Friday, January 14, 2011
S.C. Applies Mediation Confidentiality to Lawyer-Client Dispute
By KENNETH OFGANG, Staff Writer
Communications between attorneys and clients during mediation fall within the purview of mediation confidentiality in the absence of a waiver, the state Supreme Court ruled yesterday.
Holding that clothing entrepreneur Michael Cassel could not use communications between himself and his former attorneys to sue them for malpractice, the justices unanimously reversed a ruling by this district’s Court of Appeal.
The defendants, Wasserman, Comden, Casselman & Pearson, L.L.P and several of that firm’s individual attorneys, represented Cassel after he and his partner fell out over the direction of their company, Von Dutch Originals, L.L.C.
“Von Dutch” was the name used by Kenny Howard, a legendary custom painter of cars and motorcycles who died in 1992. His daughters licensed the name to Cassel in 1996, and Cassel later partnered with martial arts champion Tonni Sorensen, putting the name on a custom clothing line favored by various celebrities.
In his malpractice complaint, Cassel alleged that after losing an arbitration to Sorensen over control of the company, he continued to use the Von Dutch Originals name, based on advice by the law firm that he could do so under the license. As a result, the company sued and obtained a preliminary injunction.
The law firm, however, advised him that the injunction had no effect outside the United States, Cassel alleged, so he entered into a contract to market Von Dutch clothing in Asia. In addition, he claimed, he was persuaded by attorney Steve Wasserman to sell Von Dutch hats through an online business run by Wasserman’s son.
Cassel also claimed that he later learned that the online business was also selling counterfeit Von Dutch goods. As a result of the Asian and online sales, Von Dutch Originals sought to hold Cassel in contempt.
The company’s suit against Cassel went to mediation in August 2004. Prior to that, Cassel claimed, he and the attorneys agreed that he would sell all of his licensed rights to the company for not less than $2 million, if the company were willing to pay that much to resolve the issue.
Despite that agreement, he claimed in his complaint, the attorneys harangued him and took advantage of his fatigue and confusion—and offered to cut their bill of nearly $200,000—in order to persuade him, after 14 hours of mediation, to accept $1.25 million for the rights.
Motion in Limine
Comden Wasserman brought a motion in limine, arguing that the parties’ communications during the period of the mediation, including mediation preparation and strategy sessions, private communications during the mediation, recommendations by the attorneys, alleged accusations that Cassel was “greedy” for valuing his rights well above what he was being offered; discussions of the possibility of his regaining an interest in the company through Sorensen’s pending divorce; and the company’s alleged offer to reduce its fees if the suit was settled.
The law firm also sought to exclude, as communicative conduct, the act of an attorney in accompanying Cassel to the restroom during the mediation, which the plaintiff offered as an example of how he was pressured to accept the settlement.
Los Angeles Superior Court Judge William A. MacLaughlin granted the motion, and Cassel sought a writ of mandate. Div. Seven granted the writ, ruling 2-1 that the mediation confidentiality statutes were intended to promote frank discussions between adverse parties, and did not apply in a dispute between a party and its own attorneys.
But Justice Marvin Baxter, in his opinion for the high court, said the Court of Appeal’s opinion was contrary to the plain language of the mediation statutes, enacted by the Legislature in 1997 on the recommendation of the California Law Revision Commission.
The justice cited Evidence Code Sec. 1119, which makes confidential “anything said or any admission made or the purpose of, in the course of, or pursuant to, a mediation,” including all communications “by and between participants.”
The court has applied that language strictly in past cases, Baxter pointed out, saying there was no reason to do otherwise in the context of malpractice claims.
“The obvious purpose of the expanded language is to ensure that the statutory protection extends beyond discussions carried out directly between the opposing parties to the dispute, or with the mediator, during the mediation proceedings themselves. All oral or written communications are covered, if they are made ‘for the purpose of’ or ‘pursuant to,’ a mediation....It follows that, absent an express statutory exception, all discussions conducted in preparation for a mediation, as well as all mediation-related communications that take place during the mediation itself, are protected from disclosure. Plainly, such communications include those between a mediation disputant and his or her own counsel, even if these do not occur in the presence of the mediator or other disputants.”
Baxter acknowledged that this strict application deprive a party of important evidence. But deciding whether that constitutes “the soundest public policy,” he said, “is not our responsibility or our province.”
Justice Ming Chin, concurring “reluctantly,” said that while there was no basis for the court to depart from the clear statutory language, the Legislature might consider the fact that confidentiality could be used to protect a lawyer from liability for “incompetent or fraudulent actions” in mediation. “This is a high price to pay to preserve total confidentiality in the mediation process,” Chin wrote.
The case was argued in the Supreme Court by Los Angeles attorneys Ronald W. Makarem of Makarem & Associates for Cassel, Gerald L. Sauer of Sauer & Wagner for amici John Porter and Deborah Blair—plaintiffs in a lawsuit raising the same issue—on behalf of the plaintiffs, and Peter Q. Ezzel of Haight Brown & Bonesteel for Wasserman Comden and its attorneys.
The case is Cassel v. Superior Court (Wasserman, Comden, Casselman & Pearson, L.L.P.), 11 S.O.S. 253.
Copyright 2011, Metropolitan News Company