Exceptions to Mediation Confidentiality

by Brian R. Jerome, Esq.

In an important decision, the Appeals Court has decided in ZVI Construction Company, LLC v. Levy, et al., (Docket No. 15-P- 359) (Oct. 6, 2016) that Massachusetts should not recognize a “fraud exception” to the confidentiality of mediation among business litigants who were represented by counsel. Judge Cynthia J. Cohen wrote on behalf of the Appeals Court that whether to recognize a fraud exception to the confidentiality of mediation communications has been “an undecided question in Massachusetts.” In rejecting a fraud exception, she noted that by passing G.L.c. 233, §23C (Massachusetts’ Mediation Confidentiality Stature), the legislature “has recognized the importance of preserving the confidentiality of communications made during mediation,” She also noted that even the drafters of the Uniform Mediation Act, adopted by 11 states and Washington, D.C. “specifically considered and rejected” a fraud exception to the protection given to mediation communications.

In ZVI a contractor alleged that it had reached an agreement with a business at a mediation whereby the business, about to receive a $250,000 payment from a former partner to settle a separate dispute, fraudulently represented that the money would be received and then passed through to the contractor. When it was not so paid, the contractor sued the business and theirattorney and firm, saying the attorney fraudulently induced it to settle with a statement he had allegedly made during mediation that the funds would be transferred when received. The full text of the opinion can be accessed at : http://www.mdrs.com/wp-content/uploads/2016/10/ZVICONSTRUCTIONCOMPANYLLCvs.FRANKLINLEVYanother.pdf

This decision is important because confidentiality is at the heart of every mediation. It is what allows for candid disclosures of private information and creates and preserves a sense of security for the parties during settlement discussions in order to generate the possibility of settlement. It is in essence an assurance that that no damage will be done to their legal case by what is done and said during the mediation.

The Massachusetts Mediation Confidentiality Statute, General Laws c. 233, s. 23C, is now over 30 years old and was created when mediation was in its infancy in Massachusetts. Yet there have been very few cases presented seeking exemptions from its blanket privilege against disclosure of information shared in the presence of a qualified mediator, despite the revolutionary expansion of the mediation field.

The recent decision in the ZVI case correctly states that s.23C does not include an exception for fraud, nor did the further written mediation agreement entered into by the parties with the assistance of counsel. As such, the Court correctly refrained from creating a fraud exception to s.23C nor the confidentiality agreement separately entered into by the parties.

Some eleven states, but not Massachusetts, have adopted the Uniform Mediation Act (UMA) which carves out certain exceptions to non-disclosure where the societal interest in obtaining information contained in mediation communications may be said to outweigh its interest in the confidentiality of the mediation process. Examples of this include, but are not limited to, communications concerning commission of or planned commission of a crime, child abuse and neglect, evidence that a person poses a danger of physical harm to himself or others, to prove or disprove a claim of professional misconduct or malpractice filed against a party or mediator, and allowance for a waiver of privilege by the parties. As noted by the ZVI Court, an exception for fraud was considered by the authors of the UMA but not included as an exception.

While some commentators suggest that some reforms to s. 23C may be worthy of consideration, where grave injustices to the otherwise unprotected or vulnerable may occur without disclosure, it more appropriately should be the legislature’s function and not the Courts to carve out such limited exceptions in Massachusetts.

Fraud however, by definition, involves misrepresentation of material facts to induce action with detrimental reliance, all factors subject to interpretation and vagaries. As in ZVI, parties, particularly those who are represented by counsel, most often have information about their opponent’s proclivities, can exercise due caution during the mediation process to avoid blind reliance on representations proffered to them and often have independent means of obtaining supporting evidence of fraud and avenues of recovery available to them.

As experienced mediators know, misrepresentations or mischaracterizations of facts is unfortunately not a rare or unique occurrence at mediations, and are more often than not appropriately dealt with within the confines of the confidential mediation session itself. That having been said, law makers should be concerned about the chilling effect on mediation confidentiality that would occur if the broad area of fraud is categorized as an exception to non-disclosure.

