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Strengthening the mediation protections available under state law, the California Supreme Court has held that mediation confidentiality can not be impliedly waived by litigation conduct and that settlement agreements reached during mediation are admissible only with the express consent of both parties.
In Simmons v. Ghaderi, 187 P.3d 934 (Cal. 2008), Simmons filed a wrongful death complaint against Ghaderi. The parties proceeded to mediation. Before discussion of the claim, Ghaderi executed a "consent to settle" form for her insurance company, CAP, authorizing it to enter into a settlement agreement with Simmons during mediation. The instrument stated that it could only be revoked in a writing delivered to CAP's offices.
After discussion, CAP instructed the mediator to offer settlement to the other party for $125,000. Simmons orally accepted the offer. When Ghaderi was informed of the settlement offer, she stated that she was revoking CAP's authority to settle and left the building without singing the settlement agreement. Simmons signed the agreement, but no representative of Ghaderi signed. Days later, Ghaderi delivered written revocation to CAP.
Simmons petitioned the trial court to enforce the settlement on the ground that an oral settlement was reached with CAP while it was legally authorized to settle the claim. Because neither party signed the agreement, the trial court denied Simmons' petition.
Simmons then amended her complaint to add a cause of action for breach of the settlement agreement allegedly reached during mediation. Ghaderi opposed, asserting mediation confidentiality. The trial court held that there was a valid oral contract between Simmons and CAP and also determined that CAP was authorized to bind Ghaderi at the time of settlement by the consent form. It ordered specific performance of the settlement agreement.
In a 2-1 decision, the California Court of Appeal affirmed, finding a binding oral settlement and holding that Ghaderi was estopped from asserting mediation confidentiality by failing to object to Simmons' use of facts from the mediation at the trial court. The dissenting judge characterized the majority's reliance on estoppel as a veiled attempt to find waiver in a situation where the confidentiality privilege could not be waived by litigation conduct. See Simmons v. Ghaderi, 143 Cal. App. 4th 410 (Cal. Ct. App. 2006).
The California Supreme Court granted further review and held that the Simmons-CAP oral settlement did not comply with statutes governing the admissibility of such agreements reached in mediation. The Court noted the legislature's extensive statutory scheme protecting mediation confidentiality. Cal. Evid. Code §§ 1115-1128.
Specifically, the Court found the alleged agreement was inadmissible because there was (1) no recordation of the alleged oral agreement, § 1118; (2) no written agreement to disclose signed by the parties, § 1122; and (3) no signature on the alleged settlement's written memorialization, § 1124. With no admissible evidence of an oral agreement, the agreement could not be enforced by a court.
Second, the Court rejected the appellate court's contention that Ghaderi was estopped from objecting to the introduction of confidential evidence by her litigation conduct – namely, her failure to object to its introduction at the trial court. The Court simply reaffirmed its position that, absent a showing that the parties executed an express waiver of confidentiality or raised another express statutory exception, "confidentiality statutes unqualifiedly bar disclosure of certain communications and writings produced in mediation." See, e.g., Rojas v. Superior Ct., 33 Cal. 4th 407, 424 (Cal. 2004); Foxgate v. Homeowners' Assn., Inc. v. Bramalea Cal., Inc., 26 Cal. 4th 1, 17 (Cal. 2001). Holding otherwise, said the Court, would be "contrary to legislative intent."
Third, the Court agreed with the dissenting judge at the appellate court that the lower court had mistakenly applied the estoppel doctrine to mediation confidentiality. It observed that this was not a case where a defendant objected to the jurisdiction of a court or where a defendant made a misrepresentation or concealment of facts with the intention that the plaintiff rely upon it.
Finally, construing the appellate court's holding as one based on implied waiver instead of estoppel, the Court concluded that Ghaderi had not waived mediation confidentiality. Because mediation confidentiality statutes clearly require express waiver of the privilege, the Court declined to "violate[] the presumed intent of the legislature" by judicially creating an implied waiver rule. See Cal. Evid. Code § 1122 (unambiguously requiring that parties "expressly agree" to disclosure in writing).
The Court's decision clarifies two important points that bolster the legislatively-created protection of mediation confidentiality in California. The Court noted and endorsed the legislature's rejection of the prior rule that evidence of oral statements at mediation was admissible after a settlement was reached. See Regents of the Univ. of Cal. v. Sumner, 42 Cal. App. 4th 1209, 1213 (Cal. Ct. App. 1996). Now, the statute prohibits disclosures "made for the purpose of or pursuant to a mediation," not just those "in the course of the mediation." Cal. Evid. Code § 1119.
Also, the Court expressly overruled the proposition in Regents that litigation conduct could impliedly waive the mediation confidentiality privilege. 42 Cal. App. 4th at 1213. The Court had previously limited its treatment of this issue to a description of the Regents holding without its endorsement. Foxgate, 26 Cal. 4th at 10 n. 7. Together, these rule clarifications help preserve the candor that is critical to the effective use of mediation as an alternative to litigation.
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