California Mediation and Arbitration

Mediation, Confidentiality, Settlement Agreement: CCA 1/2 Agrees Plaintiff Suing Doctor Failed To Perform Settlement Agreement After Mediation

Including Confidentiality Provision In Settlement Of Malpractice Lawsuit Did Not Violate Public Policy, Because Provision Did Not Prevent Reporting To State Medical Board.

        In Pappas v. Chang and Chang v. Pappas, Nos. A159792 and A160293 (1/2   3/3/22) (Richman, Miller; Kline, conc.), the Court of Appeal affirms the trial court in separate consolidated appeals. In Pappas v. Chang, the court affirms the trial court's denial of Pappas's efforts to enforce a settlement agreement, agreeing that Pappas failed to perform her part of a bargain by executing a confidentiality agreement in return for payment to her of $100,000. And in Chang v. Pappas, the Court of Appeal affirms the trial court's denial of Chang's request to recover attorneys fees, based on Pappas's denial of two requests for  admission.

        Helena Pappas sued Dr. Carolyn Chang, a SF plastic surgeon, for malpractice, and settled in mediation for payment to her of $100,000. However, the settlement agreement provide for execution of further settlement documents to include a waiver of Civil Code  § 1542, and a confidentiality provision. Chang was to pay $70,000.01, and her carrier was to pay $29,999.99. Attorneys, judges, and mediators will know that $30,000 is a magic number in malpractice actions, because settlements greater than $30K trigger a requirement to report to the California Medical Board. Pappas believed Chang was trying to use confidentiality to prevent her  from reporting to the Medical Board, and that would have violated Business and Professions Code §§ 2220.7 and 801.01. Pappas refused to executed a confidentiality provision unless paid an additional $425,000.

        The Court of Appeal reasoned that the way the settlement agreement was written, a confidentiality provision would not have prevented reporting to the Medical Board; that the settlement amount was $100,000; and that as worded, the settlement agreement did not hinder legal reporting obligations. Therefore, the settlement agreement agreement was enforceable, and Pappas failed to perform her  part, so she could not enforce the settlement agreement. Nor was the confidentiality provision severable, since it was agreed to and material.

        Because the requests for admission went to ultimate questions and Pappas denied them in good faith, Chang was properly denied attorney's fees.

        Justice Kline concurred, because in the end, the law had not been stymied. But he wrote separately, "because I feel my colleagues have not adequately described Chang’s and her lawyer’s repeated attempts to violate the Business and Professions Code and the whitewashing of those efforts by the trial judge."

        BONUS: "Blepharoplasty (Greek: blepharon, "eyelid" + plassein "to form") is the plastic surgery operation for correcting defects, deformities, and disfigurations of the eyelids; and for aesthetically modifying the eye region of the face." (Wikipdedia).

        COMMENT: Pappas might have spared some trouble by signing the confidentiality agreement, and receiving the $100,000. Perhaps she felt that she achieved some measure of victory by making her unhappiness with Chang a matter of public record in a published opinion. The concurring opinion gives her some measure of vindication. At the same time, it is now a matter of  public record that Pappas may be unhappy about the outcome of her cosmetic surgery. 

 

Mediation, Attendance, And Settlement: Parties Failing To Attend Probate Court-Ordered Mediation Could Not Complain About Settlement Reached By Participating Parties And Judge Changes His Mind

Justice Tangeman, Who Concurred Before, Now Dissents After Rehearing.

        We posted on February 2, 2021 about Breslin v. Breslin, B301382 (2/6  1/26/21) (Gilbert, Yegan, Tangeman), an opinion authored by Justice Gilbert in which Justices Yegan and Tangeman concurred. The case held  the party receiving notice of a mediation ordered by the probate court and failing to participate in court-ordered mediation is bound by the result.

        Justice Tangeman, who concurred, has now dissented, having changed his position after a rehearing.