Question is raised for your consideration: Do you feel that any reforms need to be made to the Mediation Confidentiality statute in Massachusetts or, do you feel that it continues to properly serve the important interest in mediation confidentiality and, as such, if it is not broken, why fix it?

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The Attorney, the Client, and the Mediator

by Brian R. Jerome, Esq.

What makes mediation successful?  To answer this, it is important to consider the roles and relationships between a lawyer, their client, and the mediator throughout the mediation process.  

Many of us who are attorneys can recall our law school years being focused primarily on developing strong advocacy and trial skills, with little to no emphasis placed on developing negotiation skills to reach settlement.  Litigators still rightly pride themselves on their trial and advocacy skills; it is this ability and willingness of an attorney to effectively try their case that creates the opportunity to reach more favorable pre-trial settlements.  However, the primary focus of law practice is not trial but rather the preparation, negotiation, and settlement of cases, as less than 3% of cases actually go to trial.

Mediators are experts in the complex process of negotiation and settlement of disputes, skilled facilitators who orchestrate mediations like efficient business meetings.  They create dynamic, structured, and respectful climates, and encourage all parties – as well as their counsel and/or insurers – to express themselves as needed so as to completely grasp all aspects of the conflict, material and human.  S/he helps the parties focus on fundamental needs and priorities, seeking out and encouraging common ground toward the achievement of satisfactory settlement.

Effective mediators go beyond simple facilitation of the process, exploring the parties’ positions, raising questions regarding these positions, conducting reality testing, and focusing the participants on the potential strengths and weaknesses of their case, preferably in a non-threatening and confidential manner.  Capable mediators give honest feedback, cutting through posturing and argumentativeness to help parties get down to the business of resolution.  Mediators help the parties develop an agenda, identify key interests, and create a realistic action plan.

An attorney’s role in the mediation process is both as advocate and advisor to their client.  It is the attorney who has prepared, investigated, discovered, and presented the case for the client.  S/he advises the client when and if mediation is appropriate – whether at the beginning, before suit is filed – or during (or after) the discovery process is completed.  In most, but not all cases, the attorney has engaged in a negotiation process to attempt settlement before formal mediation is commenced.  It is the lawyer’s role to explain to their client the nature of the process and what to expect during mediation.  Further, the lawyer assists the client in making an informed choice of the mediator based upon the type of case, as well as the background and experience of the mediator.  

Attorneys convey the benefits of mediation to their clients and prepare them so as to take full advantage of what mediation offers.  In that regard, attorneys should determine directly from the mediator the process they employ, and should describe this process to the client.  For example, counsel should review the expected initial joint session and the likely private caucuses thereafter.  It is also important to review who will talk and when,
who will take the lead role (if applicable), and how that may change as the mediation progresses.

The attorney advises the client on the substantive law relevant to the case and to the greatest extent possible, anticipates the arguments that the other side is likely to make at the session.  A client’s level of trust in their lawyer can be badly damaged if the client learns of potential risks for the first time at a mediation, such as that there is substantial risk of summary judgment before trial, or that the forecasted legal fees will be more than previously anticipated.  The mediator will likely be discussing these issues and relevant risks in private caucuses, and the client is likely to hear similar points from the opponent during the course of the mediation.  An attorney and well-prepared client are more likely to be convincing that their position is serious and reasoned, as opposed to mere posturing.  These perceptions are often translated back to the opposing party through the mediator.

The client should also have the benefit of their lawyer’s opinion of likely outcomes at trial and/or valuation of the case prior to the mediation.  This enables the client to begin considering a range of acceptable outcomes as part of the process.  For example, in a personal injury case the lawyer may advise the party of possible outcomes regarding the issue of liability, as well as reasonable and realistic ranges of a monetary judgment. The client should be strongly encouraged to come to the mediation with an open mind, avoiding bottom line positions. 

