Enforcing Mediated Settlement Agreements Post-Simmons v. Ghaderi

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Greatsealcal100What happens when Evidence Code section 1115, et seq. (the "mediation privilege"), collides with an allegation that an enforceable, oral settlement agreement was reached during a mediation?  The mediation privilege steamrolls the allegation.  This is true even where a party stipulates to events at the mediation, submits evidence of events at the mediation, and then, at trial invokes the mediation privilege for the first time.

In Simmons v. Ghaderi (July 21, 2008), the Supreme Court 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."  After reciting the policy behind the mediation privilege, and the basic rule of inadmissibility, the Supreme Court set forth the very particular requirements for admissibility of mediation statements:

“Sections 1122 and 1124 specifically lay out exceptions for the admission of evidence produced during mediation. As relevant here, section 1122, subdivision (a)(1) provides that “[a] communication or a writing . . . that is made or prepared for the purpose of, or in the course of, or pursuant to, a mediation or a mediation consultation, is not made inadmissible, or protected from disclosure, by provisions of this chapter if . . . the following condition[] is satisfied: [¶] (1) All persons who conduct or otherwise participate in the mediation expressly agree in writing, or orally in accordance with Section 1118, to disclosure of the communication, document, or writing.”

(Slip op., at p. 8.)  When entering into a mediation of a complex matter or class action, take note of sections 1122 and 1124.  If a settlement is reached, generate a memorandum of understaning on the spot and include a provision allowing disclosure of the document, signed by all parties.

The Supreme Court then spent another 8 or so pages of opinion discussing all the reasons why the mediation privilege is nearly impenetrable, what the Legislature intended, and so on.  A certain momentum (coupled with repetition) was building at this point in the discussion.  Then the Supreme Court discussed the highly limited scenarios where a policy consideration would overcome the privilege (such as where a child's due process right to confront a witness would be impeded).  After all of that, the Supreme Court then said:

“Despite the clear legislative intent, the Court of Appeal majority nonetheless estopped the defendant from invoking mediation confidentiality because she herself used and did not object to plaintiffs’ use of evidence describing the events of mediation.

(Slip op., at p. 16.)  At this point, it doesn't look too good for you if you are the Court of Appeal majority.  Thereafter, the Supreme Court concludes that implied waiver of the mediation privilege does not exist.  (Slip op., at pp. 22-23.)

Again, don't leave a mediation where a settlement was reached without at least memorializing the major terms in writing, with a waiver of the privilge to the full extent necessary to effectuate and enforce the settlement.

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Indispensable new decision about indispensable parties: Tracy Press, Inc. v. Superior Court

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Greatsealcal100There is a fair body of jurisprudence in the federal courts about what constitutes an "indispensable party" to an action.  It's not all that surprising, given how finicky those federal courts are about having jurisdiction.  In California, on the other hand, where jurisdiction is, in kind terms, flexible, you have a tougher time finding authority about indispensable parties (a person or entity whose presence is necessary to adjudicate the action).

The Court of Appeal (Third Appellate District) recently had an opportunity to at least discuss the concept of indispensable parties.  In Tracy Press, Inc. v. The Superior Court of San Joaquin County (July 16, 2008), the Court considered whether the failure to name a city councilmember as a party to the Petition for Writ of Mandate before the Court of Appeal was a fatal defect to that Petition, given that the councilmember had been a party to a petition filed in the Superior Court.

First, the Court considered whether the omitted party could be overlooked as a defect in the pleading.  The Court concluded that such an omission could not be disregarded as a defect, due to the possibility that the outcome would affect the absent party's rights:

“Failing to name an individual as a real party in interest in the pleading that initiates the action is not a defect.  It does not render the pleading defective; it merely defines the parties, leaving out the individual not named. . . .

Issuing an order requiring Tucker to act in a mandamus proceeding in which she was not named and has not appeared would affect Tucker’s substantial rights.  This court obtains jurisdiction to enter an order against a person only if the person is named as a party and duly served with notice of the action.  “[T]he rights of a person cannot be affected by a suit to which he is a stranger.”  (Whitney v. Higgins (1858) 10 Cal. 547, 551.)

(Slip op., at pp. 7-8.)

Having determined that Tucker wasn't a party to the action and couldn't be deemed a party to the action, the Court then considered whether Tucker was an indispensable party, defining the concept and the consequences:

“A person must be made a party of a proceeding if “(1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.”  (Code Civ. Proc., § 389, subd. (a).)  If such a person cannot be joined, “the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed without prejudice, the absent person being thus regarded as indispensable.  The factors to be considered by the court include:  (1) to what extent a judgment rendered in the person’s absence might be prejudicial to him or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the person’s absence will be adequate; (4) whether the plaintiff or cross-complainant will have an adequate remedy if the action is dismissed for nonjoinder.”  (Code Civ. Proc., § 389, subd. (b).)

