Practical differences between court-provided settlement services and private mediation

Private mediators have more flexibility in many situations

James A. Steele
2015 September

Having been a litigator, a Los Angeles Superior Court judge and now a full-time private neutral with ADR Services, Inc., I have been fortunate to have experienced the settlement process from various perspectives. I like to think this has made me more effective at settling cases and my objective herein is to highlight some of what I perceive to be the salient differences between court-sponsored mechanisms, most notably mandatory settlement conferences (“MSC’s”) and private sector mediation. While review and analysis of all of the technical distinctions between settlement conferences pursuant to CRC, rule 3.1380 and private mediations might be of some interest, I will focus upon a few of the practical differences.

Pursuant to CRC, rule 3.1380(a) the court, either on its own motion or at the request of the parties, may order one, or, pursuant to the 2008 revisions to the Rule following the 2007 decision in Jeld-Wen v. Sup. Ct. (2007) 146 Cal.App.4th 536, multiple MSC’s. Although MSC’s can sometimes constitute an effective settlement tool, they are, by their very nature, subject to some significant limitations. While parties may be ordered by the Court to participate in MSC’s, usually only when the parties and their counsel themselves realize they are ready to talk settlement, does the real magic occur. While it is possible such an epiphany might coincide with issuance of the MSC Order, and despite the fact that most sitting and settlement judges do an excellent job, the parties do not always arrive at the MSC prepared to actually make a deal. There are a myriad of reasons for this.

While the cost of the mediation itself is an important factor for the parties to feel “invested” in the process, there are others. For example, great care is typically taken by the parties to screen and select prospective neutrals possessing the desired background and experience consistent with the parties’ particular case requirements. Additionally, the parties know that although the typical mediation lasts approximately six to eight hours, the conference may be extended if necessary. I believe this is the case with most offices, in order to avoid interruptions or distractions. While the fire marshal would no doubt frown upon my desire to be able to lock the participants in their conference rooms until the process has been successfully completed, that is effectively what happens. The bottom line in this regard is that the time a private neutral can continuously devote to the process simply cannot be matched in the court environment. Given ex parte applications, preparing for law-and-motion calendars, dealing with other trials and other court business, court policy mandating a lengthy lunchtime break, and security concerns barring after-hours MSC’s, most sitting judges can devote only a very limited time to settling cases.

By contrast, in a somewhat extreme example I recently assisted parties in resolving a $350 million business-dissolution dispute with settlement talks that transpired over a two and one-half day period, consuming over 25 hours of detailed negotiations. Clients as well as both litigators and transactional attorneys participated. It is also very important to note that this was a pre-filing dispute; another advantage to the private-mediation process since the court process is obviously entirely unavailable in that context.

Furthermore, the ability to select a neutral with just the right blend of qualifications, experience, skill and temperament is another material advantage incident to private mediation. There are literally scores of highly qualified neutrals with varying specializations in some of the most arcane areas of law conceivable. Because only some full-time neutrals are also willing to handle arbitrations and judicial references, many of us spend 75 percent, 80 percent or even 100 percent of our professional time devoted solely and exclusively to settling cases. By doing so, we are able to continually work towards perfecting our settlement skills.

By contrast, your trial judge or other designated settlement judge or officer, who likely has many other responsibilities, may or may not have the necessary skill or ability to settle your particular case. Furthermore, some MSC judges, for fear of creating an impression of possible bias among the parties or just unease in dealing with the parties directly, or even as a result of security concerns, refuse to meet with or discuss settlement with the parties themselves present. Instead, they bring the lawyers into chambers and leave it to the lawyers to relay any demands or offers to their clients who remain sitting out in the courtroom. The chance of successfully resolving difficult cases under such circumstances is greatly diminished.

Nevertheless, as a lawyer I was also often surprised at how approachable and friendly retired judges who entered the private sector often were. I finally figured out that having left public service they were now able to cast aside the formality previously required of them. That isn’t to say that some didn’t continue to suffer from what is oftentimes referred to as “robe-itis,” however the post-retirement private sector careers of those judges were usually very short-lived. Those who successfully transitioned realized they had the time and, yes, it’s true to some extent, the financial incentive, to expend more time and effort to successfully resolve cases.

