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Legal Mediation News – April 2014

This is another in a series of updates on Legal Mediation News from News Editor, Keith Seat. See our related Newsletter Service for your clients and referral sources.

After Agreeing to Mediators’ Proposal, Party Bound by Silence on Settlement Agreement

A fee-splitting dispute among some fifty law firms was resolved at the end of a difficult mediation when all parties finally accepted the mediators’ proposal for dividing fees.  When the settlement agreement was drafted, however, one lawyer tweaked the terms and then was silent as the agreement moved forward and was signed by all other parties.  Applying Illinois law, the U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s conclusion that based on the parties’ long course of dealing the lawyer was bound by his silence even though he never signed the agreement. 
Bauer v. Qwest Communications Co., No. 12-3036 (U.S.C.A. 7th Cir., February 14, 2014)

Court Narrowly Defines Mediation in Attorney Fee Splitting Dispute

A New York trial court took a narrow view of mediation in resolving a dispute among co-counsel in which the trial lawyer was to receive 12% of the attorneys’ fees if the case settled at mediation, but 40% if the case settled after mediation.  The mediation session began mid-afternoon and stopped later in the day for defendants to seek more authority from their insurer; a final number was agreed on 11 days later with the mediator’s ongoing efforts, three months prior to the scheduled trial.  However, the court ruled the trial lawyer was entitled to 40% because the case was not resolved during the scheduled mediation session.
Marin v. Constitutional Realty, LLC, No. 111531/2007 (N.Y. S.C., February 20, 2014)

Mental Illness Rejected as Basis for Undoing Mediated Settlement Agreement

A party who settled in mediation later claimed that he was mentally ill and should not be bound by the settlement agreement, but a Wisconsin appellate court upheld the agreement based on the trial court’s determination that the mental illness was a personality disorder and did not impact the party’s cognitive abilities, the fact that he was represented by counsel in the mediation, and the legal presumption that everyone is fully competent until proven otherwise. 
In re Estate of Jackowski, No. 2013AP335 (Wis. App., February 18, 2014)

Communication Within Family Breaches Confidentiality of Mediated Settlement

A Florida appellate court reversed the trial court and concluded that a school headmaster’s need to tell his daughter how his employment dispute was resolved in mediation violated the confidentiality provision in the settlement agreement.  The breach came to light when his daughter immediately sent out a gloating message on Facebook to 1,200 friends, including many students of the school.  The appellate court precluded the headmaster from enforcing the settlement agreement, stating that his need to say something about the case’s outcome to his daughter should have been raised and worked out during mediation. 
Gulliver Schools, Inc. v. Snay, No. 3D13-1952 (Fla. App. 3rd Dist., February 26, 2014)

Progress in Detroit Bankruptcy Mediation

  • The federal judge overseeing mediation in Detroit met with Michigan’s top two legislators to determine their willingness to help resolve the country’s largest municipal bankruptcy.  The Michigan Senate and House are both Republican-controlled and lawmakers have proposed using a nearly billion-dollar state surplus to cut taxes.  Bloomberg Businessweek (January 16, 2014)
  • The federal judge acting as lead mediator was criticized by several major financial creditors and Detroit’s two pension funds for publicly supporting a deal he mediated between Detroit and two global banks; the criticism focused on his support impinging on the confidentiality of the mediation process.  Detroit Free Press (January 2, 2014)

  • The federal appellate court that is considering the challenge to Detroit’s eligibility for bankruptcy protection stated that it will confer with the lead mediator on the case about the status and timeframe for mediation before determining whether to take the case right away.  Crain’s Detroit Business (February 10, 2014)

  • Detroit submitted its financial restructuring plan to the federal bankruptcy court a week ahead of the court’s deadline.  Although much progress has been made in mediation, many issues remain, with objections from a committee of city retirees concerned about cuts to pensions on one hand and bondholders and other creditors complaining about pensioners being favored on the other.  Municipal bankruptcies are rare, so there is less clarity about the relative priority of creditors.  The governor of Michigan is calling for the plan to be the basis for voluntary settlement as part of the mediation process to resolve the bankruptcy quickly and soften necessary changes.  The Wall Street Journal (February 21, 2014); The Wall Street Journal (February 14, 2014)

