Ninth Circuit Addresses Mediation Agreements

The United States Court of Appeals for the Ninth Circuit issued an opinion a few days ago that supports the enforcement of agreements reached through mediation and upholds confidentiality provisions in private agreements to mediate.

The case involves a claim against Facebook and its founder, Mark Zuckerberg.  A competing social media site called ConnectU and its owners sued Facebook, claiming Facebook stole their site.  Facebook countersued.  After protracted litigation, including extensive discovery, the parties were ordered to mediate the case.  The district court did not appoint a mediator.  Instead, the parties chose a private mediator and entered into an agreement to mediate.  That agreement included a confidentiality agreement, which is common to most mediations, that required all negotiations and statements made during the mediation process to remain confidential, non-discoverable, and inadmissible in any court proceeding.

The mediation was successful, and the parties signed a handwritten term sheet.   Included in the term sheet were provisions that Facebook would prepare the final settlement documents and that all claims each party had against the other were released.

The agreement fell apart during negotiations over the final settlement documents.  Facebook sought to enforce the mediation agreement, and the district court agreed.  The case was appealed to the Ninth Circuit.

In upholding the settlement agreement signed at the mediation, the Ninth Circuit noted that both sides were sophisticated businesses with legal teams and various experts.  The Court went on to state:

Parties involved in litigation know that they are locked in combat with an adversary and thus have every reason to be skeptical of each other’s claims and representations. They can use discovery to ferret out a great deal of information before even commencing settlement negotiations.  They can further protect themselves by requiring that the adverse party supply the needed information, or provide specific representations and warranties as a condition of signing the settlement agreement.  Such parties stand on a very different footing from those who enter into an investment relationship in the open market, where it’s reasonable to presume candor and fair dealing, and access to inside information is often limited.  There are also very important policies that favor giving effect to agreements that put an end to the expensive and disruptive process of litigation. (Emphasis added)

The Court went on to state, “An agreement meant to end a dispute between sophisticated parties cannot reasonably be interpreted as leaving open the door to litigation about the settlement negotiation process.”  The Court enforced the mediation confidentiality agreement and denied the fraud and securities claims the owners of ConnectU tried to make based upon statements made during the mediation.

This opinion gives an important boost to the mediation process.  It confirms that mediation is confidential (here by a confidentiality agreement as opposed to court rule) and that the agreements reached in mediation are enforceable.  As the Court concluded, “At some point, litigation must come to an end.”

The case is Facebook v. ConnectU, Inc., case number 08-16745.  A copy of the opinion can be found at http://www.ca9.uscourts.gov/datastore/opinions/2011/04/11/08-16745.pdf

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More Reasons for Mediation in Alabama

In response to pending budget cuts, Alabama Chief Justice Sue Bell Cobb has announced her authorization for court offices to close one day per week.  Additionally, Justice Cobb has notified presiding judges in all of Alabama’s judicial circuits that jury trial weeks for civil lawsuits will be cut in half.  Jurors will also be asked to forgo juror and mileage payments.

Taking into consideration the number of new cases of all types filed each year (see my April 4, 2011 post regarding cutbacks facing Jefferson County), parties need to seriously consider alternatives to filing lawsuits and going to trial to resolve disputes.  Courthouse closures and fewer weeks for civil jury trials will only add to the delay litigants now face.  Mediation provides a faster, less expensive and confidential means to resolve most disputes. 

Lawyers and their clients need to weigh all dispute resolution options available to them.  Giving the parties the ability to control the resolution, the process, the timing, and the cost, makes mediation the smart choice in these difficult financial times.

More Court Cutbacks Facing Jefferson County

With a combination of cutbacks mandated by the Administrative Office of Courts and the never-ending battle over Jefferson County’s finances, the court system in Jefferson County is bracing for loss of services and delays that will affect everyone in the County.

The Birmingham News and AL.com have been covering the pending budgetary woes facing the courts and numerous articles and opinion pieces have detailed the grim picture.  The Jefferson County Family Court will likely lose court referees who hear over 17,000 cases per year.  Bailiffs and security personnel will be cut.  Unlike in years past, the courts are not able to look to the County Commission for help – the County is struggling to avoid bankruptcy in light of the sewer debt debacle and the loss (again) of the occupational tax.  There is a likelihood of fewer weeks for jury trials and even discussions of closing the courthouses one day per week.  Back-ups in the criminal dockets will likely lead to more jail overcrowding.  People with civil lawsuits and divorce cases will have to wait even longer than normal for their cases to be reached if they cannot find ways to resolve them outside of the court system.  

The Birmingham News reported on Sunday, April 3, that the Jefferson County Commission is seeking limited home rule to allow it to enact tax increases and remove earmarks from current taxes to help meet funding shortfalls.  Under the Alabama Constitution, only the legislature can increase taxes.  So far, there has been no agreement from the County’s legislative delegation on how to help the County Commission move forward in fixing its funding problems.  This leaves the courts looking for new avenues of revenue – including the possibility of increased filing fees.  While these budgetary woes grow, the volume of cases our courts are handling continues to be staggering.

The Alabama Administrative Office of Courts reported that last year in Jefferson County (Birmingham and Bessemer) the following NEW cases were filed:

-          Circuit Court Criminal – 7,501

-          Circuit Court Civil – 9,681

-          District Court Criminal – 19,452

-          District Court Civil – 11,292

-          Small Claims – 16,369

-          Domestic Relations (Divorce Courts) 4,938 (3,838 new cases; 1,100 modifications)

-          Juvenile Cases – 5,599

-          Child support cases (Family Courts) – 5,221

This does not address matters that were already pending in the courts prior to these new filings. 

While volunteer mediation programs exist to help the small claims and divorce courts in Birmingham, these programs are limited and can only go so far to help with the backlog of cases in the County.  As the gridlock between the County Commission and the Alabama Legislature continues, the courts have begun announcing layoffs.  Difficult times require creative solutions – hopefully our elected officials will take the steps necessary to insure the safe and efficient operation of our courts.  In the meantime, the lawyers and parties in civil lawsuits and family law cases need to look for avenues other than trials to resolve their cases as early, fairly and efficiently as possible to avoid the delays this budget crisis will bring.   

Helping Healing Through Dialogue

There was an interesting article in the April 3 edition of the Rapid City Journal (South Dakota) about a program called “Restorative Justice” that brings victims of crime and the offenders who committed the crime together to bring closure and, hopefully, healing.

The program is voluntary and is not geared towards settlement of any claims.  The process is peace-making.  It gives both sides the opportunity to talk about how the crime affected them, their families, etc.  It puts a human face on both the victim and the offender.   Restorative Justice takes the centuries old approach of putting people together, with the help of a neutral (or from history town or tribal elders/leaders), to talk opening and resolve their differences.  The process is completely voluntary, and does not require the victim to forgive the offender – although forgiveness often occurs.

The story in the Journal article involved a car accident caused by a driver who was high.  Two adults, one of which who suffered a severe brain injury in the accident, and their seven year old child participated in the Restorative Justice process with the driver who hit them.  The meeting had no effect on the sentence imposed on the driver who caused the accident, nor did it affect any civil lawsuit.  What the three hour mediation session did bring about was understanding, closure, and peace.  The article can be found at http://www.rapidcityjournal.com/news/local/article_c2928576-5d8d-11e0-b5e8-001cc4c03286.html