(Slip op., at p. 8-9.)  Importantly, the Court explained that the absence of an indispensable party does not deprive a Court of jurisdiction over the matter:

““‘Failure to join an “indispensable” party is not “a jurisdictional defect” in the fundamental sense; even in the absence of an “indispensable” party, the court still has the power to render a decision as to the parties before it which will stand.  It is for reasons of equity and convenience, and not because it is without power to proceed, that the court should not proceed with a case where it determines that an “indispensable” party is absent and cannot be joined. [Citation.]’  [Citation.]”  (Save Our Bay, supra, 42 Cal.App.4th at p. 692, quoting Sierra Club, Inc. v. California Coastal Com. (1979) 95 Cal.App.3d 495, 500.)

(Slip op., at p. 10.)  Further, the Court retains discretion as to whether to dismiss the action for failure to name the indispensable party.  (Slip op., at p. 10-11, citing Kaczorowski v. Mendocino County Bd. of Supervisors (2001) 88 Cal.App.4th 564, 568.) 

Ultimately, the Court decided that it could not issue an Order that would potentially conflict with an Order of the Superior Court granting protection to a party not present before the Court of Appeal. Unfortunately, Tracy Press, Inc. never had its Petition heard on the merits.  It probably lost the Petition on the procedural issue due to a mistake in the formatting of its Petition.  It appears from the Opinion that Tracy Press, Inc. failed to designate "Real Parties in Interest" in its Petition:

“Tracy Press claims that it failed to name any real party in interest and that the clerk of this court added the City as a real party in interest.  The City makes no argument that it was not properly named in the petition, only that Tucker, an indispensable party, was not named.

(Slip op., at p. 5, fn. 6.)

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Attorney's Fees Award of $20,330 In Anti-SLAPP Proceeding Reversed

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Greatsealcal100Code of Civil Procedure section 425.16 Motions to Strike provide ample opportunity for complex legal issues.  In Tender v. www.jewishsurvivors.blogspot.com (July 7, 2008) ___ Cal.Rptr.3d ___ , the Court of Appeal (Sixth Appellate District) considered whether a request for the issuance of subpoenas, without the filing of a complaint or other action, nevertheless fell within the provisions of section 425.16.

The facts are relatively simple.  Mordecai Tendler obtained a pre-filing discovery order in Ohio as part of his effort to uncover the identities of anonymous individuals who had posted statements about him on the Internet that he considered defamatory. (Slip op., at p. 1.) After Google refused to respond to Ohio subpoenas, Tendler sought issuance of subpoenas in Santa Clara, based upon the Ohio Order. Importantly to the Court of Appeal's analysis, "filed a 'request[]' in Santa Clara County Superior Court asking the court 'to issue a case number and endorse' the four subpoenas. The court filed a 'civil case cover sheet' on May 24, 2006 and assigned a case number." (Slip op., at 2.)

The Court of Appeal first established its obligation to interpret section 425.16 in a manner consistent with the plain language of the statute and reflective of the Legislature's intent.  The Court then construed the language of section 425.16, concluding that the statute did not encompass requests for the issuance of subpoenas, absent the filing of an actual complaint or similar pleading:

“Even the broadest interpretation of the plain language of section 425.16 cannot stretch it to cover a request for a subpoena. A request for a subpoena is not a complaint, a cross-complaint, a petition or any equivalent pleading, does not contain any causes of action, and does not serve to initiate a judicial proceeding.

(Slip op., at p. 5.)

The Court concluded by noting (1) that if the Legislature intended to include activities, such as requests for subpoenas, in section 425.16, it will need to explicitly say so, and (2) a simple motion to quash a subpoena provides sufficient protection to the Doe individuals whose identities were sought by Tendler.

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Code of Civil Procedure section 998 Offer to Compromise: recap of recent decisions and analysis

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Greatsealcal100The last few weeks have, by happenstance, seen a substantial run of decisions construing the correct application of Code of Civil Procedure section 998 Offers to Compromise.  These recent decisions provide cautionary tales about how to correctly draft a clear 998 Offer and how timing is everything when 998 Offers are on the table.

