SIMMONS v. GHADERI

Filed 9/27/06

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

APPEAL from a judgment of the Superior Court of Los Angeles County, Richard L. Fruin, Judge. Affirmed.

Reback, McAndrews & Kjar, Robert C. Reback and Melanie Shornick for Defendant and Appellant.

Law Office of James Aaron Pflaster, Martin R. Berman and James Aaron Pflaster for Plaintiffs and Respondents.

The parties to a medical malpractice case attended a mediation. Defendant Lida Ghaderi, M.D. provided her medical malpractice insurer, Cooperative American Physicians/Mutual Protection Trust (“CAP-MPT”) with her written consent to settle the case for the amount of $125,000. An offer in that amount was transmitted to the plaintiffs, who unconditionally accepted. While the mediator was reducing the settlement agreement to writing, the CAP-MPT claims specialist informed Dr. Ghaderi that a settlement had been reached. Dr. Ghaderi then informed the CAP-MPT representative that she was revoking her consent to settle, and left the mediation. Plaintiffs ultimately amended their medical malpractice complaint to include a cause of action for breach of the oral settlement contract. After a bifurcated trial on that cause of action, the trial court entered judgment in favor of plaintiffs in the amount of $125,000. Dr. Ghaderi appeals, arguing that the Evidence Code provisions governing mediation confidentiality prevented plaintiffs from introducing any evidence of the oral settlement agreement. We conclude Dr. Ghaderi is estopped from relying on mediation confidentiality and therefore affirm.

FACTUAL AND PROCEDURAL BACKGROUND

On March 27, 2002, plaintiffs, the minor son and mother of Kintausha Clemmons,^[1] filed a wrongful death complaint against Dr. Ghaderi alleging medical malpractice caused the death of Kintausha Clemmons.^[2]

On July 9, 2003, the parties attended a mediation with the Honorable Robert T. Altman, retired. Plaintiffs and their counsel appeared. Dr. Ghaderi was present with Obi Amanugi, a CAP-MPT claims specialist. Two attorneys also attended with Dr. Ghaderi: Attorney Kent T. Brandmeyer, the CAP-MPT attorney; and Attorney Robert C. Reback, Cumis counsel.^[3]

Under the provisions of her professional liability policy with CAP-MPT, Dr. Ghaderi had the right to withhold her consent to the settlement of any third party malpractice claim. Prior to engaging in settlement discussions, Dr. Ghaderi executed a written consent to settlement form provided by CAP-MPT. In pertinent part, the document provided as follows: “I consent to the settlement of the . . . claim for an amount not to exceed that authorized by the Claims Review Committee of [CAP-MPT]. It is understood and agreed that my consent to the negotiated settlement of this claim involves the compromise of a doubtful and disputed claim. Neither my consent to settlement nor the payment of any sum of money by [CAP-MPT] in connection with this negotiated settlement shall constitute or be construed as an admission of liability on my part.

I understand that [CAP-MPT] has an obligation to report settlements to the National Practitioner Data Bank as well as the Medical Board of California in a manner consistent with statute and regulations.

I understand and agree that this consent to settlement may only be revoked in writing. This consent to settlement shall remain in full force and effect unless and until written revocation of my consent to settlement is received by [CAP-MPT at its office].” (Italics added.) Prior to signing the consent agreement, Dr. Ghaderi added the following language at the bottom, “The settlement value is limited to one hundred & twenty-five thousand dollars & zero cents.” Dr. Ghaderi signed and dated the consent agreement.

Settlement discussions then proceeded. During settlement discussions, Dr. Ghaderi waited in another room with Attorney Reback. Eventually, CAP-MPT advised Judge Altman to offer plaintiffs $125,000 to settle the matter in exchange for a dismissal with prejudice and a waiver of costs. Plaintiffs accepted the offer. While Judge Altman prepared a document reflecting the settlement agreement for the parties to sign, Amanugi went to the other room to inform Dr. Ghaderi and Attorney Reback that a settlement had been reached. When she was advised of the settlement, Dr. Ghaderi said, “Good, because I am revoking my consent.” Amanugi discussed this with Dr. Ghaderi, and also telephoned the CAP-MPT office to obtain guidance on how to proceed. CAP-MPT’s general counsel informed Amanugi that CAP-MPT considered Dr. Ghaderi’s oral revocation of her consent to be valid. Shortly thereafter, Dr. Ghaderi left the building. Judge Altman, plaintiffs and plaintiffs’ counsel signed the written settlement agreement; no one signed on behalf of Dr. Ghaderi or CAP-MPT.

The following day, plaintiffs’ attorney and Attorney Brandmeyer, the CAP-MPT attorney, appeared in court. Both counsel recounted the facts of the July 9, 2003 mediation to the court -- including Dr. Ghaderi’s written consent to settle for $125,000, the offer in that amount, the acceptance of the offer, and Dr. Ghaderi’s departure while the settlement was being reduced to writing. Counsel sought guidance on how to proceed.

