Deal Makers vs. Deal Breakers

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In mid-September we returned to the United States from West Africa where I served for 18 months as Associate Area Legal Counsel for a large non-profit multinational entity. We’ve been driving the West Coast, hugging grandchildren along the way. Soon we will return to the Bay Area where I will begin mediating and arbitrating cases full time (as I did before we left for our service in West Africa). I expect to be back to work full time on October 23.

Before we left West Africa I learned of a mediation (not involving the entity I was working for) that had failed. The mediation took place in the United Kingdom but it involved parties and counsel from West Africa. Apparently during the mediation one of the attorneys bristled at one of the demands made by the opposing side and responded by exclaiming “That’s a dealbreaker!”

And that’s all it took. As soon as he said that, the client to whom this comment was directed stood up, packed up his things, left the mediation and caught a plane back to West Africa. The negotiations were over – and the settlement was never concluded.

What happened? This is an extreme example, but it illustrates a key principle. Various deal points may be essential to resolution of a dispute, but the importance of this one thing cannot by overstated: Parties to a mediation must feel like they are respected and are being treated fairly. If a party at mediation feels like they have been snubbed, or if they feel like they other side is negotiating in bad faith, or is trying to manipulate or take advantage of them, then suddenly the deal points that really matter can take a back seat to considerations of self-respect and principle. Few litigants are so thin-skinned that after being told a point is a dealbreaker they will storm out of a mediation and never return. But tolerance levels vary; statements that may not bother one litigant at all may seem like the strongest of personal affronts to another.

Oftentimes counsel won’t know the temperament of an opposing party in advance of a mediation. Counsel at mediation may at times be tempted to take a hardline position as a means of gauging the other side’s willingness to move. Such an approach may be successful in some cases. But in others it may backfire (as happened with the client in the extreme example described above who permanently terminated negotiations in response to a simple statement that his demand was a “dealbreaker”). There can be significant value in testing the other side’s resolve at mediation – but there are ways to do it without taking a hardline position. Counsel who seek to test the resolve of the other side without offending them can effectively do so by telegraphing firm but quiet positions – and in this way they can gain important information about the other side’s values and positions without emotion, principle or offense getting in the way. Counsel who conduct their mediations this way become in a very real sense “Deal Makers” rather than “Deal Breakers.”

Africa

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For the past 18 months I have served as an Associate Area Legal Counsel with a large non-profit organization that conducts significant operations in West Africa.  During that time I have overseen all real estate acquisitions and nearly all real estate litigation by this entity in 17 West African Nations.

It’s been a singular experience.  I’ve not lived overseas for many years, and I have never before been in Africa.  I’ve seen poverty here like I’ve not experienced before.  I’ve been impressed with African resourcefulness, with African ingenuity; with what I have seen of resolve, commitment, heroism, good naturedness, courage and grit in the most trying and difficult of circumstances.  It’s been a testament to the strength of the human spirit and the ability of people to see the best in themselves and each other when it would seem there is very little to look forward to.  Our time here is drawing to a close.  In two weeks our assignment here will be completed and then we will return to the United States; in October we will be back in the San Francisco Bay Area.

Africa is an expanding worldwide presence, and it continues to grow.  Experts project that by the year 2050 the population of the African major metropolitan areas will triple.  The age of the average African is 19; this means the continent is poised to experience explosive population growth in the upcoming years.

Conditions are different here than in the United States.  In West Africa there is no social “safety net.”  There is no welfare program to speak of; no state-sponsored financial assistance for persons in need.  People here must make their own way without help from governmental programs.  The African “safety net” consists of one’s extended family, or if one has no family then of one’s neighbors – or even of total strangers.  Africans look out for each other; they have each other’s backs; that’s their “safety net” and it’s one of the most striking features of the African social fabric.

Litigation exists in Africa, but it’s expensive.  Few people can afford it.  Disputes exist, but because people have little or no money for court proceedings they settle their differences in other ways.  Traditional rulers, or “chiefs” have substantial influence in their local communities.  Disputes are frequently resolved by these “chiefs” in traditional, informal settings with no involvement by lawyers or court systems.

Mediation does exist here, but just barely.  ADR in West Africa usually consists of binding arbitration; mediation is almost unknown.  In another 30 years it’s possible that mediation may be as common here as it is in California, but it will take some time before lawyers and judges become familiar enough with mediation that they will appreciate how effective it can be.