It is important that clients understand the confidentiality of the mediation process, both under the terms of the written mediation agreement in effect, and by applicable statutes or laws, such as in Massachusetts, MGL c. 233, s.23c.  The client should be informed how this confidentiality applies to both the initial joint session and, importantly, how the private discussions or caucuses with the mediator are themselves confidential. 

Confidentiality creates the foundation of the mediation process and allows parties and their counsel to speak openly at the session about their case and legitimate needs. Confidentiality allows the parties to make reasonable demands and offers with communications being protected from disclosure at trial should the matter not resolve. The more that a mediator can learn – in confidence – about the fundamental needs of the parties, the better they are able to foster a resolution that best satisfies everyone involved. Principally, a mediation is for and about the parties.  It is the client’s case and they ultimately decide whether to accept settlement or not, after considering the advice of their counsel.  Most parties who proceed to mediation seek to resolve their case at that session so as to avoid the continued anxiety, time, and expense of further litigation and the uncertainty involved in going to trial.  Many parties feel that mediation is equivalent to their day in court, an opportunity at long last to express their arguments, perspectives, and feelings to both the opponent and their expert and impartial mediator. 

Parties come to mediation with differing levels of experience, both as to litigation in general and the mediation process specifically.  Some clients have never participated in a mediation.  Others, such as insurers, may have significant experience in both litigation and the mediation process.  Mediators assess these varying levels of experience and ensure that all parties equally understand the neutral’s role and the mediation
procedures to be employed.  At the opening session the mediator should clearly set forth the procedures and background rules, explain the mediator’s role and impartiality, and review mediation process confidentiality.

It is not uncommon for parties to come to mediation with intense emotions, anger dating back to the underlying event giving rise to the claim, or with frustration emerging from the claims and litigation process.  These emotions need to be expressed before an aggrieved party can consider resolution.

Some attorneys limit their client’s active engagement during the course of the mediation session.  While in some cases this may be advisable (i.e. where the client has a tendency to speak about their case in a damaging manner, has excessive anger, and/or otherwise would disrupt the mediation process), counsel should nevertheless expect that a mediator will seek to engage the client in discussion, at least in private caucuses, to assess their views, emotions, needs, and priorities.  It is important to afford a mediator this opportunity with the client to directly establish confidence, impartiality, and trust.  A lawyer should consider advising the mediator in advance of the session of any client issues, such as intense emotions or unrealistic expectations; most mediators are happy to speak with counsel prior to the mediation session in this regard.  Attorneys should consider the advantages of direct client participation as they advise as to their clients’ level of involvement.

Attorneys understandably tend to make strong opening statements at mediation. Persuasive opening statements have the advantage of impressing the strength of their arguments, belief in their case, and preparedness to proceed to trial if mediation is not successful.  Many clients expect strong advocacy from their attorney at mediation, however should be educated that resolution is more often achieved when adopting a more collaborative approach.  Mediation is not a trial, and remarks made in joint session should not be inflammatory, belligerent, or personally offensive to the opponents or their representatives.  Such statements often widen the rifts that exist between disputants.  In such instances conciliators expend precious time during the session, in effect rehabilitating the offended party to a point where compromise and collaboration on their part is possible.  At the very least, counsel should consider expressing good faith intentions during the joint session, and that it is their desire to avoid, if possible, further litigation and trial.  Such representation often enhances negotiation outcomes.   

Attorneys can face challenging clients with unrealistic expectations regarding their likelihood of success at trial and/or expected verdict ranges, even when duly counseled.  In such cases, the mediation process allows clients a first-hand glimpse into the strengths of the opponent’s case and gives a preview of how the evidence could play out at trial.  The mediator guides parties through reality testing and risk analysis, with settlement often presenting more attractively than other alternatives.  Mediators ask hard questions to all sides in the dispute.  A practiced mediator, after having established rapport and having demonstrated themselves as being both impartial and equitable, can speak in private caucuses about the strengths and potential weaknesses of the case. Mediators must understand the thoughts and expectations of all parties, and rationally discuss the risks involved in proceeding to trial, existing judge or jury trends, the time and expense of further litigation, and the anxiety and frustration which too often accompany that path.  

