– FILE PHOTO COURTESY OF ROBERT E.L. WRIGHT
“Everything said in mediation is confidential.” Really? Maybe.
By Robert E.L. Wright
Whether you are an attorney, a business person or a divorcing spouse, if you have ever been in a mediation you have likely heard a mediator promise you confidentiality for anything you say. As mediation becomes a mainstay for litigants seeking an alternative way to resolve their disputes, this promise of confidentiality will increasingly be tested in our courts. Unfortunately, given the current state of the law in Michigan’s state and federal courts, the promise - depending upon the circumstances - may prove illusory.
It is not that courts do not appreciate or value the need for confidentiality in mediation. As one court explained, “Public policy favors the settlement of lawsuits, a policy embodied in Rule 408 of the Federal Rules of Evidence…. The integrity of the mediation process depends on the confidentiality of discussions and offers made therein.” Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976, 979 (6th Cir. 2003).
Rather, legislatures have failed to provide the tools for courts to use to preserve and protect mediation confidentiality. To appreciate the issue, consider three scenarios.
1. A lawsuit is pending and the matter is referred to a mediator. Mediation ends without an agreement. Something was revealed which is potentially damaging to your side. Your opponent mentions the disclosure in a motion. Will the court exclude it?
2. Same scenario, but instead of revealing it in a motion, you receive discovery requests completely centered around the disclosure such that it will be impossible to not reveal it. Will the court uphold your objection?
3. Same scenario, but instead of using the disclosure, you and your opponent exchange even more confidential information by email, resulting in a settlement. You receive a subpoena from a third party seeking the information in an entirely different case. Will the other court quash the subpoena?
The answer to all three questions is the same: “It depends.” Three important variables affecting the outcomes for these scenarios are:
• Whether there is a written agreement of confidentiality between the participants in the mediation.
• Whether the issue arises under state or federal law or is raised in a state or federal court. (For this article, it is presumed that a court case is connected to the mediation.)
• Whether there is a privilege to protect the information from further disclosure.
Scenario 1
Confidentiality agreement? In the first scenario, if there is an agreement between the parties to bar the use of anything said or done in mediation, the motion will likely be stricken. The court can do so purely on a contract basis, upholding the agreement of the parties to keep such matters confidential. However, if there is just an order referring the case to mediation but no written agreement to mediate or it lacks a confidentiality provision, the parties are left to the rules of the court in which the motion is filed. What will a Michigan court decide? Again the answer is “It depends.”
State or federal court? In Michigan state courts, MCR 2.412 would likely bar the communication: “Mediation communications are confidential. They are not subject to discovery, are not admissible in a proceeding, and may not be disclosed to anyone other than mediation participants [with certain enumerated exceptions].” Okay, but what if the lawsuit is pending in one of Michigan’s federal courts? Again, it depends on which federal court.
In February 2015, the US District Court for the Eastern District of Michigan (“EDMI”) adopted new local rules concerning mediation. Local Rule 16 (d) provides: “Communications in ADR proceedings are confidential. They are not subject to discovery, are not admissible in a proceeding, and may not be disclosed to anyone other than the ADR participants unless the court permits disclosure.” So again, it looks like the motion would be stricken in that court.
Detroit’s bankruptcy court has its own rule on mediation confidentiality: “All proceedings and writings incident to the mediation shall be privileged and confidential, and shall not be reported or placed in evidence.” (United States Bankruptcy Court, Eastern District of Michigan, Local Rule 7016(a)(5).) So once again, the disclosure would likely be protected. But how about the Western District?
FRE 408. In the United States District Court for the Western District of Michigan, Local Rule 16.2(d) states: “All ADR proceedings are considered to be compromise negotiations within the meaning of Fed. R. Evid. 408.” What protection does Federal Rule of Evidence 408 provide? The rule merely excludes from evidence offers to compromise a “disputed claim,” including conduct or statements made during compromise negotiations about the disputed claim, to either prove or disprove the validity or amount of the “disputed claim” or to impeach “by a prior inconsistent statement or a contradiction,” UNLESS the disclosure:
a is offered in a criminal case involving a public office; or
b. is offered:
i to prove bias or prejudice of a witness;
ii. counter an argument of undue delay; or
iii. to prove an attempt to obstruct a criminal investigation.