        Justice Tangeman explains his position: "A charitable gift must be carried into effect if it 'can possibly be made good.' (Estate of Tarrant (1951) 38 Cal.2d 42, 46.) The majority’s newfound requirement that a party participate in mediation before it can inherit ignores this command. It will reduce the number of gifts that 'can possibly be made good' by encouraging parties to send out mediation notices whenever they desire to eliminate gifts to beneficiaries that don’t appear—for whatever reason." 

 

 

Mediation, Attendance, And Settlement: Parties Failing To Attend Probate Court-Ordered Mediation Could Not Complain About Settlement Reached By Participating Parties

Potential Beneficiaries Of Trust Received Notice, But Failed To Participate.

        After Don Kirchner died in 2018, the successor trustee of Kirchner's living trust found a document listing 24 charities with handwritten notes appearing to be percentages for  distributing the estate. The probate court confirmed the successor trustee and ordered mediation among interested parties. Apparently the parties received notice, but several parties, designated as the "Pacific parties," did not attend the mediation. The participating parties reached a settlement, the non-participating Pacific parties objected to the petition to confirm the settlement, and the probate court confirmed the settlement. The Pacific parties appealed. Breslin v. Breslin, B301382 (2/6  1/26/21) (Gilbert, Yegan, Tangeman).

        Affirmed. "The probate court has the power to order the parties into mediation. (See Prob. Code, section 17206 . . . .)" The dispositive case is Smith v. Szeyller, 31 Cal.App.5th 450 (2019), holding that "a party who chooses not to participate in the trial of a probate matter cannot thereafter complaint about a settlement reached by the participating parties." True, the Breslin case involved a mediation,  not a trial, but the mediation was  court-ordered, and parties receiving notice could not blow it off without consequences.

        COMMENT: An online obituary for Don Kirchner states,  "Don was a generous man who loved God, loved his wife, loved his country, and his dogs (especially Lola, who was with him through his retirement years)."

 

Mediation/Settlement Agreement: Court Enforces "Short Form" Settlement Agreement Over Objections Of Petitioner

The Neighbor Feud Had Gone On Since 2002.

 

     Wandering Elk, Dakota Indian, smokes peacepipe. c1903. Frank Bennett Fiske, photographer.  Library of Congress.

     The Court of Appeals' reliance on the wisdom of a Croatian proverb offered a strong clue in the first sentence that the Court would enforce peace among feuding neighbors:  "Better a bad harvest than a bad neighbor." Beuchel v. Sup. Ct., B268193 (2/2  5/1/17) (Hoffstadt, Ashmann-Gerst, Goodman) (unpublished).  Another clue was the Court's eagerness to treat the matter, filed as an appeal, as a writ proceeding. In this unpleasant neighbor dispute, there were allegations of spraying plaintiff with a garden hose, trespass to install barbed wire, and installation of surveillance cameras.  The 15 year history of ill-will included a citizen's arrest of plaintiff after defendants allegedly found her in their backyard damaging their fence.

    But let's cut to the chase.  Plaintiff tried to wriggle out of a short-form settlement agreement following a mediation, chiefly on the grounds that she only understood the release of claims to apply to defendants' cross-claims, not her own, as to which the trial court had already granted summary judgment against her.  After neighbors brought a motion to enforce the settlement agreement, which the trial court granted, plaintiff appealed.

    Unsurprisingly, the Court of Appeal denied the plaintiff/petitioner's request, affirming the trial court's grant of the enforcement motion.  

    COMMENT:  Key reasons that the Court was willing to enforce the shorthand form were that it described the settlement "as full and final settlement of the claims raised" in the court case; plaintiff's promise to waive her right to appeal; and a "1542 waiver" that included each parties' waiver of all claims known and unknown.  

     The Court of Appeal added, "The trial court had ample grounds to find that plaintiff's refusal to sign the  short-form agreement was an effort to create controversy where none existed and a thinly veiled attempt to 'cause unnecessary delay' by frivolous means."  As a consequence, the Court upheld a trial court order awarding payment of attorney's fees defendants incurred in moving to enforce the short-form agreement.

      There is a strong tendency to attribute fault to someone who appears to be acting unreasonably.  