The trial court speculated that there may be an enforceable settlement agreement. Attorney Brandmeyer agreed that CAP-MPT may eventually take that position, but he first wanted to speak with Dr. Ghaderi in the hopes of obtaining her agreement to the settlement. The trial court vacated the trial date and set the matter for an order to show cause why the case should not be dismissed on July 29.

On July 16, 2003, Dr. Ghaderi sent CAP-MPT a letter formally revoking her consent to settle. On July 17, 2003, plaintiffs filed an application for an ex parte order shortening time for a hearing on a petition to approve the compromise of the minor’s claim.^[4]

At the July 17, 2003 hearing, Attorney Brandmeyer informed the trial court that Ghaderi had informed CAP-MPT that she had decided to revoke her consent. Attorney Brandmeyer was not sure “where that leaves us.” The trial court asked Attorney Brandmeyer if CAP-MPT was “going to pay the money without [Dr. Ghaderi’s] signature on a settlement agreement?” Attorney Brandmeyer said CAP-MPT was “still trying to figure it out,” but he didn’t think CAP-MPT would pay if Dr. Ghaderi did not consent. The trial court ordered Dr. Ghaderi to personally appear at the order to show cause hearing on July 29, 2003.

On July 29, 2003, Dr. Ghaderi was present, with Attorney Brandmeyer and Cumis counsel, Attorney Reback. The trial court spoke with Dr. Ghaderi and her counsel in chambers. The court then stated on the record that Dr. Ghaderi was unwilling to consent to the settlement. The court added, “I told her that I would have to get briefing on the contractual issue of whether she is obligated by virtue of the document she signed to consent to this settlement. I said [that] if I found upon motion that she was so bound, I would approve the settlement over her objection.” The court indicated that it appeared that the proper course of action would be for plaintiffs to bring a motion to enforce the settlement agreement under Code of Civil Procedure section 664.6. Plaintiffs’ counsel asked if he could obtain a copy of the written consent agreement Dr. Ghaderi had signed. Attorney Brandmeyer agreed to provide a copy. Plaintiffs’ counsel also asked the court if it would “entertain a declaration from the mediator? Would that be inappropriate as to what occurred?” The trial court agreed that it “probably would be appropriate.” Attorney Reback did not interpose an objection to disclosure of the consent agreement or the obtaining of a declaration from the mediator.

On August 15, 2003, plaintiffs filed their motion to enforce the settlement, on the basis that an oral agreement had been reached with CAP-MPT while CAP-MPT had Dr. Ghaderi’s consent to settle the action. Thus, plaintiffs argued any further consent from Dr. Ghaderi would have been superfluous. Plaintiffs supported their motion with: a copy of Dr. Ghaderi’s signed consent to settle the action for $125,000; a declaration from plaintiffs’ counsel setting forth the events at the July 9, 2003 mediation; the written settlement agreement executed by plaintiffs only; and a short declaration from Judge Altman, confirming that the case was settled for $125,000 and that Dr. Ghaderi then revoked her consent.

On September 5, 2003, Dr. Ghaderi, represented by Attorney Reback, filed her opposition to the motion. She raised no objections to the evidence relied upon by plaintiffs. In fact, her memorandum of points and authorities admitted that: (1) Dr. Ghaderi “gave consent to CAP[-]MPT to engage in settlement discussions on her behalf. Any settlement value was to be limited to $125,000.00 with no admission of liability”; (2) a “settlement offer of $125,000.00 in exchange for a dismissal of the matter with prejudice and a waiver of costs was made and [p]laintiffs accepted”; and (3) Dr. Ghaderi then declined to settle and left the mediation without signing the written settlement agreement. Dr. Ghaderi’s opposition was based on the premise that, since she did not sign the written settlement agreement, the settlement was not “consummated” and her subsequent written revocation of consent was therefore timely.

Another opposition was filed on Dr. Ghaderi’s behalf by Attorney Brandmeyer. The opposition was based on the following rationale. The summary procedure for enforcing settlements under Code of Civil Procedure section 664.6 generally requires the written consent (or oral consent in open court) of the party. (Robertson v. Chen (1996) 44 Cal.App.4th 1290, 1293-1294.) Nevertheless, when the party is represented in settlement negotiations by an insurer who settles within policy limits, the party’s consent is superfluous as long as the insurer consents. (Fiege v. Cooke (2004) 125 Cal.App.4th 1350, 1353.) However, in many professional liability policies, including the one under which CAP-MPT was providing a defense for Dr. Ghaderi, the policy gives the insured the right to approve or reject any settlement negotiated by the insurer. This is designed to prevent settlements which might be regarded as an admission of wrongdoing, thus injuring the insured’s professional reputation. In such a case, the insured’s written consent is necessary in order to enforce a settlement under Code of Civil Procedure section 664.6. (See Robertson v. Chen, supra, 44 Cal.App.4th at pp. 1294-1295, fn. 3.)