So, if the disclosure is not offered to prove or disprove the amount of a claim or impeach a prior statement it could be admitted. Consider an admitted failure to report income to the IRS. If it doesn’t bear on the amount of a disputed claim or contradict prior statements, would it still be protected? Likely not. Moreover, consider all of the other opportunities for disclosure left open by the exceptions in the rule. So what would happen in the Grand Rapids bankruptcy court? The answer depends on whether a new rule under consideration by that court is adopted.
Bankruptcy court. In January, the United States Bankruptcy Court for the Western District of Michigan appointed a seven-member committee to draft proposed alternative dispute resolution rules. The ADR Committee recently finished its work and the outcome is yet to be finalized (as of this writing the rules are just being published for comment), but the Committee has finished its work and submitted a final draft of proposed rules to the court.
Proposed LBR 9019-12(b) provides that, with some explicit exceptions, all “mediation communications,” broadly defined in the rule, will be treated as confidential and “the mediator and the mediation participants shall not disclose any mediation communication outside of the mediation, and no person may introduce in any other proceeding evidence pertaining to any aspect of the mediation process.” Additionally, there are prohibitions against seeking information from a mediator by subpoena or other discovery devices, nor may a party offer anything a mediator says into evidence. Proposed LBR 9019-12(h). If adopted by the bankruptcy court and approved by the district court, the motion would likely be stricken under the proposed rules.
Other protections. FRE 408, local court rules, and the parties’ agreement to mediate are not the only safeguards for parties mediating in Michigan’s federal courts. The Alternative Dispute Resolution Act of 1998 requires each U.S. district court to adopt local rules authorizing the use of alternative dispute resolution processes in civil actions, including adversary proceedings in bankruptcy courts, and requires each district to “encourage and promote the use of ADR.” Pub. L. No 105-315, 112 2993 (1998). The need for confidentiality in mediation communications is widely recognized throughout U.S. courts and was specifically upheld by the Sixth Circuit Court of Appeals.
As noted earlier in the Goodyear case, “The integrity of the mediation process depends on the confidentiality of discussions and offers made therein.” Indeed, other language in that case supports excluding our hypothetical disclosure: “In sum, any communications made in furtherance of settlement are privileged.” Id. 332 F.3d 983. However, issues remain as to whether a disclosure was made “in furtherance of settlement” and precisely what the court meant by “privileged.” Who holds the privilege? Who may assert it? Is it unconditional or are there exceptions? These and other
questions would need to be determined on a case-by-case basis.
Diversity cases. A further complication comes into play in federal courts where jurisdiction is based on diversity. A full discussion of the multiplicity of permutations on choice of law is beyond the scope of this article. But briefly, if the rule of decision in a diversity case is based on the law of a state with a statutory mediation privilege, the non-forum state’s privilege law may apply to the hypothetical disclosure, especially if it can be shown the parties expected the foreign state’s privilege law would apply to their mediation communications. (For an excellent discussion of the choice of law issues, see The Quest for Uniformity in Mediation Confidentiality: Foolish Consistency or Crucial Pre-dictability? by Ellen E. Deason, 85 MARQUETTE LAW REVIEW 79 (2001); and the seminal case on federal mediation confidentiality privilege, Folb v. Motion Picture Industry Pension & Health Plans, 16 F.Supp.2d 1164 (CD CA 1998).) Michigan has no statutory privilege for mediation communications. So unless another state’s law applies, there is no state law privilege to protect the communications here.
Uniform Mediation Act. However, if the rule of decision is supplied by a state which has adopted the Uniform Mediation Act, the outcome could be different. The Uniform Mediation Act (or UMA) provides that all mediation participants “may refuse to disclose, and may prevent any other person from disclosing,” a mediation communication. UMA, Section 4(b). Only twelve states have enacted the Uniform Mediation Act although two more significant ones, Massachusetts and New York, currently have bills pending to do so in 2015. Although MCR 2.412, Michigan’s court rule on mediation confidentiality, mirrors the confidentiality provisions of the UMA, we have no privilege such as that found in the UMA.
Scenario 2
Discovery based on confidential disclosures. So no motion is filed, but you have received discovery requests solely focused on your client’s income tax returns for the period disclosed. Under both state and federal rules, the discovery will likely be allowed if the income tax information is otherwise discoverable.
