Saturday, May 31, 2014

Confidentiality and due process

Can mediation confidentiality threaten a party's right to due process? A recent case out of the Central District of California, Milhouse v. Travelers, currently on appeal to the Ninth Circuit, held that the due process rights of a party can override the parties' agreement, and a state evidentiary rule precluding the admission in any subsequent proceedings of statements made in mediation. The district court allowed an insurance company being accused of bad faith refusal to settle a claim, to introduce evidence of the plaintiffs' demands made during a mediation, for the purpose of showing that it was the plaintiffs, not the insurance company, who were acting unreasonably.

Generally in California mediation confidentiality is treated as sacrosanct. Maybe a little less sacrosanct in federal court than in state court, but confidentiality is still highly protected in both systems. Courts understand the value of mediation in helping to resolve disputes. They also understand that parties are often reluctant to participate in mediation unless they can be assured that the statements they make in mediation will not be used against them if the case fails to settle and ends up in trial. Confidentiality allows parties to make admissions without fear they will be bound by them at trial, and to disclose information without having their statements used against them. But confidentiality also protects parties who take unreasonable negotiating positions during mediation. Parties deciding to mediate rely both on their freedom to make concessions, as well as their freedom to refuse to settle, without either stance being held against them later.

In the Milhouse case, the insurance company wanted to justify its conduct toward the homeowners seeking payments under their policy by showing that they were making extravagant demands during the mediation. The court decided that it was only fair to allow a party accused of bad faith to introduce evidence that the other side was acting unreasonably. But once the door is opened to allow statements made during mediation into evidence, it seems difficult to limit how wide that opening should remain. What is the scope of a "due process" exception to the generally strict protections for mediation confidentiality? And how would such an exception change parties' willingness to participate in mediation?

From the court opinion, it's difficult to discern on what basis the court concluded that due process demands that a party accused of bad faith must be allowed to introduce otherwise inadmissible evidence to rebut that claim. We don't allow exceptions to other evidentiary privileges, such as attorney-client or spousal privileges, even where the evidence obtainable from that source might determine the outcome of the trial. We don't generally consider due process violated by rules that exclude all kinds of potentially helpful evidence.

The district court's opinion also fails to articulate a "rule" that would provide the necessary certainty for parties to preserve their expectations of confidentiality in mediation. Would it be limited to insurance bad faith cases? Or would anyone be able to claim that their due process rights were being violated if they were not allowed to offer evidence of statements made during mediation? While it's true that mediation confidentiality can sometimes provide a shield for bad behavior, it's difficult to see how we could remove that shield without destroying mediation confidentiality entirely, and that could dissuade many people from using mediation in the first place.

Tuesday, May 27, 2014

The business of mediation

An article in the spring issue of the ABA's Dispute Resolution magazine (Maurits Barendrect and Christopher Honeyman) sets out some daunting statistics on the overall size of the market for ADR services in this country. The number they throw out is $500 million in billings annually. That sounds like quite a lot, but it includes arbitration as well as mediation. And in comparison to the market for legal services, the ADR market is still minuscule, approximately equal to the annual billings of the 50th largest U.S. law firm. Moreover, the top two commercial providers, the AAA and JAMS, account for more than two thirds of this market.

For someone hoping to make a living, or even a partial living, as a mediator, these statistics tell us that it's a difficult field in which to succeed. Unless an aspiring mediator already has a broad reputation (as for example, with some distinguished retiring judges), or an established list of referral sources, it generally takes years to start building any kind of viable mediation practice. It's a small and crowded field.

All is not lost, however. For one reason, the market for ADR services appears to be growing substantially. While the use of mediation and other ADR processes has become much more prevalent over the years, the public is still only dimly aware of these means of obtaining satisfaction in conflict. Greater public awareness of the benefits of mediation will likely expand the market. Also, as the authors of the Dispute Resolution article point out, wherever there is some push from the court system or the legislature toward mediation, the market can expand dramatically, as happened for example, when Italy instituted mandatory mediation of civil cases.

In contrast, the market for legal services in general appears to be shrinking. So however dim the prospects seem for finding work as a mediator, we can at least expect that the demand for mediators will continue to increase (perhaps not as fast as the number of people trying to enter the market, but increasing nevertheless), as opposed to the legal profession as a whole, where technology and other factors have been reducing the demand for lawyers.

