California Supreme Court Holds All Evidence Of Oral Agreement During Mediation Is Inadmissible, Even Where Objecting Party Had Brought Mediation Communications Before The Court

California Supreme Court Holds All Evidence Of Oral Agreement During Mediation Is Inadmissible, Even Where Objecting Party Had Brought Mediation Communications Before The Court

08.19.2008

In Simmons v. Ghaderi, 2008 WL 2789224 (7/21/08), the California Supreme Court held that the mediation confidentiality protections in California Evidence Code §1115 et seq. “made inadmissible all evidence of an oral contract between plaintiffs and defendant during mediation.”

The plaintiffs in the case sued a doctor for medical malpractice. By statute, no medical malpractice insurer is permitted to enter into a settlement without the insured’s written consent. Before the mediation, upon her insurer’s request, the doctor signed a written consent to settle the case for $125,000.

Later, at mediation, the insurer representative offered $125,000 to the plaintiffs to settle the claim, and plaintiffs accepted. The mediator prepared a written agreement with the essential terms of the settlement for the parties to sign. When the doctor was informed of the plaintiffs’ acceptance, she revoked her consent to settle, left the mediation, and refused to sign a written settlement agreement.

After the mediation, the plaintiffs moved to enforce the settlement under California Code of Civil Procedure §664.5, which permits entry of judgment upon a signed settlement agreement or a settlement stipulated on the record before the court. The plaintiffs submitted evidence of what happened at the mediation, including a declaration of the mediator. The trial court denied the motion because neither the doctor nor the insurer had signed the written settlement agreement.

The plaintiffs then amended their complaint to allege a cause of action for breach of the oral settlement agreement reached at the mediation. The doctor moved for summary adjudication, contending there was no valid contract because she had revoked her consent to settle. The trial court denied the motion, stating that since the plaintiffs had accepted the $125,000 settlement offer before the doctor revoked her consent, a binding settlement agreement could have been created.

At the trial on the breach of contract claim, the doctor asserted for the first time that any evidence of mediation agreements or communications was barred by the mediation confidentiality provisions of Evidence Code §§ 1115-1128. Those statutes state that anything said or written in the course of, or pursuant to, a mediation is inadmissible in court as evidence. The trial court nevertheless admitted the evidence of mediation communications, over the doctor’s objections. The trial court found that an oral settlement agreement had been reached notwithstanding the doctor’s revocation of her consent and entered judgment in favor of the plaintiffs for $125,000.

The Court of Appeal affirmed, finding that the doctor was judicially estopped from arguing that evidence of the settlement agreement was statutorily inadmissible because she brought the facts of the mediation before the court and sought a legal determination as to their effect.

The Supreme Court reversed, holding that the evidence of mediation communications should not have been admitted at trial. The Court admonished that the courts must observe the procedures authorized by statute and are not permitted to create a judicial exception to the comprehensive statutory scheme of mediation confidentiality, such as the doctrine of estoppel. The Court acknowledged that an oral settlement agreement might have been reached during the mediation, but the parties did not follow the appropriate statutory procedures to make the agreement enforceable. Specifically, there was no written agreement signed by both parties, and the term sheet prepared by the mediator was not sufficient because there was no express agreement that it could be disclosed and it was not signed by the doctor or her counsel.

The Court emphasized that mediation confidentiality is “strictly enforced,” and the only exceptions are in the cases of express waiver or where due process is implicated. Neither exception applied in this case. In so ruling, the Court stated that parties cannot impliedly waive mediation confidentiality through their conduct.

The Court observed that enforcing mediation confidentiality would have the effect, as was the case here, of making some agreements reached during mediation unenforceable. However, the Court stated, the Legislature was aware of this when it enacted the statutes and “chose to promote mediation by ensuring confi-dentiality rather than adopt a scheme to ensure good behavior in the mediation and litigation process.”

The Court’s decision makes clear that to ensure that a settlement reached at mediation is enforceable, all litigants and insurers to be bound should be required to sign a written agreement at the mediation memorializing the essential terms of the settlement.