In Michigan state courts, MCR 2.412(E)(3) expressly states: “Evidence or information that is otherwise admissible or subject to discovery does not become inadmissible or protected from discovery solely by reason of its disclosure or use in a mediation.” So, it is likely the discovery would be allowed in state court, assuming the information was “otherwise discoverable.”
Similarly, in Michigan’s federal district courts, there is no exclusion for discovery of the underlying information, only the communications about the information are protected. For instance, FRE 408 only bars the introduction into evidence of an offer to compromise; it does not even mention discovery. Even where there is broad protection of mediation communications, there is no prohibition on discovery of the information contained in a mediation communication, only discovery of the communications concerning the information (USDC EDMI Local Rule 16.3(d); USBC EDMI Local Rule 7016-2(a)(5).) In fact, in many courts there is an explicit statement allowing the introduction of evidence which could have been discovered absent mediation: “these rules do not require the
exclusion of any evidence otherwise discoverable merely because it is presented in the course of a mediation conference.” (USBC WDMI Proposed Local Rule 9019-13(f).)
Practice tip for litigators. If you disclose something to an opponent in mediation, even though it may not be used directly, it could open your client to discovery about the subject of the disclosure.
But if the disclosure was made only to the mediator in a private caucus, would it ever be disclosed if the mediator did not reveal it to the other side? Likely not, but can you trust your mediator to not disclose it, even inadvertently. This depends on the mediator. Do they make statements like the one in the title to this article? How well have they been trained to keep private disclosures confidential? How familiar are they with the Michigan Standards of Conduct for Mediators? Do they include a reference to those Standards in their contract to serve as your mediator? Answering these questions may help you determine your mediator’s level of discretion.
Scenario 3
Now you can breathe a sigh of relief. The case is finally settled. Time to move on to other matters. Wait, what’s this IRS subpoena seeking your email records?
Here we reach the limitations of the court rules on third-party access to mediation communications. Even though the rules promise confidentiality, unless they also confer a privilege which will be upheld by a higher court, the disclosures in your post-mediation emails may not be protected. Here’s why.
•Because agreements to mediate and court rules in one court may not bind third parties in a different court.
•Because a court rule is not the same as a statutory privilege.
•Because there is a tension between the need to keep mediation communications confidential and the public’s right to know which can trump confidentiality. (E.g., consider the judicial maxim, “the public is entitled to every man’s evidence.” Branzburg v. Hayes, 408 U.S. 665, 667; 92 S.Ct. 2646, 33 L.Ed.2d 626 (U.S., 1972).)
The only refuge left is the federal common law. Does a federal mediation privilege protect the disclosures sought here? With apologies, it depends.
In 1993, the US Supreme Court proposed nine specific privileges, recognized in most of the 50 states, be incorporated into the federal evidentiary rule on privileges, FRE 501. Congress declined the proposal. Choosing a different path, they discarded all but one of the proposed privileges, the attorney/client privilege, in favor of this general statement which is now FRE 501:
The common law — as interpreted by United States courts in the light of reason and experience — governs a claim of privilege unless any of the following provides otherwise:
• the United States Constitution;
• a federal statute; or
• rules prescribed by the Supreme Court.
But in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.
No codified federal privileges. Unfortunately, there is no mediation privilege in the Constitution, any applicable federal statute or rules prescribed by the Supreme Court generally applicable to civil disputes in the district courts. So now our hapless mediation participant must determine whether there is a state statute protecting the disclosures. The answer? Possibly, if another state’s laws provided the rule of decision and they have adopted a privilege statute, but sadly for our hero/ine, the answer is not in Michigan – at least not yet. And since FRE 501 only looks to state statutes in civil cases, if the subpoena was issued in a criminal case against our client, here too the last resort is a federal common law privilege.
Which brings us back to the Folb case, mentioned earlier. There, a federal district judge sitting in the Central District of California boldly found there is a federal mediation communications
privilege. Briefly, here are the facts.
In case #1, Ms. Vasquez, a female employee sued her employer, MPIPHP, alleging that Folb, her male supervisor, had sexually harassed her. Case #1 went to mediation. No settlement agreement was reached during the mediation session, but the matter was settled shortly thereafter via communications solely between the attorneys for the employer and Ms. Vasquez. Although those communications followed upon the negotiations begun in mediation, the mediator was no longer involved in them.
