Saturday, February 1, 2014

Mediation ethics

At a program I participated in this week (my part is summarized in the two posts below on choosing a mediator), co-sponsored by the Santa Monica Bar Association, one of the panelists, mediator Mark Fingerman, gave an informative presentation on mediation ethics. The problem of assuring that mediations are conducted in a fair and ethical manner is complicated by strict protections for mediation confidentiality that exist in California. While confidentiality is generally agreed to be necessary to the process, prohibitions against introducing evidence of misconduct alleged to have occurred during mediations can potentially give free rein to attorneys--and mediators--to pressure or deceive parties into agreeing to settlements to which they might not have agreed otherwise. In fact, mediation seems in some ways designed to encourage parties to let down their guard and trust one another, and that trust may not always be justified.

Fingerman noted that other than the intrinsic satisfactions derived from acting as a moral and ethical person, there do not seem to be many effective tools available to prevent fraudulent conduct that may induce parties to enter into a settlement agreement. He did, however, suggest one possible safeguard, a common technique used in corporate deal-making, which is to include in the settlement agreement a recitation of any important representations upon which the parties relied, and warranties by the parties making the representations. Such statements in a written settlement agreement are not shielded by mediation confidentiality. So if any of those representations can later be shown false, the aggrieved party at least has the opportunity to set the agreement aside.

Can we design other effective safeguards to prevent coercion and fraud from tainting settlement agreements arrived at through mediation without unduly threatening confidentiality? Somehow parties have to be given adequate time and space to make sure they are not making agreements they will regret in the morning. But it is often only after a long, grueling day that makes all the participants tired and confused, that the parties' own counsel, and frequently the mediator, urge them to make the final concessions necessary to get a deal done. Under such conditions, they may not have the time or capacity to think through their decisions, and they may be swayed by false information. But if we were to build in a cooling off period, or allow parties to rescind their agreements within a number of days, we would have to accept the fact that a lot of settlements would come unraveled, and in most cases that would not benefit the parties.

Does this mean that mediation is an inherently flawed process, as opposed to the traditional justice system, with its many rules and procedures designed to prevent fraud and coercion? Perhaps, but the traditional justice system doesn't always do such a great job of preventing or policing fraud either.  Let's start with the fact that there is an awful lot of fraud out in the real world. It doesn't just exist in the conference rooms where settlement discussions are held. Victims of fraud--probably the number one crime in the world in terms of both economic impact and occurrence--are often told when they call the police or the district attorney, that the department doesn't have the resources to pursue this crime, and they should handle it as a civil matter. But if they resort to the civil justice system, victims of fraud find that the courts set a high bar for pleading and proving fraud, that judges and juries tend to blame the victims of fraud for their losses, and that they are often reluctant to compensate them. I have frequently had to remind victims of fraud just how difficult it is to prove those claims, and obtain adequate compensation.

Not only is it difficult to prove fraud in court, court opens up opportunities to commit even more fraud. It should not shock anyone to learn that witnesses sometimes lie under oath. Whenever a jury has to choose between two diametrically opposed stories, it's likely that one side or the other is lying. But the legal system rarely prosecutes such perjury. And sometimes the trier of fact accepts the wrong story.

Remedies for fraud and coercion are difficult to obtain in mediation as well as in the traditional justice system. Sometimes fraud will occur in mediation just as it sometimes occurs in court. The most effective protections against fraud may still reside in being cautious to accept anything anyone tells you at purely face value; while trusting at least to some extent in the innate desires of most of us to try to do the right thing most of the time.

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