Even though mediation is essentially unknown here, the dynamics that contribute to successful mediations are nonetheless present in every day life, but the stakes are much smaller.  Vendors walk up and down lanes of traffic all day trying to sell drinks or other items for 15 or 20 cents U.S.  Every sale is a victory, but the amounts of such sales are so small that people are sweating a lot in order to make sales that might total up to two or three dollars a day.

We know one young man (with a spouse and several children) who cleans houses for a living.  He recently realized that the competition for cleaning jobs is increasing and he needed to branch out in order to support his family.  He rented part of a shipping container that had been dropped on the side of the road with a doorway cut out of the side.  He operates a small retail business where he sells beans, maize, canned tomatoes, cookies, soft drinks and – stationary.  He’s smart; he’s savvy.  There are many vendors in his locale who sell exactly the same products he does.  It’s a bit of a situation where people who have no money are trying to make a living by selling inexpensive items to other people who have no money.  And yet he has analyzed his market to identify opportunities.  If a competitor sells a pencil for 20 cents, he’ll sell the same pencil for 15 cents.  He’s seen that his customers are entirely driven by price (with very little value on customer service).  He undersells his competitors where he can, and then on some product lines he buys in bulk so that he can get discounts; he then wholesales these products to his competitors.  When he does this he stops selling these same items at retail so that his new wholesale customers (who were formerly his retail competitors) feel comfortable in buying product from him.  That way instead of competing with other retail vendors for sales, he partners with these other vendors by supplying them with their goods – and by removing one point of competition (himself) he helps promote sales by his other retail competitors, thereby driving up his own wholesale business sales.

Brilliant.  Determine what you need, identify what the other side wants, and see if you can provide the other side with what they want – so that the other side can in turn provide you with what you need.  Instead of beating the other side down, restructure things so that the other side’s success enhances your own.

It’s a tried and true strategy that works as well in business as it does in dispute resolution.  Savvy mediators consider this dynamic one of the best tools in their toolbox.  But our African friend intuited it from the business dynamics he saw at work in his local community, and he capitalized on it to bring himself up by his bootstraps.  And why shouldn’t he?  Human nature and dynamics are interchangeable to some extent between cultures – and if such an approach works well in the United States, why shouldn’t it work in Africa?  The answer is “It does.”  This kind of analysis works well in any situation where people with competing interests are involved, regardless of whether those competing interests exist in business or dispute resolution.

Soft Considerations

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Before I became a mediator I participated in many mediations where I served as legal counsel for one of the parties.  Most of the time we talked only about money.  It seemed like the plaintiff always wanted too much and the defendant always wanted to offer too little.  After wrangling about facts, law and responsibility for several hours we would finally get down to the business of figuring out just how much it was going to take for the plaintiff to dismiss their claims, or just exactly how much the defense was willing to pay in order to buy peace.

That’s still a common model for many mediations.  But after becoming a mediator I discovered some things I’d never known about mediation.  For many years I had said that mediations are resolved due to two things: Risk and Cost. 

Risk and Cost are readily identifiable as key settlement factors.  No litigant is ever guaranteed any particular litigation outcome, and finding out who if going to win and who is going to lose a case can be an expensive (and time-consuming) proposition.  In order to save their time and their pocketbooks many plaintiffs will agree to “take a haircut” on their claims; likewise, many defendants will offer more than they feel is reasonable just so they can put this case behind them.

But sometimes the prospect of losing a case just isn’t enough to get a settlement over the finish line.  Sometimes there are other considerations that are just as important – maybe even more important – than Risk and Cost. These “other considerations” take the form of pride, ego, saving face, respect, a desire to punish the other side, a desire to “teach them a lesson,” a sense of fair play or substantial justice.  I sometimes refer to these as “soft considerations” (in contrast with cold hard cash, also sometimes referred to as a “hard consideration”).  The importance of these “soft considerations” cannot be overstated.

When you hear someone decline to settle because “It’s the Principle of the Thing” then you know you are dealing with “soft considerations.”  When people say “I don’t care how much I get; I just don’t want them to get more” you likewise know you are dealing with soft considerations.  Sometimes parties will openly admit they are motivated by “soft considerations.”  If asked whether their dispute is “about the money” or whether it’s about “what the money represents” they will sometimes admit that the dispute is about “what the money represents.”  In those situations the money is a way of “Keeping Score” or “Receiving Recognition” or simply just about being respected.  Sometimes people will acknowledge this directly, but other times they themselves may not fully appreciate just how important these “soft considerations” are to their settlement posture.

