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Avoidable sins When a mediator steps beyond the boundaries.

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Alternatives
TO THE HIGH COST OF LITIGATION
VOL. 22 NO. 5
CPR INSTITUTE FOR DISPUTE RESOLUTION
Alternatives
TO THE HIGH COST OF LITIGATION
Publishers:
Thomas J. Stipanowich
CPR Institute for Dispute Resolution
Susan E. Lewis
John Wiley & Sons, Inc.
JUNE 2004
Editor:
Russ Bleemer
Jossey-Bass Editor:
David Famiano
Production Editor:
Chris Gage
Alternatives to the High Cost of Litigation (Print ISSN 1549-4373, Online ISSN 1549-4381) is a newsletter published 11 times a year by the CPR Institute for Dispute Resolution and Wiley Periodicals, Inc., a Wiley Company, at Jossey-Bass. Jossey-Bass is a registered trademark of John Wiley & Sons, Inc.
Editorial correspondence should be addressed to Alternatives, CPR Institute for Dispute Resolution, 366 Madison Avenue, New York, NY 10017-3122; E-mail:
alternatives@cpradr.org
Copyright © 2004 CPR Institute for Dispute Resolution. All rights reserved. Reproduction or translation of any part of this work beyond that permitted by Sections 7 or 8
of the 1976 United States Copyright Act without permission of the copyright owner is unlawful. Request for permission or further information should be addressed to
the Permissions Department, c/o John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774; tel: 201.748.6011, fax: 201.748.6008; or visit
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For reprint inquiries or to order reprints please call 201.748.8789 or E-mail reprints@wiley.com.
The annual subscription price is $175.00 for individuals and institutions. CPR Institute for Dispute Resolution members receive Alternatives to the High Cost of Litigation
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Visit the Jossey-Bass Web site at www.josseybass.com. Visit the CPR Institute for Dispute Resolution Web site at www.cpradr.org.
ABOUT THE CPR INSTITUTE FOR DISPUTE RESOLUTION
ORGANIZED BY PROMINENT CORPORATE COUNSEL, THE
CPR INSTITUTE FOR DISPUTE RESOLUTION has become a
leader in developing uses of private alternatives to the costly
litigation confronting major corporations and public entities.
The membership of CPR, a nonprofit organization, consists
of large companies, leading U.S. law firms, academics and
judges. See “Membership” at our Web site, www.cpradr.org.
TO ITS MEMBERS, CPR OFFERS EXTENSIVE BENEFITS
AND SERVICES, including research access to CPR’s unique
ADR database; training and counseling; a complete library of
ADR practice tools and model procedures; and semi-annual
conferences.
WOULD YOU LIKE FURTHER INFORMATION ABOUT CPR?
See our Web site at www.cpradr.org or complete this form:
Name:
Organization:
Title:
Address:
Telephone:
RETURN TO: Membership and Administration, CPR Institute for
Dispute Resolution, 366 Madison Avenue, New York, NY 10017.
Tel: (212) 949-6490. Fax: (212) 949-8859. E-mail: info@cpradr.org
Alternatives
TO THE HIGH COST OF LITIGATION
DIGEST
ADR ADVOCACY
When bad mediation behavior winds up
in litigation, there are important lessons
for attorneys beyond “Don’t do it
again.” Los Angeles mediator and frequent contributor Jeff Kichaven discusses an Australian case that sparks a
list of “Avoidable Sins” for advocates,
mediators, and parties. ............Page 77
CPR NEWS
Alternatives goes electronic for all individuals at CPR members, and details
on meetings, a CPR 25th anniversary
dinner, and more. ..................Page 78
NEUTRALS’ SKILLS
Donald Trump’s The Apprentice became
a cultural phenomenon. Michael S.
