As reported in the ABA Journal by Debra Cassens Weiss:

A law firm fired by the founders of the website ConnectU apparently got carried away in a recent marketing brochure.

Quinn Emanuel Urquhart Oliver & Hedges touted a settlement in the infringement case, and even revealed the confidential amount won by ConnectU: $65 million, the Recorder reports. The figure was published in a January business litigation newsletter, the story says. “WON $65 million settlement against Facebook,” is the exact wording.

The founders of ConnectU had claimed in their suit that Facebook chief executive Mark Zuckerberg stole their idea for a social networking site. The $65 million is apparently an estimated value of the settlement paid in cash and Facebook shares, the story says.

The disclosure appears to be a mistake, according to the Recorder. Quinn Emanuel chairman John Quinn said the settlement amount was confidential and asked the publication not to print it.

The case originally settled last February, but ConnectU later said the settlement was too low and claimed it had new evidence against Zuckerberg, according to the Recorder account. ConnectU fired Quinn Emanuel and obtained a new settlement that was placed under seal. Quinn Emanuel and ConnectU are arbitrating the issue of attorney fees.

In Rael v. Davis, 166 Cal. App. 4th 1608, the California Court of Appeal considered the following issue: Is the waiver of confidentiality provision in a settlement agreement enforceable even if the agreement was not signed by all the settling parties? The Court answered the question in the negative and concluded that the trial court correctly held that the term of the agreement waiving confidentiality never took effect because one of the parties to the settlement had not signed it. The Court further held that as a result, the agreement was inadmissible and therefore, unenforceable in whole or in part.

November 19, 2008 - The Petition for Review filed by Stephen L. Kaplan, Esq., counsel for Respondent Jameson Thottam,  with the California Supreme Court was denied.

As a result, the appellate court’s ruling still stands that California Evidence Code §1123(c) requires neither that an express agreement in writing permitting disclosure be contained in the settlement agreement itself nor that it even be made at or after the time the settlement agreement is entered into. 

We adressed the history of the Thottam case and the Court of Appeal’s decision underlying the Petition for review on September 15, 2008. For more information, please see:  Recent Confidentiality Decisions … In a Nutshell.

The California Court of Appeal in Kullar v. Foot Locker Retail, Inc. found that the trial court abused its discretion in finding the terms of the class action settlement to be fair, reasonable, and adequate where the record failed to establish what investigation counsel conducted or what information counsel reviewed on which counsel based their assessment of the strength of the class members’ claims.

The Court further found that the record lacked sufficient information for the trial court to intelligently evaluate the amount in controversy and the realistic range of outcomes of the litigation. Furthermore, the fact that the settlement was reached during mediation did not eliminate the trial court’s obligation to evaluate the terms of the settlement. If there were some relevant information that was subject to a privilege that the trial court needed to respect, other data should have been provided that would have enabled the court to make an independent assessment of the adequacy of the settlement terms.

The Court of Appeals held that just because communications made during mediation and writings prepared for use in mediation were inadmissible and not subject to compulsory production did not mean that underlying data, not otherwise privileged, was also immune from production.

California Supreme Court

On September 23, 2008, Stephen L. Kaplan, Esq., counsel for Respondent Jameson Thottam, filed a Petition for Review with the California Supreme Court in the matter of Estate of Thottam. Therein Mr. Kaplan presented the Court with two issues to consider:

ISSUE #1: Fair v. Bakhtiari, (2006) 40 Cal. 4th 189, 192 held that subdivision (b) of Evidence Code §1123 does not waive mediation confidentiality for purported settlement agreements created during mediation that are “simply a memorandum of terms for inclusion in a future agreement.” Does the same apply to subdivision (c) of Evidence Code §1123 so that purported written settlement agreements created during mediation are inadmissible at trial if it is unclear from the face of the document whether the document is a settlement agreement or “simply a memorandum of terms for inclusion in a future agreement”?

ISSUE #2: When the parties disagree whether a writing created during mediation is a settlement agreement, is mediation confidentiality waived under Evidence Code §1123(c) by signing a mediation agreement before the mediation commences that acknowledges that mediation is confidential “except as may be necessary to enforce any agreements resulting from the Meeting” and “shall be considered privileged and, as a settlement conference, non-admissible under the
California Evidence Code in any current or future litigation between us”? [1CT(Civ) 104].

We adressed the history of the Thottam case and the Court of Appeal’s decision underlying the Petition for review on September 15, 2008. For more information, please see:  Recent Confidentiality Decisions … In a Nutshell.

We will be keeping a close eye on the filings in this case and will report back as the story develops.

In light of the extensive blogosphere coverage that mediation confidentiality has received in recent months, we will keep this post short and sweet.  The last year has yielded a host of decisions from across the country that has impacted the confidentiality protections afforded parties to a mediation. 

We have summarized these cases with their respective citations so that the information is available and encapsulated in one area for easy reference.

