Mediator Testifies For Insurance Carrier And Court Enforces Mediated Settlement Agreement Against Policyholder

What????????????

This opinion — Palmer v. State Farm – is wrong on so many levels that it’s no surprise the appellate court ordered that it not be published.  The opinion therefore controls only the fate of the parties to the case and cannot be cited as authority.  The no-publication order does not, however, diminish my distress about the mediator’s decision to file a declaration in support of State Farm’s motion to enforce a formal settlement agreement that its insured refused to sign as contrary to the handwritten agreement drafted by the mediator during the mediation proceedings.

The appellate court affirmed the trial court’s enforcement of the post-mediation settlement agreement based, in large part, on the mediator’s sworn declaration that State Farm’s formal agreement accurately represented the one signed by the parties during the mediation —  a matter that, if true, should have appeared on the face of both documents.   See HANDWRITTEN SETTLEMENT SHOWS PARTIES’ INTENT, CALIF. COURT FINDS for a summary of the Court’s decision.

What’s wrong with this opinion?  Let me count the ways.

In California, a mediator is presumed incompetent to testify under Evidence Code section 703.5.  A good thing, too, since mediators are bound by the confidentiality provisions contained in  Evidence Code section 1115 et seq. /1

Mediators are also required to be — ahem — NEUTRAL.  Why was this mediator providing a sworn declaration to support State Farm’s case against the policy holder?  And does his drafting of the handwritten agreement at the mediation give him a personal or professional stake in its enforcement, thus further undermining his neutrality.

I’m not going to mince words about this.  I believe it falls below the standard of care for a mediator to voluntarily provide a Declaration to the Court concerning anything anyone said during the mediation, including his opinion about what the parties an meant to say when they entered into a settlement agreement (an intuition that could only be based upon confidential communications).  I also believe that its below the standard of care for a mediator to voluntarily provide a declaration to one party in support of a motion against another party to the mediation.  The fact that the mediator provided a declaration in support of State Farm (and not the policyholder) is even more troubling when you consider the fact that insurance carriers are repeat players in ADR circles and hence a better source of business for mediators than single-player plaintiffs.

On the confidentiality issue, it is notable that the mediator-drafted agreement stipulated that:

The parties waive the provisions of [the] California Evidence Code relating to mediation confidentiality, rendering this agreement enforceable pursuant to . . . section 664.6.”  (Italics added.)

The language used suggests to me that the purpose of the clause was to render the written agreement admissible in evidence to prove its existence  — “waive . . . mediation confidentiality [to] render[] this agreement enforceable.”  I know it doesn’t say that.  It says that the parties are waiving confidentiality  PERIOD.  It would surprise me if that’s what the parties meant to do, i.e., open up to judicial scrutiny every communication uttered in the course of the mediation – in separate caucus and joint session.  Would a mediator be liable for an ambiguously drafted agreement that leads to the loss of mediation confidentiality for the parties?  I don’t have an answer to the question but mediators might want to ask themselves whether they should be drafting the parties’ agreements if they want their malpractice premiums to remain as low as they are today.

Hat tip to my husband Stephen Goldberg, who blogs at the Catastrophic Insurance Coverage Blog for the head’s up on this. You should post on this one honey.  It gives you something else to rail against the insurance carriers about!

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1/  It is not clear from the opinion whether the Court treated the mediator’s declaration as one from an expert.  It does appear, however, that the mediator’s declaration was in the form of a legal conclusion — the formal written contract was the same as the handwritten contract — testimony that is inadmissible to interpret the meaning the parties gave to the agreement at the time of contracting.  See the Construction Weblink Article Experts’ Opinions on Contract Interpretation here by John W. Ralls of Howrey’s San Francisco office.

                       

Victoria Pynchon

Attorney-mediator Victoria Pynchon is a panelist with ADR Services, Inc. Ms. Pynchon was awarded her LL.M Degree in Dispute Resolution from the Straus Institute in May of 2006, after 25 years of complex commercial litigation practice, with sub-specialties in intellectual property, securities fraud, antitrust, insurance coverage, consumer class actions and all… MORE >