Mediation/Settlement Agreement/Confidentiality: Settlement Agreement Enforced Under CCP 664.6 Against George R. Hearst’s Widow

Famous Family, Simple Legal Principles.

      Though the opinion opens with a fanfare announcing, “George R. Hearst, Jr. . . scion of the wealthy Hearst family,” the facts and legal points are actually pretty simple. 

     George and Susan Hearst married in 1998, and entered into a marital property agreement (MPA) in 2002, whereby Susan waived her community property interests in George’s assets in exchange for $10 million in cash and a life estate in certain real property.  Susan accepted the $10M in cash without attempting to invalidate the MPA.  After George died, however, Susan filed claims against his estate and trust seeking her share of community property.  Following mediation, Susan entered into a written settlement agreement, providing an additional $550K, with $140K allocated to her life estate in a residential property and $410K allocated to her community property claims. 

     Susan signed the settlement agreement, but refused to accept respondents’ tendered performance, triggering the filing of a successful motion for entry of judgment under Code of Civ. Proc., section 664.6 in the probate actions.  Susan appealed.  Estate of Hearst, Case Nos. B251912 and B251964 (2/6 Dec. 16, 2014) (Perren, Gilbert, Yegan) (unpublished).

    The settlement agreement, stating it was binding and could be enforced by motion under section 664.6, was admissible in evidence under Evid. Code, section 1123.  Susan may not have read the entire agreement – but she signed it, and therefore was deemed to assent to its terms.  Marin Storage & Trucking, Inc, v. Benco Contracting & Engineering, Inc., 89 Cal.App.4th 1042, 1049 (2001).  And:  “Susan was represented by three attorneys from two different law firms.”  Apparently Susan decided to forego legal advice on her MPA claims – a fact that did not render the settlement agreement unenforceable because section 664.6 only requires a written agreement signed by the parties, not legal advice.  Given her legal representation, her entitlement to $10,550,000, and lack of evidence about her late husband’s personal (as opposed to familial) wealth, Susan was unable to show procedural and substantive unconscionability. 

     Is anyone surprised the Court of Appeal affirmed the judgments?

Mediation/Settlement Agreement: No Explanation As To How Defendant’s Alleged Hearing Loss Impaired His Ability To Read And Understand A Written Settlement Agreement

Court Enforces The Settlement Agreement.

     Plaintiff Jing Jing Dan sued Rambla Vista Enterprises, LLC and Joichi Gushiken alleging sexual harassment and unwelcome sexual advances by Gushiken, followed by termination of employment after she objected to her treatment.  Four days after a mediation, the parties entered into a stipulation for settlement, whereby defendants agreed to pay Dan $420K in consideration for a general release and a dismissal with prejudice.  After defendants refused to pay or recognize the settlement, Dan filed a successful motion to enforce the settlement pursuant to CCP section 664.6.  Defendants appealed.  Jing Jing Dan v. Rambla Vista Enterprises, LLC, B252050 (2/1 Nov. 25, 2014) (Rothschild, Chaney, Miller) (unpublished).

     The Court of Appeal shot down defendants’ three arguments for setting aside the settlement on appeal.

     First, the Court of Appeal disagreed that a stipulation calling for payment in exchange for a full and complete general release of claims and a dismissal with prejudice was not definite and certain.  Also, the stip provided that it was an enforceable settlement and contained all material terms.

     Second, the Court rejected the argument that the stipulation was unenforceable because defendants’ counsel did not sign it.  Cases supporting that argument were distinguishable, because they involved attorneys of record who were bypassed in the settlement process – not the case here.

     Third, the Court rejected the argument the settlement should be scrapped because the defendant was old, hearing impaired, and exhausted by stress.  None of that explained why he couldn’t understand a document he signed four days after the mediation.  In any case, the trial court did not abuse its discretion. 

