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

Story continue from Part III ...

Thus, by enacting the present comprehensive mediation confidentiality statutory scheme, the Legislature firmly articulated the policy that all communications of an oral settlement and all communications relating to such an agreement, including negotiations, made for the purpose of, in the course of, or pursuant to, a mediation are inadmissible unless there was compliance with the express statutory requirements of Evidence Code sections 1118 and 1124.

It is tempting to prohibit Dr. Ghaderi from escaping the deal to which she agreed. But, such a result would encourage a flexible approach to the statutes. The Legislature has re-drafted the mediation confidentiality statutes after Ryan and Regents to reject that approach. The Legislature has articulated explicit steps that a party must take to admit evidence of an oral agreement made for the purpose of, in the course of, or pursuant to, a mediation. Because the parties did not take these steps here, such as by memorializing the agreement in a recording or in a writing, the evidence of the July 9, 2003, oral agreement was inadmissible.

5. Precedent establishes that we are not permitted to judicially craft an exception to the statutory scheme.

By focusing on estoppel, the majority in essence is attempting to create a new exception to the comprehensive scheme. This cannot be done. In Foxgate, supra, 26 Cal.4th 1 and Rojas v. Superior Court (2004) 33 Cal.4th 407 (Rojas), the Supreme Court pronounced that mediation confidentiality is to be strictly enforced, even in situations that on the surface might beg for flexibility.

In Foxgate, supra, 26 Cal.4th 1, the trial court awarded sanctions based upon a mediator’s report that there had been misconduct during the mediation proceedings. (Id. at pp. 6-10.) The report indicated that an attorney had engaged in a pattern of tactics pursued in bad faith and solely intended to delay. (Id. at pp. 6-7.) Although the court of appeal reversed for other reasons, it also addressed the admissibility of the report. The court of appeal found it was necessary to create a nonstatutory exception to the mediation confidentiality statutes so that the mediator’s report could be considered and sanctions imposed. It reasoned that otherwise parties who disobeyed valid orders governing participation in mediation would be shielded from their obstructive behavior. (Id. at p. 9.) The Supreme Court reversed concluding that the mediation confidentiality statutes “are clear. [Evidence Code s]ection 1119 prohibits any person, mediator and participants alike, from revealing any written or oral communication made during mediation.” (Foxgate, supra, at p. 13.) “To carry out the purpose of encouraging mediation by ensuring confidentiality, the statutory scheme . . . unqualifiedly bars disclosure of communications made during mediation absent an express statutory exception.” (Id. at p. 15, fn. omitted.) Foxgate held that the “motion for sanctions and the trial court’s consideration of the motion and attached documents violated both [Evidence Code] sections 1119 and 1121.” (Foxgate, supra, at p. 17.) Thus, even though the goal of preventing bad faith conduct was laudable, the purpose of the mediation statutes -- to promote and ensure open communications in mediations -- would not be served if exceptions to the statutes were judicially created.^[1]

In Rojas, supra, 33 Cal.4th 407, the owner of an apartment complex settled a construction defect case with the contractors as a result of a mediation. As part of the settlement, the parties stipulated that reports and photographs prepared for the mediation were to remain confidential. In a subsequent lawsuit, tenants of the apartment complex sought to discover the files, witness statements, analyses of raw data, and photographs prepared during the prior mediation. Noting that all of the items were “ ‘prepared for the purpose of, in the course of, or pursuant to, [the] mediation’ in the underlying action” (id. at p. 423), the Rojas court held that the mediation confidentiality statutes are not subject to a “ ‘good cause’ exception.” (Ibid.) Since permitting the disclosure of the items conflicted with Evidence Code section 1119, the items were not discoverable.

Together, Foxgate and Rojas stand for the proposition that the courts may not craft exceptions to the statutory scheme because the Legislature has decided that mediation confidentiality is required to further the purpose of mediation and has decided to statutorily limit the number of exceptions thereto.

