From the Business Conflict Blog of Peter Phillips.
We are all too familiar with settling parties who seek to relieve themselves of their settlement agreements. The Fifth District Court of Appeals in Dallas recently reversed a trial court that had permitted such a party to obtain testimony of opposing counsel’s communications during the mediation that led to the settlement.
In In re Pipeline Corporation (September 15, 2010), the parties concluded a mediation session by signing a document entitled “settlement agreement.” Attorney Robert Harris represented the defendant companies. Two months later the plaintiff, Glenn Gunter, moved to “vacate” that agreement, alleging fraud, duress, coercion, mistake, breach of the agreement, breach of fiduciary duty and (my favorite) “withdrawal of consent.” The trial court issued an order enforcing the agreement and Gunter appealed.
While the appeal was pending, Gunter filed a declaratory judgment seeking a finding of defendants’ failure to perform the agreement. The appeals court meanwhile returned the original matter to the trial court for further proceedings. The remanded action and the declaratory judgment action were consolidated.
Then Gunter served a Notice of Deposition on attorney Harris. The notice required (among other things) the production of all notes and drafts Harris had created during the mediation, and his testimony with respect to the “discussions and negotiations with opposing parties, including the mediator and Plaintiff and his counsel.” Gunter expressly denied that his demand for discovery sought ”the work product of counsel, nor his trial strategy, but rather information going to the very heart of the issue: was an agreement actually reached at the mediation, and if so, what were its terms?”
The trial court granted the motion for discovery to the extent that Gunter was allowed to take attorney Harris’ deposition, as long as no trial preparation or attorney-client communications were sought “unless such matters were communicated to the mediator or to [Gunter] or his representatives.”
Defendants and Harris sought mandamus, arguing that the trial court’s abuse of its discretion would yield harm for which no adequate remedy would exist on appeal.
Gunter relied on a 2002 case in which an estate guardian sued a financial institution for breach of fiduciary duty, based on the institution’s conduct during a mediation. That action was allowed despite its reliance on mediation communications, because the claim was an independent one against a nonparty to the mediation, claiming a tort that had occured during the mediation by the nonparty fiduciary. The holding in that case was thus distingushable — there, the court held “only that where a claim is based upon a new and independent tort committed in the course of the mediation proceedings, and that tort encompasses a duty to disclose, [the Texas mediation confidentiality statute] does not bar discovery of the claim….”
The court in this case, by contrast, found no support for permitting such discovery in an action to avoid or nullify the settlement agreement reached between the parties to a mediation. The court thus concluded that all of the discovery granted by the trial court is barred by the Texas statute, and granted a writ of mandamus, which would issue only if the trial judge failed to vacate its order and render a new order denying the motion to compel discovery.
They got a lot of chutzpah in Texas, but trying to invalidate a mediated settlement agreement by seeking to depose your adversary’s counsel seems to be just a step too far.
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