Enter Case #2. Folb is suing MPIPHP for firing him over the alleged incidents with Ms. Vasquez in Case #1. Next comes the request for production to the employer. Mr. Folb wants a copy of the employer’s mediation brief in Case #1 and any correspondence related to settlement negotiations with Ms. Vasquez’s attorneys. MPIPHP objects; Mr. Folb files a motion to compel. Enter Judge Paez.
After deciding a complex choice of law issue, Judge Paez finds a federal common law privilege protects mediation communications! Citing language in a US Supreme Court decision, Jaffee v. Redmond, 518 US 1, 9 (1996), Judge Paez determined there is a “public good transcending the normally predominant principle of utilizing all rational means for ascertaining the truth.” The public good is the prompt resolution of disputes through mediation. Over the next 10 pages, the court found that: (1) the mediation privilege was “rooted in the imperative need for confidence and trust;”
[in the mediation process and neutrality of the mediator]; (2) would serve public ends [settling lawsuits]; (3) the evidentiary detriment is not too great [without the protection mediation participants wouldn’t disclose the information anyway]; and (4) denial of the privilege would frustrate a parallel privilege adopted by the states [the court found court rules and statutory privileges protecting mediation communications in almost every state to be evidence of a parallel privilege]. Folb, 1171-1180. So our attorney is home free, right? Not quite.
First, this is only a district court opinion and it is from the “Left Coast.” Moreover, the inquiry did not end there. Examining the meaning of the term “mediation communications,” Judge Paez found the term only applied to communications made during a formal mediation session, not conversations in the parking lot afterwards or, in our hypothetical, post-mediation emails between attorneys without the mediator’s involvement. As such, Folb was denied access to the mediation brief and any communications made during the formal mediation, but he was allowed, subject to in camera review by the court, to pursue “production of communications that took place between counsel privy to the mediation after the mediation was formally concluded.” Id., 16 F.Supp.2d 1180.
Thus, even with a federal mediation communication privilege, whether the IRS can compel the production of the disclosures in our hypothetical depends on whether the disclosures fall within a court’s definition of “mediation communications.” Most definitions of the term do not include post-mediation negotiations without the mediator’s involvement. For example, see 2 UMA (2); MCR 2.412(B)(2); and USBC WDMI Proposed Local Rule 9019-12(a). For the same reason, the privilege would likely not extend to any offers made prior to mediation either.
So, until Michigan adopts a statute like the Uniform Mediation Act with a privilege protecting mediation communications, litigants going to a mediation and wishing to protect the confidentiality of their communications, should contractually agree with the mediator and all participants to more expansive confidentiality protections than those provided in the court rules. In addition, for disclosures which could conceivably result in discovery attempts by a third party, only disclose them to the mediator.
Please notice I am not advocating adoption of the UMA specifically. Many of my colleagues have well-reasoned issues with some of its provisions. But until Michigan adopts a privilege statute for mediation communications, I cannot promise mediation participants unconditional confidentiality beyond my promise that I won’t reveal anything they tell me absent their permission or a court order.
Even with a statutory mediation privilege, be aware that some disclosures will likely not be protected. For example, to support her claim of self-defense, a woman accused of murdering her allegedly abusive husband wants access to any confessions of physical abuse her husband may have made to the mediator during mediation. In such a circumstance, a criminal court is likely to find the widow’s need for the information to defend herself outweighs the public’s need for confidentiality.
In spite of uncertainty in certain settings, mediation is still the most useful tool around for resolving a dispute short of arbitration or litigation. Confidentiality concerns can be alleviated with four potential safeguards:
1. Always enter into a broad confidentiality agreement with all parties to the mediation;
2. Be careful who you choose as your mediator and what you tell them in mediation;
3. Clarify with the mediator whether the burden is on you to specifically identify what information can and cannot be shared with the other party that you disclose during private caucuses; and,
4. If you don’t settle during the initial mediation conference and you need to reveal additional information to settle after the mediation conference, keep the mediation open and have the mediator carry the water to the opposition.
Robert E,L. Wright is a Grand Rapids attorney with years of mediation and ADR epxerience. He works for Professional Resolution Experts of Michigan, LLC (PREMi), an association of legal professionals with numerous years of experience in dispute resolution and a large breadth of subject matter knowledge. PREMi’s attorneys work with parties in conflict across Michigan and around the country, utilizing creative approaches and processes to achieve meaningful results. More information about PREMi can be found on its website: www.premiadr.com.
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