As the California Judicial Branch budget crisis deepens, more and more cases will be resolved in mediation rather than in the courtroom. Meanwhile, the rules regarding mediation confidentiality are under close scrutiny.  Currently, lawyers who commit malpractice during mediation are protected by strict confidentiality statues.  Under Evidence Code sections 1119 and 1126, all oral and written communications made in connection with a mediation or mediation consultation generally are absolutely inadmissible and protected from discovery in subsequent civil actions or other noncriminal proceedings, including claims of legal malpractice. Earlier this year, a bill was introduced in the state Assembly that would have created an exception allowing the admission of such evidence in legal malpractice cases. 

In February of 2012, Assembly Bill 2025 (AB 2025) was introduced in response to a 2011 California Supreme Court decision in the case of Cassell v. Sup. Ct. (Wasserman, Comden, Casselman & Pearson, L.L.P.)  In Cassell, the appellant had sued his attorneys for malpractice, claiming they improperly pressured him to accept an inadequate settlement during mediation.  The Court upheld the lower court’s decision to exclude evidence of communications between the appellant and the attorneys, reasoning that mediation confidentiality covered all oral or written communications made for the purpose of or pursuant to mediation, even if their application would preclude a client from seeking redress for attorney malpractice. 

As introduced, Assembly Bill 2025 would have added an exception excluding from protection “communications directly between the client and his or her attorney during mediation if professional negligence or misconduct forms the basis of the client’s allegations against the attorney.”   However, there was much opposition to the bill, which was ultimately withdrawn and replaced in June with another version of 2025 which sent the question to the California Law Revision Commission (CLRC) for study.  (As of this writing, the CLRC website does not list “mediation confidentiality” as an active topic of study, but it is clearly “on deck”.)

In August of 2012, our own Second Appellate District, Division Eight, handed down an unpublished opinion in Hadley v. The Cochran Firm (B233093). The Cochran Firm represented Hadley and seven other plaintiffs in a racial discrimination case against their employer.  The case was apparently settled at mediation; however, the plaintiffs allege that The Cochran Firm induced them to sign a fake confidentiality agreement at the mediation, later fraudulently appending the signature sheet to a settlement agreement that the plaintiffs had not seen. The Court cited Evidence Code 1119 and Cassell, finding that “mediation confidentiality provisions are clear and absolute.” Even in the face of the egregious facts alleged in Hadley, the notion that “what happens in mediation, stays in mediation,” has held firm.  However, change may be afoot as this issue has already captured the attention of the Legislature, which is awaiting the results of the CLRC study. Change is not likely to come quickly, but stay tuned, because when it comes it could be a game-changer with the potential to expose attorneys to liability for their communications during mediation, just as there is more pressure than ever to mediate rather than litigate.

Jampol Zimet LLP - Insurance Defense Blog originally posted this entry on December 3, 2012. Click here to read. 
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