Why is all of this important?  For two reasons.  First, if you don’t identify important soft considerations you may not be able to reach a settlement at all.  If these soft considerations are the things truly driving the dispute, then unless you have a limitless supply of settlement money available (and nobody does) you don’t make any settlement headway unless you satisfactorily deal with them.  Secondly, even though money is always important, if the true issues underlying the dispute are a desire for respect, equality or fairness then if you identify that early on you may be able to satisfy those concerns other than with money – which may make it far more likely a settlement will actually be reached. 

I’ve seen a multimillion dollar deal fail not because the money involved was insufficient – but because there was a perceived lack of respect.  Money talks – but sometimes respect talks even louder.  Be oblivious to these concerns and you may find yourself on the short end of the stick with unresolved disputes that could have been resolved if these soft considerations had been adequately identified and addressed.

Never Give In

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The fastest way to end a mediation without settlement is for someone to leave.
The second fastest way is for the mediator to give up.
The third is for one (or both) of the parties to give up.
“[N]ever give in, never give in, never, never, never, never—in nothing, great or small, large or petty—never give in . . . .”
-Winston Churchill, October 29, 1941 (quoted in www.WinstonChurchill.org)

In October of 1941 Great Britain was locked in combat with Nazi Germany during the early years of World War II. Things appeared dire for England. During this conflict the British entertained the idea of surrendering to Germany and thereby avoiding wide scale German bombing and destruction of English cities and countryside. This was a very realistic option available to the British.

Churchill wouldn’t hear of it. In a speech at his old school of Harrow, Churchill gave a stirring address encouraging those present to “Never give in.” During the following months and years he followed his own advice. He was tenacious; he was relentless; he never gave up; he never gave in; he fiercely held on without yielding.

During the course of some mediations, I reflect on this attitude; this relentless drive of Churchill’s to never give up and thereby accomplish a highly valuable result. Litigation is unpleasant. Emotions run high. Frustration abounds. Mediation is no different. Sometimes emotions get the better of people and in an effort to control their environment (or the other side), they simply fold up shop, stand up and walk out.

But until that happens, settlement is always a possibility. Settlement may not be the best option in every situation. But I’m a firm believer that settlement is the best option in most situations. I’ve seen too many situations where a settlement fails; parties resume their litigation positions and they end up fighting and spending substantial amounts of money for no appreciable benefit. These cases get toxic. Nothing good comes of them. Everyone is worse off than if a settlement had been reached. In a very real sense, everyone loses.

So what makes the difference between a mediation that fails and one that succeeds? I am firmly convinced that many times — many, many times — settlement is a matter of sheer tenacity. Frankly, it’s often easier to throw in the towel; to let the other side stew in their own juices; to let them fashion their own ruin in their stubbornness and then hand them the due rewards of their own poor choices. But if the other side continues to fight, then everybody loses. Everybody.

So why not fight the good fight? Why not hang in there and get a settlement done regardless of the poor choices by the other side? The answer is that it often takes sheer grit to get a settlement done in these circumstances. Achieving a settlement under adverse conditions requires a high degree of tenacity. It requires an unwillingness to take the easier route; a determination to run the matter to the end of its course. Often, it’s much easier to just “throw in the towel” and resort to the long, slow, grind of litigation. But even though an unfavorable settlement is often difficult to swallow, the bitterness of protracted litigation is often even less satisfying. Not every case can be settled. But I firmly believe that more cases could be settled if the settlement discussions were handled with more skill – and tenacity. Often the difference between settlement and the long, slow bleed of litigation is determined primarily by tenacity (or the lack of it). I’m absolutely convinced that more cases would be settled if we were determined to follow the advice Churchill gave so many years ago by never giving in until a settlement is reached.

The Bargaining Granddaughter

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We recently had the joy of visiting with our daughter and son-in-law in Utah.  They have five children. All of them are quick, smart, and unafraid.

My wife said she wanted to take our daughter and our oldest granddaughter out for pedicures.  I suppose that’s what grandparents do on vacation these days.  Taking our oldest granddaughter out for a pedicure would leave our 7 year old granddaughter without a chaperone (or, more accurately, without a babysitter; the other children were already occupied).  My wife asked me if I’d like to take our seven year old granddaughter swimming. My response was “Of course!”  So my young granddaughter and I both got on our swimsuits and headed to a nearby pool.

We enjoyed swimming, diving, playing games and splashing each other for the better part of an hour.  At this point I realized we should be heading home, but I didn’t say anything.  I simply grew quiet for a moment; seeing this, my seven year old granddaughter asked me “Do we need to go back now?”  How did she pick up on that?  I hadn’t said anything about leaving and we were having a great time, but even at her young age she sensed my feelings through nonverbal communication and she spoke to them.

