Background on Confidentiality: Legal History

Background on Confidentiality:
Legal History

A. Sources of Confidentiality Commitments and Obligations:

Court ADR plans, rules, and orders; statutory and regulatory provisions; evidentiary exclusions; evidentiary privileges; ethics rules; and contract provisions.

B. Court-Annexed Plans and Orders

1. The Alternative Dispute Resolution Act (ADRA) of 1998, which requires each federal district court to authorize use of ADR processes in civil actions, requires that the courts provide that for confidentiality of ADR processes and prohibit disclosure of confidential dispute resolution communications. 28 USC §652(d).

2. Even before the ADRA, however, courts with mediation programs provided confidentiality protections through their plans and orders. Breaches of such confidentiality obligations by attorneys have led to sanctions. For example:

a. Bernard v. Galen Group, Inc., 901 F. Supp. 778 (SDNY, 1995). Judge Denny Chin granted defendant''s motion for sanctions and fined the plaintiff''s counsel $2500.00 for disclosing to the court terms of settlement offers which had been made during mediation proceedings conducted pursuant to the court''s mediation program. The mediation order, notice, and program provisions had specified that the entire mediation process was confidential and that parties and the mediator "may not disclose information regarding the process, including settlement terms, to the court or to third persons unless all parties otherwise agree."

b. Cohen v. Empire Blue Cross and Blue Shield, 178 F.R.D. 385 (ED NY, 1998). Rejecting a "defendant-is-talking-out-of-both-sides-of-its-mouth" defense, U.S. magistrate imposed a sanction of $750.00 against plaintiff''s counsel for violating confidentiality provisions of court-annexed mediation program by revealing to the court in an affidavit that, in the mediation of another case with the same defendant and a different plaintiff, the defendant had taken a position opposite to that which it was taking in the current litigation. This, the court held, was "a blatant violation of the confidentiality requirements that are essential to the mediation process," which were stated in the mediation plan and the local rules. Cf. Kitchen and Kitchen Farms v Kitchen, 231 Mich. App. 15, 585 N.W.2d 47 (Ct. App. Mich, 1998) (affirming lower court decision finding mediation summary from court-annexed process inadmissible but reversing the imposition of sanctions).

c. As background for the principles of confidentiality in mediation, the courts often cite Lake Utopia Paper Ltd. v. Connelly Containers, Inc., 608 F.2d 928 (2nd Cir., 1979), cert. denied, 444 US 1076, 62 L.Ed.2d 758, 100 S.Ct. 1093 (1980), in which the Second Circuit denied appellee''s request for costs and attorney fees in the appeal from district court''s confirmation of arbitration award. In support of the allegation that the appeal was frivolous, appellee stated in its brief that staff counsel for the court, in a confidential pre-argument settlement conference, had told the appellant that the appeal was baseless. Commenting on what it called a "serious breach of the confidentiality essential to the purposes of the pre-argument conference," the court noted, "If participants cannot rely on the confidential treatment of everything that transpires during these sessions then counsel of necessity will feel constrained to conduct themselves in a cautious, tight-lipped, non-committal manner more suitable to poker players in a high-stakes game than to adversaries attempting to arrive at a just resolution of a civil dispute." Id. at 930.

C. Statutory and Regulatory Protections

1. The numerous state statutes addressing mediation confidentiality and mediator protections are remarkable both for their variations in approach and the narrow subject matters to which they apply. See, e.g., Revised Statutes of Nebraska §2-4812 and 4804 (farm mediation); Hawaii Revised Statutes §672-8 (design professional conciliation); 40 Pennsylvania Statutes §1301.702 ("binding mediation" of certain medical professional liability cases). But see California Evidence Code §§1115, et seq., relating generally to admissibility and confidentiality of mediation communications. Confidentiality provisions are common in statutory mediation provisions relating to labor relations, family law, and civil rights. See, e.g., Montana Code Annotated, §26-1-811 (family law mediation); Ohio Revised Code §4112.05 (civil rights charge conciliation); Iowa Code §20.17 (public sector collective bargaining mediation).

