Limits of mediation confidentiality


“Everything said in mediation is confidential.” Really? Maybe.

by Robert E.L. Wright

Whether you are an attorney, a business person or a divorcing spouse, if you have ever been in a mediation you have likely heard a mediator promise you confidentiality for anything you say. As mediation becomes a mainstay for litigants seeking an alternative way to resolve their disputes, this promise of confidentiality will increasingly be tested in court. Unfortunately, given the current state of the law in Michigan’s state and federal courts, the promise - depending upon the circumstances - may prove illusory.

It is not that courts do not appreciate or value the need for confidentiality in mediation. As one court explained, “Public policy favors the settlement of lawsuits, a policy embodied in Rule 408 of the Federal Rules of Evidence….   The integrity of the mediation process depends on the confidentiality of discussions and offers made therein.” Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976, 979 (6th Cir. 2003).

Rather, legislatures have failed to provide the tools for courts to use to preserve and protect mediation confidentiality. To appreciate the issue, consider three scenarios.

1. A lawsuit is pending and the matter is referred to a mediator. Mediation ends without an agreement. Something was revealed which is potentially damaging to your side. Your opponent mentions the disclosure in a motion. Will the court exclude it?

2. Same scenario, but instead of revealing it in a motion, you receive discovery requests completely centered around the disclosure such that it will be impossible to not reveal it. Will the court uphold your objection?

3. Same scenario, but instead of using the disclosure, you and your opponent exchange even more confidential information by email, resulting in a settlement. You receive a subpoena from a third party seeking the information in an entirely different case. Will the other court quash the subpoena?

The answer to all three questions is the same:  “It depends.” Three important variables affect the outcomes in these scenarios:

•Whether there is a written agreement of confidentiality between the participants in the mediation.

•Whether the issue arises under state or federal law or is raised in a state or federal court. (For this article, it is presumed that a court case is connected to the mediation.)

•Whether there is a privilege to protect the information from further disclosure.

Scenario 1

Confidentiality agreement?  In the first scenario, if there is an agreement between the parties to bar the use of anything said or done in mediation, the motion will likely be stricken. The court can do so purely on a contract basis, upholding the agreement of the parties to keep such matters confidential. However, if there is just an order referring the case to mediation but no written agreement to mediate or it lacks a confidentiality provision, the parties are left to the rules of the court in which the motion is filed. What will a Michigan court decide? Again the answer is “It depends.”

State or federal court?  In Michigan state courts, MCR 2.412 would likely bar the communication:  “Mediation communications are confidential. They are not subject to discovery, are not admissible in a proceeding, and may not be disclosed to anyone other than mediation participants [with certain enumerated exceptions].” Okay, but what if the lawsuit is pending in one of Michigan’s federal courts? Again, it depends on which federal court.

In February 2015, the US District Court for the Eastern District of Michigan (“EDMI”) adopted new local rules concerning mediation. Local Rule 16 (d) provides: “Communications in ADR proceedings are confidential. They are not subject to discovery, are not admissible in a proceeding, and may not be disclosed to anyone other than the ADR participants unless the court permits disclosure.” So again, it looks like the motion would be stricken.

Detroit’s bankruptcy court has its own rule on mediation confidentiality: “All proceedings and writings incident to the mediation shall be privileged and confidential, and shall not be reported or placed in evidence.” (United States Bankruptcy Court, EDMI, Local Rule 7016(a)(5).) So once again, the disclosure would likely be protected. But how about the Western District?

FRE 408. In the United States District Court for the Western District of Michigan, Local Rule 16.2(d) states:  “All ADR proceedings are considered to be compromise negotiations within the meaning of Fed. R. Evid. 408.” What protection does Federal Rule of Evidence 408 provide? The rule merely excludes from evidence offers to compromise a “disputed claim,” including conduct or statements made during compromise negotiations about the disputed claim, to either prove or disprove the validity or amount of the “disputed claim” or to impeach “by a prior inconsistent statement or a contradiction,” UNLESS the disclosure: a. is offered in a criminal case involving a public office; or b. is offered: i. to prove bias or prejudice of a witness; ii. to counter an argument of undue delay; or iii. to prove an attempt to obstruct a criminal investigation.