Thus, it would be unwarranted for us to expand the Legislature’s list of express statutory exceptions by judicially permitting plaintiffs to prove an oral contract when to do so would not further the purpose of the statutory scheme.

6. The arguments of the majority are not persuasive.

The majority concludes that a valid contract was formed because Dr. Ghaderi provided the attorneys for her insurance carrier with consent to settle and the case was resolved within the confines of that authority. For this proposition, the majority relies only upon Fiege v. Cooke (2004) 125 Cal.App.4th 1350 (Fiege). Fiege is irrelevant to the present situation and its rationale is inapplicable.

In Fiege, supra, 125 Cal.App.4th 1350, the plaintiff orally agreed before the court to a settlement arrived at between himself and the insurers of the defendants. (Id. at p. 1353.) Thereafter, the plaintiff tried to escape from the settlement and the defendants successfully moved for enforcement of the agreement pursuant to Code of Civil Procedure section 664.6. (Fiege, supra, at p. 1353.) Code of Civil Procedure section 664.6 permits the enforcement of an oral agreement under certain circumstances. It states in part, “If parties to pending litigation stipulate, in a writing signed by the parties, outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement.” (Italics added.)

Quoting extensively from Robertson v. Chen (1996) 44 Cal.App.4th 1290 (Robertson), Fiege concluded that while the defendants themselves did not agree in writing or orally before the court to the settlement, the agreement was enforceable because the attorneys for the defendants agreed to the settlement orally before the court in the presence of the insurers’ representatives who did not object, the insurers had total control over settlement, and the insurers fully covered the settlement under the insurance policies. (Fiege, supra, 125 Cal.App.4th at pp. 1353, 1355-1356.) Fiege held that this satisfied Code of Civil Procedure section 664.6’s requirement that the “parties” had agreed to the settlement “orally before the court.”

Fiege, supra, 125 Cal.App.4th 1350 does not control the issues here. The issue in this case is not who negotiated the settlement on behalf of Dr. Ghaderi, but if the oral agreement formed during the July 9, 2003, mediation can be proven. The mediation statutes do not provide for an exception to the requirements of Evidence Code sections 1118, 1119, and 1124 when mediation negotiations are being handled by an insurance carrier’s representatives.

Nor does the rationale of Fiege, supra, 125 Cal.App.4th 1353, apply here. Fiege recognized that in Levy v. Superior Court (1995) 10 Cal.4th 578, the Supreme Court “held ‘that the term “parties” as used in [Code of Civil Procedure] section 664.6 . . . means the litigants themselves, and does not include their attorneys of record.’ “ (Fiege, supra, at p. 1353.) Fiege also recognized that Levy’s conclusion was “ ‘based on the proposition that the Legislature intended to require litigants’ ‘direct participation’ because this ‘tends to ensure that the settlement is the result of their mature reflection and deliberate assent.’ [T]his ‘protects the parties against hasty and improvident settlement agreements by impressing upon them the seriousness and finality of the decision to settle,’ and that it ‘protects parties from impairment of their substantial rights without their knowledge and consent.’ [Citation.]” (Id. at p. 1354.) However, Fiege concluded that the goals discussed in Levy were met when litigants, by contract, have given total control to their insurance carriers to resolve a dispute and the negotiated settlement is fully covered by the policy. In such situations, the right to settle rests with the insurer and not the insured. (Fiege, supra, at p. 1353; Robertson, supra, 44 Cal.App.4th at pp. 1293-1296.) As Robertson, supra, recognized, this rationale does not apply when there is a professional liability policy, such as the one Dr. Ghaderi had with CAP-MPT.

