Mediation Confidentiality and Enforceable Settlements: Deal or No Deal?
by Karin S. Hobbs
Editor’s note: On May 2, 2007, the Utah Supreme Court will hear argument on an interlocutory appeal involving a trial court’s order requiring an attorney to testify regarding mediation discussions.
After hours of mediation, the parties have reached a “deal” on the principal issues. The parties want closure. Attorneys begin preparing the written agreement to ensure the deal is clear, complete, final and enforceable. Mediation discussions continue. Emotions run high as the parties work through the final issues. If the “deal” is not written and signed, is there an agreement? Are the discussions confidential? How do attorneys ensure confidentiality of mediation? How do attorneys create an enforceable settlement agreement and avoid court action?
Why is confidentiality so important? Confidentiality is a critical element of successful mediation. In order for the mediator, the attorneys and the clients to understand the central issues, the motivations, the pressure points and the risks of litigation, the participants must be assured the discussions cannot and will not be disclosed to others so they can talk openly. Frequently, some of the motivating forces behind lawsuits are legally irrelevant and yet exceptionally important to understanding the conflict and facilitating resolution. Frequently, clients disclose private events, perceptions or issues in mediation they would not want disclosed to anyone. Explaining their concerns and fears is often critically important to them in order to resolve the conflict. If discussions with the mediator are not confidential and privileged, the mediation process, the mediator’s role and the potential for resolution are significantly diminished.
In preparing for mediation, attorneys explain to clients that mediation is confidential. “These are settlement discussions and cannot be disclosed in court,” attorneys tell their clients. “You can feel free to talk to the mediator. She won’t disclose it to the other side if you tell her the information is confidential.” In the opening session of the mediation conference, the mediator explains that the discussions are confidential and privileged. All participants sign an Agreement to Mediate, stating they understand the mediation process, the mediator’s role and the confidentiality of the discussions. Mediation proceeds based on an understanding that the mediation discussions are confidential.
Despite mediation confidentiality, courts are increasingly asked to enforce settlement agreements reached in mediation, jeopardizing the confidentiality of mediation discussions.1 Confidentiality and privilege, two different yet intertwined concepts, are often used interchangeably. Confidentiality means the mediation communications are not disclosed. The mediation privilege is a rule providing that the confidential communications are not admissible in court. Utah recently enacted the Uniform Mediation Act, articulating guidelines for mediation privilege and mediation confidentiality. Attorneys can take steps to plan for and create enforceable settlement agreements to ensure that the process remains confidential and privileged.
The Uniform Mediation Act
On May 1, 2006, Utah became the eighth jurisdiction to adopt the Uniform Mediation Act (UMA).2 The UMA defines mediation communication as “conduct or a statement, whether oral, in a record, verbal, or nonverbal, that occurs during a mediation or is made for purposes of considering, conducting, participating in, initiating, continuing, or reconvening a mediation or retaining a mediator.” Utah Code Ann. § 78-31c-102(2) (2006). Thus, discussions with a mediator before, during or as a continuation of the mediation discussions are both confidential and privileged under the UMA. When the mediator meets with the attorney and client before mediation or in a follow-up meeting, the protections of confidentiality and privilege continue to apply.
1. Prior to the UMA
Even prior to the creation of the UMA, courts throughout the country recognized mediation confidentiality as essential to effective mediation because it allows a candid and informal exchange of information.3 “The process works best when parties speak with complete candor, acknowledge weaknesses, and seek common ground, without fear that, if a settlement is not achieved, their words will later be used against them in the more traditionally adversarial litigation process.”4 Courts agree that “[w]hat is said and done during the mediation process will remain confidential, unless there is an express waiver by all parties or unless the need for disclosure is so great that it substantially outweighs the need for confidentiality.”5 Further, “[t]he mediation process was not designed to create another layer of litigation in an already over-burdened system.”6
2. Confidentiality under the UMA
The UMA, finalized in 2003, solidifies and reinforces mediation confidentiality. Mediation confidentiality, according to the drafters of the UMA, encourages parties to have an informal and candid exchange of ideas.7 Frank discussions are essential to opening constructive and creative dialogue and to enabling parties to discover ways to resolve their disputes independent of the judicial system.8 According to the Act, “[t]his frank exchange can be achieved only if the participants know that what is said in the mediation will not be used to their detriment through later court proceedings and adjudicatory processes.”9
The Utah UMA specifies that mediation communications are “confidential to the extent agreed by the parties or provided by other law or rule of this state” unless subject to the open and public meetings statutes or government access to records laws. Utah Code Ann. § 78-31c-108 (2006). Thus, the Act provides for a general protective umbrella of confidentiality over mediation communications.
