CASSEL v. SUPERIOR COURT OF LOS ANGELES COUNTY









Filed 1/13/11




IN THE SUPREME COURT OF CALIFORNIA



MICHAEL CASSEL, )
)
Petitioner, )
) S178914
v. )
) Ct.App. 2/7 B215215
THE SUPERIOR COURT OF LOS )
ANGELES COUNTY, )
) Los Angeles County
Respondent; ) Super. Ct. No. LC070478
)
WASSERMAN, COMDEN, )
CASSELMAN & PEARSON, L.L.P., )
et al., )
)
Real Parties in Interest. )
__________________________________ )

In order to encourage the candor necessary to a successful mediation, the Legislature has broadly provided for the confidentiality of things spoken or written in connection with a mediation proceeding. With specified statutory exceptions, neither “evidence of anything said,” nor any “writing,” is discoverable or admissible “in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which . . . testimony can be compelled to be given,” if the statement was made, or the writing was prepared, “for the purpose of, in the course of, or pursuant to, a mediation . . . .” (Evid. Code, § 1119, subds. (a), (b).)[1] “All communications, negotiations, or settlement discussions by and between participants in the course of a mediation . . . shall remain confidential.” (Id., subd. (c).) We have repeatedly said that these confidentiality provisions are clear and absolute. Except in rare circumstances, they must be strictly applied and do not permit judicially crafted exceptions or limitations, even where competing public policies may be affected. (Simmons v. Ghaderi (2008) 44 Cal.4th 570, 580 (Simmons); Fair v. Bakhtiari (2006) 40 Cal.4th 189, 194 (Fair); Rojas v. Superior Court (2004) 33 Cal.4th 407, 415-416 (Rojas); Foxgate Homeowners’ Assn. v. Bramalea California, Inc. (2001) 26 Cal.4th 1, 13-14, 17 (Foxgate).)
The issue here is the effect of the mediation confidentiality statutes on private discussions between a mediating client and attorneys who represented him in the mediation. Petitioner Michael Cassel agreed in mediation to the settlement of business litigation to which he was a party. He then sued his attorneys for malpractice, breach of fiduciary duty, fraud, and breach of contract. His complaint alleged that by bad advice, deception, and coercion, the attorneys, who had a conflict of interest, induced him to settle for a lower amount than he had told them he would accept, and for less than the case was worth.
Prior to trial, the defendant attorneys moved, under the statutes governing mediation confidentiality, to exclude all evidence of private attorney-client discussions immediately preceding, and during, the mediation concerning mediation settlement strategies and defendants’ efforts to persuade petitioner to reach a settlement in the mediation. The trial court granted the motion, but the Court of Appeal vacated the trial court’s order.
The appellate court majority reasoned that the mediation confidentiality statutes are intended to prevent the damaging use against a mediation disputant of tactics employed, positions taken, or confidences exchanged in the mediation, not to protect attorneys from the malpractice claims of their own clients. Thus, the majority concluded, when a mediation disputant sues his own counsel for malpractice in connection with the mediation, the attorneys — already freed, by reason of the malpractice suit, from the attorney-client privilege — cannot use mediation confidentiality as a shield to exclude damaging evidence of their own entirely private conversations with the client. The dissenting justice urged that the majority had crafted an unwarranted judicial exception to the clear and absolute provisions of the mediation confidentiality statutes.
Though we understand the policy concerns advanced by the Court of Appeal majority, the plain language of the statutes compels us to agree with the dissent. As we will explain, the result reached by the majority below contravenes the Legislature’s explicit command that, unless the confidentiality of a particular communication is expressly waived, under statutory procedures, by all mediation “participants,” or at least by all those “participants” by or for whom it was prepared (§ 1122, subd. (a)(1), (2)), things said or written “for the purpose of” and “pursuant to” a mediation shall be inadmissible in “any . . . civil action.” (§ 1119, subds. (a), (b).) As the statutes make clear, confidentiality, unless so waived, extends beyond utterances or writings “in the course of” a mediation (ibid.), and thus is not confined to communications that occur between mediation disputants during the mediation proceeding itself.
