The Uniform Mediation Act — A Radical Approach to Confidentiality

At its recent meeting in California, the Drafting Committee on the Uniform
Mediation Act of the National Conference of Commissioners on Uniform State Laws
(NCCUSL), in an apparent attempt to placate the California mediation community, has
intensified its efforts to mimic the radical approach to mediation confidentiality embodied in the
California statutes. The NCCUSL Draft is radical in the sense that (a) it creates an evidentiary
privilege in the context of mediated settlement discussions that goes well beyond the type of
protections which Rule 408 of the Federal Rules of Evidence (and similar state rules) provide for
statements made between adversaries in settlement discussions which are not facilitated by a
mediator, (b) it creates a statutory privilege in favor of a disputant’s adversary (who usually does
not have an interest aligned with the disputant) which is broader than the privilege afforded to a
person when confiding in his or her lawyer, doctor or priest (who does have a commonality of
interest with such person), (c) it covers not only statements which relate to the subject matter of
the dispute, but also to statements made by a disputant’s adversary, or by any other participant in
the mediation, which are totally unrelated to the dispute which is the subject of the mediation,⁽¹⁾ and (d) the privilege remains in effect even after
the dispute has been resolved. Unless all disputants waive the privilege, it also prohibits any
non-disputant participant in the mediation from testifying as to statements made by any other
non-disputant participant, irrespective of the subject matter of the statement and even if both
non-disputant participants waive the privilege.

It is universally recognized that an essential element of mediation is
confidentiality. Without confidentiality, parties may be unwilling to engage in the type of
creative and interest-based problem solving that is often needed to facilitate settlements.
However, it is important to distinguish between confidentiality and an evidentiary privilege. The
proposed statutory mediation privilege does not require that a disputant’s adversary keep the
disputant’s mediation statements confidential by refraining from repeating them publicly (which
is the type of confidentiality that parties coming into mediation often desire). This type of
confidentiality usually is (and should be) covered by confidentiality provisions contained in
mediation agreements or court rules. Instead, the proposed statute prohibits statements made in
a mediation from being disclosed in civil judicial, administrative or arbitration proceedings,
even if such statements have nothing to do with the dispute between the parties, even if the
statements are made by participants other than the disputants and even if the dispute between the
parties has settled or otherwise been resolved.

The proposed mediation privilege could prevent the impeachment of perjured testimony.

The proposed mediation privilege could encourage perjured testimony by a
disputant or other participant in the mediation who admits in the mediation to having committed
a fraud or other wrongful act, even if such wrongful act was committed against a person not
involved in the mediation. Such participant could, in a subsequent lawsuit brought by the victim
of such wrongful act, deny under oath that he ever admitted to anyone that he committed such
act, and his sworn statement could not be impeached because the only witnesses to the
admission were participants in the mediation who would be prevented from testifying due to the
privilege. Such would not be the case if the admission was made in the context of an
unmediated settlement discussion where the admissibility of evidence is governed by Rule 408
of the Federal Rules of Evidence and similar state statutes. Rule 408 protects disputants by
prohibiting statements, including apologies, made by them in the context of a settlement
discussion from being used against them in a litigation relating to the dispute to prove liability
for a claim or its amount, or the invalidity of the claim. However, Rule 408 permits statements
made in the course of settlement discussions to be admitted for other purposes, such as to
impeach sworn testimony or prove bias or prejudice of a witness. Thus, Rule 408 balances the
need to protect parties to a dispute in order to encourage candor in settlement discussions against
the need of the courts to be able to obtain relevant evidence which may not otherwise be
available (and which may not involve the parties or their dispute) in order to prevent injustice.

The proposed mediation privilege would prevent courts from fairly balancing the need for
evidence to prove fraud and prevent injustice against the need of the disputants for the
privilege.