In Guerrero v. Rodan Termite Control, Inc. (June 16, 2008) ___ Cal.Rptr.3d ___, the Court of Appeal (First Appellate District, Division Three) tackled a difficult issue involving the effect of offsetting settlements, one before a rejected 998 offer, and one after.  The Court describes the core issue:

“The present appeal questions whether a pretrial settlement and corresponding offset to zero necessarily requires the shifting of postoffer costs under Code of Civil Procedure  section 998 if the plaintiff previously rejected a section 998 cash offer from the defendant against whom the claim was tried. There is currently a division of authority with respect to a similar issue under section 1032. However, regardless of the proper interpretation of section 1032, the determination of whether the plaintiff recovered more or less than the amount offered by the defendant for the purpose of applying section 998 is to be made taking into account any other settlements entered as of the time the section 998 offer was outstanding, but not considering settlements that had not yet been reached.

(Slip op., at p. 1.)    A brief statement of facts will add some clarity to the holding.  Plaintiff sued Gonsalves,  Help-U-Sell, and Rodan. In December 2003, Rodan served on plaintiff a section 998 offer to compromise for $5,000, each side to bear its own costs.  Plaintiff rejected the offer.  In November 2006, shortly before the start of trial, plaintiff entered a judicially approved good faith settlement with Help-U-Sell for $34,000. The case proceeded to trial against Rodan and the jury returned a special verdict for plaintiff in the amount of $15,600.  The court then granted Rodan’s motion pursuant to section 877 to offset the settlement proceeds against the verdict and reduce the judgment to zero. Judgment was entered in favor of plaintiff for zero dollars, and the Court of Appeal affirmed.  Rodan moved to tax the costs plaintiff incurred subsequent to the filing of the section 998 offer to compromise, arguing that plaintiff’s zero judgment was not more favorable than the $5,000 settlement offer.  At the same time, plaintiff filed a motion to strike Rodan’s memorandum of costs, contending he was nonetheless the prevailing party.  The trial court agreed with Plaintiff.(Slip op., at p. 2.)

The Court of Appeal affirmed, concluding that the correct application of section 998 requires taking into account only the verdict and any offsets to which the verdict was subject at the time the section 998 offer was outstanding.  (Slip op., at p. 5.)  In this instance, there was no offsetting settlement in 2003, the time at which the 998 offer was outstanding.  At trial, Plaintiff recovered more than the 998 offer of $5,000.  The Court reasoned that the purpose and policy of section 998 was furthered by this interpretation.

California Attorney's Fees has a thorough analysis of the decision, and Cal Biz Lit offers some further, cautionary commentary, inspired by the post at California Attorney's Fees.

In Ford Motor Credit Co. v. Hunsberger (June 18, 2008) ___ Cal.Rptr.3d ___, the Court of Appeal (Fourth Appellate District, Division One) examined the interplay between Civil Code section 1717 and Code of Civil Procedure section 998.  The defendant moved for an award of attorney fees as costs under Code of Civil Procedure section 998 after the plaintiff dismissed its breach of guarantee action.  The defendant argued that he was entitled to attorney fees because the plaintiff failed to obtain a more favorable judgment than his earlier section 998 offer, but the trial court denied the request.  The Court of Appeal concluded that the trial court was correct and fees were unavailable because section 998 did not create an independent right to fees:

“[S]ection 998 does not create an independent right to attorney fees and defendant's only avenue for the recovery of attorney fees was subdivision (a) of Civil Code section 1717, which creates a bilateral right to attorney fees where, as here, a contract contains a unilateral attorney fee provision.  However, this path to fees is blocked by subdivision (b)(2) of Civil Code section 1717, which bars any award of contractual attorney fees where an action has been voluntarily dismissed.

(Slip op., at p. 2.)  Under the analysis and holding of Ford Motor Credit Co. v. Hunsberger, a plaintiff pursuing claims arising under contract can avoid the exposure created by a section 998 offer via a dismissal.

Once again, California Attorney's Fees has a detailed discussion of the decision.

Finally, in Chen v. Interinsurance Exchange of The Automobile Club (June 19, 2008) the Court of Appeal (Second Appellate District, Division Eight) examined when ambiguity in a section 998 offers renders the offer void.

Plaintiffs suffered property damage.  Plaintiffs filed claims with their insurance carrier and later sued for insurance policy breach and bad faith.   While the suit was pending, plaintiffs’ home suffered new water damage in the kitchen unrelated to the earlier bathroom flooding.  Defendant issued a 998 offer to pay $251,000, conditioned upon plaintiffs executing a dismissal with prejudice of the pending lawsuit "as well as a general release of all claims in lieu of an entry of judgment against defendants."   Plaintiffs rejected the offer.

