Tug of War: Mediation Privilege vs. Subsequent Legal Malpractice Action
by Kenneth C. Feldman and Karen A. Tang
(County Bar Update, December 2004, Vol. 24, No. 11)


Tug of War: Mediation Privilege vs. Subsequent Legal Malpractice Action


By Kenneth C. Feldman, partner, and Karen A. Tang, associate, Los Angeles office of Lewis Brisbois Bisgaard & Smith LLP. They specialize in the defense of legal malpractice, malicious prosecution, and other professional liability actions.


Pursuant to Rule 3-510 of the California Rules of Professional Conduct, in civil litigation an attorney shall promptly communicate to the client all written offers of settlement. The discussion under the rule states that "any oral offers of settlement made to the client in a civil matter should also be communicated if they are 'significant' for the purposes of rule 3-500," which is the general rule as to keeping a client reasonably informed about the representation.


Communicating the Offer and its Ramifications


Due to the proliferation of "settle and sue" cases, on which the California Court of Appeal fortunately has placed substantial limitations, counsel should write letters to their clients discussing the pros and cons of settling or not settling. Settlements frequently result from compromises and considerations that have little to do with the merits of the case. Typical reasons beyond the merits for settling include avoiding the stress and time of litigation, but often there are reasons beyond these. Many times, when there is a later questioning of the settlement, former clients forget the real motives for the settlement. Documenting these reasons is helpful -- and such correspondence may stave off a potential malpractice claim.


When an offer to allow judgment pursuant to Code of Civil Procedure Sec. 998 is made, it is recommended that not only should the lawyer communicate the terms of the offer to the client but also that the potential ramifications of not accepting the 998 offer be explained. Although there is no requirement to do so, unless the client is sophisticated in litigation (e.g., the attorney is reporting to a general counsel, attorney, or insurance company), the better practice would be to explain the ramifications in writing. Numerous costs and attorney's fees issues can arise if the client rejects the 998 offer, proceeds to trial, and fails to obtain a more favorable judgment or award than the offer. Indeed, the court has the discretion to award expert fees, provided the 998 offer is properly made. All of these ramifications are beyond the scope of this article, and counsel should be well versed in the intricacies of a 998 offer.


Admissibility of Communications from Underlying Mediation


An interesting question arises when the 998 offer is delivered in a mediation and the counsel discusses the ramifications of the offer with the client. Assume the client then rejects the 998 offer, proceeds to trial, fails to obtain a more favorable judgment or award than the offer, and is held liable for the costs of the opposing party pursuant to section 998. The unhappy client then proceeds against the attorney for professional negligence for failure to advise regarding the 998 offer and/or its ramifications. Can the attorney seek to disclose the communications held at the mediation between the attorney and the (former) client?


On one hand, Evidence Code Sec. 958 generally provides for a waiver of the attorney-client privilege in a malpractice action. Conversely, Evidence Code Sec. 1119(c) provides that "all communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation shall remain confidential."


The California Supreme Court in Rojas v. Superior Court (2004) 33 Cal.4th 407, 415, held that the mediation privilege was not subject to a good cause exception and that the privilege for writings applied to witnesses' statements, analyses of raw test data, and photographs prepared during the mediation. Also, in Foxgate Homeowners' Association, Inc. v. Bramalea California, Inc. et. al. (2001) 26 Cal.4th 1, 14, the Supreme Court held that there could not be disclosure to the court of purportedly sanctionable conduct that occurred at a mediation.


No decisional case law has discussed or reconciled the seemingly contrary statutory provisions of Evidence Code Secs. 958 and 1119. Notwithstanding the broad pronouncements in Foxgate and Rojas, the court in Foxgate further stated that "because the language of sections 1119 and 1121 is clear and unambiguous, judicial construction of the statutes is not permitted unless they cannot be applied according to their terms or doing so would lead to absurd results, thereby violating the presumed intent of the Legislature." It would seem that not allowing evidence in a subsequent malpractice action of the communications that an attorney has with a client during a mediation in underlying litigation would lead to an absurd result and violate the presumed intent of the Legislature.


In Foxgate, the court stated, "The parties and all amici curiae recognize the purpose of confidentiality is to promote a 'candid and informal exchange regarding events in the past. . . . This frank exchange is 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 other adjudicatory processes.' "


Contrary to the parties' reluctance in dealing with an adversary, there is no such reluctance in dealing with one's own counsel due to the confidentiality that already permeates the attorney-client relationship. Accordingly, it is absurd to suggest the communications between attorney and client in an underlying mediation should be inadmissible in a later malpractice action. If trial courts are unwilling to allow the admission of such evidence, the dismissal by the court of the malpractice action may be appropriate.


In conclusion, irrespective of the potential admissibility in a subsequent malpractice suit, it is a good practice to provide the ramifications of a 998 offer and the pros and cons of settling in writing.


This article is intended to inform the reader of potential liability exposures for attorneys. This article reflects general principles only and does not render legal advice. Readers should consult legal, financial, insurance, and other advisors if they have specific concerns. Neither the Los Angeles County Bar Association, Aon and its affiliates, nor the authors assume any responsibility for how the information in this article is applied in practice or for the accuracy and completeness of the information. Reproduction without written permission is prohibited. This article is made available by Aon Direct Insurance Administrators, administrators of the LACBA Sponsored Aon Insurance Solutions Program, to the LACBA members. www.aonsolutions.com

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