New California Mediation Confidential Law

The California legislature recently passed, and the governor signed last month, a law (AB 939) substantially revising and elaborating California rules for mediation-and especially confidentiality in mediation. The law will take effect January 1, 1998.

Repealed are Evidence Code sections 1152.5 and 1152.6, which governed when communications made in the course of a mediation would be privileged. Added to the Evidence Code is a new Chapter on Mediation, at sections 1115-1128. The chapter contains new, broad definitions for "mediation," "mediator" and "mediation consultation" (section 1115). It expressly does not apply to a settlement conference under California Rules of Court 222.

The law restates that statements made and documents prepared in the course of a mediation are not admissible, and all discussions among mediation participants shall remain confidential (section 1119), with certain exceptions (sections 1120 and 1122). An agreement made or prepared in the course of a mediation may nonetheless be admissible in certain circumstances (sections 1123 (written) and 1124 (oral)). "Oral agreements" are defined (section 1118) as those (1) recorded by a reliable sound recording, (2) recited by the mediator in front of the parties who express agreement "on the record," (3) stated by the parties "on the record" to be enforceable or binding or (4) reduced to a writing signed by the parties within 72 hours after recording.

Significantly, the law attempts to define when a "mediation" (and attendant confidentiality) ends (section 1125). Not surprisingly, the mediation ends if there is a settlement, a written statement that the mediation is over, or no communication for 10 days (unless shortened or extended by agreement) between mediator and any other of participant in the process (section 1125).

Finally, the law attempts to provide some "teeth" for breach of mediation confidentiality: any reference to mediation in a subsequent trial is an "irregularity" under Code of Civil Procedure section 657 [governing when a verdict may be vacated] or, in any noncriminal matter, grounds for vacating the decision and a further hearing (section 1128).

The law also has special new provisions for mediation of disputes involving insurers and insureds. If a settlement occurs during the mediation, the insured still has 3 days to rescind, unless s/he was represented by counsel at the mediation and counsel signed the settlement agreement (Insurance Code section 10089.82(c)). The law also contains provisions for documents to be produced in insurance mediation (Ins. Code section 10089.80(a)). The law also provides for limited tolling of the statute of limitations during the pendency of an insurance mediation. Insurance Code section 10089.82(b).

Comment: Persons involved in mediation after December 31, 1997 should be familiar with these new provisions. The legislative summary states that the bill "revise[s] and recast[s]" provisions of existing law, but these are substantial changes to what was a relatively straightforward statute. The very act of revisingand providing the many definitions will likely provide grist for litigation. In particular, the 10-day provision on when a mediation ends, and the definition of oral agreement may create traps for the unwary.