Robertson, supra, the case Fiege quoted extensively, correctly stated: “An exception to the general rule affording insurers the unconditional right to settle most third party claims without the insured’s consent are the provisions in professional liability policies which ‘often give the insured the right to approve or reject any settlement negotiated by the insurer. This is designed to prevent settlements which might be regarded in the community as an admission of wrongdoing by the insured, thus injuring the insured’s professional reputation.’ (Croskey et al., Cal. Practice Guide: Insurance Litigation 2 (The Rutter Group 1995) 7:2492 et seq., pp. 7K-17 to 7K-18; see, e.g., Bus. & Prof. Code, § 801, subd. (d) [requiring the consent of health care professionals for settlement of health care malpractice claims]; accord, Carlile v. Farmers Ins. Exchange (1985) 173 Cal.App.3d 975, 980, fn. 3.) The rationale of Levy [v. Superior Court, supra, 10 Cal.4th 578] would apply to protect the insured in the professional liability context where the insured’s consent is specifically required for settlement.” (Robertson, supra, 44 Cal.App.4th at pp. 1294-1295, fn. 3.)

Additionally, unlike Fiege, supra, and Robertson, supra, the case before us does not involve a traffic accident where monetary considerations are paramount in settling the dispute. While CAP-MPT would be responsible for the financial aspect of settling with plaintiffs, other aspects vital to a resolution were significant to Dr. Ghaderi, such as the potential harm to Dr. Ghaderi’s reputation. Thus, as Business and Professions Code section 801, subdivision (g) (see fn. 4) demands, Dr. Ghaderi’s explicit approval of a settlement would be required. When that approval was withdrawn before any settlement was finalized, there was no enforceable deal.

Lastly, even if the rationale of Fiege, supra, applies when there is a professional liability policy, it is inappropriate to do so here.

The purported July 9, 2003, settlement took place in a mediation, before a mediator. Code of Civil Procedure section 664.6 permits an expedited proceeding to enforce settlements when the “parties to pending litigation stipulate . . . orally before the court . . . .” When the oral agreement sought to be enforced was made orally before a mediator who had no adjudicatory function, the agreement was not “ ‘before the court.’ “ (Murphy v. Padilla (1996) 42 Cal.App.4th 707, 711-715; In re Marriage of Assemi (1994) 7 Cal.4th 896, clarified by Levy v. Superior Court, supra, 10 Cal.4th at p. 585, fn. 3.) After the mediation, when Dr. Ghaderi and her attorneys explained the events of July 9, 2003, to the trial court, they did so to explain why Dr. Ghaderi believed there was no enforceable contract. Further, the mediation ended when Dr. Ghaderi refused to execute the settlement agreement and left the mediation. CAP-MPT indicated it would consider her withdrawal of consent effective and thereafter, CAP-MPT always argued to the trial court that there was no enforceable settlement. Thus, it cannot be said that a mediated settlement was the result of mature reflection and deliberate assent. To enforce the oral settlement by the use of the expedited procedures provided in Code of Civil Procedure section 664.6 would impair Dr. Ghaderi’s substantial rights without her knowledge and consent, and without her carrier, CAP-MPT, agreeing to the resolution of the case.

The majority holds that Dr. Ghaderi is estopped from asserting the mediation confidentiality statutes. This holding turns a blind eye to the mediation confidentiality statutory scheme and is a veiled attempt at relabeling waiver as estoppel.

Throughout the litigation in this case, Dr. Ghaderi and her attorneys honestly described the events of July 9, 2003, that raised the issue as to whether there was an enforceable oral contract. The majority concedes that these representations cannot be classified as an implied waiver by Dr. Ghaderi of the mediation confidentiality statutes. This concession is based upon Eisendrath v. Superior Court (2003) 109 Cal.App.4th 351 (Eisendrath).

In Eisendrath, supra, 109 Cal.App.4th 351, a former husband filed a motion to correct a spousal support agreement. The judgment was based upon a settlement reached in mediation. (Id. at p. 355.) The ex-husband argued that the order did not accurately reflect the parties’ agreement. In support of the motion, the ex-husband filed a declaration that recalled mediation negotiations and conversations. (Id. at pp. 355-356.) The ex-wife filed a motion for a continuance so that she could depose the mediator. She stated she was willing to waive mediation confidentiality and argued her ex-husband had impliedly waived the “mediation privilege.” (Id. at p. 356.) The ex-husband opposed the ex-wife’s request and asked for a protective order barring the deposition, other discovery, and admission of any communications during the mediation sessions. In his opposition, the ex-husband stated he would not rely on discussions within the scope of mediation confidentiality for his motion to correct the judgment. The trial court denied the protective order finding that both parties had impliedly waived the mediation confidentiality statutes. (Ibid.)