Other Notable & High Profile Proceedings

  • Use of mediation in arriving at a class action settlement is a factor in favor of the court finding no collusion, but is not dispositive even if the mediator is a retired judge.  Prior to approval, the court required detailed evidence concerning the mediation and negotiations of the settlement agreements, including the mediation statements and other documents concerning mediation offered by the parties.  Four in One Co. v. S.K. Foods, No. 2:08-cv-3017 KJM EFB (U.S.D.C. E.D. Cal., January 2, 2014)
  • A federal trial court approved attorneys’ fees of $7.5 million for class counsel, which was the maximum agreed to in a settlement that was reached after five all-day mediation sessions; the court rejected defendant’s objection to four senior partners attending each mediation session, as mediation ultimately led to settlement.  Moore v. Verizon Communications, Inc., No. C 09-1823 SBA (U.S.D.C. N.D. Cal., February 14, 2014)

  • Failure of a party to pursue mediation as required by contract does not deprive Connecticut courts of subject matter jurisdiction; courts have discretionary authority to stay litigation and compel mediation.  Mark v. Neundorf, No. AC 33762 (Conn. App., January 14, 2014)

  • Although not raised by the parties, the court held that the unambiguous mediation and arbitration requirement of a partnership agreement between the parties divested the court of jurisdiction, so the plaintiff’s complaint was dismissed without prejudice.  Salem Vegas, LP v. Guanci, No. 12-cv-01892-GMN-CWH (U.S.D.C. D. Nev., January 2, 2014)

  • The court agreed with plaintiff to dismiss its complaint while retaining jurisdiction over the mediated settlement agreement, rejecting various arguments from defendant relating to its own representative negotiating outside his settlement parameters in mediation, plaintiff’s representative not having a written statement of authority, the parties signing the settlement in the wrong signature blocks, and more.  Aveos Fleet Performance, Inc. v. Vision Airlines, Inc., No. 8:11-CV-0950 (U.S.D.C. N.D. N.Y., January 13, 2014)

  • Appellants could not have the settlement agreement from mediation rescinded due to not being informed about another fraud action involving defendant, because what is not said in mediation is no more admissible than what is said.  Cruz v. Bank of America, No. B247763 (Cal. App., 2d Dist., January 6, 2014)

  • The court refused to sanction one party for leaving the mediation without notifying the other side or sending a representative without adequate authority because the mediator’s report did not indicate a problem.  The court refused to sanction the other side for improperly disclosing confidential mediation information in its motion for sanctions, stating that since the mediator was not required to report lack of good faith the party’s only recourse was to move for sanctions.  Freedom Scientific BLV Group, LLC v. Orient Semiconductor, Ltd., No. 8:13–cv–569–T–30TBM (U.S.D.C. M.D. Fl., January 17, 2014)

  • The court refused to strike defendant’s two experts because they accidentally were given confidential ADR materials, accepting the experts’ affidavits that they did not rely on the material and noting that neither cited the confidential material in their reports.  McLean v. Air Methods Corp., No. 1:12-cv-241-jgm (U.S.D.C. Vt., January 24, 2014)

  • Assertions that a bank failed to make an offer in good faith during mediation with a homeowner were rejected due to mediation confidentiality as well as the bank’s evidence that it did make an initial settlement offer.  Klahn v. Clackamas County Bank, No. 13-CV-621-ST (U.S.D.C. D. Ore., January 2, 2014)

  • The authority of counsel to settle the case two days after mediation was challenged by his clients; the court reversed a decision to enforce the settlement agreement, concluding that there was no evidence that counsel had explained the terms of the settlement to his clients.  Lemoine v. Thornton, No. CA 13-889 (La. App., February 12, 2014)

  • Even when court-ordered, mediation is not a recoverable cost in federal litigation under 28 U.S.C. § 1920.  Fantroy v. Publix Super Markets, Inc., No. 8:12-cv-1940-T-33EAJ (U.S.D.C. M.D. Fla., February 3, 2014)

  • Mediation fees may not be imposed as costs on the losing party under local rule or practice in Montana.  Lazy JC Ranch, LLC v. Donnes, No. DA 13-0249 (Mont., January 28, 2014)

Mediation Initiatives

Oregon Medical Malpractice Program May Need More Mediators

Under Oregon legislation enacted a year ago, the Oregon Patient Safety Commission will launch a program in July seeking to resolve medical errors by encouraging a first round of direct discussions between providers and patients before bringing in mediators when needed.  However, a shortage of mediators may impede the program, with some estimating that only a dozen mediators in the state may currently qualify for the state’s list of recommended mediators.  Others believe there are plenty of experienced mediators who can deal with medical malpractice, and that hospitals may be directly developing relationships with mediators and may not need to rely on the official list. 
The Lund Report (January 16, 2014); SB 483

