Court Refuses To Carve Out Judicial Exception To Mediation Privilege While Explaining Why Privilege Simply Didn’t Apply Here.
Few are the cases in which courts have pierced the mediation confidentiality privilege, because the courts have said the privilege is almost absolute, refusing to craft judicial exceptions to the statutory privilege, Evid. Code sections 1115 et seq. Thus, the law is relatively well-defined in this area. Gilda Lappe v. Superior Court (Murray Lappe Real Party In Interest), Case No. B255704 (2/3 Dec. 19, 2014) (Kitching, Klein, Edmon) offers a rare counter-example of a case in which the mediation privilege is not enforced.
In a divorce proceeding, Gilda Lappe relinquished for $10M her community property interest in shares owned by her husband Murray Lappe, a successful physician/businessman. Some five months after judgment was entered in the family law case, Dr. Lappe sold his interest for $75M pre-tax dollars. Ms. Lappe sought to reopen the judgment and obtain through discovery a financial disclosure statement her husband had produced during mediation. Dr. Lappe’s attorneys took the position that the disclosure statement was subject to the mediation privilege; indeed, a marital settlement provided the Declarations of Disclosure were subject to the privilege and were confidential.
The superior court judge assigned the discovery dispute to a referee who concluded the Declaration of Disclosure was not subject to mediation confidentiality because the document had “independent legal significance” and the “public policy” declared under the Family Code favoring disclosure to ensure fair and equal property divisions trumped mediation confidentiality. However, the superior court judge rejected the referee’s recommendation, instead concluding the public policy argument provided insufficient reason to carve out a judicial exception to mediation confidentiality.
The threshold question, said the Court of Appeal, is: “[D]o the mediation confidentiality statutes apply in the first instance to statutorily mandated disclosures that must be made regardless of whether the parties participate in mediation? We conclude the answer to this question is ‘no.’” (Fam. Code, section 2103 mandates the exchange of of preliminary and final disclosure statements, except under limited circumstances prescribed by statute (Fam. Code, sections 2105 and 2110)).
The Court hurried to explain that it was not agreeing with the referee’s conclusion that a declaration of disclosure was not subject to mediation confidentiality because of “public policy” and the Family Code favoring disclosure. Rather, the Court explained that it was simply recognizing “that the confidentiality statutes do not apply in the first instance, because these statutorily mandated declarations do not fall into any category delimited by Evidence Code section 1119.” In other words, mandated financial disclosures must be made whether or not mediation occurs, and making the disclosures in mediation will not immunize them from discovery.
Having concluded that the disclosures were not immunized by mediation confidentiality, the Court still needed to explain why the settlement agreement, by which the parties agreed that the documents were confidential and subject to section 1119 confidentiality, failed to be an effective contractual waiver of the mandatory Family Code disclosure requirement. Here, the Court relied on Civil Code, section 3513: “Any one may waive the advantage of a law
intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.” By way of explanation, the Court simply said, “So it is here,” adding that waiver was only permitted under section Family Code, section 2105.
COMMENT: Saying that the Family Code statutory requirement is for the public benefit, rather than for private benefit, begs the question. Why is it for a public benefit that cannot be waived, rather than for a private benefit that could be waived? The fact that the Family Law Code expressly limits waiver supports the “public benefit” argument. However, I suspect that the same reasons waiver is limited under the Family Code may be the same public policy reasons the referee gave for “overriding” mediation confidentiality – namely, that the Family Code favors disclosure to ensure fair and equal property divisions. So even though the Court of Appeal expressly abjured reliance on “public policy”, perhaps public policy slipped in under the radar via reliance on Fam. Code, section 2105.