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Does good faith avoid a breach of mediation confidentiality.

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CPR N
ISTTIUTE
..........
EMPLOYMENT ADR
Page 157
Linda Stamato, of Rutgers University’s
Center for Negotiation and Conflict
Resolution in New Brunswick, N.J., uses
two recent high-profile cases involving
women executives-one positive, one
negative-and shows how systematic ADR
methods can encourage good employment
practices and help eliminate bad ones.
ADR ETHICS FORUM
........
Page 157
Re..:aling to a court what happened in a
mediation session gone awry isn’t wrong.
Or is i t ? Partner William B. Leahy and
associate Karen E. Rubin of Cleveland’s
Thompson Hine & Flory analyze and
update mediation confidentiality law.
COLLATERAL ESTOPPEL....Page 1 5 9
Orrick, Herrington & Sutcliffe partner W.
Reece Bader, of Menlo Park, Calif.,
analyzes a recent California Supreme
Court decision that says that issues decided
in an arbitration cannot, without the
parties’ agreement, be barred from being
raised in a future litigation.
CHALLENGING AWARDS. ..Page 159
The Eighth U.S. Circuit Court of
Appeals has clarified its view on vacating
arbitration awards. Faegre & Benson
partner Terri L. Combs of Des Moines,
Iowa, and Anthony DeToro, counsel at
NetZero Inc. of Westlake Village, Calif.,
review “undue means” under the Federal
Arbitration Act.
ADR BRIEFS
...................
Page 1 6 1
Details on Settlement Month, the
National Association of Securities Dealers’
annual effort to boost mediation use.
...........
CPR NEWS
Page 1 6 2
The nominating process opens for the
1999 CPR Awards for Excellence in ADR.
DEPARTMENTS
Letter to the Editor ............ Page
CPR 20 Past, 20 Future ..... Page
Index Info ...........................
Page
ADR Briefs .........................
Page
Cartoon by Cullum ............ Page
CPR News ..........................
Page
Online Info.. Pages 161, 162 &
158
160
160
161
161
162
168
FOR DISPUTE RESOLUTION
VOL. 17, NO. 9 OCTOBER’I~~~
WWW.CPRADR.ORG
Lnding hex Uiscrimination at the
Top: Shattering the Glass Ceiling
BY LINDA STAMATO
.
for the post was another woman, one of
many women managers,
,glison K. sdieffelin, a principal in M ~ ~ Hewlett-Packard’s
whose
numbers
are
reported at more than
gan Stanley Dean Witter & cO.’s equity divi25%
and
sion, contends that she was passed over for
0
.
.
managing director because of her sex. She
The
contrast
in the expefiled her complaint against the
two
women is
rience
of
these
firm with the U.S. Equal Emstriking.
It
invites
comparison
ployment Opportunity Comand analysis.
mission, a necessary first step to
Their stories, individufiling a suit. In July, the EEOC
ally
have
generated a good deal
took Morgan Stanley to court
of
national
coverage. But conto force the firm to release data
templating
the connection in
on its employment practices for
counterpoint
is a more producsenior female employees.
Does Good Faith Avoid a Breach
Of Mediation Confidentiality?
BY WILLIAM B. LEAHY
AND KAREN E. RUBIN
Scene: A federal court-ordered mediation.
ActomThe mediator; counsel for the defendant; and you,
as counsel for the plaintiff.
PZot; During the course of
the mediation, the defendant
takes a Dosition omosite to its I
stance in related state court litigation. Without disclosing the name of the
federal case or any mediation documents, you
inform the state court about the inconsistency,
to demonstrate that the defendant is “talking
out of both sides of its mouth.”
I I
Issue: Are you subject to federal-court
sanctions for breaching the confidentiality of
the mediation?
At least one recent case
suggests that the answer is
“Yes.”As mediation becomes a
more common means of dispute resolution, scenes like the
one above, raising significant
confidentiality issues, will arise
more frequently.
How should mediation
confidentiality be protected, and what penalty should follow when a party or counsel
breaches confidentiality? In two leading decisions in 1995 and 1997, courts imposed
I
(continued on page 166)
Should Good Faith Be the Test for Sanctions Where a
Partv is Accused of Breaching Mediation Confidentialitv?
d
(continued from front page)
sanctions to punish breaches of mediation
confidentiality.Three more recent cases have
continued the trend.
Taken together, however, the recent cases
demonstrate some disparity in how courts
address breaches of mediation confidentiality under similar factual circumstances, particularly with respect to the standard by which
the conduct of parties and attorneys should
be judged.
of the court’s standing mediation guidelines
as well as the order requiring the parties to
mediate their dispute. The court was influenced by the fact that the attorney had announced his clients’ opposition to mediation
from the outset, showing his later conduct to
be a poorly-disguised attempt to subvert the
proceedings.