Oberman of New York describes how
the Donald’s staccato television style
may be at home in the mediation
“boardroom.” ...........................Page 79
LAW FIRM ADR
Christopher Newmark of the London
office of Baker & McKenzie details his
firm’s efforts to build a worldwide conflict resolution practice, and offers views
on what the economies of scale can
bring to a case. .......................Page 81
ADR BRIEFS
Two sessions at the American Bar
Association’s Section of Dispute
Resolution annual meeting dealt with
practice at the U.S. Equal Employment
Opportunity Commission. One session
provided the release of new quantitative
data on mediation processes, and another
aired a theory that the EEOC’s complaint
processes perpetuate the ills they are supposed to cure. Also, an update on
Leonard Riskin’s work combining mindfulness meditation with mediation skills,
focusing on work being done at a new
Harvard University initiative......Page 83
DEPARTMENTS
CPR News ..............................Page 78
ADR Briefs................................Page 83
Cartoon by Cullum ................Page 83
Index Info ......................Pages 82 & 91
Online Info ..................Pages 91 & 92
CPR INSTITUTE FOR DISPUTE RESOLUTION
VOL. 22 NO. 5
JUNE 2004
Avoidable Sins: When a Mediator
Steps Beyond the Boundaries
BY JEFF KICHAVEN
Sept. 20, 2001. Plaintiff Tapoohi was represented by three lawyers at the mediation,
In 1954, Australian Prime Minister Robert
and she is a lawyer herself. She participated
Menzies observed that “A man may be a
by telephone from her home in Israel. The
tough, concentrated, successful moneyestate includes several parcels
maker and never contribute
of real property. Complex
to his country anything more
“company structures” are
than a horrible example.”
involved in the ownership of
Some 50 years later, MenADR
these properties.
zies’ countryman, Australian
During the mediation,
mediator George Golvan,
ADVOCACY
Tapoohi’s lawyers told mediaproved these words true once
tor Golvan that “Any agreeagain—his horrible example
ment reached will need to be
instructively reported by the
subject to getting proper tax
Supreme Court of Victoria in
advice because it was on any view a matter
Tapoohi v. Lewenberg, [2003] VSC 410
involving complex corporate and trust
(Oct. 21, 2003). Golvan’s misdeeds can
structures and unusual terms contracts.”
teach powerful lessons about proper and
Tapoohi, Para. 22.
improper behavior by lawyers as well as
The Court continued: “At approximediators, and help conflict resolution
mately 8:00 p.m. the parties reached agreepractitioners raise practice standards.
ment in principle concerning the commerTapoohi started as a dispute between
cial settlement proposal, which provided
two sisters over their late mother’s estate
that the properties would be transferred to
and has evolved into a legal malpractice
Mrs. Tapoohi in return for the payment of
claim by one of the sisters against her
$1.4 million and that Mrs. Tapoohi would
lawyers, who in turn have filed a contriburelinquish her interest in the family comtion claim against a mediator.
panies.” Tapoohi, Para. 25. Tapoohi’s lead
Mediation of the dispute over the
counsel declared that “[w]hen agreement
mother’s estate took place in Australia on
in principle had been reached . . . [the
attorney] thought they had done enough
The author is an independent mediator in Los
for the day. . . . [He] was hungry, tired and
Angeles, an adjunct professor at Pepperdine
University School of Law in Malibu, Calif., and a
worn out and did not think that he could
fellow of the International Academy of Mediators.
deal constructively with the many outHe is a member of Alternatives’ editorial board.
standing issues.” Tapoohi, Para. 26.
His most recent Alternatives article, “Litigators’
Views and Goals Vary on Selecting their
But Golvan would hear nothing of it.
Arbitrators,” 22 Alternatives 1 (January 2004),
The court reports that he said such things as:
was co-written with Deborah Rothman. This article
is adapted with permission of the publisher,
International Risk Management Institute Inc.,
from its Web site, www.irmi.com. The institute is
a Dallas-based research and publishing company
focusing on risk management and insurance.
Further reproduction prohibited.
“You have got to stay, you have got
to do the terms of the settlement
tonight.” “No, we are doing it now.