At trial, the jury awarded plaintiffs $8,500 in economic damages and $141,500 in non-economic damages.  Defendant sought to recover post-offer costs.  The trial court awarded $310,000 in post-offer costs to defendant and $9,800 in pre-offer costs to plaintiffs.

After noting that a 998 offer cannot dispose of any claims beyond the claims at issue in the pending litigation (Valentino v. Elliott Sav-On Gas, Inc. (1988) 201 Cal.App.3d 69), the Court of Appeal held that  the phrase "all claims" was ambiguous because of plaintiffs’ pending claim for kitchen flooding.  As a known claim, the Court concluded that a reasonable construction of the 998 offer would purport to release the kitchen claim that was not part of the litigation.   (Slip op., at pp. 5-6.)

And once more, California Attorney's Fees provides further discussion and summary of the Chen decision.

Finally, The Complex Litigator offers this additional, cautionary note about accepting 998 offers by cross-defendants that require a dismissal with prejudice and release of claims.  One might rationally (but incorrectly) believe that a cross-complainant can accept a 998 offer to compromise a cross-complaint with no affect on the defense of the original complaint.  That would be a dangerous mistake.  Under Torrey Pines Bank v. Superior Court (1989) 216 Cal.App.3d 813 and its limited progeny, some Courts of Appeal have determined that the acceptance of a 998 offer on a cross-complaint, and resulting dismissal with prejudice, may act as a retraxit, providing a basis for a summary judgment motion against the affirmative defenses asserted by the defendant/cross-complainant.  The upshot is that the defendant would be limited to "traversing the complaint" in its defense of the complaint, having withdrawn all of its affirmative defenses.

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Losing plaintiff in dangerous public property case does not suffer adverse award of fees under the request for admission "cost of proof" scheme or Code of Civil Procedure section 1038

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Greatsealcal100The mechanisms available for recovering attorney's fees are a factor routinely considered by parties to litigation and their counsel.  The topic is of sufficient import that a new blog, California Attorney's Fees, is dedicated to that one area of practice.  Given the elevated fees incurred in class actions and complex litigation generally, the issue of fee recovery is magnified in importance.  In Laabs v. City of Victorville (June 12, 2008) ___ Cal.Rptr.3d ___, the Fourth Appellate District, Division Two, reviewed a mechanism for recovering fees that has moved into the spotlight in recent weeks, the "cost of proof" fee recovery provision of Code of Civil Procedure section 2033.420.

Plaintiff (and minor) Amanda Laabs was injured in an automobile collision.  She sued various governmental entities, alleging a dangerous condition of public property. The City moved for summary judgment, which the court granted. The court subsequently denied the City’s motion for expenses incurred in proving matters that plaintiff had denied (pursuant to Code of Civil Procedure section 2033.420).

On the issue of "cost of proof" fees, the Court stated the statutory rule:

“Under Code of Civil Procedure section 2033.420, a party that denies a request for admission may be ordered to pay the costs and fees incurred by the requesting party in proving that matter. The court “shall” order the payment of such fees and costs unless it finds: (1) that an objection to the request was sustained or a response to the request was waived; (2) the admission sought was of no substantial importance; (3) the party failing to make the admission had reasonable ground to believe that the party would prevail on the matter; or (4) there was other good reason for the failure to admit the request.

(Slip op., at pp. 49-50.)  Then, examining various requests at issue, the Court, relying upon Brooks v. American Broadcasting Co. (1986) 179 Cal.App.3d 500 [interpreting former Code of Civil Procedure section 2034], concluded that three requests were not of substantial importance to the matter at issue (government liability) and, as to the remainder, the plaintiff had a reasonable basis for denying the requests.  (Slip op., at pp. 50-51.)

Several points are worth noting.  First, this matter provides an interesting couterpoint to the unpublished decision outcomes discussed by California Attorney's Fees in posts on June 6 and June 11.  But the fact that fees were awarded in the two cases discussed by California Attorney's Fees, and not in this case, only serves to highlight the need for care when denying Requests for Admissions; the recovery of fees will place tremendous discretion in the hands of the trial court judge.  And it was a close call in this matter - the decision was 2-1, with an extensive dissent on the attorney's fee issue.  Third, it didn't hurt the Plaintiff's chances of getting the benefit of the doubt on appeal that she was a minor.

It's easy to overlook Requests for Admissions as a litigation tool, especially in complex matters.  Don't.