MORE SANCTIONS
Paranzino and Bernardwere bellwether cases
in which courts attempted to redress breaches
THE TREND BEGINS
In 1997, the Florida Court of Appeals decided Paranzino u. Barnett Bank, 690 So.2d
725 (Fla. App. 4th Dist. 1997), affirming the
imposition of the most severe sanction possible-dismissal of the plaintiff‘s case- as a
penalty for breaching the confidentiality of
court-ordered mediation.
The plaintiff had participated in mediation and received a settlement offer from the
defendant bank, which the plaintiff rejected.
In violation of the agreement binding the
parties to keep mediation discussions confidential, the plaintiff gave the Miami Herald
her version of events, including the terms of
the bank‘s settlement offer. The trial court
granted the banks motion to strike the
plaintiffs complaint based on the breach of
confidentiality.The court of appeals affirmed,
holding that the plaintiff and her attorney
had willfully and deliberately disregarded
their obligations to keep mediation discussions confidential.
Another early decision imposing sanctions
for a breach of mediation confidentiality was
Bernardv. Galen Group Inc., 901 F. Supp. 778
(S.D.N.Y. 1995). In Bernard the trial court
fined the plaintiffs’ attorney $2,500 for writing a letter to the trial judge specifying the
settlement amounts discussed at a court-ordered mediation. The attorney’s letter also
identified the mediator by name, reported
statements made by the mediator and attached a copy of a mediation brief. The
attorney’s letter further suggested that the
mediation be abandoned.
The court held that the attorney’s conduct violated the confidentiality provisions
William B. Leahy is a litigation partner at Cleveland‘s
Thompson Hine & FLOW LLP and a practicing mediator. Karen E. Rubin, an associate o f the firm, i s a
member of i t s litigation group.
The Alternatives
ADR Ethics Forum
i s produced i n affiliation
w i t h t h e CPR-Georgetown
Commission on Ethics and
Standards o f Practice i n ADR.
If you have a question about
ADR and ethical obligations
or a scenario has arisen i n
your practice t h a t you would
like t o submit for analysis,
please send it t o Alternatives
c/o CPR I n s t i t u t e for Dispute
Resolution, 366 Madison Ave.,
New York, N.Y. 10017-3122
or E-mail it t o
Alternatives@ c prad r. o rg .
of mediation confidentiality through judicially crafted sanctions tailored to the violation. Cases after Paranzino and Bernardhave
followed the same path.
Most recently, in Lyons u. Booker, 1999
W.L. 333195 (Utah App. 1999), an appellate court issued a public admonition and
warning to an attorney who filed a motion to
enforce a settlement. The parties had settled
the case after trial through the appellate court’s
pre-hearing mediation program. When the
defendant disputed the settlement terms, the
plaintiffs attorney filed a motion to enforce,
which contained detailed references to discussion at the mediation. The Utah Court of
Appeals has operated an appellate mediation
program since 1998. In its standard pre-hearing mediation order, the court states that
mediation discussions are confidential and
not to be disclosed to the court by the mediator, counsel or the parties. The Lyonscourt
noted that, notwithstanding the pre-hearing
mediation program, its role as a reviewing
court precluded it from hearing or considering evidence, including evidence necessary to
resolve a dispute arising from the parties’ participation in the mediation program. Therefore, the appellate court remanded the case
to the trial court to consider the motion to
enforce settlement.
Significantly, however, the appeals court
ordered that on remand stringent measures be
taken to contain the breach of confidentiality.
First, the parties were barred from disclosing
statements made during the appellate mediation to the trial court. They also were forbidden to make any use on remand of documents
created in connection with the mediation.The
plaintiffwas ordered to delete any reference to
the mediation proceeding from his motion to
enforce settlement before re-filing it with the
trial court. In addition, the pleadings and documents filed with the appeals court in connection with the motion to enforce settlementwere
ordered sealed, and the appellate judges who
heard the motion and reviewed the moving
papers were recused from further proceedings
in the case.
But even these elaborate measures were
not sufficient in the eyes of the Lyons court.
The court noted that a “guarantee of confidentiality is essential to the proper functioning of an appellate settlement conference
program,” and “revealingstatements or comments made at a settlement conference is a
serious breach of confidentiality”and a breach
of the order of the court sending the parties
into mediation. 1999 W.L. 33195 at *2, quoting Cldrk u. Stapleton C o p , 957 E2d 745,
746 (10th Cir. 1992).Therefore, for his violation of the nondisclosurerequirement in the
court’s mediation order, the appellant’scounsel was formally admonished, with a note that
“future violations of this order may subject
counsel to more severe sanctions.” Id.
SAVED BY GOOD FAITH
While the attorney in Lyom escaped with an
admonition, in Willisu. McGraw, 177 F.R.D.
632 (S.D. W.Va. 1998), a finding of good
faith saved the attorney from any sanction,
under facts similar to Lyom. In Willis,the trial
court had referred the case to mediation under a local rule providing that mediation proceedings “shall be privileged and not
reported.” 177 F.R.D. at 632. The court
noted that the purpose of the local rule is to
“ensure confidentiality, to reassure the parties and counsel they would suffer no prejudice ... as a result of the full, frank ... and
sometimes heated exchanges that occur inevitably during the mediation process.” Id.