(continued on page 89)
VOL. 22 NO. 5
JUNE 2004
CPR INSTITUTE FOR DISPUTE RESOLUTION
ALTERNATIVES 89
Avoidable Sins: When a Mediator Oversteps
(continued from front page)
We’re signing up tonight as that is
the way I do it, that’s how I conduct
mediations.” “Given the acrimony
between these two sisters we must
go away with something that is
written. It is in the interests of all
the parties to sign up tonight.”
Tapoohi, Para. 27.
The fatigued attorney foolishly capitulated:
(He) said in an affidavit that he
“decided to defer to Golvan’s
advice.” He said that he knew Mr.
Golvan was an experienced mediator
and that “his firmness of position
weighed heavily on me.” He
regarded what Mr. Golvan had said
“as a direction from the mediator
about which, effectively, I did not
have any choice.” Tapoohi, Para. 29.
And, worse, counsel allowed the bullying to continue:
Mr. Golvan then proceeded to dictate the proposed terms of the settlement. [Tapoohi’s attorney]
attempted to raise with Mr. Golvan
that all terms were subject to seeking taxation advice. [Other lawyers
there] confirmed this. However,
Mr. Golvan interrupted [the attorney] and stated that he wished to
continue to dictate the terms.
Tapoohi, Para. 30.
Golvan’s hijacking of the drafting
process caused a critical error:
Part of the Terms of Settlement
included the transfer of shares in
EOS Holdings from Mrs. Tapoohi to
Mrs. Lewenberg. When Mr. Golvan
came to this issue in his dictating, the
question of price was raised by him.
The agreement was signed later that
night, before there was time for tax experts
to have been consulted.
As surely as night follows day, “Following the receipt of taxation advice, it was
considered that the figure of $1 for the
price of the shares in EOS Holdings would
have undesirable taxation consequences for
Mrs. Tapoohi. Attempts by her lawyers to
have the price varied failed. The commencement of this proceeding followed.”
Tapoohi, Para. 39.
The mediation party never reached
the point where she could make
a clear decision because she never had
the tax advice she needed. The mediator
bulldozed ahead anyway.
. . . [Tapoohi’s attorney] replied that
the amount of consideration could
not be dealt with until advice on the
tax implications was sought. Mr.
Golvan suggested that a figure of $1
be provided as nominal consideration for the share transfer. [Tapoohi’s
attorney] stated that it was “all subject to review.” Although no one said
that the figure of $1was appropriate
it was inserted in the Terms. Tapoohi,
Para. 31.
Golvan moved for summary judgment
in his favor on the contribution claims
Mrs. Tapoohi’s lawyers brought against
him. In this opinion, among other things,
the court denied Golvan’s motion.
He will have to stand trial.
If the court’s facts as recited are true, we
should feel bad for Mr. Golvan personally.
He was trying to help and he thought that
what he did was right.
(continued on next page)
ABOUT THE CPR INSTITUTE FOR DISPUTE RESOLUTION
ORGANIZED BY PROMINENT CORPORATE COUNSEL, THE
CPR INSTITUTE FOR DISPUTE RESOLUTION has become a
leader in developing uses of private alternatives to the costly
litigation confronting major corporations and public entities.
The membership of CPR, a nonprofit organization, consists
of large companies, leading U.S. law firms, academics and
judges. See “Membership” at our Web site, www.cpradr.org.
TO ITS MEMBERS, CPR OFFERS EXTENSIVE BENEFITS
AND SERVICES, including research access to CPR’s unique
ADR database; training and counseling; a complete library of
ADR practice tools and model procedures; and semi-annual
conferences.
WOULD YOU LIKE FURTHER INFORMATION ABOUT CPR?
See our Web site at www.cpradr.org or complete this form:
Name:
Organization:
Title:
Address:
Telephone:
RETURN TO: Membership and Administration, CPR Institute for
Dispute Resolution, 366 Madison Avenue, New York, NY 10017.
Tel: (212) 949-6490. Fax: (212) 949-8859. E-mail: info@cpradr.org
90 ALTERNATIVES
Avoidable Sins
(continued from previous page)
But he deserves to be sued. He probably deserves to lose. His behavior was
not only incompetent, it was unethical.
