . “

     When the parties were unable to resolve the dispute themselves, the mediator resolved the dispute by choosing the $5,000,000 amount.  (Compare baseball-style arbitration, “in which an arbitrator decides a monetary dispute by selecting from the parties’ final proposals”, which the Court of Appeal cites as “an example of binding mediation”.)

     Along the way, the Court had to distinguish Lindsay v. Lewandowski, 139 Cal.App.4th 1618 (2006), a case in which the Court of Appeal refused to enforce an agreement requiring “binding mediation.”  However, unlike the appellants in Lindsay, “the defendant in this case never objected to binding mediation or insisted it was entitled to a post-mediation arbitration hearing until after the mediator made an award in plaintiffs’ favor.”  Also, unlike the parties in Lindsay, the parties in Bowers “elaborated on what they meant by the alternative dispute resolution method they chose.” 

     Finally, the Court of Appeal concluded that giving up a right to a jury trial through the ADR method chosen was not forbidden by the Constitution or by statutes.  True, statutory rules prescribe how one can waive the right to a jury trial, and end up instead with a court trial.  But the parties can choose a dispute resolution mechanism (such as settlement) that avoids trial altogether.  And that, according to the Court, is what happened here:  “In this case, the parties agreed to settle their dispute through binding mediation in a nonjudicial forum.”

     So, unless “binding mediation” is truly an oxymoron in all circumstances, Bowers is indeed distinguishable from Lindsay, and hence, the result is different.

Enforcement of Settlement Agreement: Second District, Division 8 Holds Settlement Enforceable Against Employer Under CCP section 664.6 in Wage and Hours Case.

 

Court Rejects Employer’s Arguments That Agreement Lacked Material Terms and Was Obtained Through Fraud.

     Mejia v. Jhan, Inc., No. B230818 (2^nd Dist. Div. 8 January 10, 2012) (unpublished), involved an overtime dispute between the employee, Mejia, and the employer, Jhan, Inc. The parties entered into a settlement agreement calling for the employer to make a lump sum payment of $25,000, without admission of liability, and for the parties to execute a further long form agreement, a common term in short form agreements.

     You guessed it: the employer did not pay $25,000, claimed that the agreement was unenforceable for lack of material terms, argued that it had been obtained through fraud and argued that the employee had breached a confidentiality agreement.

     From the employee’s point of view, it turned out that the settlement was adequately drafted:

“The Stipulation satisfies the statutory prerequisites of section 664.6. It is a written agreement duly executed by all parties. Moreover, paragraph 6 of the Stipulation expressly provides that "[t]his mediation settlement agreement is intended to be binding and enforceable and is effective this 13th day of Oct., 2010, and reflects the final agreement between the parties to this dispute, and each of them, pursuant to Evidence Code Section 1123. This stipulation for settlement is admissible and subject to disclosure, despite the otherwise enforceable requirements of confidentiality, solely for the purpose of establishing in court that an agreement has been reached by the parties for purposes of enforcing and interpreting that agreement."

     Evidence of fraudulent inducement was lacking, and even if the employee had breached a confidentiality term, that did not render the agreement unenforceable.

     Result: Affirmed on appeal. Justice Grimes authored the opinion, in which Justices Rubin and Flier concurred.