A hearing on the motion was held on September 15, 2003. The court concluded the summary procedure of Code of Civil Procedure section 664.6 did not apply because neither Dr. Ghaderi nor CAP-MPT had signed the written agreement. Nonetheless, the court expressed its opinion that an enforceable oral settlement agreement was reached and that Dr. Ghaderi’s subsequent attempt to withdraw her consent was ineffective. The court and counsel then agreed that the best way to proceed would be for plaintiffs to amend their complaint to allege a cause of action for breach of contract. On March 9, 2004, plaintiffs filed their first amended complaint which asserted a cause of action for breach of contract.

On June 25, 2004, Dr. Ghaderi moved for summary adjudication of the breach of contract cause of action. Dr. Ghaderi’s motion was based on the theory that there was no valid contract because she did not sign the written settlement agreement. Dr. Ghaderi’s motion was supported by her own declaration,^[5] in which she stated that: (1) she had given her consent for CAP-MPT to settle the case for $125,000; (2) her counsel had made a $125,000 settlement offer to plaintiffs; and (3) she revoked her consent without executing the settlement agreement. In Dr. Ghaderi’s separate statement of undisputed facts, she asserted the above facts were undisputed.

On August 24, 2004, plaintiffs filed their opposition to the motion, arguing that, during the time that CAP-MPT had been authorized to settle the action on Dr. Ghaderi’s behalf for $125,000, CAP-MPT made the $125,000 offer which was accepted, resulting in an enforceable oral contract. The opposition was supported by the transcript of Dr. Ghaderi’s deposition, taken on August 13, 2004. At her deposition, Dr. Ghaderi had testified (in contrast to her declaration) that she did not know if a $125,000 offer had been made to plaintiffs at the mediation. Attorney Reback then stated, “We’re not disputing the fact that the offer was made or that the plaintiffs accepted it.” Plaintiffs’ counsel responded, “I’ll accept the stipulation.” Attorney Reback rejoined, “Great.” The opposition was also supported by the deposition of Amanugi, who testified that, based on Dr. Ghaderi’s written consent to settlement, she had offered plaintiffs $125,000 to settle the case, and that the offer had been accepted.

Dr. Ghaderi’s reply memorandum again argued that her consent for CAP-MPT to settle the case had “remained in effect only until” her revocation, and that she had revoked it “prior to completion of the Settlement Agreement.”

The trial court denied the motion on the basis that, since plaintiffs had unconditionally accepted the $125,000 settlement offer, “CAP-MPT operating with Dr. Ghaderi’s consent and within her authorization appears to have completed a contract before she revoked her consent.”

On September 23, 2004, the trial court severed the breach of contract cause of action and ordered it tried first. The parties were directed to file simultaneous trial briefs.

On October 6, 2004, Dr. Ghaderi filed her trial brief. In that document, filed nearly fifteen months after the mediation, Dr. Ghaderi asserted, for the first time, that “[a]ny attempt to introduce evidence of discussions, purported agreements, or any form of communication at mediation or thereafter” is barred by the mediation confidentiality provisions of the Evidence Code. (Evid. Code §§ 1115-1128.) Dr. Ghaderi’s trial brief raised no other issue. Her sole position was that plaintiffs could not prove the existence of a contract to settle the malpractice action, because any proof would violate the confidentiality of the mediation.

The case proceeded to trial where, over objection, Amanugi testified as to the events at the mediation. The trial court concluded that a valid, enforceable contract had been entered into prior to Dr. Ghaderi’s withdrawal of her consent.^[6] The court stated, “Whether, when and how Dr. Ghaderi withdrew her consent is irrelevant if the settlement agreement was entered into by her agent acting within her consent. If so, the settlement agreement became effective and enforceable notwithstanding her later withdrawal of consent.

. . .

The bottom issue, for this court, is whether an oral settlement agreement that was entered into by an attorney who was specifically authorized by his client to accept the settlement terms is enforceable. This settlement agreement, in the court’s view, meets the conditions for and is therefore enforceable as an oral contract.” The trial court ordered specific performance of the agreement.

The court subsequently entered judgment in favor of plaintiffs for $125,000 plus prejudgment interest. Dr. Ghaderi filed a timely notice of appeal.

CONTENTIONS OF THE PARTIES

Dr. Ghaderi again argues that her revocation of consent was sufficient to prevent the settlement from becoming effective, and that no evidence of the events occurring at the mediation was admissible due to the principles of mediation confidentiality. Plaintiffs dispute each of these arguments.