And his malpractice insurance carrier
even may have substantial reason to deny
coverage.
The silver lining in Golvan’s plight is
that both mediators and lawyers can learn
from his horrible example and thereby
Mediators must
stay away from
those tasks that
are at the heart
of law practice.
Mediators must
not be allowed to
draft contracts
that affect the
legal rights of
others.
raise the standards of practice in the
respective professions and help prevent
disasters such as the one from which the
unfortunate Mrs. Tapoohi must suffer.
THE MEDIATOR’S
AVOIDABLE SIN: INSISTENCE
Beware of the mediator who says, “My
client is the deal.” That mediator is likely
to become a bully, much as Golvan did.
Do you want to run the risk that, late at
night, when you are tired, hungry, can’t
concentrate and want to leave, your
mediator will turn into an authoritarian
bully?
No. The goal of mediation is not
“agreement for agreement’s sake.” Rather,
CPR INSTITUTE FOR DISPUTE RESOLUTION
the goal is for the parties to make a clear
decision as to whether they want a deal
and, if so, its terms. When that decision
point is reached, settlements will be the
natural by-products, most of the time.
A few cases will not settle. And that’s
good. Because sometimes, the available
settlement option really is worse than the
unpleasant prospect of continued litigation. This is the only set of outcomes that
is truly consistent with the paramount
value set forth in every set of ethical standards for mediators: informed self-determination by the parties in resolving their
own disputes.
Tapoohi never reached the point
where she could make a clear decision.
That’s because she never had access to all
the information she needed, especially
tax advice. Mediator Golvan bulldozed
ahead anyway, to Tapoohi’s great disservice. It was bad mediation practice on
Golvan’s part. But Tapoohi’s disaster is
not the fault of Mr. Golvan alone.
THE AVOIDABLE SIN OF THE
ADVOCATE: ABDICATION
As improper as Golvan’s bullying was, he
still may win this case. That’s because the
extent to which Golvan was unethical is
exceeded only by the extent to which
Tapoohi’s lawyer was incompetent. How
dare the lawyer abdicate his responsibilities
so completely to a mediator? Didn’t he
realize that while he owed his client a duty
of undivided loyalty, the mediator did not?
Even in a mediation, a lawyer is still a
lawyer and the duty to represent the client’s
interests zealously within the bounds of
law still applies. Even in a mediation, a
lawyer can never pass off his client responsibilities to another—especially not to a
mediator, who is engaged by both sides
whose loyalties are by definition different
from those of the lawyers.
In California, as a matter of law, a
client represented by counsel cannot “reasonably” or even “actually” rely on the
advice of anyone else on matters within the
scope of that counsel’s representation. Wilhelm v. Pray, Price, Williams & Russell, 186
Cal.App.3d 1324, 1332 (1986).
Tapoohi’s attorney was profoundly
wrong when he allowed, or maybe even
required, his client to rely on the advice of
another on matters within the scope of his
representation. If similar legal principles
VOL. 22 NO. 5
JUNE 2004
govern in Australia, then the Wilhelm reasoning may protect Golvan from the
Tapoohi attorney’s contribution claim.
THE AVOIDABLE CONSEQUENCE FOR
THE MEDIATOR: A POTENTIAL LOSS
OF MALPRACTICE COVERAGE
Perhaps a more interesting question from a
risk management perspective is whether
Golvan’s “Errors & Omissions” malpractice policy is obligated to provide him
with a defense. His engagement in this
matter was expressly “as a mediator.”
Tapoohi, Para. 16. But dictating detailed
contract terms is not part of mediation
practice. At least in California, it is the
essence of the practice of law. People v.
Merchants’ Protective Corp., 189 Cal. 531,
535 (1922). See generally, The Rutter
Group California Practice Guide, “Professional Responsibility” Vol. 1, Ch. 1, pp.
45–51 (2003).