​I said “yes – we need to go now.”  She then said “Can I do one more thing?”  I quickly and easily replied “yes.”  Sensing that she had started the negotiations too low, she said “How about five things?”  I responded with “If I let you do five things I will be a terrible negotiator.”  She then said “How about two?”  I said “alright” and that’s what we did.

The negotiated aspects of this interchange didn’t escape me.  Even though she is only seven years old, she’s already a skilled negotiator (she’d have to be in order to maintain her turf in a family with five children.  She’s the youngest.  If she doesn’t stand up for herself, nobody else will).  By this young age she has already learned how to successfully perceive nonverbal communication to the point where she was able to discern that I felt it was time to go.  Remarkable.  And when the negotiations started, she instantly recognized she had started the bidding too low.  If she asked to do one more thing and I’d told her “No, we need to leave right now” then she may well have been satisfied with doing only one more thing.  In retrospect I can see she was thinking we needed to leave right away and one more thing was all she could hope for.  But she totally read me (and my response).  When I readily and easily acquiesced to her doing “one more thing,” she intuited (correctly) that I would probably allow her to do more things – which lead to her request to do five more things (clearly at this point she was testing the water).

How does this relate to mediation?  We all grow up and realize that lots of things we learned on the playground translate very well into our grown-up situations.  As children we cut our teeth on negotiation techniques with siblings, friends, parents and others.  Our grown-up techniques get more refined and are usually more complex than our childhood techniques, but many of the dynamics are the same as when we were young.

​These days most of my mediations are still done via Zoom, but some are in-person.  I find that counsel who have never mediated via Zoom are often quite hesitant to do so (because they are concerned that they may lose out on the non-verbal communication that happens at mediation). But counsel who have used Zoom extensively soon find out that a mediation on a flat panel screen via a computer platform isn’t as sterile as one might think.  If the equipment is all in working order, then voices through Zoom are transmitted with near perfect clarity (along with all of the tone, pausing and inflection that accompanies all speech).  And if the webcams are working properly then the visual aspect of Zoom is remarkable.  A Zoom meeting isn’t exactly like being in a room with someone – but can be very close.  As a Zoom mediation progresses the focus on the Zoom mechanics tend to lessen to the point where those mechanics are almost invisible.  I find that the Zoom mechanics rarely gets in the way of the mediation process – and I find the success rates of Zoom mediations to be fully interchangeable with in-person mediations.  Between cases which tend to resolve at mediation and those that don’t, I see certain trends and factors affecting success – but the Zoom platform doesn’t seem to be one of them. 

​Whether you are seven years old or seventy, non-verbal communication is going to be key in your mediation and settlement work.  Choosing an environment that fosters effective communication, both verbal and non-verbal, is essential to successful mediation.  All indications – and lots of experience – shows that suitable environments can be created both with Zoom and in-person mediations.  

The foregoing article is provided for general information purposes and should not be used in connection with any specific legal matter.  Persons with legal issues or matters should consult competent legal counsel. 
 
Robert B. Jacobs is an attorney, mediator and arbitrator with over 30 years of litigation experience.  He mediates business, real estate, construction, personal injury, wrongful death, employment, trust and probate cases.  He is a designated Super Lawyer and holds an AV rating with Martindale-Hubbell.  He was the 2020 chair of the ADR section of the Contra Costa County Bar Association and the co-chair of the ADR section of the Alameda County Bar Association. Since 2018 he has been an update author for the CEB treatise Real Property Remedies and Damages. He is an adjunct law professor at Hastings College of the Law in San Francisco.  Reach him at [email protected]

I Settled My Case! Now What?

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Key Points on Drafting an Enforceable Settlement Agreement at Mediation

The posturing, negotiations, drama and stress are over.  The mediation was successful.  You’ve settled the case.

Now what?

Nobody wants to settle a case only to have the settlement fall apart later on.  Everybody wants a settlement that sticks.  But no settlement is bulletproof.

We all know what happens.  Parties settle their case – and then (assuming no confidentiality agreement) they go home and talk about it with their parents, their children, their siblings or their friends.  Sometimes these are happy conversations.  Other times not so much.  Buyer’s remorse (and settler’s remorse) can be a real thing.  

What happens when someone regrets settling a case because after talking it over they think they paid too much – or accepted too little? What do they do then?    