     DRAFTING TIP:  The stipulation for settlement contained language that it was binding on the parties and admissible pursuant to Evid. Code section 1123 – important if you want to get around mediation confidentiality.  Also, we like the following “plain language”:  “that ‘[w]hile there may be additional, minor, usual and customary settlement provisions, there are no other material terms (deal breakers) beyond those which are described in this memorandum and the lack of any specificity in that regard will not prevent the parties from being bound by the terms of the agreement.’”

Mediation/Confidentiality: Potential Error Admitting Evidence Subject To Mediation Confidentiality Was Harmless

Also, Settlement Documents May Be Admitted For Purposes Other Than Proving Liability.

     While documents subject to the mediation privilege may be inadmissible as evidence, an error in admitting the documents into evidence will not matter to the Court of Appeal, if admission of the evidence resulted in harmless error.  That was the case in Lofton v. Wells Fargo Home Mortgage, Case No. A136626 (1/3 Oct. 22, 2014) (Siggins, McGuiness, Jenkins) (certified for publication).

     Initiative Legal Group, APC (ILG) objected to a TRO freezing funds from a class action settlement while the trial court sorted out problems with the settlement.  One of ILG’s contentions was that the trial court erred by relying on inadmissible evidence subject to mediation confidentiality.  The Court of Appeal, however, brushed off this contention on the ground that “any potential error was harmless in light of the substantial admissible evidence before the court supporting its issuance of the TRO.”  The admissible evidence included attorney letters to clients, an attorney declaration, and the record of settlement approval proceedings in the class action.

     Furthermore, attorney letters related to settlement were not being introduced to establish the attorney’s liability for any loss, “but rather to establish the risk of imminent harm that would justify issuance of the TRO.”  The Court reminds us that Evid. Code section 1152 is not an absolute bar to introducing settlement documents, because such documents may be admissible for purposes other than proving liability.

     The case is a wild one involving a bungled class action settlement and the disbursement of settlement funds to clients and attorneys.  It makes for interesting reading, and is the subject of a post today on California Attorney’s Fees.

Mediation/Confidentiality/Family Law/Settlement Agreement: Affirming Trial Court, Second District, Division 1 Agrees Stipulated Judgment Reached Through Mediation Is Enforceable, Despite Failure To File It In Dissolution Proceedings, And Dismissal Of Mari

Stipulated Judgment May Not Have Contained Magic Words, But It Was Sufficient To Express Parties’ Intent To Waive Confidentiality And Allow Enforcement

     Daly v. Oyster, B249255 (2/1 July 29, 2014) (Chaney, Johnson, Wiley) (published) deals with that nettlesome situation that sometimes arises after mediation when papers are not filed with the court, the case is eventually dismissed, and one of the parties then seeks to enforce the settlement. Does the confidentiality of mediation prevent introduction of the stipulated judgment into evidence? Has a party simply waited too long to enforce the agreement? Has the court lost jurisdiction to enforce?

    In 1981 Joanne Daly and David Oyster married. In 2004 they separated.  In 2005, Daly filed a marital dissolution petition.  In June 2006, the parties entered into a stipulated judgment following mediation.  In May 2011, the superior court dismissed Daly's petition for lack of prosecution.  In June 2011, Daly filed a second dissolution petition to enforce the stipulated judgment. Apparently wanting to open up the proceedings and seek modifications, Oyster objected to admission of the stipulated judgment on the ground it was protected by the mediation privilege, Evid. Code section 1119.

     The Court of Appeal, however, disagreed with Oyster.  One exception to mediation confidentiality is a written settlement agreement providing “that it is admissible or subject to disclosure or that it is enforceable or binding, or words to that effect.”  That little tail -- “words to that effect” – means that magic words are not necessary.  It is enough if the terms unambiguously signify the parties’ intent to disclose the agreement or be bound by it.  Such was the case here:  “The parties agreed the court would enforce the document, which it could not do unless the document was disclosed to it.” 

     Did the time to enforce the stipulated settlement run out, given that the divorce took longer than five years, and the underlying case was dismissed after five years?   No – there was no authority that the statute of limitations for asserting breach of the agreement created a deadline for seeking to enforce it.  But for good measure, even if a statute of limitations was running, Daly could have filed the stipulation until the case was dismissed in June 2011, after which she would have had four years to sue for breach of a written agreement.