Unlike the mediation privilege contained in the recently enacted federal
Administrative Dispute Resolution Act (the “ADR Act”), which provides for many exceptions,
including a broad exception “to prevent a manifest injustice” and an exception to “help
establish a violation of law,”⁽²⁾ the most recent NCCUSL Draft of the Uniform Mediation Act
contains only a small number of narrow exceptions. Although the Draft provides for an
exception for evidence needed to prove that a settlement agreement negotiated in the course of a
mediation was procured by fraud or duress, unlike the ADR Act, it does not permit testimony as
to the meaning of an ambiguous provision in such settlement agreement. Thus, the usual
exception to the parol evidence rule would be inapplicable to settlement agreements negotiated
in a mediation. Nor does the Draft contain an exception for evidence to prove common law
contract defenses, such as mutual mistake or unconscionability. Also, the Draft’s fraud or duress
exception does not permit the mediator to be a witness even if both disputants waive the
privilege and desire the mediator to testify because she is the only impartial witness to the
alleged fraud or duress.⁽³⁾ Such a privilege in favor of the mediator is difficult to justify in view
of the fact that only clients and patients, and not their lawyers and doctors, have the right to
assert the lawyer-client or doctor-patient privilege.

In addition to providing that the mediator as well as the disputants are holders of the
privilege, the fraud or duress exception (including most of the other enumerated exceptions in
the NCCUSL Draft) provides that, before the evidence of the fraud or duress can be admitted
into evidence, the court or other tribunal must first make a finding, after an in camera hearing,
not only that the evidence is not otherwise available, but also “that there is an overwhelming
need for the evidence that substantially outweighs the importance of the state’s policy favoring
the protection of confidentiality [in mediations].” How far must the scales of justice tip in favor
of a victim of fraud or duress to enable a court to find that the victim’s need for the evidence is
“overwhelming” and that such overwhelming need “substantially” outweighs the importance of
confidentiality in mediation? Since the Draft enumerates exceptions to an evidentiary privilege
rather than exceptions to a contractual provision imposing a requirement of confidentially, a
more appropriate balancing might be to weigh the proponent’s need for the evidence against the
need of the disputants to assert the privilege, which might be minimal or non-existent if their
dispute has settled or the mediation communications were made by participants in the mediation
other than the disputants. Unless the fraud victim’s need for the evidence is deemed to
“substantially” outweigh the important public policy favoring the confidentiality of mediation
communications, the fraud victim may suffer a serious injustice if the broad mediation privilege
proposed in the Draft is adopted.

The federal ADR Act appropriately recognizes that the need for an evidentiary privilege
should be limited to confidential caucuses with the mediator.

The most meaningful exception from the evidentiary privilege contained in the
ADR Act is its exception for a dispute resolution communication made by someone other than
the neutral which “was provided to or was available to all parties to the dispute resolution
proceeding.”⁴ Thus, the federal privilege is applicable only to communications made in
confidence to the neutral or to less than all of the disputants. Although a case can be made for
extending the lawyer-client, doctor-patient and priest-penitent type of privilege to confidential
communications made by a disputant to the mediator, it is difficult to justify creating a similar
privilege for communications between disputants, which may be witnessed by persons other than
the mediator and where the disputants have adverse interests.

The proposed mediation privilege could have unintended consequences.

Since a mediator can be anyone who the parties to a dispute designate as a “mediator” in
a written agreement, a mediation privilege which prohibits any participant in a mediation from
testifying as to statements made in a mediation could have unintended consequences, such as
excluding from evidence a disputant’s admission of a prior fraud or intentional tort. For
example, a rogue securities broker who organizes a group of other brokers to manipulate the
price of a thinly traded stock would fit within the definition of a “mediator” if, pursuant to a
written agreement, the organizing broker conducts a confidential mediation with his cohorts in
an attempt to facilitate a resolution of their dispute as to how to divide their ill-gotten gains.
Assuming that the “mediation” takes place after the stock manipulation has taken place and does
not involve plans for a future crime, none of the exceptions contained in the Draft would apply.⁽⁴⁾
Should each of these disputants have a statutory right to prevent any other disputant from
testifying as to the stock manipulation scheme in a civil suit brought by the victims of the stock
manipulation or in an SEC administrative proceeding?