DISCUSSION

1. A Valid Oral Contract Was Formed

Under general rules of the laws of contract, a contract is formed when capable parties mutually agree to a lawful object supported by consideration. (Civ. Code, § 1550.) Contracts may be oral, except as required by statute. (Civ. Code, § 1622.) Once a valid offer is accepted, the parties are bound. A subsequent revocation is not valid. (Civ. Code, §§ 1586, 1587.)

When an insurer settles a case within policy limits under a policy that gives the insurer the right to settle without the insured’s consent, the insured’s consent to the settlement is unnecessary. (Fiege v. Cooke, supra, 125 Cal.App.4th at p. 1353.) In such a case, the insurer is permitted to take full control of the settlement negotiations and the insured is precluded from interfering. (Id. at p. 1354.) The insured may not prevent settlement by purporting to withhold consent. (Ibid.)

Professional liability policies, however, present a different problem. By statute, no medical malpractice insurer shall enter into a settlement without the written consent of the insured. (Bus. & Prof. Code, § 801, subd. (g).) Thus, unless such consent is provided, the insurer has no right to conclude a settlement of the action brought against the insured. When such an insurer has the written consent of the insured, however, the rule of Fiege applies and the insurer may take full control of the settlement negotiations, within the limits of the insured’s written consent. The insured no longer has any right to object to the settlement or to otherwise interfere in the process.^[7]

In this case, CAP-MPT had Dr. Ghaderi’s written consent to settle the action for $125,000. With this authorization, CAP-MPT entered into a valid oral contract to settle the action for that amount. Dr. Ghaderi’s subsequent revocation of her consent was both irrelevant and ineffectual. CAP-MPT was authorized when it made the offer which plaintiffs accepted; the offer could not be revoked after the contract was formed. Plaintiffs’ contractual right had attached and CAP-MPT was legally bound to perform under the agreement whatever concerns it may have had about the effect of Dr. Ghaderi’s tardy attempt to withdraw her consent.

2. Mediation Confidentiality is No Bar

Evidence Code section 1119 provides as follows: “Except as otherwise provided in this chapter:

(a) No evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible or subject to discovery, and disclosure of the evidence shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given.

(b) No writing . . . that is prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation, is admissible or subject to discovery, and disclosure of the writing shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given.

(c) All communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation shall remain confidential.” The purpose of mediation confidentiality is “to ensure open communication” in mediation. (Stewart v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565, 1575.)

To be continue as Part II ...

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^[1] The complaint was filed by Michelle Simmons, as the personal representative of the Estate of Kintausha Clemmons. Thereafter, Michael Dujuan Nelson III, through his guardian ad litem, Michelle Simmons, was added in as a plaintiff. Michelle Simmons and Michael Dujuan Nelson III were decedent’s mother and minor son. At some point, Tommie Simmons was also added as a plaintiff. For simplicity, we refer to these parties as “plaintiffs.”

^[2] Clemmons had been under the care of a nephrologist who was treating her with dialysis for renal failure. The complaint alleged that, without consulting with Clemmons’s nephrologist, Dr. Ghaderi took Clemmons off dialysis, resulting in her death from severe renal failure.

^[3] “Cumis counsel” is the term sometimes used to refer to the independent counsel provided to an insured by an insurer contesting coverage but still providing a defense. The authority for such counsel is San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 364 and Civil Code, section 2860. (See also, Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2005) 7:769, p. 7B-91 et seq.)

^[4] According to plaintiffs’ counsel’s declaration, at some time after the July 10, 2003 hearing, Attorney Brandmeyer had told plaintiffs’ counsel “that he was uncertain as to what was occurring but to move fast and get the minor’s compromise approved.”

^[5] Dr. Ghaderi’s motion was also supported by the declaration of Attorney Melanie Shornice, an associate of Attorney Reback. Her declaration purported to set forth the events that took place at the July 9, 2003 mediation. As Attorney Shornice had not been present at the mediation, objections to her declaration were sustained.

^[6] Interestingly, this was not the court’s initial decision. At first, the trial court concluded that “a settlement was not reached, because the settlement process as followed by Judge Altman was to write up the settlement agreement, and to provide a signature line for signature by plaintiffs, by the counsel, by defense counsel and defendant . . . . So I think the authorization was revoked in the middle of the settlement discussions. I know an argument could be made to the contrary, and [a] strong argument too, but that is the side I come down on.”

^[7] Our colleague’s dissent argues that the rule of Fiege has no application because Dr. Ghaderi had a right under her professional liability policy to withhold her consent to any settlement negotiated by her insurer (citing Robertson v. Chin, supra, 44 Cal.App.4th at pp. 1293-1296). This argument ignores the undisputed fact that Dr. Ghaderi had given her written consent to the settlement that CAP-MPT had negotiated with the plaintiffs and thus had no more right to object to its enforcement than would an insured who had no right to withhold consent in the first place.