We must apply the plain terms of the mediation confidentiality statutes to the facts of this case unless such a result would violate due process, or would lead to absurd results that clearly undermine the statutory purpose. No situation that extreme arises here. Hence, the statutes’ terms must govern, even though they may compromise petitioner’s ability to prove his claim of legal malpractice. (See Foxgate, supra, 26 Cal.4th 1, 17; Wimsatt v. Superior Court (2007) 152 Cal.App.4th 137, 163 (Wimsatt).) Accordingly, we will reverse the judgment of the Court of Appeal.
FACTS AND PROCEDURAL BACKGROUND
On February 3, 2005, petitioner filed a complaint against defendants and real parties in interest Wasserman, Comden, Casselman & Pearson, L.L.P., a law firm (WCCP), and certain of its members, including attorneys Steve Wasserman and David Casselman (hereafter collectively real parties). (Michael Cassel v. Wasserman, Comden, Casselman & Pearson, L.L.P., et al., Super. Ct. L.A. County, 2005, No. LC070478.) The complaint alleged that real parties, petitioner’s retained attorneys, had breached their professional, fiduciary, and contractual duties while representing petitioner in a third party dispute over rights to the Von Dutch clothing label.
The complaint asserted the following: In 1996, petitioner acquired a “global master license” (GML) to use the Von Dutch label, and he founded a company, Von Dutch Originals, L.L.C. (VDO), to sell clothing under that name. In 2002, WCCP began representing petitioner in a dispute over ownership of VDO. Petitioner lost an arbitration resolving that dispute, but the rights to the GML were not determined. Thereafter, petitioner did business in accordance with WCCP’s advice that the GML still entitled him to market clothing under the Von Dutch label. These activities caused VDO to sue petitioner for trademark infringement (the VDO suit). WCCP did not inform petitioner that, in connection with the VDO suit, VDO sought a preliminary injunction against his use of the Von Dutch label. When WCCP failed to oppose the injunction request, it was granted.
The complaint continued: Repeatedly assured by WCCP that the VDO injunction applied only within the United States, petitioner struck a deal to market Von Dutch clothing in Asia. Around the same time, Steve Wasserman, a silent partner in his son’s online sales business, persuaded petitioner to provide genuine Von Dutch hats for sale through the son’s business. Petitioner later learned this business was also selling counterfeit Von Dutch goods. Citing both the Asian agreement and the online sales as violations of the VDO injunction, VDO sought a finding of contempt against petitioner. In discovery relating to the VDO suit and the contempt motion, VDO deposed Steve Wasserman about the online sales of counterfeit Von Dutch merchandise. Wasserman thus assumed the conflicting roles of counsel and witness in the same case.
Further, the complaint asserted: A pretrial mediation of the VDO suit began at 10:00 a.m. on August 4, 2004. Petitioner attended the mediation, accompanied by his assistant, Michael Paradise, and by WCCP lawyers Steve Wasserman, David Casselman, and Thomas Speiss. Petitioner and his attorneys had previously agreed he would take no less than $2 million to resolve the VDO suit by assigning his GML rights to VDO. However, after hours of mediation negotiations, petitioner was finally told VDO would pay no more than $1.25 million. Though he felt increasingly tired, hungry, and ill, his attorneys insisted he remain until the mediation was concluded, and they pressed him to accept the offer, telling him he was “greedy” to insist on more. At one point, petitioner left to eat, rest, and consult with his family, but Speiss called and told petitioner he had to come back. Upon his return, his lawyers continued to harass and coerce him to accept a $1.25 million settlement. They threatened to abandon him at the imminently pending trial, misrepresented certain significant terms of the proposed settlement, and falsely assured him they could and would negotiate a side deal that would recoup deficits in the VDO settlement itself. They also falsely said they would waive or discount a large portion of his $188,000 legal bill if he accepted VDO’s offer. They even insisted on accompanying him to the bathroom, where they continued to “hammer” him to settle. Finally, at midnight, after 14 hours of mediation, when he was exhausted and unable to think clearly, the attorneys presented a written draft settlement agreement and evaded his questions about its complicated terms. Seeing no way to find new counsel before trial, and believing he had no other choice, he signed the agreement.
