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Mediation Confidentiality: Does It Exist In Federal Court?

From the Blog of Phyllis G. Pollack.

       On August 16, 2007, the Ninth Circuit Court of Appeals issued its opinion in Babasa v. LensCrafters, Inc. (Case No. 07-55880), which, while focusing on the removal jurisdiction of the Court, determined that mediation confidentiality is of no moment. For many mediators in California, the Court’s discussion is unsettling.

      Factually, in April 2005, Patrick Babasa and others filed a putative class action in state court against LensCrafters, Inc. alleging various labor code violations. After the plaintiffs filed an amended complaint, the parties agreed to enter mediation.

       In December 2005, counsel for Babasa and the other plaintiffs sent a letter to counsel for LensCrafters confirming certain issues regarding the size of the class and the number of potential violations. The letter noted that it was sent“[i]n preparation for the mediation.” It further discussed the amount of potential damages, noting that missed meal periods amounted to $4.5 million while potential penalties amounted to an additional $5 million under provisions of the California Labor Code (“Letter”). (These amounts would constitute notice of damages and thus, that plaintiffs’ damages exceeded the amount in controversy requirement for federal jurisdiction. In essence, this would give notice to LensCrafters the case could be removed to federal court. ) 

       When the mediation did not resolve the case, on November 27, 2006, LensCrafters filed a notice of removal of the action to federal court, alleging that LensCrafters was not aware that the case was appropriate for removal until its counsel had a telephone call with opposing counsel on November 1, 2006.

      Under the federal removal statute, 28 U.S.C. §1446(b), LensCrafters was required to file a notice of removal within thirty (30) days of its first notice that the case is one which is or has become removable.  

       Thus, the issue was whether the December 2005 Letter – prepared for purposes of mediation and thus subject to mediation confidentiality under the California statutes – provided such notice or could LensCrafters rely on the November 1, 2006 telephone conversation between counsel as its first notice.

      The trial court determined that the December 2005 Letter was the operative document providing such notice and remanded the case back to state court because the request for removal was not filed within thirty (30) days of that letter, and thus, not timely.

        The appellate court affirmed, rejecting the argument of LensCrafters that the “. . . letter could not serve as proper notice of the amount in controversy for removal purposes, because the letter is privileged under state law.” (Id. at 10295) (i.e. mediation confidentiality found in California Evidence Code §1119.)

      The appellate court attempted to side-step the issue:


       “It is far from clear whether the. . . letter falls within the scope of the California mediation privilege. But we need not decide whether it does or not, because California privilege law does not directly apply in the present context.” Id. at 10295. 


       Citing  Federal Rule of Evidence 501, the appellate court determined that “state law does not supply the rule of decision here.” Id. As it is federal law determining whether this case meets the amount in controversy requirement necessary for diversity jurisdiction in federal court, 28 U.S.C. §1332, then it is also federal law that applies to determining whether the Letter constituted notice for purposes of removal jurisdiction.

      The appellate court found that, clearly, upon reviewing the December 2005 Letter in which plaintiffs claim damages in the millions, LensCrafters would have been put on notice that the case was removable to federal court.

          In a footnote, the appellate court further avoided the issue by noting that because LensCrafters did not raise the argument that the Letter is privileged under some federal evidentiary privilege (as opposed to the state mediation confidentiality statute) or that it falls within a federal common law privilege or even a federal mediation privilege, the court would not consider these notions and certainly would not determine their applicability. (Id. at 10296, fn.1).

          In sum, the court focused quite narrowly: since this was an issue to be decided under federal law, California state law on mediation confidentiality did not apply.

      Was this case decided on a technicality? Will its ruling be considered an extremely narrow one? Limited to its facts? I certainly hope so. . . because if not, many litigants and mediators in California will find themselves in a quandary. They will be left to guess and to apply at their peril, what, if any, rules apply regarding mediation confidentiality to their cases in federal court. Clearly, a mediator in a federal case  filed within the geographical boundaries of the Ninth Circuit (i.e., Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, Guam and the Northern Mariana Islands) will wonder whether mediation confidentiality exists, and if so, what are its parameters?

      For those who litigate or mediate cases in federal court, this decision clouds the landscape: is there mediation confidentiality in federal court?

       . . . Let us be guided by the mediator’s perpetual optimism and believe that such a notion does still exist.


Phyllis Pollack

Phyllis Pollack with PGP Mediation uses a facilitative, interest-based approach. Her preferred mediation style is facilitative in the belief that the best and most durable resolutions are those achieved by the parties themselves. The parties generally know the business issues and priorities, personalities and obstacles to a successful resolution as… MORE >

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