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Serrano v. Stefan Merli Plastering decides interesting fee dispute over court reporting charges

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Greatsealcal100Serrano v. Stefan Merli Plastering (May 7, 2008), arising from a fee dispute between the plaintiffs and a court reporting agency, is an interesting decision that may ultimately affect complex cases with far greater frequency than simple cases like Serrano.  In Serrano, the Court of Appeal (Second Appellate District, Division Three) reviewed a ruling by the trial court that required plaintiffs to pay the full amount charged by a court reporting agency to receive their certified copies of various transcripts:

The defendant noticed the depositions of several of the Serranos’ expert witnesses, including Robert Audell. The Audell deposition took place on June 26, 2006, and was reported by a certified shorthand reporter employed by Coast. Counsel for the Serranos requested a certified copy of the transcript. The trial was scheduled to begin on July 25, 2006.

(Slip op., at p. 4.)  Despite the fact that the defendant requested the expedited transcripts, the court reporting agency also charged the plaintiffs an "expedite" fee on top of the cost of the certified copies.  (Ibid.) "The Serranos filed an ex parte application on July 5, 2006, for an order requiring Coast to provide a copy of the Audell deposition transcript without charging any expedited service fee." (Slip. op., at p. 5.)

At this point, things get exciting.  The court reporting agency provided the transcripts on the condition that the plaintiffs agree to be bound by the trial court's ruling on the charges.  At the ex parte hearing, the trial court expressed sympathy with the plaintiffs, but denied them relief:

“I would love to give you relief. I don’t think I can. So take it up. Maybe, you know, one of the divisions up there will feel sympathetic.”

(Slip op., at p. 6.) The Serranos then petitioned the Court of Appeal for an extraordinary writ on August 25, 2006. The Court of Appeal summarily denied the petition on September 20, 2006 (parenthetical note: the denial of a petition for a writ is many times not an opinion on the merits of the issue raised).  The parties settled, but the trial court carved out the issue of the transcript fees on appeal.  Then, the Court of Appeal considered the merits, the court reporting agency appearing as objector and respondent.  After dispensing with various standing and jurisdictional arguments, the Court didn't mince words when examining the core contention:

Coast argues that a court ordering a deposition reporter to provide a copy of a transcript to a party pursuant to section 2025.510, subdivision (c) must order that party to pay the fee charged by the deposition reporter regardless of the amount of the fee. We firmly reject that argument. As we now explain, if a deposition reporter either refuses to provide a copy of a deposition transcript to a non-noticing party in a pending action, for whatever reason, or imposes unacceptable conditions upon such delivery, and the court must intervene, we conclude that the “expense” that the court may require the non noticing party to pay for the transcript must be reasonable.

(Slip op., at pp. 27-28.)  Continuing to pound in the point, the Court said:

Depositions play an important role in litigation and trial preparation, and deposition testimony may be offered as evidence in pretrial proceedings and, in some circumstances, at trial. In light of the importance of deposition testimony in a pending action and the non-noticing party’s lack of bargaining power, a trial court must be cautious not to lend assistance to overreaching by the deposition reporter. For a deposition reporter to refuse to provide a copy of a transcript to a non-noticing party in a pending action unless the party agrees to pay an unreasonable fee would be grossly unfair. Moreover, for a deposition reporter, as an officer of the court, to engage in such conduct would be an abuse of the reporter’s authority. For a trial court to condone such conduct by conditioning the party’s right to receive a copy of a transcript on payment of an unreasonable fee would undermine rather than promote the administration of justice and could very well result in a denial of due process to the non-noticing party victimized by the reporter’s conduct. It therefore follows that the only monetary condition that the court may properly place upon the non noticing party’s right to receive a copy of the deposition transcript would be payment of a reasonable fee.

(Slip op., at pp. 28-29.)  The Court of Appeal concluded by expressly holding that "[t]he cost of transcription must be borne by the party noticing the deposition, unless the court on motion and for good cause orders otherwise (§ 2025.510, subd. (b)), so a reasonable fee for a copy of the transcript would not include any amount that compensates the deposition reporter for the cost to expedite the transcription."  (Slip op. at p. 31.)

So out of a simple personal injury case that settled, we now know that court reporters cannot charge non-noticing parties an expedited transcript fee if it was the noticing party that requested the expedited transcript.  Court reporters around the state must be calling the respondent to thank them for clearing up this point of law.  Complex, multi-party cases may see a significant bottom-line cost savings, although I do not profess to know whether there is an industry practice by court reporters to charge non-noticing parties an expedited transcript fee when it was the noticing party that initially requested the expedited processing.

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