On appeal, Eisendrath, supra, 109 Cal.App.4th 351, held that without express consent as required in the mediation confidentiality statutes, the ex-husband had not impliedly waived confidentiality by discussing confidential material in his declaration. (Id. at pp. 357, 362.) Eisendrath recognized that because the ex-husband needed information to make his argument, and because express waivers of confidentiality from both parties were required, the ex-wife had “a substantial measure of control over [the ex-husband’s] ability to present evidence in support of his motion to correct the spousal support agreement. Nonetheless, this result does not disturb our interpretation of the statutory scheme in question. In explaining that the Legislature had balanced conflicting policies in enacting this scheme, the Foxgate court recognized that the scheme effectively gives control over evidence of some sanctionable misconduct to the party engaged in the misconduct. . . . Following the Foxgate court, we assume that the Legislature considered these limitations on the presentation of evidence when it enacted the statutory scheme.” (Id. at p. 365.)

Thus, the fact that prior to trial Dr. Ghaderi revealed in her pleadings and orally before the court confidential material does not result in an implied waiver of the mediation confidentiality statutes.^[2] Although the majority agrees that there was no implied waiver here, the majority attempts to turn these same facts into an estoppel.

The majority is mixing traditional notions of equitable estoppel with estoppel to contest the court’s jurisdiction.

Traditionally, equitable estoppel is a concept based upon fairness. “In order to establish a claim or defense based on equitable estoppel, a party must establish four elements: ‘(1) The party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury. [Citation.]’ [Citation].” (Chen v. Superior Court (2004) 118 Cal.App.4th 761, 772, fn. 14.)

Here, plaintiffs knew all of the facts and they did not change their position in reliance upon any action taken by Dr. Ghaderi. There is no unfairness to plaintiffs as they can return to the trial court and litigate the merits of their medical malpractice case.

Also, the majority’s reliance upon Gee v. American Realty & Construction, Inc. (2002) 99 Cal.App.4th 1412 and Conservatorship of Kevin M. (1996) 49 Cal.App.4th 79 confuses another type of estoppel. The majority states, “When a party asks the court to determine a matter, the party is estopped from arguing the court’s action was, in fact, outside the court’s statutory power to resolve.” (Maj. Opn., ante, at p. 16.) This is an imprecise statement of the law, as demonstrated by the two cases cited by the majority, and an ill-conceived attempt at making an end-run around the strict limits of the confidentiality statutes.

The Supreme Court in In re Griffin (1967) 67 Cal.2d 343 articulated the correct legal proposition: “When . . . the court has jurisdiction of the subject, a party who seeks or consents to action beyond the court’s power as defined by statute or decisional rule may be estopped to complain of the ensuing action in excess of jurisdiction. [Citations.] Whether he shall be estopped depends on the importance of the irregularity not only to the parties but to the functioning of the courts and in some instances on other considerations of public policy. A litigant who has stipulated to a procedure in excess of jurisdiction may be estopped to question it when ‘To hold otherwise would permit the parties to trifle with the courts.’ [Citation.] On the other hand waiver of procedural requirements may not be permitted when the allowance of a deviation would lead to confusion in the processing of other cases by other litigants. [Citation.] Substantive rules based on public policy sometimes control the allowance or disallowance of estoppel.” (Id. at pp. 345-346.)