The proposed mediation privilege is unnecessary to give disputants the comfort they need to
feel safe in a mediation.

Since most court rules and mediation agreements contain a provision that all mediation
communications shall be confidential (even though what is meant by “confidential is often not
defined), courts have, with rare exceptions, refused to order the disclosure of confidential
mediation communications without a clear and specific showing that the information is highly
material and relevant, necessary or critical to prove or disprove a claim and not obtainable from
other available sources.⁽⁵⁾ For example, in Folb v. Motion Picture Industry Pension & Health
Plans, 16 F. Supp. 2d 1164 (C.D. Cal. 1998), the court would not permit a former employee
suing his former employer to obtain, through pre-trial discovery, evidence of mediation
communications made by the employer in a prior mediation between the employer and another
employee despite the possibility that the employer’s statements in the prior mediation might be
needed as evidence by the former employee in his current lawsuit against the employer. Based
on the facts of that case, the court held that the general expectation of confidentiality of
mediation communications outweighed the evidentiary benefit to be gained by the former
employee by permitting him to discover what the employer said in the prior mediation.

The Folb case is instructive because the court analyzed the mediation privilege issue in
the context of Rule 501 of the Federal Rules of Evidence, which provides that a privilege issue
“shall be governed by the principles of the common law as they may be interpreted by the courts
of the United States in the light of reason and experience.” In addition to deciding that the
federal rather than the California law of privilege should apply (because the court’s jurisdiction
was based on a federal question rather than diversity), the court held that the mediation privilege
issue should be analyzed to comport with the analysis set forth by the Supreme Court in Jaffee v.
Redmond,⁽⁶⁾ which recognized a psychotherapist-patient privilege under Rule 501. The court
noted that the principal purpose of the mediation privilege is “to provide mediation parties
protection against [the] downside risks of a failed mediation”⁽⁷⁾ and that “the general rule is that
the public is entitled to every person’s evidence and testimonial privileges are disfavored.”⁽⁸⁾ The
court also recognized that, because Rule 408 only protects disputants from disclosure of
information to the trier of fact, the coverage of Rule 408 should be expanded in the context of
mediated settlement discussions to protect the confidentiality of mediation communications in
pre-trial discovery as well as at the trial.

The Folb court, noting the dearth of analysis on the question of “whether

communications disclosed to the opposing party in the course of mediation proceedings should
be accorded the same level of protection as private communications between one party and the
mediator,”⁽⁹⁾ discussed the issue in the context of mediation communications in the presence of
both disputants. Although finding a need to apply a mediation privilege under the facts
presented in that case, the Folb court quoted Professor Eric Green’s self described “heretical”
view of the issue as follows:

“Although most mediators assert that confidentiality is essential to
the process, there is no data of which I am aware that supports this
claim, and I am dubious that such data could be collected.
Moreover, mediation has flourished without recognition of a
privilege, most likely on assurance given by the parties and the
mediator that they agree to keep mediation matters confidential,
their awareness that attempts to use the fruits of mediation for
litigation purposes are rare, and that courts, in appropriate
instances, will accord mediation evidence Rule 408 and public
policy-based protection.”⁽¹⁰⁾

The Court also noted that Professor Green argued that the campaign to obtain a blanket
mediation privilege rests on “faulty logic, inadequate data and short-sighted professional self
interest.”⁽¹¹⁾

A Rule 408 type of evidentiary exclusion is preferable to the proposed NCCUSL mediation
privilege.

A logical and less radical approach for confidentiality provisions in a uniform mediation
statute could be to incorporate the provisions of Rule 408 and expand them to cover (a) pre-trial
discovery proceedings and (b) proceedings which may not presently be covered by the rules of
evidence, such as arbitration and administrative proceedings. The statute should also expressly
provide that the parties can agree to impose a greater level of confidentiality with respect to their
mediation communications by a written or other recorded agreement.