At times, the attorney has unrealistic expectations for their client’s case.  Being sure to respect and foster the important attorney/client relationship, a mediator may need to engage counsel similarly about their thoughts and expectations, providing them with a different perspective on potential risks and nuances of a given case. 

Some attorneys are uncomfortable continuing to stress weaknesses in their case to the client or insurer, anticipating a negative response.  In such cases it can be very powerful for the parties to hear directly from an unbiased mediator the shortcomings of the case so they can consider a more realistic evaluation.

This is why it is critical for all parties, as well as insurers with needed settlement authority, to attend the mediation.  Even insurer participation by telephone is a poor second to actual mediation attendance.  In such circumstances, the mediator’s ability to speak to the insurer is limited and, too often, entirely restricted; to make the most of the process, the attorney should have his insurance client attend the session and work with the mediator directly.

Finally, participants are often anxious to depart the session when settlement is reached.  They do not wish to remain for the processing of a signed settlement agreement, preferring to prepare and sign such an agreement in the following days. However, most mediators know of cases where the agreed upon settlement falls though, whether a party changes their mind or a misunderstanding arises as to previously agreed-upon terms.  At the very least, there is the need for a minimal, written, signed, and legally binding settlement document at the end of every successful mediation.  The attorney, the client, and the mediator have all worked hard and must ensure that the settlement is binding.  It is critical to thoroughly sculpt the terms of the mediation settlement agreement and/or further releases while all parties are immediately available.

We hope all parties better understand the multifaceted roles and relationships that come into play during the mediation process.  Dispute Resolution methods provide effective alternatives to the time, expense, frustration, and uncertainty of ongoing litigation.

The Attorney, The Client, and The Mediator

By Brian Jerome, Esq.

Many attorneys recall law school being focused primarily on developing strong advocacy and trial expertise, with less emphasis placed on developing negotiation skills. Litigators rightly pride themselves on strong defensive skills; it is this ability and willingness of an attorney to effectively try their case that creates the opportunity to reach more favorable pre-trial settlements for their clients. However, with less than 3% of cases actually going to trial, focusing on negotiation, mediation, and settlement of cases is widely beneficial.

A mediator is an expert in the complex process of negotiation and settlement of disputes. An effective mediator orchestrates a mediation like an efficient business meeting. S/he creates a dynamic, structured and respectful climate, and sees that all parties, as well as their counsel and/or their insurers, have the opportunity to express themselves as needed to generate a full understanding of all aspects of the conflict, both material and human. S/he helps the parties focus on their fundamental needs and priorities and seeks out and encourages common ground in order to arrive at a satisfactory settlement.

An experienced mediator also goes beyond simple facilitation of the process, exploring the parties’ positions, raising important questions, reality testing, and focusing the participants on potential strengths and weaknesses of their case. The mediator helps the parties identify their key interests and has the ability to cut through posturing and argumentativeness to help parties achieve resolution.

An attorney’s role in the mediation process, as advocate and advisor to their client, is to suggest when mediation is appropriate, whether before suit is filed, or during/after the discovery process. The attorney must also explain the mediation process and benefits, suggest mediator selection, and prepare their clients to take full advantage of what mediation offers. The attorney advises the client on substantive case law, anticipated opposing arguments, potential risks, a realistic valuation of the case, and a range of possible outcomes – all prior to mediation.

Confidentiality plays a vital role in mediation; it’s important that clients understand confidentiality both under the terms of the written mediation agreement in effect as well as by applicable statutes or laws, such as in Massachusetts MGL c. 233, s.23c. Clients who know that their private discussions with the mediator are confidential speak more openly about their case and personal interests, which allows the mediator to better foster a resolution that meets the needs of all involved.