     PRACTICE TIP:  Include language that your settlement agreement, achieved through mediation, is admissible, subject to disclosure to the court, enforceable, and binding, and you eliminate one problem encountered by Daly. 

Mediation/Settlement Agreement: When Class Has Not Yet Been Certified, Putative Class Rep Cannot Consent To Temporary Judge On Behalf of Absent Putative Class Members

Trial Judge Refuses To Appoint Retired Judge Who Mediated The Class Action Dispute As Temporary Judge

      Petitioner Luckey’s mediation of a class action lawsuit with defendants resulted in a settlement agreement pursuant to which the parties stipulated to appoint a temporary judge to hear the matter “until final determination thereof.”  The parties intended that the temporary judge would decide issues related to preliminary and final approval of the class action settlement, and that the same retired judge who had served as mediator would act as the temporary judge and be privately compensated.  The trial judge, however, declined to appoint a temporary judge, leading to plaintiff/petitioner Luckey’s writ petition seeking relief.  Luckey v. Super. Ct., B253892 (2nd Dist. Div. 3 July 22, 2014) (Croskey, Kitching, Aldrich).

     The Court of Appeal denied the writ petition:

“We conclude that the California Constitution, the California Rules of Court, and public policy concerns all preclude the appointment of a temporary judge for purposes of approving the settlement of a pre-certification class action. When the class has not yet been certified, the putative class representative has no authority to consent to a temporary judge on behalf of the absent putative class members.”

    The Court mentioned two interesting issues that, however, it did not decide: (1) following class certification, does the class representative have authority to consent to a temporary judge on behalf of absent class members?  (2) are any ethical issues raised by having the same individual who mediated a settlement agreement act as a temporary judge in the matter?

Ninth Circuit Punts On Existence Of Federal Mediation Privilege

Maricopa County Waived Argument That Evidence Admitted To Show Settlement Should Be Privileged Under Federal Law

     87 Yard Punt . . .

     In Wilcox v. Arpaio, No. 12-16418 (9th Cir. Feb. 2, 2014) (Tashima, Farris, Reinhardt), the Ninth Circuit avoids having to “determine whether a mediation privilege should be recognized under federal common law and, if so, the scope of such a privilege.”  The panel punted on the issue when it determined that Maripoca County, which did not want a settlement agreement enforced, had failed to argue that evidence of settlement should be privileged under federal law, by instead staking the erroneous position that state law governed. 

      Here are the points about the “privilege” that we can glean from the opinion:

• Federal common law generally governs a claim of privilege.  Federal Rule of Evidence 501.
• In a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.  Id.
• The admissibility of evidence of settlement reached during mediation of federal and state law claims is governed by federal privilege law.

     How did these rules play out here?

     Plaintiffs brought claims against Maricopa County and certain officials alleging wrongful investigation, prosecution, harassment, and retaliation -- federal claims pleaded under 42 U.S.C. section 1983, and supplemental state law claims.   Therefore, the admissibility of evidence that plaintiffs reached a settlement with defendants will be decided under federal law.  Under federal law, there is no statutory mediation privilege – leaving the murky status of the privilege to be decided under federal common law.  But here, the Court of Appeal did not have to decide the interesting question.

     Because Maricopa County staked the (incorrect) position that the privileged status of the evidence had to be decided under Arizona state law, it forfeited the argument that the evidence was privileged under federal law.

     And so the district court did not err by admitting evidence of settlement and enforcing the settlement.  Affirmed.

     NOTE:  On February 24, 2012, I blogged about Facebook, Inc. v. Pac. New. Software, Inc., 640 F.3d 1034 (9th Cir. 2011), a case now described in Wilcox v. Arpaio as:

“applying state contract law to determine in mediation the parties reached an enforceable settlement of plaintiffs’ federal and state law claims, but applying federal privilege law to determine what evidence from mediation was admissible in support of that determination.”