Lawyers are paid (in part) to dissect documents and look for loopholes and imperfections.  We are paid to fight, and if our client wants to back out of a settlement, then we may end up placing a magnifying glass over the written settlement agreement in an effort to break it up.   After all, a settlement agreement is – well – an agreement, which means it’s a contract.  And as we all know, any contract is subject to possibly being broken.

So how do you wrap up your settlement agreement in “armored legalese” so that if it’s attacked, any stones or arrows just bounce off of it instead of making a major headache for you and your clients?

Know and follow key rules that govern the admissibility and the enforceability of settlement agreements that are signed at mediation. Read on.  

Make it Admissible.    In the event of a dispute, the world’s most bulletproof settlement agreement is useless if it’s not admissible in court.  Do attorneys or their clients ever regret signing a settlement agreement and then seek to thwart its enforcement based on inadmissibility? The answer is a clear “YES.”   Evidence Code §1119(a) provides that nothing said in the course of a mediation is admissible, so an oral settlement agreement at mediation isn’t worth the paper it’s not written on.  Evidence Code §1119(b) provides that any “writing” prepared in the course of a mediation is inadmissible.  A settlement agreement is unquestionably a “writing” and is therefore made inadmissible by this section unless an exception applies; Evidence Code §1123 provides that exception.  Section 1123 provides that a “written settlement agreement” prepared “in the course of, or pursuant to, a mediation” isn’t made inadmissible by the mediation sections of the Evidence Code if the following requirements are met:

First, the settlement agreement must be signed “by the parties.” 

Second, the written settlement agreement must satisfy any of the following three criteria:

(a)   The settlement agreement provides that it is admissible or subject to disclosure (or words to that effect); or

(b)  The settlement agreement provides that it is “enforceable” or “binding” (or words to that effect); or

(c)  All parties to the settlement agreement expressly agree in writing, or orally, to its disclosure.  However, such an oral agreement must satisfy each of the following four requirements:

i)  The oral settlement terms must be recorded by a court reporter or by other “reliable” means of audio recording, and

ii)   The terms of the oral agreement must be recited on the record in the presence of the parties and the mediator, and the parties must express on the record that they agree to the terms, and

iii) The parties expressly state on the record that the agreement is enforceable or binding, or words to the effect, and

iv)  The recording must be reduced to writing and the writing must be signed by the parties within 72 hours after it is recorded.

Wow!  Those are a lot of requirements for enforcing an oral settlement agreement.  Miss any one of them and you’re out.  Parties might orally settle a case on the record if they are at the courthouse for a settlement conference, but virtually all mediated cases are settled by written settlement agreement.   

Are these real considerations?  Will a court really refuse to admit a hard-fought signed and written settlement agreement if the other side backs out and refuses to perform?

The answer is unquestionably yes.  The legislature and the courts mean business about these admissibility requirements.  See Fair v. Bakhtiari (2006) 40 Cal. 4th 189, 197 where the Supreme Court declined to enforce a written settlement memorandum because it failed to incorporate all of the elements which Evidence Code §1123 requires in order to create an exception to the nearly absolute ban on admissibility of documents prepared at mediation which is established by Evidence Code 1119.  Not only was the settlement agreement in Fair signed by the parties and the mediator, it also included an arbitration provision.  In holding the settlement agreement inadmissible, the Supreme Court held that such an arbitration provision by itself is insufficient to show that the parties intended to be bound by the settlement agreement.  Instead, “a writing must directly express the parties’ agreement to be bound by the document they sign” and “words to that effect” may be insufficient if they don’t clearly show this express intent to be bound. 

The upshot?  Either include one of the above-described elements of 1123(b) in your settlement agreement or risk having it deemed inadmissible in subsequent court proceedings  (and it’s clear that an inadmissible settlement agreement is unenforceable).

Are there other considerations to enforceability of settlement agreements?  

Yes.  “A settlement agreement is a contract, and the legal principles [that] apply to contracts generally apply to settlement contracts.”  Stewart v. Preston Pipeline Inc., (2005) 134 Cal. App. 4th 1565, 1585.  A settlement agreement’s “validity is thus ‘judged by the same legal principles applicable to contracts generally.’”  Id.  The required elements of a valid, binding contract include consideration and mutual assent, but a full discussion of the elements and enforceability of contracts is outside the scope of this article.  Instead, this article will focus on only one issue in the enforceability of written settlement agreements:  mutual assent as manifested by signatures.

