The Thorny Question of Mediation Confidentiality and Legal Malpractice

By Kirsten H. Spira and Elizabeth H. Capel

Kirsten H. Spira is a partner at Jenner & Block and a member of Los Angeles County Bar Association's Professional Responsibility and Ethics Committee. Elizabeth H. Capel is an associate at Jenner & Block. The opinions expressed here are their own.

Mediation confidentiality, mandated by Evidence Code sections 1115, et seq., is designed to encourage settlements by eliminating the fear that statements made during mediation might later be used against a participant. But what happens when a client sues his attorney alleging that the lawyer made misrepresentations, or gave bad advice, during mediation? In Cassel v. Superior Court,[1] the California Supreme Court answered this question, holding that a lawyer's statements and conduct in connection with mediation are inadmissible and therefore cannot support a malpractice claim.

Recently, efforts have ramped up to amend the Evidence Code to effectively overturn Cassel and make mediation-related communications admissible in legal malpractice actions and disciplinary proceedings. While the California Law Revision Commission has made a laudable effort to deal with the thorny issues inherent to the mediation setting, its proposed solution raises questions of desirability and effectiveness.

Mediation Confidentiality Protects Lawyers, Too

In Cassel, the plaintiff brought a malpractice action alleging that his lawyer threatened to abandon him at trial if he didn't accept the other side's settlement offer, misrepresented terms of the offer, and made other false statements and promises. In short, the client alleged that his lawyer had breached several ethical obligations and provided ineffective and even destructive guidance at mediation.

The trial court granted a motion in limine excluding the mediation communications from evidence and the California Supreme Court, in a landmark decision, decided that the trial court was correct. It stated that the rules surrounding mediation confidentiality are "clear and absolute"[2] and disallowed the disclosure of mediation communications unless mediation confidentiality were "expressly waived, under statutory procedures, by all mediation 'participants,' or at least by all those 'participants' by or for whom it was prepared."[3]

The court expressed some concern over its own holding. Justice Ming. W. Chin noted that, "This is a high price to pay to preserve total confidentiality in the mediation process"[4] and the majority appeared to invite legislative review, stating that "the Legislature is free to reconsider whether the mediation confidentiality statutes should preclude the use of mediation-related attorney-client discussions to support a client's civil claims of malpractice against his or her attorneys."[5]

After Cassel, the Legislature asked the California Law Revision Commission to examine ethics laws, including the rules on mediation confidentiality.[6] After several years of study and comment, in December 2017, the commission published a final report recommending that the California Legislature enact an exception to the mediation confidentiality rules.[7]

Policy Supporting Mediation Confidentiality

California has long followed a public policy of encouraging the settlement of disputes.[8] In furtherance of this policy, in the early 1980s, the commission "recommended the enactment of a new evidentiary provision, which would protect oral and written information disclosed in mediation from subsequent disclosure in a judicial proceeding."[9] This recommendation ultimately resulted in the mediation confidentiality provisions enacted in Evidence Code sections 1115, et seq.

The confidentiality rule's basic function is to encourage settlement by promoting candid and informal exchanges at mediation.[10] As the Harvard Law Review observed: "Agreement may be impossible if the mediator cannot overcome the parties' wariness about confiding in each other….Accordingly, effective mediation demands that the parties be privileged not to testify about communications they have made to each other in the course of mediation."[11]

Assessing Whether the Rule Should Change

The commission's final recommendation proposes an exception to mediation confidentiality for communications made in connection with mediation if proffered in a malpractice action, an attorney disciplinary proceeding, or a dispute between the lawyer and client concerning fees or costs. Evidence, either oral or written, by a mediator would remain inadmissible. Other mediation evidence would be admissible, but "only the portion of it necessary,"[12] and only after the other affected mediation participants are given notice and an opportunity to "speak up and guard against improper disclosure."[13]

The proposed legislation presents numerous challenges. First, it permits a malpractice action based on the conduct of a lawyer at mediation, but it potentially limits the scope of evidence available to the defendant. In Solin v. O'Melveny & Myers, LLP, when a defendant law firm was unable to introduce attorney-client privileged but potentially exculpatory evidence, the court recognized that the situation created due process concerns.[14] Concluding that the dispute was "incapable of complete resolution without breaching the attorney-client privilege," and the court dismissed the lawsuit.[15]

Under the proposed exception, if exculpatory evidence is possessed by the mediator (not a far‑fetched scenario because the mediator would presumably be the most informed person as to the proceeding) or a participant who had successfully objected to the introduction of his confidential evidence, a Solin-like conflict would be created.[16] The lawyer-defendants would potentially be unable to fully defend themselves in the malpractice action without the disclosure of the still‑confidential communications.