3. Confidentiality Rules and Statutes in Utah
Utah’s Alternative Dispute Resolution Act also provides that “[u]nless all parties and the neutral agree, no person attending an ADR proceeding…may disclose or be required to disclose any information obtained in the course of an ADR proceeding, including any memoranda, notes, records, or work product.” Utah Code Ann. § 78-31b-8(4). Further, “an ADR provider…may not disclose or be required to disclose any information about any ADR proceeding to anyone outside the proceeding….” Utah Code Ann. § 78-31b-8(5).
Further, the Utah Rules of Alternative Dispute Resolution provide that “[m]otions, memoranda, exhibits, affidavits, and other written, oral or other communication submitted…to the ADR provider…shall be confidential and shall not be made a part of the record or filed with the clerk of the court. Neither shall any such communication be transmitted to the judge to whom the case is assigned….”10 The ADR provider “shall not disclose to or discuss with anyone, including the assigned judge, any information about or related to the proceedings, unless specifically provided otherwise in these rules. ADR providers shall secure and ensure the confidentiality of ADR proceeding records.”11
Rule 4-510 of the Utah Rules of Judicial Administration also states that “No ADR provider may be required to testify as to any aspect of an ADR proceeding except as to any claim of violation of Rule 104 of the Utah Rule of Alternative Dispute Resolution which raises a substantial question as to the impartiality of the ADR provider and the conduct of the ADR proceeding involved.”
Thus, the Utah UMA, the Utah Alternative Dispute Resolution Act, the Utah Rules of Alternative Dispute Resolution and the Utah Rules of Judicial Administration all provide that mediation discussions are not to be disclosed to others. In one narrowly drawn Utah appellate case, the Utah Court of Appeals enforced the confidentiality of court-ordered appellate mediation stating that counsel, the parties, and the mediator could not disclose any statements, comments, or notes made during the initial mediation conference or in related discussions.12
Mediation confidentiality is more expansive than confidentiality in other professional relationships. In many professional relationships, the duty of confidentiality, such as the attorney/client relationship and the physician/patient relationship, the obligation restricts the professional only and not the client or patient.13 For example, in the attorney/client relationship, the client is free to disclose conversations with the attorney, whereas the attorney is prohibited from doing so.14 However, mediation is different. In mediation, the duty to maintain confidentiality extends to all participants from all participants, including third-parties, “to the extent agreed to by the parties or provided by other law or rule of this state.” Utah Code Ann. § 78-31c-108 (2006). The Utah UMA specifically allows third party involvement in mediation and allows third-parties the protection of mediation confidentiality and the mediation privilege.
So, how does the mediation privilege mesh with mediation confidentiality? Confidential mediation communications, under Utah evidentiary law, are settlement discussions under the federal and state rules of evidence and are not disclosed in court.15 The UMA specifically provides for a mediation privilege and articulates waivers of the privilege and exceptions to the privilege. For example, in the medical profession, patient records are confidential; however the physician/patient privilege regulates whether the information can be admitted as evidence in court. Similarly, mediation communications are confidential, and the privilege governs admission of the confidential information in court.
Waiver of the Privilege
How can the privilege be waived, thus allowing the mediation communications to be admitted as evidence in a proceeding? The UMA provides that the mediation privilege may be waived in a record or orally during a proceeding if it is expressly waived by all parties to the mediation and is expressly waived by the mediator and by the third party participants. Thus, in order to waive the privilege, everyone involved in the mediation must waive the privilege in a record or in a proceeding.
The Act further states that a person may be precluded from asserting the privilege if a person discloses or makes a representation about a mediation that prejudices another person in a proceeding. Utah Code Ann. § 78-31c-105(2) (2006). Thus, attorneys, clients, mediators and third-party participants in mediation should be forewarned that they may waive the privilege if they make a statement about mediation communications. For example, if a client takes confidential mediation discussions to the media and the disclosure prejudices the other side, the privilege may be waived. If the privilege is waived, it is only waived to the extent necessary for the person to respond to the representation or disclosure.
All mediation participants should be on notice that disclosure of confidential information may leave a crack open in a door they wanted sealed shut. For example, if a mediation participant learns confidential information during mediation, disclosure of that information may give rise to a lawsuit for breach of contract, i.e., the mediation agreement. If damages are proven, a plaintiff may prevail on the breach of a confidentiality provision in a mediation agreement. All mediation participants should understand that breaching the Agreement to Mediate and mediation confidentiality can lead to future problems and potential lawsuits.