In his May 2007 deposition, petitioner testified about meetings with his attorneys immediately preceding the mediation, at which mediation strategy was discussed, and about conversations with his lawyers, outside the presence of the other mediation participants, during the mediation session itself. Petitioner’s deposition testimony was consistent with the complaint’s claims that his attorneys employed various tactics to keep him at the mediation and to pressure him to accept VDO’s proffered settlement for an amount he and the attorneys had previously agreed was too low.
Thereafter, real parties moved in limine under the mediation confidentiality statutes to exclude all evidence of communications between petitioner and his attorneys that were related to the mediation, including matters discussed at the premediation meetings and the private communications among petitioner, Paradise, and the WCCP lawyers while the mediation was under way. A hearing on the motion took place on April 1 and 2, 2009. The trial court examined petitioner’s deposition in detail and heard further testimony from David Casselman.
At length, the court ruled that, in addition to information about the conduct of the mediation session itself, the following evidence was protected by the mediation confidentiality statutes and would not be admissible: (1) discussions between petitioner and WCCP attorneys on April 2, 2004, concerning plans and preparations for the mediation, mediation strategy, and amounts petitioner might be offered, and would accept, in settlement at the mediation; (2) similar discussions between petitioner and WCCP attorneys on April 3, 2004; (3) all private communications among petitioner, Paradise, and WCCP attorneys on April 4, 2004, during the mediation, concerning (a) the progress of the session, (b) settlement offers made, (c) petitioner’s departure from the mediation over the objection of WCCP attorneys and their efforts to secure his return, (d) recommendations by WCCP lawyers that petitioner accept VDO’s $1.25 million offer, (e) their accusations that he was “greedy” for considering $5 million as an appropriate amount, (f) who would try the case if petitioner did not settle the VDO suit, (g) a possible deal, if petitioner settled, to acquire an interest in VDO for him through the pending divorce of VDO’s owner, and (h) WCCP’s willingness to reduce its fees if petitioner settled the suit. The court also ruled inadmissible, as communicative conduct, the act of a WCCP attorney in accompanying petitioner to the bathroom during the mediation.
Petitioner sought mandate. The Court of Appeal issued an order to show cause why the trial court’s order should not be vacated. After real parties filed a return to the petition, and petitioner filed a reply, the Court of Appeal granted mandamus relief.
The majority reasoned as follows: The mediation confidentiality statutes do not extend to communications between a mediation participant and his or her own attorneys outside the presence of other participants in the mediation. The purpose of mediation confidentiality is to allow the disputing parties in a mediation to engage in candid discussions with each other about their respective positions, and the strengths and weaknesses of their respective cases, without fear that the matters thereby disclosed will later be used against them. This protection was not intended to prevent a client from proving, through private communications outside the presence of all other mediation participants, a case of legal malpractice against the client’s own lawyers. Moreover, a mediation disputant and the disputant’s attorneys are a single mediation “participant” for purposes of the mediation confidentiality statutes. Thus, an attorney cannot block the client’s disclosure of private attorney-client communications by refusing, as a separate “participant,” to waive any mediation confidentiality that might otherwise apply. (See § 1122, subd. (a)(2).) Were this not so, the mediation confidentiality statutes would unfairly hamper a malpractice action by overriding the waiver of the attorney-client privilege that occurs by operation of law when a client sues lawyers for malpractice. (See § 958.)