It's also important to remember that becoming a professional mediator of litigated disputes is not the only career path for those who wish to put their mediation training to good use. Mediation skills can be applied in a wide variety of contexts. In fact, in dealing with almost any inter-personal situation, it's helpful to know how to listen, how to empathize, how to negotiate. Whether in their place of employment, or in business negotiations, or in resolving conflict among family members, people who have studied mediation and negotiation are likely to use those skills every day in whatever situation they find themselves. In my own litigation practice, I find myself using mediation techniques constantly, both as a result of my training and experience as a professional mediator, and as a result of changes in the practices of litigation that emphasize the negotiated resolution of most cases.

The Dispute Resolution magazine article paints mediation as a disruptive business. I wasn't sure what that meant until I read another article this week about the difficulties Microsoft has been having breaking into the market for tablets and smartphones. Because Microsoft built its business on designing operating systems and software for PCs, they have a tendency to try to make every new system work like a PC. But the newer portable devices aren't meant to work like PCs. They lack a lot of the capabilities of a PC, but they greatly simplify the tasks they are good at performing. That's what makes them a disruptive technology. So according to Microsoft's critics, unless Microsoft abandons its efforts to cram the Windows operating system, and Microsoft Office software into its tablets and smartphones, the company is going to have difficulty adapting to these new technologies.

Mediation lacks a lot of the infrastructure--rules, forms, procedures, rights--that characterizes litigation. Litigation can thus be analogized to the PC business, and mediation represents a new, disruptive technology. Mediation is not going to up-end the traditional model of conflict resolution as quickly as happens in the tech field--and after all, those traditional dispute resolution processes have been around for several thousand years--but it is slowly transforming the practice of law, and finding other new applications. If we think of the "mediation business" in a broad sense, to encompass the incorporation of conflict resolution skills in a variety of contexts, an awful lot of people are succeeding in the field--far more than the number who make a living as professional neutrals. And the field is still expanding.

Thursday, May 22, 2014

Employment disputes

At the employment law program mentioned in my previous post, we were honored to hear a talk from Phyllis Cheng, the director of the California Department of Fair Employment and Housing ("DFEH"). Ms. Cheng walked through the process of resolving employment claims in the department (outlined in the flow chart below). For cases not processed by issuing an immediate right to sue notice, note that the department offers numerous opportunities to steer those cases to a negotiated resolution (generally denoted by the smooth round-bordered boxes), as opposed to a judicially or administratively determined outcome (the sharp-edged boxes), and maintains a staff of 11 mediators for the purpose. In all, the number of cases resolved consensually far exceeds the number that the Department prosecutes.

Given the huge numbers of settlements, in contrast to adjudications, we should perhaps think of the DFEH not so much as a law enforcement agency, charged with putting teeth into statutory prohibitions against discrimination, but rather as a conflict resolution service offered by the government to assist parties in dealing with all manner of employment disputes.

That role also appears to flow naturally from the gradual expansion of the department's mandate. Over time, statutes prohibiting discrimination based on race, sex or religion have expanded their reach to embrace all manner of categories, including age, sexual preference, harassment, etc. Currently, the fastest growing category of cases, according to Director Cheng, is discrimination or failure to make accommodations for disabilities.

I have observed in my own practice of representing clients in employment disputes, that at bottom, many of these claims arise out of actual or perceived unfair treatment of an employee that doesn't necessarily fit comfortably within the law's pigeonholes. For example, an employee may have a personality clash with a supervisor, or feel victimized by some new management practice, but cannot simply file a complaint alleging that he or she was treated unfairly at work. The law only allows employees to seek redress for discrimination based on a recognized category. But the perception has gradually taken hold that there should be a remedy for any sort of harassment or unfair treatment at work, whether or not based on such a category.