Some attorneys tend to limit their client’s active engagement during the course of the mediation session. While in some cases limiting a client’s participation may be advisable, i.e. where the client has a tendency to speak in a manner damaging to them, has excessive anger, and/or otherwise would disrupt the process, counsel should expect that the mediator will seek to engage the clients in discussion to assess their views, emotions, needs, and priorities. It is important for the mediator to establish a relationship of trust, openness and impartiality with all parties directly. A lawyer should consider advising the mediator in advance of the session of any client issues, such as intense emotions or unrealistic expectations so that the mediator can tailor their approach appropriately.

Some attorneys find it challenging to communicate to their client (or their insurer) weaknesses they have in their case. It can be very powerful for such parties to hear the mediator directly point out shortcomings so they can consider a more realistic evaluation. This is why all parties must attend the mediation. Participation by telephone during the mediation is a poor second to actual attendance. In such circumstances, the mediator’s ability to speak to the party or insurer is necessarily limited, and it is left to the attorney to communicate the many ebbs and flows of an ongoing mediation process to his client, which can be difficult at best for many reasons. To take full advantage of mediator input, the attorney should have his insurance client attend the session and work with the mediator directly.

Principally, a mediation is for and about the parties. It is the client’s case and s/he ultimately decides whether to accept settlement or not at the mediation, after hearing the advice of their counsel. To many, the session is equivalent to their day in court, an opportunity at long last to express their arguments, perspectives and feelings to both the opponent and an expert, impartial mediator, who is there to listen and help promote resolution.
The relationships involved in a mediation are at the heart of resolving the matter.

To learn more about this and other ADR-related topics, visit us at http://www.mdrs.com/faqs/mdrs-articles.

This shortened article was printed in Massachusetts Lawyers Weekly (April 27, 2015).  For a full and more detailed article, please click here.

What Happens in the (Mediation) Room Stays…

MDRS’ Brian Jerome was recently quoted in the Boston Herald in regards to the now-resolved Market Basket situation.  During a phone interview with the Herald, Brian expressed the importance of confidentiality while in the mediation room.  While his quote was referenced out of context in the published article, the interview brought up an important component of mediation, which is critical to highlight, and is always in the ADR spotlight – confidentiality.

Confidentiality in mediation is essential to the successful resolution of a case. It serves to preserve the sense that a mediation room is a sanctuary for those hoping to resolve a legal matter without trial.  This is especially important to emphasize given that if the case is not settled in mediation and finds its way in front of a judge that the information brought up in the mediation room will not impact the case.  It is the goal of the mediator to promote a comfortable environment where all parties feel safe to discuss a number of scenarios in order to reach a settlement.  Without the promise of confidentiality, some may not feel as secure in this process.  It’s also important to know that confidentiality doesn’t just start in the mediation session…it actually begins when the parties initially agree to mediation and submit their case.  This confidentiality is guaranteed until the mediation ends – and even then, if parties do not reach a settlement in mediation, the happenings of the mediation cannot be disclosed at any judicial proceeding or trial.

All parties involved in mediation have to trust in this confidentiality, and the mediator plays a significant role in maintaining this security.  A mediator’s role is to facilitate a settlement between multiple parties, and this can only be done if they are comfortable and willing to be open with their conversations and end-result considerations, which is a feat accomplished primarily through confidentiality and trust.  The mediator will also have private one on one caucuses with each party, and their counsel if represented, and these private caucuses are themselves confidential, which allows the parties to discuss their fundamental needs and interest in confidence with the mediator, based upon which a skillful mediator will work to sculpt a beneficial settlement to all parties.

Mediation is a timely, cost-effective alternative to trial and offers an opportunity to reach a settlement that is more agreeable to all parties.  If you agree to mediation, you should know that the information you share will be protected, and confidentiality will be upheld throughout the process.