In dissent, Presiding Justice Perluss argued that the majority had crafted a forbidden judicial exception to the clear requirements of mediation confidentiality. The dissent reasoned as follows: By their plain terms, subdivisions (a) and (b) of section 1119 do not simply protect oral or written communications “in the course of” mediation — i.e., those made to the mediator, to other mediation disputants, or to persons participating in the mediation on behalf of such other disputants. Instead, the statutes also include within their protection communications made “for the purpose of” mediation. Thus, even unilateral mediation-related discussions between a disputant and the disputant’s own attorneys are confidential. Moreover, unless all mediation participants waive confidentiality, the protection applies even if the communications do not reveal anything about the content of the mediation proceedings themselves. The latter conclusion flows from section 1122, subdivision (a)(2), which allows fewer than all participants in the mediation to waive, by an express writing or recorded oral statement, the confidentiality of an oral or written communication prepared solely for their benefit, but only if the communication “does not disclose anything said or done . . . in the course of the mediation.” Applying the mediation confidentiality statutes in accordance with their plain meaning to protect private mediation-related discussions between a mediation disputant and the disputant’s attorneys may indeed hinder the client’s ability to prove a legal malpractice claim against the lawyers. However, it is for the Legislature, not the courts, to balance the competing policy concerns.
We granted review.
DISCUSSION[2]
As below, real parties urge that under the plain language of the mediation confidentiality statutes, their mediation-related discussions with petitioner are inadmissible in his malpractice action against them, even if those discussions occurred in private, away from any other mediation participant. Petitioner counters that the mediation confidentiality statutes do not protect such private attorney-client communications — even if they occurred in connection with a mediation — against the client’s claims that the attorneys committed legal malpractice . As we will explain, we agree with real parties.[3]
Pursuant to recommendations of the California Law Revision Commission, the Legislature adopted the current version of the mediation confidentiality statutes in 1997. (Simmons, supra, 44 Cal.4th 570, 578.) The statutory purpose is to encourage the use of mediation by promoting “ ‘ “a candid and informal exchange regarding events in the past . . . . This frank exchange is achieved only if the participants know that what is said in the mediation will not be used to their detriment through later court proceedings and other adjudicatory processes.” [Citations.]’ (Foxgate[, supra,] 26 Cal.4th 1, 14 . . . .)” (Simmons, supra, at p. 578.)
Section 1119 governs the general admissibility of oral and written communications generated during the mediation process. Subdivision (a) provides in pertinent part that “[n]o evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation . . . is admissible or subject to discovery, and disclosure of the evidence shall not be compelled, in any . . . civil action . . . .” (Italics added.) Subdivision (b) similarly bars discovery or admission in evidence of any “writing . . . prepared for the purpose of, in the course of, or pursuant to, a mediation . . . .” Subdivision (c) of section 1119 further provides that “[a]ll communications, negotiations, or settlement discussions by and between participants in the course of a mediation . . . shall remain confidential.” (Italics added.) Exceptions are made for oral or written settlement agreements reached in mediation if the statutory requirements for disclosure are met. (§§ 1118, 1123, 1124; see Simmons, supra, 44 Cal.4th 570, 579.)
Under section 1122, “participants” in the mediation may, by the means set forth in the statute, waive, at least in part, the confidentiality of otherwise protected mediation-related communications. Subdivision (a)(1) of section 1122 provides that all “who . . . participate” in a mediation may “expressly agree in writing,” or orally if statutory requirements are met, “to disclosure of [a] communication, document, or writing.” Subdivision (a)(2) provides that if a “communication, document, or writing was prepared by or on behalf of fewer than all of the mediation participants, those participants [may] expressly agree in writing,” or orally if statutory requirements are met, to disclosure of the communication, document, or writing, so long as “the communication, document, or writing does not disclose anything said or done . . . in the course of the mediation.” (Italics added.)
As noted above, the purpose of these provisions is to encourage the mediation of disputes by eliminating a concern that things said or written in connection with such a proceeding will later be used against a participant. “Toward that end, ‘the statutory scheme . . . unqualifiedly bars disclosure of communications made during mediation absent an express statutory exception.’ ” (Fair, supra, 40 Cal.4th 189, 194, quoting Foxgate, supra, 26 Cal.4th 1, 15.) Judicial construction, and judicially crafted exceptions, are permitted only where due process is implicated, or where literal construction would produce absurd results, thus clearly violating the Legislature’s presumed intent. Otherwise, the mediation confidentiality statutes must be applied in strict accordance with their plain terms. Where competing policy concerns are present, it is for the Legislature to resolve them. (Simmons, supra, 44 Cal.4th at pp. 582-583; Foxgate, supra, at pp. 14-17.)
