Seven percent of all legal malpractice claims involve a contention that the lawyer steered the client into accepting a bad settlement, according to a CNA litigation claims analysis. The concept that a client’s voluntary agreement to settle a case was somehow coerced
by his or her lawyer may sound dubious. However, one can certainly imagine a case where the lawyer inadequately prepared the case for trial, trial is imminent, and the client feels no other choice but settling exists – even for far less than the case should be worth.
Whether the legal malpractice contention is valid or frivolous, lawyers should consider, and clients should be wary of, settling cases through mediation. Why? Because of the mediation privilege.
Mediation confidentiality is codified in Evidence Code section 1115 et seq. “With specified statutory exceptions, neither ‘evidence of anything said,’ nor any ‘writing,’ is discoverable or admissible ‘in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which . . . testimony can be compelled to be given,’ if the statement was made, or the writing was prepared, ‘for the purpose of, in the course of, or pursuant to, a mediation . . . .’ “ Cassel v. Superior Court (2011) 51 Cal.4th 113, 117 (Cassel), quoting Evid. Code § 1119, subds. (a), (b). Even after mediation ends, communications and writings protected by the statutes are to remain confidential. Id. at § 1126.
The Supreme Court’s holding in Cassel explains the mediation privilege in the context of a legal malpractice action. The plaintiff in Cassel sued his attorneys for malpractice, alleging the attorneys “induced him to settle” a business dispute for less than the case was worth by coercing him to enter a settlement agreement during mediation. Cassel, 51 Cal.4th at p. 118. The Supreme Court upheld the trial court’s order precluding evidence related to the mediation, including private discussions the plaintiff had with his attorneys about the settlement. In doing so, the high court rejected the Court of Appeal majority’s view that “[t]he mediation confidentiality statutes do not extend to communications between a mediation participant and his or her own attorneys outside the presence of other participants in the mediation.” Id. at 121-122, 129-134.
The Cassel court recognized its holding may hinder the client’s ability to prove a legal malpractice claim against his or her lawyers. Cassel, 51 Cal.4th at 122, 133-34. Quoting Wimsatt v. Superior Court (2007) 152 Cal.App.4th 137, the California Supreme Court acknowledged “ ‘[t]he stringent result we reach here means that when clients, such as [the malpractice plaintiff in [Wimsatt]], participate in mediation they are, in effect, relinquishing all claims for new and independent torts arising from mediation, including legal malpractice causes of action against their own counsel.’ “ Cassel, at p. 133, quoting Wimsatt, supra, 152 Cal.App.4th at p. 163. As the concurring opinion of Justice Chen observed, “This holding will effectively shield an attorney’s actions during mediation, including advising the client, from a malpractice action even if those actions are incompetent or even deceptive.”
Why Settle Cases Through Mediation?
Just this month, a California court of appeal granted summary judgment to attorneys charged with committing legal malpractice assisting their client to settle a case in mediation. Amis v. Greenberg Traurig LLP (2015 DJDAR 3179). The court found that, “Amis cannot prove that any act or omission by GT caused him to enter the settlement agreement and, hence, to suffer his alleged injuries, because all communications he had with GT regarding the settlement agreement occurred in the context of mediation [and] . . . the mediation confidentiality statutes bar Amis from presenting the critical evidence necessary to establish GT’s acts or omissions caused his alleged injuries, . . . “
In a nutshell, the best protection for attorneys is to settle all of their cases through mediation. This is usually very good for the clients, too. In those rare instances of attorney negligence, however, the confidentiality of mediation that fosters settlements will also bar the client from seeking recompense from his or her attorney.