Exceptions to the Privilege
The UMA also provides exceptions to the mediation privilege. Prior to the UMA, case law developed exceptions to the mediation privilege. In 1999, Magistrate Judge Wayne Brazil jolted the mediation community when he ordered a mediator to testify.16 In Olam v. Congress Mortgage Company, a woman participated in mediation late into the night and signed an agreement. She then moved to set aside the agreement, claiming that she was physically, intellectually and emotionally incapable of giving consent. The court held that the best evidence of her capacity to consent was testimony from the mediator. Both parties waived their right to maintain the confidentiality of the mediation communications. The mediator did not join in that waiver, but Judge Brazil ordered the mediator to testify in a sealed proceeding. Judge Brazil reasoned that the public interest in disclosing the confidential mediation discussions outweighed the interest in confidentiality. Although this case has been distinguished due to the parties’ waiver of confidentiality, the case created great concern among the mediation community and is often cited for the proposition that the interest in confidentiality may be weighed against the public interest in disclosing the confidential information17
Mediation confidentiality has also been deemed waived when an attorney failed to object to admission of or evidence of events occurring in mediation.18 In addition, a juvenile’s significant constitutional right to a defense has been held to outweigh mediation confidentiality.19
Prior to May 1, 2006, attorneys relied on the evidentiary rule that evidence of conduct or statements made in compromise negotiations is not admissible.20 The Utah UMA creates a specific mediation privilege and extends it to the parties, the mediator and third-party participants. The mediation communication is not privileged if the mediation communication is demonstrated “in an agreement evidenced by a record signed by all parties to the agreement.” Utah Code Ann. § 78-31c-106(1) (2006). Thus, if all parties sign an agreement, that agreement is not privileged. In addition, there is no privilege if the mediation communication is available to the public under the public meeting laws or if a threat is made to inflict bodily injury or to commit a crime of violence. Also, the Act states there is no mediation privilege if the mediation communication is used to plan a crime or if it is sought or offered to prove or disprove a claim or complaint of professional malpractice. Utah Code Ann. § 78-31c-106(1)(b) – (e) (2006).
Finally, the Utah UMA states that mediation communications are not privileged if “there is a need for the evidence that substantially outweighs the interest in protecting confidentiality.” Utah Code Ann. § 78-31c-106(2)(b) (2006). To qualify under this provision, the mediation communications must not otherwise be available and the communication must be sought or offered either in a felony or misdemeanor proceeding or in a proceeding regarding a contract arising out of mediation. Thus, if one of the parties seeks to enforce a mediation agreement, the court may find no mediation privilege if a more important countervailing public interest is involved, the evidence is not otherwise available and the communication is sought in an action to enforce a mediated agreement. Utah Code Ann. § 78-31c-106(2) (2006)
Practical Steps to Maintain Confidentiality and Avoid Court Action
Prepare Settlement Agreement in Advance of Mediation
Mediation has expanded enormously. As a result, actions to enforce mediated agreements are becoming more common. Although the UMA and other rules offer a veil of confidentiality, what practical steps can attorneys take to avoid court action and preserve confidentiality?
Prior to the mediation conference, attorneys should envision standard provisions of a settlement agreement. Attorneys can either arrive at the mediation conference with a laptop computer, a partially drafted settlement agreement or prepared staff members standing by to compose and/or email documents to the mediation. Clients are also excellent sources of this preparation, as they often identify unknown and important terms.
Create and Sign a Written Agreement in Mediation
At the close of the mediation conference, attorneys and clients should create and sign a written agreement addressing all essential terms, if possible. Additional time spent in mediation drafting and signing the settlement agreement, while everyone is focused on settling the case, will significantly reduce the most common reason to explore confidential mediation communications. How can you accomplish this effectively at the end of a long day when the participants are exhausted? What if a party voices a desire to prepare the agreement the following day or a desire to “sleep on it.” At this point, the clients and attorneys are required to think about the benefits of closure versus the risk the agreement may fall apart. Both options are available. If a signed agreement is not possible due to lack of information, insufficient time or complexity of the issues, the parties may want to continue the process. If enough of the information is available, continuing the process is generally not helpful. However, some cases require more than one or two mediation sessions. In addition, attorneys should clarify for clients the impact of leaving the mediation without signing an agreement, the loss of momentum, and whether either party will be held to any statements made during the mediation process. Momentum is another consideration. At the end of the negotiation, parties have momentum and are more likely to concede on minor issues.