If mediation is to develop as a profession separate from the practice of law, and
non-lawyers are allowed to mediate without being guilty of the unauthorized practice of law—a crime in most places—then
mediators must stay away from those tasks
that are at the heart of law practice. Mediators must not be allowed to draft contracts that affect the legal rights of others,
as Golvan did here.
Formal mediators’ ethical standards
have not evolved to this point. That’s
because too many mediators, like Golvan,
are inappropriately attached to “settlement
for settlement’s sake” as their goal. So
many, in fact, that it’s doubtful that mediation organizations, if left to their own
devices, will take that step any time soon.
If mediators do not move to more
appropriate ethical standards voluntarily, a
carrier’s coverage lawyer is going to push
practitioners there—because a strong case
can be made that Golvan’s malpractice
policy does not provide coverage in this
case.
Many attorney-mediators have malpractice policies that cover mediation services only, and do not provide coverage for
law practice. The premiums for such policies are lower than for policies that cover
both mediation and legal practice.
If the act of drafting contract terms is
the exclusive domain of law practice, as it
is in California, then Golvan’s malpractice
carrier might be justified in denying him
VOL. 22 NO. 5
JUNE 2004
coverage for this claim if his policy covers
mediation services only, and not the practice of law.
And, if this analysis is correct, Golvan’s
problems may get worse. In many U.S.
CPR INSTITUTE FOR DISPUTE RESOLUTION
into a monstrous bully at the drop of a hat.
This bully does not owe your client the
same duty of undivided loyalty that you,
her lawyer, do. And his hat is likely to be
dropped when you are physically and emo-
Limit the help a mediator gives you
in drafting a settlement agreement.
Good mediators know how to help
without crossing the line.
jurisdictions, his conduct could also get
him disbarred. If drafting contract terms is
law practice, then when Golvan began dictating the settlement agreement, he was
doing so on behalf of both Mrs. Tapoohi
and her sister Mrs. Lewenberg—the party’s
opponent in the then-pending litigation.
The quintessence of an actual conflict of
interest!
Assuming that the conflict was waivable (which it probably was not), did
Golvan even try to get written, informed,
prior waivers of that conflict, as lawyers’
ethical codes would generally require him
to do? See, e.g., Rule 3-310(C)(1), California Rules of Professional Conduct.
There’s no mention of any such
attempt in the Supreme Court of Victoria’s
opinion, and it’s doubtful that any such
effort was made. But mediator Golvan proceeded confidently nevertheless.
In a civil lawsuit, Golvan may be subject to a direct claim by Tapoohi for legal
malpractice. When the mediator started
dictating the settlement agreement, his sins
went beyond the ethical lapse of undertaking the legal representation of clients with
an actual, unwaived conflict of interest. He
also acted incompetently toward Tapoohi,
one of his “clients,” when his legal work
exposed her to adverse tax consequences.
His personal silver lining may be that, if he
still carries legal malpractice insurance,
that carrier may still be obligated to cover
this claim.
WHAT ARE THE LESSONS?
1. Never hire a mediator who believes that
“the client is the deal.” This Jekyll-andHyde character has the capacity to turn
tionally least able to protect your client
from his mindless pursuit of settlement for
settlement’s sake.
2. Never ask a mediator to draft a settlement agreement. That’s your job, if you
are there as a lawyer. If a mediator starts to
do so, politely but firmly tell him to stop.
Don’t even ask the mediator for a form.
Bring your own form. Your form is
designed to protect your client’s interests;
the mediator’s is not. Your job is to create a
settlement agreement that protects your
client’s rights and promotes her interests.
Whatever the mediator’s job is, it’s not the
same as yours.
3. Limit the help a mediator gives you
in drafting a settlement agreement. Good
mediators know how to help without
crossing the line. Better mediators will use
better mediation techniques, asking questions rather than making statements. If the
lawyers had been drafting the settlement
agreement and hit a snag on this point,
Golvan might have asked, “Can we put in
a price?” or “What about $1 as a price?”
Of course, these questions must be
posed in a spirit of honest curiosity. The
lawyers must be free to answer in any way
that is consistent with the discharge of
their fiduciary obligations to their clients.
