Mediation as malpractice? The effect of California mediation confidentiality statutes.

• Author: Brown, Michael E.

This article originally appeared in the November 2011 Professional Liability Committee Newsletter.

In January of this year, the California Supreme Court reaffirmed more than a decade of jurisprudence that provides nearly impenetrable confidentiality for communications made pursuant to mediation--even where such communications are offered as evidence of legal malpractice. (1) The court in Cassel v. Superior Court relied on a line of cases stemming from Foxgate Homeowners' Association v. Bramalea California. (2) Despite pleas from statutorily hamstrung Courts of Appeal in the intervening years between Foxgate and Cassel, the California Legislature has yet to revisit the mediation confidentiality statutes, which have produced documented inequitable results. (3)

The specific statute interpreted by Foxgate and its progeny is contained within the California Evidence Code. (4) Section 1119 provides that "[n]o evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation or mediation consultation is admissible or subject to discovery." (5) When read in conjunction with the California Rules of Professional Conduct, Section 1119 creates a significant ethical dilemma for attorneys who wish to counsel their clients in mediation. (6) Because the Rules of Professional Conduct prohibit contracts between lawyers and clients that limit the lawyer's liability for malpractice, the simple act of "contracting" to attend a mediation could be construed as malpractice by the lawyer. (7) The defendant attorneys in Cassel apparently faced no such considerations. Instead, the Supreme Court of California in Cassel considered attorney malpractice in the context of mediation itself. (8)

The defendant attorneys had represented the plaintiff in a dispute regarding rights to the Von Dutch clothing label. (9) The plaintiff alleged malpractice, breach of fiduciary duty, fraud, and breach of contract. Michael Cassel acquired a license to sell Von Dutch clothing, and subsequently formed VDO, a corporation that would distribute the clothing. The defendant attorneys from Wasserman, Comden, Casselman & Pearson, L.L.P. ("WCCP") represented Cassel in a dispute over ownership of VDO, which Cassel lost. (10) He continued selling the clothing regardless, and WCCP failed to oppose an injunction filed by VDO, which was granted. (11) WCCP nevertheless advised Cassel to sell Von Dutch goods in Asia and through an online business of one of WCCP's attorneys. These facts led VDO and Cassel to a pretrial mediation.

During the fourteen-hour mediation, Cassel remained insistent that he receive no less than $2,000,000 from VDO for the assignment of his license to sell Von Dutch products, but he alleged that attorneys from WCCP "harassed" and "coerced" him into not accepting $1,250,000. There was evidence that Cassel and his...