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Noting that "confidentiality is essential to effective mediation," the California Court of Appeal has affirmed a judgment against a former property owner whose claims relied upon a potential settlement agreement developed during court-ordered mediation.
In Alkop Agriservices, Inc. v. Giampaoli, No. C051609, 2007 WL 1068150 (Cal. Ct. App. April 10, 2007), Alkop Agriservices, Inc (AAI) lost title to a valuable tract of land that AAI had put up as collateral for a loan. Because of an allegedly unlawful trustee's sale, the property was acquired by Gaimpaoli for approximately 4% of its fair market value.
To prove its claims of illegal interference, AAI had to establish a "prospective business advantage" for Giampaoli. AAI attempted to do so by introducing into evidence a proposed written settlement offer that Giampaoli claimed was written during court-ordered pre-trial mediation.
AAI tried to persuade the Court that, because the offer had not been presented directly to the mediator during formal hearings, the settlement letter was not made "in the course of mediation," and should therefore be admissible The Court rejected this narrow reading, noting that it was prepared in response to an order by the mediator.
In affirming the judgment for Giampaoli, the Court noted that California evidentiary rules have been declared "clear and unambiguous" on this issue by the state Supreme Court: no oral or written communications made during mediation may be revealed, absent explicit exception by the state legislature. The unsigned, proposed settlement letter did not qualify for such an exception.
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