If the answer is, “I don’t know, I have to
check with the tax expert and I can’t do
that until tomorrow, maybe we can’t sign
this tonight, let’s move on to the next point
for now,” the mediator might just have to
accept that.
4. Know when to call it a day. In some
cases, it is appropriate for a mediator to be
(continued on next page)
ALTERNATIVES 91
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Click on PUBLICATIONS, then
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You will find entries for
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Search “Consumer ADR” for
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Search “Consumer ADR” for
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92 ALTERNATIVES
Avoidable Sins
(continued from previous page)
firm in encouraging—but never forcing—
parties to stay until an agreement is
signed. In cases where the only, or domi-
In the commercial
context, parties
generally are
better able to
prevent their
buyer’s or seller’s
remorse from
becoming so severe
that it undoes
the deal.
nant, issue is “What must the defendant
pay as the price of a release from the plaintiff?” the firm approach generally works
well. These include, for example, most
employment, personal injury, medical
malpractice and other cases with consumer plaintiffs. If the mediation of such a
case adjourns without a signed “deal,” it
generally takes all the king’s horses and all
the king’s men to put the deal back
together again, even if the adjournment is
only overnight.
When these plaintiffs go home for the
evening and say to their significant others,
“I’m about to make a deal,” those others
rarely say “I’m so happy for you!” Rather,
they almost always say “WHAT? After
what they have put you through?” and all
progress is lost.
But Tapoohi is different. It’s more of a
business-to-business case, and its settlement involved the negotiation and documentation of a “commercial transaction.”
It’s not good lawyering—or even common
CPR INSTITUTE FOR DISPUTE RESOLUTION
sense—to try to document most commercial transactions late at night on the back
of a napkin, a legal pad, a laptop computer, or otherwise “on one foot.” Neither
is it necessary. In the commercial, as
opposed to the consumer, context, parties
generally are better able to prevent their
buyer’s or seller’s remorse from becoming
so severe that it undoes the deal.
And if the deal becomes undone? Well,
as mediate.com’s Jim Melamed sagely said
in one of the first mediation trainings this
author attended, “If the deal isn’t right on
Tuesday, it probably wasn’t really right on
Monday, either.” What kind of lawyer
would you be if you allow a mediator to
bully you and your client into signing a
deal that isn’t really right? One who
deserves to find himself a defendant in a
malpractice suit—just where Mrs.
Tapoohi’s lawyer finds himself right now.
5. Tapoohi leads to more questions
than answers. Though the analysis in this
article applies to commercial cases, there
are at least two issues that remain troublesome and for which there are no clear
answers.
First, John Wade, an Australian mediation trainer, scholar and practitioner, likely
would chide this author for an apparent
insensitivity to parties to marital dissolution proceedings and others not represented by lawyers, whose disputes require
settlement documentation beyond their
own drafting capacity. If mediators cannot
draft them, who will?
Then again, who drafted those documents before mediation gained its current
popularity?
What kind of lawyer
would you be if you
allow a mediator to
bully you and your
client into signing
a deal that isn’t
really right?
VOL. 22 NO. 5
JUNE 2004
Second, despite analyzing some behaviors that are inappropriate for mediators, it
is much more difficult to set forth a clear,
comprehensive declaration of what a mediator’s duties are and what a mediator’s role
is. Mediator Golvan should have done
something to help make sure that
Tapoohi’s attorney understood the risks
and consequences of leaving without a
signed deal. But what?
What is the boundary between proper
mediator behavior and improperly hijacking the lawyer’s role, interfering with the
integrity of the attorney-client relationship
and commandeering the lawyer’s role as
well as the role of mediator?
George Golvan surely went too far. For
now, that conclusion will have to be
enough.
DOI 10.1002/alt.20012
ONLINE
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On WESTLAW, you can find articles
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On LEXIS, select the ADR library; then
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Topic,” then choose “Alternative Dispute
Resolution,” and then go to “CPR Institute
for Dispute Resolution Publications.”
Alternatives digest and feature article for
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