Private-sector neutrals also have another very important advantage over their public service counterparts. As private neutrals, we are not only permitted to have, but to extensively utilize, ex parte communications with the different sides to a dispute. By doing so, we can engage in separate discussions with the parties’ counsel both before and, if the matter is not settled at the initial session, subsequently. A conscientious neutral will do so, usually without any expectation of additional remuneration. For example, I recently mediated a very complicated real estate title dispute that didn’t settle at the initial mediation session. Because the parties had earlier unsuccessfully participated in the MSC process, the plaintiff was somewhat pessimistic about our ability to resolve the case and would agree to only a half-day mediation. Even though I was fairly certain we could resolve the case given perhaps an additional four or five hours of effort, the plaintiff steadfastly refused to authorize any further expenditure of time.

As a matter of ego if nothing else, I thereafter remained in close contact with the parties’ counsel, periodically calling them to encourage continued settlement efforts through me. Among other things, I sent each of them additional case authority which I believed would be helpful in their respective evaluations of the case. As they were also embroiled in various contentious discovery disputes which detracted from their ability to work at resolving the case, my involvement offered them an opportunity to continue to do so along a parallel track. Within a month or so I was authorized to convey a demand on behalf of the plaintiff which, after extensive discussion with defendant’s counsel and the title insurance carrier’s representative, the defendant accepted.

Some mention of mediation confidentiality is also warranted. What transpires during MSC’s is subject to the somewhat limited protections afforded by Evidence Code section 1152 while mediation confidentiality is, as a matter of public policy, far broader (see, Evid. Code, §§ 1115-1128). Although there is no mediation “privilege” per se, there is not the plethora of various exceptions so often found in the context of evidentiary privileges in the law. Mediation writings are comprehensively protected by the provisions of Evidence Code section 1119 while in section 1152, the privilege afforded documents typically utilized in the course of MSC’s, merely precludes such materials from being utilized “to prove liability.” In other words, they may be admissible for other purposes. Because of the comprehensive scope of mediation protections in this regard, the parties are usually far more likely to share documents and information in an effort to resolve their matters.

Last, perhaps the most important distinction is, for a variety of reasons, that there is the ability in the private setting to resolve a matter on terms likely not otherwise possible through the court process. I recently assisted parties in a residential real-estate mediation involving a buyer’s suit for specific performance and a seller’s cross-complaint of alleged elder abuse. A developer had agreed to purchase the subject Westside home from an elderly homeowner with the stipulation that the occupant would not be obligated to transfer possession until she no longer occupied the home (e.g., vacating upon moving to a skilled nursing facility, death, etc.). In the interim, the buyer would be entitled to the benefit of a reduction in the seller-carry back financing by a portion of a monthly rental factor.

The homeowner was adamant that she would not “pay rent on her own house,” especially since she and her heirs would be deprived of future appreciation on the property. By restructuring the transaction in settlement as an option in favor of the buyer subject to a formulized price upon exercise following the elderly homeowner’s passing that would reflect some portion of future appreciation, the parties were able to fully resolve the case. If nothing else, the hours expended to develop, explain, overcome objections to, and document the suggested resolution would not have been otherwise available in any other setting.

The private-sector dispute-resolution mechanism has several distinct advantages over the MSC and other court-sponsored alternatives. These include the ability to select a neutral with industry-specific or other relevant experience, the availability of neutrals who are highly experienced and proficient in the settlement process, the willingness of private neutrals to directly include parties in the process, greater flexibility in time and duration of mediation conferences, more comprehensive evidentiary protection afforded documents prepared for or utilized in mediation and the opportunity for more creative settlement strategies than might otherwise exist.

James A. Steele James A. Steele

Judge James A. Steele retired from the Los Angeles Superior Court and is now a full-time neutral working with ADR Services, Inc.  He re-assumed mortal form when he retired from the bench in late 2014 where he had held assignments in both unlimited (general) civil as well as probate. He emphasizes trusts & estates, business, real estate, construction, and legal malpractice mediations, among others, and also acts as an Arbitrator, as well as both discovery and trial Referee in a variety of fields. In 2014 he was selected by the Rutter Group to develop its new Construction Law Program. He has also recently spoken on Elder Abuse at CAALA Las Vegas. In addition to his law degree, he has an undergraduate degree in Economics, an MBA and has completed a post-graduate program in tax law. You can reach him through his case manager, Chelsea Rhodes, at (310) 201-0010 or by email to: Chelsea@ADRServices.org.

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