For example, a defendant was not estopped to attack banishment as a condition of probation even though he requested it, as public policy forbade banishment. (People v. Blakeman (1959) 170 Cal.App.2d 596, 598.) “On the other hand a party who has procured a divorce decree is estopped to claim later that it is invalid.” (In re Griffin, supra, 67 Cal.2d at p. 348.) Or, when a defendant orally stipulates to arbitration, the defendant is estopped from arguing that a written stipulation to arbitrate was required. (Law Offices of Ian Herzog v. Law Offices of Joseph M. Fredrics (1998) 61 Cal.App.4th 672, 680.)

In Gee v. American Realty & Construction, Inc., supra, 99 Cal.App.4th 1412, the defendants asked the trial court to permit them to file abstracts of judgment. Thereafter, they challenged that procedure. The court of appeal held the defendants were estopped to challenge the result they generated. In Conservatorship of Kevin M., supra, 49 Cal.App.4th 79, the appellate court held there was an estoppel that resulted in permitting one party to have a jury trial, even though the request did not meet the time limitations of Welfare and Institutions Code section 5350. (Conservatorship of Kevin M., supra, at pp. 91-93.)

Here, Dr. Ghaderi never argued that the trial court could not proceed. She never argued that the trial court lacked jurisdiction. She never argued that the trial did not have the right to decide her case. She never used a procedure and then argued against the use of that procedure. Rather, at every step of the process, Dr. Ghaderi stated, and restated her position -- there was no enforceable settlement. When Dr. Ghaderi disclosed facts, she did so to explain the events and to explain why she believed there was no enforceable oral contract.

Thus, Dr. Ghaderi is not estopped from arguing the evidence of an oral agreement emanating from the mediation is inadmissible.

CONCLUSION

The majority does not want to accept the result of the legislative mandate that communications made for the purpose of, in the course of, or pursuant to, a mediation are not admissible in a civil proceeding unless specifically made admissible. Since the facts here do not fit into any of the exceptions, the majority inartfully has crafted a result that may feel right--but is just wrong.

I would reverse the judgment because plaintiffs should have been prohibited from introducing at trial on their breach of contract cause of action the existence and terms of any oral agreement. The mediation confidentiality statutes made inadmissible all evidence of an oral contract between Dr. Ghaderi and plaintiffs. The trial court had no substantial evidence of an oral contract, and thus no evidence upon which it could render a judgment for plaintiffs on their cause of action for breach of an oral contract. The matter should be reversed and remanded to the trial court where plaintiffs would have a trial on the merits of their medical malpractice cause of action, since that cause of action has not been dismissed.

ALDRICH, J.

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^[1] Foxgate, supra, 26 Cal.4th 1 left the door slightly ajar for the creation of non-statutory exceptions in extraordinary situations. (Id. at pp. 15-16, discussing Rinaker v. Superior Court (1998) 62 Cal.App.4th 155 [statutory rights of mediation confidentiality yields to minor’s due process rights to put on a defense and confront witnesses]; Olam v. Congress Mortg. Co. (N.D.Cal. 1999) 68 F.Supp.2d 1110 [parties, but not mediator, expressly waived confidentiality; mediator’s testimony was necessary to determine competency of party to enter into settlement].)

^[2] In Regents, supra, 42 Cal.App.4th 1209, the appellate court also held that the plaintiffs suing for sexual harassment had waived the confidentiality provisions by introducing “the transcript of the dictated settlement into evidence, and did nothing to timely object to the introduction or consideration of such evidence. [The question of confidentiality] was not raised by [plaintiffs] at all; it was the trial court which raised this issue at the hearing on the motion for new trial . . . .” (Id. at p. 1213.) None of the facts discussed by Regents, supra, as constituting a waiver exist in our case. And, it is questionable as to whether Regents, supra, can be relied upon for any of its holdings in light of its express rejection by the Legislature. I acknowledge that Regents, supra, has been cited on the issue of waiver in footnote 8 in Foxgate, supra, 26 Cal.4th at page 10. However, Foxgate, does not discuss Regents’ viability after the statutory changes or the 1997 California Law Revision Commission comments. Further, the footnote is dicta.