Hurricane Sandy Claimants in New Jersey Receive Small Payments in Mediation

New Jersey’s mediation program for insurance claims from Hurricane Sandy has resulted in settlements with over 200 consumers who received an average of less than $16,000 each, which is only about 16 percent of their claims.  Nonetheless, the commissioner of the New Jersey Department of Banking and Insurance declared the ongoing mediation program a success, as it helps consumers close claims more quickly so they can apply for government grants and rebuild.  The mediation program only covers damage not caused by flood, which was modest compared to flood damage; flood claims are under the Federal Emergency Management Agency’s flood insurance program. 
Asbury Park Press (January 11, 2014)

Wisconsin Farm Center Celebrating 25 Years

The Wisconsin Farm Center is a federally-funded mediation program that serves about 80-100 Wisconsin farmers each year, relying on 20 mediators and 20 financial advisors who volunteer their time.  The mediation program began in 1989 and helps farmers, their creditors and the U.S. Department of Agriculture address loan problems, adverse decisions and other disputes.
Milwaukie Wisconsin Journal Sentinel (January 6, 2014)

Study Shows Litigants Prefer Mediation over Arbitration
Empirical research indicates that civil litigants clearly favor mediation over arbitration, although they like direct negotiation by their counsel as much as mediation as long as they are present in the negotiations.  Civil litigants also favor judge trials over jury trials.  The study covered a wide range of legal disputes among 400 litigants in 19 states, gathering information about their views at the beginning of their cases; later papers will analyze their views at the end of litigation.
Donna Shestowsky, “The Psychology of Procedural Preference: How Litigants Evaluate Legal Procedures Ex Ante,” 99 Iowa L. Rev. 637 (2014); Central Valley Business Times (January 13, 2014)

Federal Judicial Center Studying ADR in Federal Courts
The Federal Judicial Center is conducting a detailed analysis of the way a range of federal trial courts have designed and use their Alternative Dispute Resolution (ADR) procedures.  In 2011, the Federal Judicial Center compiled a summary report on the forms of ADR authorized by local rules in federal courts and discovered that about one-third of the federal trial courts use mediation, about one-third authorize multiple forms of ADR, and the other third provide general authorization for ADR or settlement conferences.  The new study focuses on eight districts of varying sizes and locations around the country and is to be completed by late 2014. 
United States Courts (January 23, 2014)

eDiscovery Mediation
Mediation can be helpful in developing a mediated discovery plan to deal with the cost and complexity of e-discovery, which otherwise can be overwhelming in many cases, with emails, text messaging, social media posting, along with word documents, spreadsheets, and other forms of electronic documents. 
Crain’s Cleveland Business (February 6, 2014)

Other Notable News & Programs

  • The Ohio Supreme Court has revived its Commission on Dispute Resolution to mediate disputes over budgets, public records and other governmental issues.  The Commission had been eliminated in budget cutbacks in 2011.  The revived Commission successfully mediated its first matter, involving a budget dispute in Hocking County between a county judge and county commissioners.  The Columbus Dispatch (January 21, 2014)
  • Legislation recently introduced in New Jersey would mandate greater use of alternative dispute resolution approaches by state agencies in order to obtain the benefit of techniques developed in the private sector and through court-sponsored programs.  LegiScan (January 14, 2014)

  • Legislation introduced in Hawaii would authorize the board of land and natural resources to mediate disputes over the market value of public lands since arbitration is cumbersome and does not provide the opportunity to work collaboratively.  Arbitration could be used when mediation fails to resolve disputes.  LegiScan (January 21, 2014)

  • The Colorado HOA information officer submitted a report to the Colorado General Assembly proposing that lawmakers provide both arbitration and mediation for residents to settle disputes with dysfunctional homeowners associations, based on systems in place in Florida, Nevada and Virginia. The Gazette (February 21, 2014)

  • The Mediation Program of the U.S. District Court for the Southern District of New York increased its settlement rate in general civil litigation to 60% in 2013, up from 53% the year before.  Other changes were also made in 2013, such as permitting mediations to be conducted in the mediator’s office for the first time.  Annual Report of the Mediation Program (January 15, 2014); Lexology (January 20, 2014)

  • A Massachusetts senator was honored for his leadership in securing funding and establishing the Community Mediation Center Grant Program, which supports the work of 14 community mediation centers statewide which have over 600 trained staffers. (January 16, 2014)

  • The city of Henderson, Nevada, has begun offering free mediation services through a Neighborhood Justice Center to resolve disputes among neighbors, landlords and tenants, homeowner associations and residents, and employers and employees. (January 21, 2014)

Keith Seat

Keith L. Seat is a full-time mediator and arbitrator who can effectively assist parties in resolving a wide range of telecommunications, antitrust and other commercial disputes. With over twenty years of legal experience as a mediator, arbitrator, litigator, advocate before executive branch agencies, and key staffer in the legislative and… MORE >

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