So, if the disclosure is not offered to prove or disprove the amount of a claim or impeach a prior statement it could be admitted. Consider an admitted failure to report income to the IRS. If it doesn’t bear on the amount of a disputed claim or contradict prior statements, would it still be protected? Likely not. Moreover, consider all of the other opportunities for disclosure left open by the exceptions in the rule. So what would happen in the Grand Rapids bankruptcy court? The answer depends on whether a new rule under consideration by that court is adopted.

Bankruptcy court. In January, the United States Bankruptcy Court for the Western District of Michigan appointed a seven-member committee to draft proposed alternative dispute resolution rules. The ADR Committee recently finished its work and the outcome is yet to be finalized (as of this writing the rules are just being published for comment), but the Committee has finished its work and submitted a final draft of proposed rules to the court.

Proposed LBR 9019-12(b) provides that, with some explicit exceptions, all “mediation communications,” broadly defined in the rule, will be treated as confidential and “the mediator and the mediation participants shall not disclose any mediation communication outside of the mediation, and no person may introduce in any other proceeding evidence pertaining to any aspect of the mediation process.” Additionally, there are prohibitions against seeking information from a mediator by subpoena or other discovery devices, nor may a party offer anything a mediator says into evidence.
Proposed LBR 9019-12(h). If adopted by the bankruptcy court and approved by the district court, the motion would likely be stricken under the proposed rules.

Other protections. FRE 408, local court rules, and the parties’ agreement to mediate are not the only safeguards for parties mediating in Michigan’s federal courts. The Alternative Dispute Resolution
Act of 1998 requires each U.S. district court to adopt local rules authorizing the use of ADR processes in civil actions, including adversary proceedings in bankruptcy courts, and requires each district to “encourage and promote the use of ADR.” Pub. L. No 105-315, 112 2993 (1998). The need for confidentiality in mediation communications is widely recognized throughout U.S. courts and was specifically upheld by the Sixth Circuit Court of Appeals.

As noted earlier in the Goodyear case, “The integrity of the mediation process depends on the confidentiality of discussions and offers made therein.” Indeed, other language in that case supports excluding our hypothetical disclosure: “In sum, any communications made in furtherance of settlement are privileged.” Id. 332 F.3d 983. However, issues remain as to whether a disclosure was made “in furtherance of settlement” and precisely what the court meant by “privileged.” Who holds the privilege? Who may assert it? Is it unconditional or are there exceptions? These and other questions would need to be determined on a case-by-case basis.

Diversity cases. A further complication comes into play in federal courts where jurisdiction is based on diversity. A full discussion of the multiplicity of permutations on choice of law is beyond the scope of this article. But briefly, if the rule of decision in a diversity case is based on the law of a state with a statutory mediation privilege, the non-forum state’s privilege law may apply to the hypothetical disclosure, especially if it can be shown the parties expected the foreign state’s privilege law would apply to their mediation communications. (For an excellent discussion of the choice of law issues, see The Quest for Uniformity in Mediation Confidentiality:  Foolish Consistency or Crucial Predictability? by Ellen E. Deason, 85 Marquette Law Review 79 (2001); and the seminal case on federal mediation confidentiality privilege, Folb v. Motion Picture Industry Pension & Health Plans, 16 F.Supp.2d 1164 (CD CA 1998).) Michigan has no statutory privilege for mediation communications. So unless another state’s law applies, there is no state law privilege to protect the communications here.

Uniform Mediation Act. However, if the rule of decision is supplied by a state which has adopted the Uniform Mediation Act, the outcome could be different. The Uniform Mediation Act (or UMA) provides that all mediation participants “may refuse to disclose, and may prevent any other person from disclosing,” a mediation communication. UMA, Section 4(b). Only twelve states have enacted the Uniform Mediation Act although two more significant ones, New York and Massachusetts, currently have bills pending in 2015. Though MCR 2.412, Michigan’s court rule on mediation confidentiality, mirrors the confidentiality provisions of the UMA, we have no privilege such as that found in the UMA.

This column will be continued in the next issue.

Author Robert E. L. Wright is a pioneer in mediation and ADR in Michigan. In 2011, he left a large Michigan firm to develop his own arbitration and mediation practice, The Peace Talks, PLC and is a member of Professional Resolution Experts of Michigan (PREMi).