When Mediators Cross the Line1
October 2004
Mediators and lawyers can sometimes cross
the line of common decency—bordering on committing illegal acts—particularly
during difficult mediations. Strong-arm tactics do not help the process, however.
A settlement for settlement's sake does all parties a disservice.
by Jeff
Kichaven
Jeff Kichaven,
A Professional Corporation
Mediator misdeeds can teach us powerful lessons about proper and improper
behavior by lawyers as well as mediators. Consider a situation where a property
dispute tears apart brothers living on separate continents. One brother, Manny,
participates in the mediation by telephone from a foreign land, while the other
brother, Harry, participates with three other lawyers by his side. The disputed
estate includes several parcels of real property. Complex "company structures"
are involved in the ownership of these properties.
During the mediation, Harry's lawyers told Mad Maxx the mediator that any
agreement reached needed to be subject to getting proper tax advice because
of its complexity. During the teleconference, which lasted several hours, the
parties reached agreement in principle concerning the commercial settlement
proposal, which provided that Harry's interest in the properties would be transferred
to Manny in return for the payment of $1, and that Harry would relinquish his
interest in the family companies. Harry's lead counsel declared that he thought
they had done enough for the day and that everyone was hungry, tired, and worn
out. He suggested adjourning until they were rested and could deal more constructively
with the outstanding issues. But Mad Maxx would hear nothing of it. He insisted
that the mediation continue until a settlement was reached, no matter how late
or how long, and the fatigued lawyers foolishly capitulated.
The agreement was signed later that night, before tax experts had been consulted.
As surely as night follows day, once tax experts were consulted, it was considered
that the agreed-upon amount would have undesirable taxation consequences for
Harry. Attempts by his lawyers to have the price varied failed. A lawsuit resulted.
The Mistakes Made
Mad Maxx the mediator was trying to help, and he thought that what he did
was right. But he deserves to be sued, and he probably deserves to lose. His
behavior was not only incompetent, it was unethical. And his malpractice insurance
carrier may even have substantial reason to deny coverage. The silver lining
in Mad Maxx's plight is that both mediators and lawyers can learn from his horrible
example, and thereby raise the standards of practice in the respective professions
and help prevent disasters such as the one from which the unfortunate Harry
suffered.
The Avoidable Sin of the Mediator: Insistence
Beware of the mediator who says, "My client is the deal." That mediator is
likely to become a bully, much like mediator Mad Maxx. Do you want to run the
risk that, late at night, when you are tired, hungry, can't concentrate, and
want to leave that your mediator will turn into a merciless bully? No, the goal
of mediation is not "agreement for agreement's sake." Rather, the goal is for
the parties to make a clear decision as to whether or not they want a deal and,
if so, its terms.
When that decision point is reached, settlements will be the natural byproduct,
most of the time. A few cases will not settle, and that's good, because sometimes
the available settlement option really is worse than the unpleasant prospect
of continued litigation. This is the only set of outcomes that is truly consistent
with the paramount value set forth in every set of ethical standards for mediators
that I have ever seen: informed self-determination by the parties in the resolution
of their own disputes. Harry never reached the point where he could make a clear
decision. That's because he never had access to all the information he needed
to make a sound decision, especially tax advice. Mad Maxx bulldozed ahead anyway,
to Harry's great disservice. It was bad mediation practice on Mad Maxx's part.
But Harry's disaster is not the fault of Mad Maxx alone.
The Avoidable Sin of the Advocate: Abdication
As improper as Mad Maxx's bullying was, he could still win this case. That's
because the extent to which Mad Maxx was unethical is exceeded only by the extent
to which Harry's tired lawyers were incompetent. How could they abdicate their
responsibilities so completely to a mediator? Didn't they realize that, while
they owed his client a duty of undivided loyalty, the mediator did not?
Even in a mediation, a lawyer is still a lawyer, and the duty to represent
the client's interests zealously within the bounds of law still applies. Even
in a mediation, a lawyer can never pass off his client responsibilities to another—especially
not to a mediator, who is engaged by both sides, whose loyalties are by definition
different than those of the lawyers. In California, as a matter of law, a client
represented by counsel cannot "reasonably" or even "actually" rely on the advice
of anyone else on matters within the scope of that counsel's representation. Wilhelm v Pray, Price, Williams & Russell, 186
Cal App 3d 1324, 1332 (1986).
The tired lawyers were profoundly wrong when they allowed, or maybe even
required, their client to rely on the advice of another on matters within the
scope of their representation. If similar legal principles govern in the country
where this mediation took place, then the reasoning of Wilhelm might protect Mad Maxx from the tired
lawyers' claim for contribution.
The Avoidable Consequence for the Mediator: A Potential Loss of Malpractice
Coverage
Perhaps a more interesting question from a risk management perspective is
whether Mad Maxx's errors and omissions (malpractice) policy is obligated to
provide him with a defense. His engagement in this matter was expressly "as
a mediator." But dictating detailed contract terms is not part of the practice
of mediation. At least in California, it is the essence of the practice of law.