Thus, in Foxgate, we concluded that under the confidentiality provisions of section 1119, and under section 1121, which strictly limits the content of mediators’ reports,[4] a mediator may not submit to the court, and the court may not consider, a report of communications or conduct by a party which the mediator believes constituted a failure to comply with an order of the mediator and to participate in good faith in the mediation process. As we noted, the pertinent statutes are clear and unambiguous, thus precluding judicially crafted exceptions. Even if the failure to allow such a report means there is no sanction for a party’s refusal to cooperate during a mediation, we observed, “the Legislature has weighed and balanced the policy that promotes effective mediation by requiring confidentiality against a policy that might better encourage good faith participation in the mediation process.” (Foxgate, supra, 26 Cal.4th 1, 17.)
Moreover, we pointed out, there was no justification to ignore the plain statutory language, because a literal interpretation neither undermined clear legislative policy nor produced absurd results. As we explained, the Legislature had decided that the candor necessary to successful mediation is promoted by shielding mediation participants from the threat that their frank expression of views during a mediation might subject them to sanctions based on the claims of another party, or the mediator, that they were acting in bad faith. (Foxgate, supra, 26 Cal.4th 1, 17.)
In Rojas, we confirmed that under the plain language of the mediation confidentiality statutes, all “writings” “ ‘prepared for the purpose of, in the course of, or pursuant to, a mediation,’ ” are confidential and protected from discovery. (Rojas, supra, 33 Cal.4th 407, 416, quoting § 1119, subd. (b).) We explained that the broad definition of “writings” set forth in section 250, and incorporated by express reference into section 1119, subdivision (b), encompasses such materials as charts, diagrams, information compilations, expert reports, photographs of physical conditions, recordings or transcriptions of witness statements, and written or recorded analyses of physical evidence. (Rojas, at p. 416.) We agreed that direct physical evidence itself is not protected, even if presented in a mediation, because such evidence is not a “writing.” (§§ 250, 1119, subd. (b).) We also acknowledged that a “writing” is not protected “solely by reason of its introduction or use in a mediation.” (§ 1120, subd. (a).) However, we stressed that any “writing” is so shielded if that “writing” was prepared in connection with a mediation. (Rojas, supra, at p. 417.)
Rojas further made clear that the nondiscoverability of writings prepared for mediation, unlike the shield otherwise provided for certain attorney work product, is not subject to a “good cause” exception, based on “prejudice” or “injustice” to the party seeking discovery. (Code Civ. Proc., former § 2018, subd. (b); see now id., § 2018.030, subd. (b) [attorney work product, other than writings reflecting “attorney’s impressions, conclusions, opinions, or legal research or theories” (id., subd. (a)), is discoverable if court finds “that denial of discovery will unfairly prejudice the party seeking discovery . . . or will result in an injustice”].) The mediation confidentiality statutes, we pointed out, include no similar “good cause” limitation, and courts are thus not free to balance the importance of mediation confidentiality against a party’s need for the materials sought. (Rojas, supra, 33 Cal.4th 407, 414, 423-424.)
In Fair, we construed subdivision (b) of section 1123, which permits disclosure of a written settlement agreement reached in mediation if, among other things, “ ‘[t]he agreement provides that it is enforceable or binding or words to that effect.’ ” (Italics added.) “In order to preserve the confidentiality required to protect the mediation process and provide clear drafting guidelines,” we held that, to satisfy section 1123, subdivision (b), the written agreement “must directly express the parties’ agreement to be bound by the document they sign.” (Fair, supra, 40 Cal.4th 189, 197, italics added.) Thus, the writing must include, on its face, “a statement that it is ‘enforceable’ or ‘binding,’ or a declaration in other terms with the same meaning.” (Id., at pp. 199-200, italics added.) The mere inclusion of “terms unambiguously signifying the parties’ intent to be bound” (id., at p. 197, italics added) will not suffice (id., at p. 200).