The parties resolved the case at mediation, but the defendant later refused to endorse the written settlement agreement. The
plaintiff filed a motion to enforce the settlement, disclosing the terms of the parties’
agreement.
The court responded by denying the motion to enforce emphatically,adopting what it
called a “bright-line rule,” and holding that
preserving the beneficial aims of the mediation process precluded the court from becoming involved in any way, including “sorting out
disagreementsamongst the parties emanating
from the mediation process.” Id. at 633.
While recognizing that the Bernard trial
court had imposed sanctions against an attorney who revealed settlement offers exchanged during the mediation process, the
Williscourt rejected that option, noting that
“[s]anctions are not appropriate here. The
Court is satisfied counsel for the Plaintiff was
acting in good faith under the circumstances.”
Id. at n.2.
Therefore, in both Lyons and Willis, the
breach of mediation confidentialitystemmed
not from a high-profile news article, as in
Paranzino, but from attempts to enforce a
settlement reached during mediation. While
both the Lyons and Willis courts declined to
become involved in a dispute corollary to the
mediation, the differing decisions in the two
cases suggest how the flexibility inherent in
judicial sanctions can produce disparate outcomes based on similar facts.
INCONSISTENT POSIT10 N S
The attorney in Cohen v. Empire Blue Cross
&Blue Shield, 1998 W.L. 16944 (E.D.N.Y.
1998), withdrawn from publication, 178
F.R.D. 385 (1998), reported in the New York
LawJournal,~.3, col. 1 (May27,1998), was
not as fortunate as the Lyons or Willis attorneys: For his breach of mediation confidentiality, he was fined $750 plus attorneys’ fees
by the presiding federal magistrate.
In Cohen, the plaintiff and the defendant
were litigating in both federal and state court.
In the federa! action, the parties were ordered
into mediation under the rules of New York‘s
Eastern District, which required the mediating parties to execute a confidentiality agreement. In an effort to demonstrate that the
defendant was “talking out of both sides of
its mouth,” Id., the plaintiff notified the state
court that the defendant had adopted a position in the federal mediation that was inconsistent with its position in the state court case.
The plaintiffs counsel disclosed neither the
name of the federal case, nor any documents
that revealed the defendant‘s position in the
mediation.
torneys each violated a court order that mandated mediation confidentiality.
In Paranzino, however, as in Cohen, there
was no single court order providing that the
mediation was confidential. Rather, in
Paranzino,the court was required to draw from
several sources in order to find the breach of
confidentiality sanctionable, including the
parties’ mediation agreement, the state mediation privilege statute and the state civil rules.
In Cohen, the route to sanctions was even
more convoluted. The magistrate “reasoned
that by violating the confidentiality of the
mediation, the plaintiffs counsel had in fact
violated the court’s order directing the parties to mediate their dispute-an order that
triggered the mediation procedures of the
Eastern District, which in turn required the
execution of ‘an agreement of confidentiality,’ which plaintiffs disclosures violated,”and
which in turn was sanctionable under Rule
One local rule ensures confidentiality,
and reassures parties and counsel that
they would suffer no prejudice from any
frank-or even heated-mediation discussion.
Even without such disclosures, however,
the magistrate found that the plaintiffs counsel had engaged in “a blatant violation of the
confidentiality requirements that are essential to the mediation process,” meriting imposition of a $750 fine plus payment of
attorneys’ fees. New York Law Journal, p. 3 ,
col. 1 (May 27, 1998). The Cohen magistrate
cited Bernard, decided two years earlier in
New York‘s Southern District, in support of
his determination.
Cuhen also is noteworthy for the
magistrate’s conclusion that the conduct of
the plaintiffs attorney violated Rule 16(f) of
the Federal Rules of Civil Procedure, which
authorizes the court to impose sanctions for
violating a pretrial order. As demonstrated by
the earlier Bernard and Paranzino cases, as
well as Lyons, there are diverse sources from
which courts derive their power to sanction
breaches of mediation confidentiality.In Bernard, Lyons and Willis, for example, the at-
16(f) ofthe Federal Rules of Civil Procedure.
New York Law Journal: p. 3, col. 1 (May 27,
1998).
I S GOOD FAITH A VALID TEST?
Lyons, Willisand Cohen continue the course
of judicial sanctions plotted in Bernard and
Paranzino. The Willis court’s almost casual
introduction of a subjective good-faith test
into a determination of the issue of mediation confidentialityseems questionable, however. Except for the attorney in Bernard there
has been no suggestion in any of the cases
that the attorneys were acting in bad faith.
(Even in Bernard, it is possible that the attorney was merely overzealous in advancing the
objectivesofa client for whom mediation was
disadvantageous.) Unless sanctions for
breaching the confidentialityof mediation are
imposed based on objective standards, the
courts’ policing of mediation confidentiality
may suffer from unpredictability.
B
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