[People v Merchants' Protective Corp., 189 Cal
531, 535 (1922). See generally, The Rutter Group
California Practice Guide, Professional Responsibility (2003), Vol. 1,
Ch. 1, pp. 45-51.]
If mediation is to develop as a profession separate from the practice of
law, and nonlawyers are to be allowed to mediate without being guilty of the
"unauthorized practice of law" (a crime in most places), then mediators must
stay away from those tasks that are at the heart of law practice. Mediators
must not be allowed to draft contracts that affect the legal rights of others,
as mediator Mad Maxx did here.
Formal ethical standards for mediators have not evolved to this point. That's
because too many mediators, like Mad Maxx, are inappropriately attached to "settlement
for settlement's sake" as their goal. So many, in fact, that I doubt that mediation
organizations, if left to their own devices, will take that step any time soon.
If mediators do not move to more appropriate ethical standards voluntarily,
some insurer's coverage lawyer is going to push us there, because a strong case
can be made that Mad Maxx's malpractice policy does not provide coverage in
this case.
Many attorney-mediators have malpractice policies that cover mediation services
only, and do not provide coverage for law practice. The premiums for such policies
are lower than for policies that cover both mediation practice and the practice
of law. If the act of drafting contract terms is the exclusive domain of law
practice, as it is in California, then Mad Maxx's malpractice insurer might
be justified in denying him coverage for this claim if his policy covers mediation
services only, and not the practice of law.
And, if this analysis is correct, situations like Mad Maxx's could get worse
still. In many American jurisdictions, his conduct could also get him disbarred.
If, by dictating the settlement agreement, he was doing so on behalf of both
Harry and his brother Manny—the party's opponent in the then-pending litigation.
This is the quintessence of an actual conflict of interest! Assuming that the
conflict was waivable (which it probably was not), did mediator Mad Maxx even
try to get written, informed, prior waivers of that conflict, as lawyers' ethical
codes would generally require him to do?
In a civil lawsuit, mediator Mad Maxx might be subject to a direct claim
by Harry for legal malpractice. When Mad Maxx started dictating the settlement
agreement, his sins went beyond the ethical lapse of undertaking the legal representation
of clients with an actual, unwaived conflict of interest. He also acted incompetently
toward Harry, one of his "clients," when his legal work exposed him to adverse
tax consequences. His personal silver lining may be that, if he still carries
legal malpractice insurance, that carrier may still obligated to cover this
claim.
The Lessons Learned
Never hire a mediator who serves the agreement over
the client. This type of mediator does not owe the client the same duty
of undivided loyalty the client's own lawyer does. The client must be protected
from mindless pursuit of "settlement for settlement's sake."
Never ask a mediator to draft a settlement agreement. That's the job of lawyers. If a mediator starts to do so, he or she should be
told, politely but firmly, to stop.
Limit the mediator's role in drafting a settlement
agreement. Good mediators know how to help without crossing the line.
Better mediators will use better mediation techniques, asking questions rather
than making statements. Of course, these questions must be posed as in a spirit
of honest curiosity. The lawyers must be free to answer in any way that is consistent
with the discharge of their fiduciary obligations to their clients.
Know when to call it a day. In some cases,
it is appropriate for a mediator to be firm in encouraging (but never forcing)
parties to stay until an agreement is signed. In cases where the only, or dominant,
issue is "What must defendant pay as the price of a release from the plaintiff?",
the firm approach generally works well. These include, for example, most employment,
personal injury, medical malpractice, and other cases with consumer-type plaintiffs.
If the mediation of such a case adjourns without a signed "deal," it generally
takes all the king's horses and all the king's men to put the deal back together
again, even if the adjournment is only overnight. In the commercial, as opposed
to the consumer, context, parties are generally better able to prevent their
buyer's or seller's remorse from becoming so severe that it undoes the deal.
And if the deal becomes undone? Well, as Jim Melamed of Mediate.com sagely said in one of the first mediation trainings I ever attended, "If the
deal isn't right on Tuesday, it probably wasn't really right on Monday, either."
Any lawyer who allows himself and his client to be bullied into signing a deal
that isn't really right deserves to find himself a defendant in a malpractice
suit.
Conclusion
Although I have analyzed some behaviors that are inappropriate for mediators,
it is much more difficult to set forth a clear, comprehensive declaration of
just what a mediator's duties are and what a mediator's role is. Mediator Mad
Maxx should have done something to help make sure that everyone involved understood
the risks and consequences of leaving without a signed deal, but what exactly?
What is the boundary between proper mediator behavior and improperly hijacking
the lawyer's role, interfering with the integrity of the attorney-client relationship,
and commandeering the role of lawyer as well as the role of mediator? Mediator
Mad Maxx went too far, of that I am sure. For now, that conclusion will have
to be enough.
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