We further determined in Fair that a written settlement reached in mediation cannot be made admissible by virtue of extrinsic evidence of a party’s intent to be bound, such as a representation in court by that party’s attorney that a final, enforceable agreement was reached in mediation. As we explained, section 1123, subdivision (b) “is designed to produce documents that clearly reflect the parties’ agreement that the settlement terms are ‘enforceable or binding.’ ” (Fair, supra, 40 Cal.4th 189, 198.)
In reaching these conclusions, we noted that a tentative working document produced in mediation may include terms, such as an arbitration provision, “without reflecting an actual agreement to be bound. If such a typical settlement provision were to trigger admissibility, parties might inadvertently give up the protection of mediation confidentiality during their negotiations over the terms of settlement.” (Fair, supra, 40 Cal.4th 189, 198.) Durable settlements, we explained, are more likely to result “if [section 1123, subdivision (b)] is applied to require language directly reflecting the parties’ awareness that they are executing an ‘enforceable or binding’ agreement.” (Fair, supra, 40 Cal.4th at p. 198.)
Most recently, in Simmons, we held that the judicial doctrines of equitable estoppel and implied waiver are not valid exceptions to the strict technical requirements set forth in the mediation confidentiality statutes for the disclosure and admissibility of oral settlement agreements reached in mediation. (§§ 1118, 1122, subd. (a), 1124.) Thus, we determined, when the plaintiffs sued to enforce an oral mediation agreement the defendant had refused to sign,[5] the plaintiffs could not claim the defendant’s pretrial disclosure of the agreement for litigation purposes estopped her from invoking the mediation confidentiality statutes, or constituted a waiver of their requirements.[6]
We affirmed once again in Simmons that the Legislature intended the unambiguous provisions of the mediation confidentiality statutes to be applied broadly (Simmons, supra, 44 Cal.4th 570, 580), that exceptions are limited to narrowly proscribed statutory exemptions, and that “[e]xcept in cases of express waiver or where due process is implicated” (id., at p. 582; see Foxgate, supra, 26 Cal.4th 1, 15-17; Rinaker v. Superior Court (1998) 62 Cal.App.4th 155, 167 (Rinaker) [mediator required to testify where juvenile’s due process right to confront witnesses outweighed mediation confidentiality]; Olam v. Congress Mortg. Co. (N.D.Cal. 1999) 68 F.Supp.2d 1110, 1118-1119, 1129 [parties expressly waived confidentiality]), mediation confidentiality must be strictly enforced, even where competing policy considerations are present.
We determined that Simmons, “[l]ike Foxgate and Rojas, . . . [did] not implicate any due process right equivalent to the right bestowed by the confrontation clause of the United States Constitution, nor ha[d] the parties executed express waivers of confidentiality.” (Simmons, supra, 44 Cal.4th at p. 583.) Accordingly, we concluded that litigation conduct by the defendant, not meeting the technical requirements for the disclosure of an agreement reached in mediation, neither estopped her from invoking mediation confidentiality nor constituted an implied waiver of such confidentiality. (Id. at pp. 582-588; accord: Eisendrath v. Superior Court (2003) 109 Cal.App.4th 351, 360-365 (Eisendrath) [no implied waiver by conduct].)
Here, as in Foxgate, Rojas, Fair, and Simmons, the plain language of the mediation confidentiality statutes controls our result. Section 1119, subdivision (a) clearly 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 . . . is admissible or subject to discovery . . . .” As we noted in Simmons, section 1119, adopted in 1997, “is more expansive than its predecessor, former section 1152.5. Section 1119, subdivision (a), extends to oral communications made for the purpose of or pursuant to a mediation, not just to oral communications made in the course of the mediation. [Citation.]” (Simmons, supra, 44 Cal.4th 570, 581, italics added, citing Cal. Law Revision Com. com., now reprinted at 29B pt. 3B West’s Ann. Evid. Code (2009 ed.) foll. § 1119, p. 391.)


TO BE CONTINUED AS PART II….



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