Second, while the commission clearly struggled to arrive at a solution that would "preserve the confidentiality expectations of mediation participants,"[17] as a practical matter, absent costly intervention by a former mediation participant, participants would unilaterally lose the confidentiality that they bargained for in the event of a subsequent malpractice suit.

Finally, the commission urges that the proposed exception is designed to "protect against claims based on buyer's remorse,"[18] but it is unclear how it does so as the exception allows clients to relitigate their settlement decisions in a "round two" against their lawyer.  In such suits—often referred to as "settle and sue" cases—the former client would seek to recoup from his former lawyer (rather than the prior opposing party) its perceived losses as a result of the settlement. While allegations of attorney misconduct such as those in Cassel are distressing, in general suits such as these claiming that a better settlement should have been achieved present damage claims that are "inherently speculative,"[19] and place lawyers in the difficult position of having to justify in retrospect the basis for their judgement as to "the amount that [could have been] recovered at trial and what the opponent was willing to pay or accept."[20]

In sum, before the legislature slices out an exception to mediation confidentiality for purposes of malpractice claims, further consideration must be given to whether such an exception would be workable, or even desirable.

[1] 51 Cal.4th 113 (2011).

[2] Id. at 117.

[3] Id. at 119. Four years after Cassel, the Court of Appeal applied the rule to find that even inferences based on what happened at a mediation cannot be admitted into evidence due to the mediation confidentiality rule. Amis v. Greenberg Traurig LLP, 235 Cal. App. 4th 331, 340-42 (2015).

[4] Id. at 139 (Chin, J., concurring).

[5] Id. at 136.

[6] 2012 Cal. Stat. res. ch. 108 (ACR 98 (Wagner & Gorrell)).

[7] See California Law Revision Commission, Relationship Between Mediation Confidentiality and Attorney Malpractice and Other Misconduct, Pre-Print Recommendation at 135, available at http://www.clrc.ca.gov/pub/Printed-Reports/RECpp-K402.pdf.

[8] See Bus. & Prof. Code § 465 (stating a legislative finding and declaration that it seeks to encourage the use of mediation, conciliation and arbitration over litigation).

[9] California Law Revision Commission, Relationship Between Mediation Confidentiality and Attorney Malpractice and Other Misconduct, Pre-Print Recommendation at 25-26.

[10] See, e.g., Foxgate Homeowners' Ass'n, Inc. v. Bramalea Cal., Inc., 26 Cal.4th 1, 14 (2001).

[11] Note, Protecting Confidentiality in Mediation, 98 Harv. L. Rev. 441, 445 (1984).

[12] California Law Revision Commission, Relationship Between Mediation Confidentiality and Attorney Malpractice and Other Misconduct, Pre-Print Recommendation at 145.

[13] Id. at 142.

[14] Solin v. O'Melveny & Myers LLP, 89 Cal.App.4th 451, 463 (2001).

[15] Id. at 467.

[16] Two published opinions have considered the Solin rule in the mediation context, but reached differing conclusions (See Kurtin v. Elieff, 215 Cal. App. 4th 455, 474 (2013) and Millhouse v. Travelers Commercial Ins. Co., 982 F. Supp. 2d 1088, 1108-09 (C.D. Cal. 2013)), whereas several unpublished (and therefore not citable) opinions have recognized that the Solin rule applies to mediation communications.  See, e.g., Shaoxing City Maolong Wuzhong Down Prods. Ltd. v. Landsberg & Assocs., No. B257823, 2015 WL 3897769, at *3 (Cal. Ct. App. June 25, 2015); Kausch v. Wimsatt, No. B208724, 2009 WL 3897769, at *3 (Cal. Ct. App. Oct. 28, 2009). 

[17] California Law Revision Commission, Relationship Between Mediation Confidentiality and Attorney Malpractice and Other Misconduct, Pre-Print Recommendation at 141.

[18] Id. at 136.

[19] Filbin v. Fitzgerald, 211 Cal.App.4th 154, 167 (2012).

[20] Barnard v. Langer, 109 Cal.App.4th 1453, 1462 n.13 (2003) ("The hindsight vulnerability of lawyers is particularly acute when the challenge is to the attorney's competence in settling the underlying case").