Mediation

Mediation Confidentiality Meets Attorney Malpractice

While working for a company, a guy opens up a competing business and lures away customers.  He is sued by his employer for fraud and breach of fiduciary duty.  Prior to trial he participates in a mediation, that is unsuccessful.  At trial he loses and is found liable for $364,000 in damages and $51,000 in attorney fees.

amazement

What does he do?  What any red-blooded American would do — he sues his attorney in federal court for shoddy representation during the mediation.

This is Fehr v. Kennedy, No. 08-1102-KI (D. Or. July 24, 2009).  The duplicitous employee (Fehr) claimed that his attorney (Kennedy) “failed to assess and advise [Fehr] of the risk of going to trial and specifically discounted and contradicted the mediator’s assessment of the likelihood of success of [the employer’s] claims and the consequences of a loss at trial. Kennedy’s failures allegedly caused the Fehrs to reject an offer to settle the case which was much more favorable than the result achieved at trial.”

(That really is unforgivable, isn’t it?  I always remind counsel to bring their crystal ball with them when they come to the mediation — how could Kennedy have forgotten his?  Anyway….)

Kennedy’s argument is simple, if somewhat appalling:  Fehr cannot prove his claim without revealing confidential mediation communications.  Kennedy, a communicant, does not consent to the disclosure.  Therefore, Fehr cannot prevail, and summary judgment must be granted to Kennedy.

The District Court agreed and made quick work of Fehr’s three protestations:

1.  This Isn’t the Same Case That Was Mediated.  The Oregon mediation statute prohibits disclosure in the course of the same or “ancillary” proceeding.  Malpractice ain’t fraud, says Fehr, so the confidentiality statute doesn’t apply.  No, says the court, the conduct alleged is sufficiently related to the prior proceeding, and the statute has been suffiently broadly interpreted, that this one counts too.

2.  Well Then It Must Be an Unconstitutional Constraint on Speech.  No law, says Fehr, can constitutionally forbid talking about something (especially about a tort) unless it is narrowly tailored, like admissions of liability made during settlement discussions.  The statements at issue had no bearing on this type of statement — rather, they were themselves evidence of malpractice, and cannot be barred by statute.  No, says the court.  If you agree to participate in a mediation then you agree to abide by the rules, as set forth in the Oregon mediation statute.  One rule is that you gotta shut up about mediation communications.

3.  It Was Not a Mediation Communication.  Fehr is trying to prove that advice given by his lawyer was lousy, and wants to introduce that advice in evidence.  He’s the client and can waive his own attorney-client privilege, so why can’t he?  No, says the court.  The mediation confidentiality statute has no exception for attorney-client communications concerning the mediation.  More to the point, in order to ascertain whether Kennedy gave bad advice the court would have to know what the other party offered and on what terms, what the mediator said to Fehr about the likely outcome at trial, what advice Kennedy gave Fehr about that offer, those terms and the mediator’s statements, and so on.  No, says the court, no no no.

Seems like a good outcome, doesn’t it?  But I put it to you:  What if your attorney is so poor that, relying on his advice, you miss a chance to settle a case and end up being screwed?  Are mediation confidentiality statutes also attorney immunity statutes?

3 Comments
  1. We had a case like that in California, Cassel v. Superior Court, and the Court found a loophole in the mediation confidentiality statute wide enough to let the client attempt to prove his malpractice case. Most mediators seem to think that result indicates a flaw in the confidentiality statute, but I think I lean toward your view. I’m not sure why a client should be totally precluded from bringing a malpractice claim merely because the alleged attorney malpractice occurred during a mediation. http://www.mediate-la.com/2009/11/carrie-prejean-sex-tape.html

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