Mutual assent to most written contracts is most frequently expressed by having the contracting parties sign the contract. But mutual assent can be manifested in other ways so that parties can in some situations agree to and be bound by a contract through behavior other than affixing their signature to the contract document itself.  In Stewart v. Preston Pipeline Inc. (2005) 134 Cal. App. 4th 1565, 1584 a mediation concluded with a written settlement agreement that was signed by the plaintiff, plaintiff’s counsel and defense counsel (but not by defendant).  The defendant thereafter repudiated the settlement agreement by claiming 1) it was inadmissible under Evidence Code 1119 as a written document prepared in the course of mediation and 2) it was signed only by his attorney and not by himself.  Litigation was filed and an appeal was taken.  The court of appeal held the signature of defendant’s counsel was sufficient to qualify the settlement agreement for the mediation confidentiality exclusion provided by Evidence Code 1123 so that it was admissible.  Stewart v. Preston Pipeline Inc. supra, 134 Cal. App. 4th at 1583-1584.  The Stewart court noted that in order to be enforceable under C.C.P.  §664.6, a settlement agreement must be signed by each of the parties personally (and not by their attorney).    Id. at 1584 citing Levy v. Superior Court (1995) 10 Cal. 4th 578, 584.   The Stewart court then further cited Levy for the proposition that settlement agreements which do not qualify for enforcement pursuant to C.C.P. §664.6 because they are not signed by the litigants personally may nevertheless qualify for enforcement by alternative methods such as by motion for summary judgment, a separate suit in equity or an amendment of the pleadings.  Stewart v. Preston Pipeline Inc., supra at 1584.  By so holding, the Stewart court expressly confirmed that impediments to enforceability under C.C.P.  §664.6 (such as a lack of the litigants’ personal signatures) may be purely procedural in nature such that some settlement agreements that may not satisfy the necessary elements for enforcement pursuant to C.C.P.  §664.6 may nevertheless still be enforceable (via an alternative method).

Following a successful mediation many attorneys will include in the written settlement agreement a provision that the agreement may be enforced pursuant to motion under C.C.P.  §664.6.  The language of C.C.P. §664.6 provides that “If parties to pending litigation stipulate, in writing . . . for settlement of the case, the court . . . may enter judgment pursuant to the terms of the settlement.”  In Levy v. Superior Court (1995) 10 Cal. 4th 578, the Supreme Court held that the word “parties” as used in C.C.P.  §664.6 means the litigants themselves and not their attorneys.  The Levy opinion thereby foreclosed enforceability of written settlement agreements through a §664.6 motion if the written settlement agreement was signed by anyone other than by the parties themselves.  However, pursuant to Stewart a settlement agreement signed by an attorney (or by another authorized representative) may still be enforceable through court procedures other than a C.C.P.  §664.6 motion.

The California Legislature recently amended C.C.P. §664.6 by broadening the definition of “parties” to include an attorney who represents a party.  C.C.P. §664.6(b)(2).  This amendment became effective January 1, 2021.  By making this change the Legislature brought the enforcement procedures available through §664.6 more in line with effect of the Stewart decision (which expressly recognized the potential enforceability of a settlement agreement through means other than §664.6 when the agreement was signed by a party’s counsel instead of by a party).  Now settlement agreements at mediation can be enforced pursuant to §664.6   if for whatever reason one of the parties is not personally present at the mediation (or is otherwise available to sign the settlement agreement) and the settlement agreement is signed by their attorney.

This new arrangement provides an opportunity for abuse.  Sometimes the interests of a client and their attorney may differ; for several different reasons an attorney may be more interested in settlement than a client is.  The possibility of such abuse is specifically addressed in the 2021 amendment to §664.6 by providing that an attorney who signs a settlement agreement without the client’s “express authorization” is subject to professional discipline.  By including this provision the Legislatures strongly disincentivized California attorneys from making any rogue signatures on settlement agreements that they may otherwise be tempted to make.

This “hammer” of potential professional discipline may create a trap for the unwary practitioner.  Attorneys won’t have a professional discipline problem with clients who never dispute their attorney’s signature on a settlement agreement at mediation.  But what about a client who experiences “buyer’s remorse” and alleges they never authorized their attorney to sign a settlement agreement at mediation?   