Desire for Finality vs. Reluctance to Enter an Agreement
Finalizing the agreement in writing is the final stage of the mediation process. Momentum is often lost if the parties leave mediation without an agreement. Frequently, if an agreement is not signed on the day of mediation, one party retracts the agreement. Attorneys and clients can prepare for this tension of reluctance to enter an agreement versus desire for finality by understanding this tension exists and knowing this tension is a common final step in resolving conflict. Mediators and attorneys can facilitate closure. As the agreement is prepared, food can be delivered, rejuvenating the participants. Clients can take a walk around the block, check their email or run an errand. Just the brief break assists the parties in clearing their minds and preparing to sign the final agreement.
Standard Provisions in Settlement Agreements
Standard provisions in settlement agreements include releases of liability, resolution of all claims and defenses, dismissal of lawsuits, timelines and security for payments, confidentiality clauses, cooperation in preparing documents necessary to effectuate the agreement, and payment of attorney fees. The parties may want their agreement to state that in the event of a dispute regarding the agreement, they will return to mediation prior to initiating court action. As with all other provisions of the agreement, this provision could be negotiated, including the process to be used, the allocation of costs and other terms that serve the parties’ interest in resolving the dispute and avoiding the litigation process. To avoid claims of duress, agreements should also state that the parties enter the agreement freely, voluntarily, without duress or coercion and with the advice of counsel.
Standard Settlement Agreement Provisions:
• Mutual releases of liability
• Dismissal of lawsuit(s)
• Timelines for payments, interest, security, liens
• Confidentiality clauses
• Cooperation in preparing documents necessary to effectuate agreement
• Payment of attorney fees
• Resolution of all claims and defenses
• Dispute resolution clauses, i.e., mediation, arbitration, allocation of costs
• Agreement entered freely, voluntarily, without duress or coercion and with the advice of counsel
The goal of the mediation process is to empower parties with information and a process for solving their own issues by mutual agreement without court intervention. If the process produces another layer of litigation, the mediation process will suffer and parties will hesitate to engage in frank and productive settlement discussions. After the agreement is signed, the clients generally feel relief. They have compromised more than they wanted but are relieved the conflict is resolved. Carefully crafted settlement agreements insulate the parties from court action, and allow parties to resolve the conflict, move on and focus their emotions and energy on other more positive aspects of their lives.
1. Simmons v. Ghaderi, 143 Cal. App. 4th 410 (Cal App. 2d Dist.) (2006).
2. Utah joins Washington D.C., Iowa, Nebraska, Illinois, Ohio, New Jersey, and Washington. Vermont was the ninth state to adopt the UMA, and the UMA is pending in four states: New York, Massachusetts, Connecticut and Minnesota.
3. Foxgate Homeowners Association v. Bramalea California, Inc., 26 Cal.4th 14 (Cal. 2001); Sharp, D., Mediation Confidentiality, AAA Handbook on Mediation (2006). Hoffman, D. and Shemin, V., The Uniform Mediation Act: Upgrading Confidentiality in Mediation, Massachusetts Lawyers Weekly, July 18, 2005.
4. Princeton Ins. Co. v Court of Chancery of Delaware, 883 A.2d 44, 51 (Del. 2005); see also, Foxgate Homeowners Association v. Bramalea California, Inc., 26 Cal.4th 1, 14 (Cal. 2001).
5. Lehr v. Afflitto, 382 N.J. Super. 376, 391, 889 A.2d 462, 472 (N.J. 2006).
7. Uniform Mediation Act, Final Version with prefatory remarks, National Conference on Commissioners of Uniform State Laws (2003).
10. Utah Rule of Alternative Dispute Resolution 103.
12. Lyons v. Booker, 982 P.2d 1142 (Utah 1999).
13. Utah Rule of Evidence 506(c); DeBry v. Goates, 999 P.2d 582 (Utah 2000).
14. Utah Rule of Professional Conduct 1.12
15. Utah Rule of Evidence 408; Federal Rule of Evidence 408.
16. Olam v. Congress Mortgage Company, 68 F.Supp.2d 1110 (N.D. Cal. 1999)
17. Eisendrath v. Superior Court, 109 Cal.App.4th 351 (2003) (participants to mediation cannot impliedly waive their confidentiality rights by challenging the agreement reached in mediation.)
18. Regents of University of California v. Sumner 42 Cal. App.4th1209 (1996).
19. Rinaker v. Superior Court, 62 Cal.App.4th 155 (Cal. 1998) (Prior inconsistent statements made by a witness at mediation may be introduced at a subsequent delinquency hearing.).
20. Utah Rule of Evidence 408, which is identical to Federal Rule of Evidence 408.