Given the gradual expansion of categories of discrimination, a complainant can usually find some available legal "hook" on which to hang her complaint. Eventually the real cause of the dispute comes into play, because resolution of the discrimination claim requires the court or the agency or the parties themselves to talk about the claimed underlying unfairness or policy change or personality clash that actually caused the dispute. The difference is that in a lawsuit or administrative adjudication, the determination of whether an adverse employment action was taken for impermissible reasons is supposed to be dispositive, but in a consensual resolution, an employee's ability to prove that the employer acted for the wrong legal reason may be less important, thus giving the parties the ability to concentrate on their real grievances, whether or not they overlap with legal requirements. (Note that I am not arguing that discrimination has been eliminated, or that claims of discrimination are always pretextual. Discrimination remains a serious problem. What I'm saying is that claims of unfair treatment at work don't always include legally cognizable discrimination. Yet employees understandably feel aggrieved by any sort of unfair treatment.)

It seems that we are almost to the point--given the agency's predominant focus on alternative dispute resolution as opposed to adjudication--where the DFEH can deal with any type of workplace unfairness as long as the original complaint is appropriately labeled with a charge of discrimination to get it past the agency's door. The agency doesn't yet have an explicit mandate to deal with all types of workplace conflict, even though a lot of workplace conflicts that don't necessarily arise from legally cognizable discrimination are already sneaking through that door. But private mediation, either within companies' workplace grievance procedures, or outside them, does have that capacity.

Wednesday, May 21, 2014


Is it possible for a mediator to show too much empathy? At a program SCMA put on last night which included a mock employment mediation, reaction in the room was divided in response to the demonstrator's expressions of understanding of the employee's grievances. Although a few in the audience felt that the mediator could have gone even further in commiserating with the employee's feelings that the employer had not adequately accommodated her need for religious observances in the workplace, a fair number of others thought it was wrong for the mediator to display any sort of solidarity with the employee's complaints.

Those who objected to the mediator's expressions of empathy thought this approach could threaten the mediator's neutrality. They also seemed to think that what parties in mediation need is not so much understanding of their complaints and feelings, but more reality testing. In this case, the non-empathizers thought this employee needed to hear a strong message that she was unlikely to prevail in her lawsuit alleging discrimination based on her religion. Presumably that sort of warning would dissuade her from pursuing a lawsuit, and induce her to accept what the employer might be willing to offer. What was telling, however, was the role-playing employee's reaction to these differing approaches. It was the more empathetic responses that made her feel more positively about the process, and that seemed more likely to cause her to react favorably to the possibility of a negotiated resolution of the dispute.

The split in the audience for our program revealed a real dichotomy of views going to the very essence of what mediation is, and what role the mediator is supposed to play in it. The mediators who disapproved of empathizing with the parties believe in appearing judgmental and stern. Parties unable to resolve their conflict come to such a figure to be told what to do, presumably because they lack sufficient knowledge of how the law would resolve their dispute. In mediation parlance, this is called an evaluative approach, and it suits former judges and many experienced attorneys who assume that what parties need from mediation is an opinion on the merits of their positions by a neutral who is knowledgeable and experienced in the ways of trials and juries. A mediated solution is almost imposed on the parties in that scenario. They may not always like it, but they may accept it as a good approximation of what they would receive from court.

An empathetic mediator, on the other hand, appears kind and forgiving, and seeks to inspire hope and trust from the participants. Such mediators, who range, again in mediator parlance, from facilitative to transformative, believe that the solutions to parties' conflicts lie within the parties themselves, and that greater understanding and sympathy from the mediator will lead them to greater understanding of each other's interests, and to a resolution that feels right to them. Such a mediator is not going to tell the parties what to do, but may instill enough trust in the parties that they will willingly modify their demands, and help find solutions to their conflict.

Which approach is right? The field may not be well-developed enough to answer that question. Certainly those in our group who feel that excessive empathy violates the mediator's neutrality consider their evaluative style more appropriate. On the other side, those who find it hard to believe that the mediator can be too empathetic believe that their more facilitative approach is the only true form of mediation, and some even consider it antithetical to the proper conduct of mediation to offer legal opinions or suggest solutions for the parties.

Personally, I would pay attention to the parties' feelings and expectations and reactions to the process. People do tend to open up to expressions of empathy. And they don't usually respond well, at least initially, to having their feelings and positions challenged. But parties also sometimes need to face some unpleasant truths. How soon should mediators lower the boom on them? My sense is that most participants in conflict are suffering enough when they walk into a mediation that they don't need that to happen right away.