A Rule 408 type of evidentiary exclusion for mediation communications has the
advantage of simplicity and is likely to be enacted by most states because: (a) it is not
controversial because it and similar state evidentiary rules are presently accepted as the state of
the law applicable to unmediated settlement discussions; (b) it avoids the need to craft the
numerous controversial exceptions to the privilege approach which are currently enumerated in,
or recently omitted from, the Draft; (c) disputants can agree to a greater degree of confidentiality
than the lesser degree provided by statute, and such agreements are generally enforced by the
courts unless there is an overriding need for the evidence in the interest of justice; and (d) there
is no evidence that anyone has been deterred from participating in a mediation which would be
protected by confidentiality provisions contained in a mediation agreement or court rules merely
because of the lack of an evidentiary exclusion which is broader than the protections afforded by
Rule 408.

It is important that the confidentiality provisions included in a Uniform Mediation Act be
generally acceptable and uniformly applicable to all types of mediations. They must make sense
whether the mediation is facilitative or evaluative or conciliatory or adversarial and meet the
needs and expectations of the disputants in the context of a community mediation, a matrimonial
mediation, an environmental mediation as well as in the context of an adversarial commercial or
personal injury dispute where the disputants will not have a continuing relationship. In many of
these types of cases there is no need for confidentiality beyond the protections provided in Rule
408 because the disputants would never admit liability during the mediation, especially in the
presence of their adversary. In other types of cases, such as community or matrimonial disputes,
where the goal may be to induce the parties to speak candidly to each other and restore a prior
relationship, the need for confidentiality may be greater than in the adversarial context. Unless
NCCUSL is prepared to follow the lead which Congress took in its recent enactment of the ADR
Act and create two levels of confidentiality, a Rule 408 type for mediation communications
made in the presence of the adversaries and a higher lawyer-client type privilege for the private
caucus communications with the mediator, whatever level is created must work in both contexts.
If NCCUSL wants to increase the likelihood that its Uniform Mediation Act will be enacted by
most states in addition to states like California (which are free to choose to supplement the
uniform act with an absolute evidentiary privilege applicable to all mediations if they so desire),
NCCUSL should consider adopting a minimalist approach to a statutorily imposed level of
confidentiality for mediation communications, leaving it to the parties to impose a greater level
of confidentiality by agreement.

1. Compare this to the doctor-patient privilege, which prevents the doctor from testifying against his or her patient as to statements relating to the patient’s medical condition but does not prohibit the doctor from testifying as to statements unrelated to the patient’s medical treatment.

2. 5 U.S.C. § 574.

3. In Olam v. Congress Mortgage Company, 1999 W.L. 909731, __F.Supp. 2d ___ (N.D. Cal. 1999), U.S. Magistrate Judge Wayne Brazil, an acknowledged expert in court sponsored ADR, held that the mediator should testify on the issue of whether the settlement agreement was induced by duress where both disputants waived the California mediation privilege and wanted the mediator to testify.

4. § Although the Draft contains an exception for evidence to prove that a disputant or
mediator used the mediation “to plan or commit a crime,” that exception would not cover mediations relating to prior crimes or the use of the mediation process to plan to commit a fraud or tortious act wich does not constitute a crime.

5. Courts have also used this standard when considering the need to override the need to protect the confidentiality of journalists sources. See In re Petroleum Products Antitrust Litigation, 680 F.2d 5, 7 (2nd Cir. 1982).

6. 518 U.S. 1, 116 S.Ct. 1923, 135 L.Ed2d 337 (1996).

7. 16 F.Supp.2d at 1173.

8. Id. at 1171.

9. Id. at 1173.

10. Ibid.

11. Ibid.

                       

Stephen A. Hochman

Stephen A. Hochman recently retired from the New York City law firm of Friedman, Wittenstein & Hochman, where he practiced from 1987 – 2006, first as a partner and later as counsel.  He was a founding partner in the firm now known as Kramer, Levin, Naftalis  & Frankel, where he… MORE >