If an attorney signs a settlement agreement at mediation on behalf of a client, and if that client becomes unhappy and complains to the State Bar by claiming that the attorney signed the settlement agreement without express authority, what happens?   Since C.C.P. §664.6(d) now expressly provides for attorney discipline, there’s a real chance the State Bar would investigate such a claim.  If the settlement agreement signed by the attorney states that it’s intended to be binding (or otherwise qualifies for the confidentiality exceptions provided by Evidence Code §1123) then such a settlement agreement could properly be admitted into evidence by the State Bar court since it would qualify for an exception to the confidentiality provisions of Evidence Code §1119.  Arguably the client’s statement to the State Bar would not be subject to the confidentiality provisions of §1119 because the client would be asserting a negative:  i.e. “I never authorized the attorney to sign the settlement agreement” and Evidence Code §1119 only bars evidence of anything said at mediation.  The client wouldn’t be relying on nor communicating anything said at mediation, but would instead be relying on a lack of something being said; therefore the client’s complaint may not be subject to mediation confidentiality under §1119.  However, once the client has made an allegation against the attorney that the attorney was never authorized to sign the agreement, the burden of proof would naturally shift to the attorney, who would need show that the client expressly authorized the attorney to sign.  But Evidence Code §1119(a) makes inadmissible anything that was said at mediation, even in an administrative adjudication (which would undoubtedly include State Bar proceedings).  Evidence Code §1119(b) makes inadmissible any writing prepared in the course of a mediation.  Evidence Code §1123 only provides exceptions for settlement agreements, so a written instruction from the client authorizing the attorney to sign the settlement agreement may also be inadmissible unless such a written instruction can be construed as a “settlement agreement.”  It’s a conundrum.  A State Bar court may construe §1119 differently, but under current case and statutory law there’s a real possibility that the attorney would be prevented in a State Bar court proceeding from introducing into evidence any client statement made at mediation authorizing the attorney to sign the settlement agreement.  This mediation “statutory scheme . . . unqualifiedly bars disclosure of communications made during mediation absent an express statutory exception.”  Provost v. Regents of University of California (2011) 201 Cal. App. 4th 1289, 1302 citing Foxgate Homeowners’ Association v. Bramalea California, Inc. (2001) 26 Cal. 4th 1, 15. “The Legislature decided that the encouragement of mediation to resolve disputes requires broad protection for the confidentiality of communications exchanged in relation to that process, even where this protection may sometimes result in the unavailability of valuable civil evidence.”  Provost v. Regents of University of California (2011) supra at 1302-1303 (citing Cassel v. Superior Court (2011) 51 Cal. 4th 113, 136).

Attorneys who proceed to sign settlement agreements on behalf of their clients at mediation may want to give careful consideration as to whether or not their client is likely to claim that they didn’t authorize their attorney to sign the agreement.  It’s not presently clear exactly how such attorneys may be able to defend themselves in State Bar proceedings should the client lodge a complaint with the State Bar.

 After litigating for more than 30 years, Robert Jacobs now mediates challenging real estate, business, construction, personal injury, trust and probate cases. In 2020 he served as Chair of the Contra Costa County Bar Association ADR section and Co-Chair of the Alameda County Bar Association ADR section.  Since 2017 he has served as one of the update authors for the CEB treatise Real Property Remedies and Damages and is a co-author of CEB Practitioner (Real Property). He holds an AV rating from Martindale-Hubbell and is a designated SuperLawyer. Mr. Jacobs received his mediator training from Northwestern University in Chicago, Illinois.  

The Continuance Fee

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Near the end of my second year of law school I found myself in summer internship interviews. One of these interviews involved my brother’s old High School buddy who had gone to work for the state Attorney General’s office. I remember meeting with him at the State Capitol building. I was impressed with the formality – after all, this is where the Law was made; this was where the Law was enforced. It all seemed so official.

Near the end of our meeting my interviewer surprised me. He said simply, “Law is a business. I need to figure out a way to make more money.”

I was taken aback. This gentleman was in a government service job – and an important one. He was part of the governmental machine. It hadn’t occurred to me that public servants in important positions might be dissatisfied (to some degree) with their lot in life. And after spending so much time in law school talking about how the law worked, it surprised me to hear how money factored so directly into public services.

Now I’m here after more than 30 years in the law, and I have a far better understanding of what he was talking about. On occasion I’ve been known to say, “It all comes down to money” or “It’s all about the money.” That’s not always true – but it often is. It’s true for attorneys. It’s true for clients.

I’m also learning it’s true for mediation. If law is a business, then so is mediation. We may not always think of mediation that way. But mediators have expenses – just like everyone else. Some mediators may enjoy a pension or other income stream so payment for them may not be as pressing as with others. But most mediators expect to be paid for their services (except for some court programs, some Bar Association programs and certain community mediation programs).