Estate of Thottam, Case No. B196933 (Cal. App. 8/13/2008).  Three siblings mediated a dispute concerning distribution of their deceased mother’s estate and trust. At the outset of the mediation, the parties all signed a mediation confidentiality agreement. During the course of the mediation, a chart was prepared that delineated how the estate would be dispursed as among the three siblings. The chart was later introduced at trial by one of the siblings as evidence of the agreement over objection of the other two siblings. The trial court found the chart inadmissible, rejecting the introducing party’s argument that any mediation confidentiality was waived pursuant to the provision in the confidentiality agreement stating that confidentiality would apply “. . . except as may be necessary to enforce any agreements resulting from the Meeting.” (Emphasis added.) The appellate panel determined that the confidentiality agreement between the siblings that all matters discussed or agreed to in mediation “(2) shall not be used in any current or future litigation between us (except as may be necessary to enforce any agreements resulting from the Meeting”) was an enforceable agreement even though made prior to any settlement being reached. The appellate court reversed the trial judge and decided that California Evidence Code §1123(c) requires neither that the express agreement in writing permitting disclosure be contained in the settlement agreement itself nor that it even be made at or after the time the settlement agreement is entered into. 

Simmons v. Ghaderi, Case No. S147848 (Cal. App. 7/21/2008).  In this medical malpractice case, the defendant, Dr. Lida Ghaderi, gave her insurer consent during mediation to settle the case for $125,000.  After the parties reached an agreement and the mediator drew up the contract, Dr. Ghaderi retracted her consent and left the mediation. The plaintiffs sought to enforce the settlement with a declaration from the mediator outlining the events as they transpired at the mediation. Dr. Ghaderi objected and claimed the mediator’s declaration was a breach of mediation confidentiality and the oral settlement should be thrown out. The California Supreme Court agreed with Dr. Ghaderi, reversed the lower court’s decision and held that the “Court of Appeal improperly relied on the doctrine of estoppel to create a judicial exception to the comprehensive statutory scheme of mediation confidentiality and that the evidence relating to the mediation proceedings should not have been admitted at trial.”

Wimsatt v. Superior Court, (6/18/2007) 152 Cal.App.4th 137.  In a legal malpractice action, the plaintiff-client claimed his attorney cut his settlement demand by more than half without his authorization. Plaintiff sought discovery of all mediation briefs, including the one prepared by his own lawyer, and e-mails sent the day before the mediation that quoted from the mediation brief to support his contention that he had not authorized the reduced demand.  The Court of Appeal issued a writ of mandate directing the trial court to prohibit disclosure of the mediation briefs, holding that mediation confidentiality protects mediation communication in the context of a legal malpractice action arising from the handling of the underlying settlement process. The Court of Appeal reversed the decision, properly relying on Foxgate Homeowners’ Assn. v. Bramalea California, Inc. (2001) 26 Cal.4th 1, Rojas v. Superior Court (2007) 33 Cal. 4th 407, Fair v. Bakhtiari (2006) 40 Cal.4th 189 , and the California Evidence Code and held firm to the position that there are no exceptions to strict mediation confidentiality, even where the result seems unjust. The Court of Appeal reaffirmed the importance of confidentiality to the mediation process and emphasized the Supreme Court’s repeated refusal to “judicially create exceptions to the statutory scheme, even in situations where justice seems to call for a different result.”

Hauzinger v. Hauzinger, 2008 NY Slip Op. 05781 (NY Ct. App., June 26, 2008).  The New York Court of Appeals affirmed the Appellate Division’s holding that where one party signs a waiver releasing the mediator from maintaining confidentiality and the other pary waives confidentiality by seeking disclosure from the mediator, the mediator is not allowed to assert a qualified privilege and is required to testify at trial if subpoenaed.  

Williams v. Johanns, 2008 WL 36633 (D.D.C., January 2, 2008).  Counsel for plaintiff was found in civil contempt by the U.S. District Court for the District of Columbia for filing a pleading containing statements made in mediation. the Court held a show of cause hearing and ultimately imposed a nominal fine noting the importance of confidentiality in the mediation process.

Rees v. Tingey Construction, Case No. 20060594 (Utah February 1, 2008).The trial court’s order requiring counsel for a party to be deposed to determine whether the parties had orally agreed to settle during mediation was reversed. The decision was based on state law prior to the Utah Uniform Mediation Act taking effect on May 1, 2007.

Arben Corp. v. NYS Thruway Authority, Case No. 2008-036-308 (NY Ct. Cl., February 26, 2008).  In litigation over an alleged written settlement agreement, the New York trial court on a motion in limine ruled that post-mediation evidence from the mediator was permitted to determine whether or not a settlement agreement had been finalized and then breached.  The court based its decision on a written agreement to mediate between the parties and on New York Law (CPLR 4547) which codifies the common law “settlement privilege.” The court concluded that negotiations concerning the underlying dispute between the parties were protected by mediation confidentiality but that CPLR 4547 does not block efforts to prove the existence of a settlement agreement.