2. New York Civil Service Law ("The Taylor Law") §205(4)(b) is typical of many state statutory provisions which establish certain protections for mediators in the collective bargaining context. The Taylor Law protects NY Public Employment Relations Board (PERB) mediators from being compelled or volunteering to testify to information or to produce documents "relating to the resolution of a particular dispute in the course of collective negotiations acquired in the course of his official activities under this article." This provision was found to comport with due process requirements of the United States Constitution in New York State Inspection, Dist. Council 82 v. PERB, 629 F.Supp. 33 at 50-56 (NDNY, 1984). In Salmon River Central School Dist., 10 PERB 3023 (1977), a charging party, attempting to establish proof of an agreement, sought to introduce a memorandum of understanding that had been prepared by a PERB conciliator in the presence of only the charging party. PERB found the evidence inadmissible. See also East Ramapo Central School District, 31 PERB 3038, n. 3 (1998), citing Salmon River.

3. But compare Newark Bd of Ed v. Newark Teachers Union, 152 NJ Super. 51 377 A.2d 765 (NJ Super. App Div., 1977). In an unfair labor practice proceeding alleging a refusal to execute an agreement, the court upheld the NJ Public Employment Relations Commission''s (PERC) denial of a motion to quash a subpoena requiring employer''s counsel to produce counterproposals transmitted by PERC mediators and transcripts, minutes, and notes taken at joint negotiation sessions conducted in the presence of the PERC mediators. The agency''s relevant mediation confidentiality rule provided that "information disclosed by a party to a mediator in the performance of his mediation function" shall not be divulged voluntarily or by compulsion. The court endorsed PERC''s view that discovery may not be foreclosed just because documents either have been transmitted by a mediator or have been prepared by a negotiator during across-the-table negotiations with the other party in the presence of the mediator. Thus, counterproposals provided to the mediator for transfer to the other party were not considered to be within the scope of the rule''s confidentiality provision. In camera inspection by the hearing examiner was deemed appropriate to ensure that any notations attributed to a mediator were redacted.

4. The Administrative Dispute Resolution Act, 5 U.S.C. §§571, et.seq., governs ADR activities in federal administrative agencies. Section 574 of the Act sets the minimum level of confidentiality to be provided in agency dispute resolution proceedings.

C. Evidentiary Exclusions. See In re Hillard Development Co., 221 B.R.. 282 (S.D. FL, 1998), in which a U.S. Bankruptcy Court, relying on the FRE 408 exclusion of settlement-process statements, found statements made in mediation inadmissible.

D. Federal Mediation Privilege Established for Application under Federal Rule of Evidence (FRE) 501:

1. Creation of the privilege: Folb v Motion Picture Industry Pension and Health Plans, 16 F.Supp.2d 1164 (C. Dist, CA, 1998). Creating a federal mediation privilege that would be applied under FRE 501, the court relied on a four-part analysis, citing: (1) the imperative need for confidence and trust among participants in mediation; (2) the important public ends served by promoting conciliatory relationships among parties to a dispute, reducing litigation costs, and decreasing size of federal and state court dockets, thereby increasing quality of justice in cases that do not settle; (3) the modest loss of likely evidentiary benefit, since most mediation-related evidence not otherwise discoverable would never come into being were it not for the confidentiality of the process; and (4) the consistent body of state law adopting such a privilege.

2. Application of the privilege. The court in Folb applied the newly created privilege to prevent a plaintiff alleging discrimination and whistle-blower violations from obtaining information disclosed in a mediation of a sexual harassment claim in which the plaintiff had been identified as the alleged harassor. The privilege was limited to information disclosed in formal mediation conducted by a neutral and was not applied to settlement communications made after the mediation, even though such post-mediation communication may have included information that initially had been disclosed in the mediation.

3. See also United States v Gullo, 672 F.Supp. 99 (WDNY, 1987). The court found that, under FRE 501, it would recognize the New York statutory confidentiality privilege under NY Judiciary Law §849-B.6 for mediations conducted through the Community Dispute Resolution Centers Program. The court therefore suppressed evidence of the terms of the settlement and all statements made during the dispute resolution process.