There’s one aspect of the mediation business that has held my attention for some time: the “continuance fee.” Some years ago I had a friend who practiced personal injury law. One day he said, “I just don’t like it when I get charged a full fee for a mediation that didn’t happen.” I don’t have a problem with paying a mediator for their time – but I don’t like paying the full fee.” What he was talking about is what I call the “continuance fee.”

I first ran into this several years ago when I was engaging a mediator through a mediation service. The terms of the service provided that if a date was reserved and the mediation was canceled or postponed within a certain number of days of the scheduled mediation, then the entire fee would be forfeited and nothing would be returned.

This seemed to be a bit heavy handed. I called up the service, and they confirmed what the documentation said. If the mediation was canceled or postponed shortly before the mediation, then no refund would be forthcoming. I understood this was because the mediator had reserved time, and it was unlikely on short notice that a replacement mediation could be scheduled. The mediator (and the mediation service) would then “lose out” on the opportunity of generating income that day.

That seemed a bit troubling to me. What if the other side balked? What if somebody got sick? What if the mediation was postponed for reasons beyond my control?

Too bad. No exceptions. If the mediation doesn’t happen, no refund.

As mediator myself, I see the dynamics more clearly now. Law (and mediation) is a business – with ongoing expenses and a continuing need for revenue. Reserve a day for mediation and you commit resources. Lose out on that day, and the expenses continue (but the income doesn’t). Voila! The continuance fee.

But in reality how many mediations get canceled or continued? Some – but not many. How many get canceled or postponed for no good reason? Even fewer. So what’s a mediator (or a mediation service) to do?

Everybody gets to choose. Some airlines charge a penalty for changing your flight. Some don’t. Everybody chooses their own business policies. But there’s nothing set in stone that says a party has to give up their entire mediation deposit just because someone fell ill, ran into trouble, or couldn’t proceed on a certain day – whatever the reason.

Nobody wants to see a scheduled mediation get put over. But when the unexpected happens, sometimes it’s just unavoidable. In those situations counsel and their mediators get to figure out what happens next based on their agreements made beforehand.

The foregoing article is provided for general information purposes and should not be used in connection with any specific legal matter. Persons with legal issues or matters should consult competent legal counsel.

Robert B. Jacobs is an attorney, mediator and arbitrator with over 30 years of litigation experience. He mediates business, real estate, trust and probate cases. He is a designated Superlawyer and hold an AV rating with Martindale-Hubbell. He was the 2019-2020 chair of the ADR section of the Contra Costa County Bar Association and the co-chair of the ADR section of the Alameda County Bar Association. Reach him at [email protected]

The Mediator Who Wasn’t

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He came late.

The mediation was all set to begin at 9:30 a.m. But by 9:00 a.m. there was no sign of the mediator. The plaintiff was present with two attorneys. The defendant was present with two attorneys. Everything was all set to go – but no mediator.

At 9:00 a.m. I grew concerned. Where was the mediator? I called his office. No answer. I checked my email. Nothing. No text from him either.

What to do? I couldn’t reach him, had no idea where he was, assumed he was coming but didn’t know for sure. The parties had exchanged briefs a week before and held a pre-mediation phone conference. But now the mediation was ready to start without a mediator.

Finally at 9:20 a.m. I called another local mediator to see if he could serve as backup and do a mediation on 10 minutes’ notice. No luck – he was in joint session with a large group. If my mediator didn’t show up soon, I was going to have to do some quick thinking.

Finally, while I was on the phone with the other mediator’s office our mediator showed up – five minutes late. Why didn’t he call? Why didn’t he take my call when I tried to reach him earlier that morning?

We started the joint session and the mediator began asking questions. I was floored. He was asking questions about everything in my brief. After several minutes I realized he hadn’t read my brief – not at all. We then spent the next hour (in joint session) educating him about all of the points in my brief.

After he got his arms around the issues, the mediator started asking questions. He didn’t walk on eggshells. He dove right in and started asking pointed questions about sensitive issues –issues I’d just as soon not discuss in front of the other side. He drove right through the sensitive issues in my case and started making comments and observations in front of everybody in joint session.

Why would he do such a thing? Here we were at the start of the mediation and he was empowering the other side. How did he ever hope to convince them to take less when he was spending precious time in joint session driving roughshod over the weaker, more sensitive parts of my case and emboldening the plaintiff? In reality, I think he was pleased with himself that he had accurately identified the weaker parts of my case. I think he felt he was really getting somewhere. It all happened so fast that it was difficult to put an abrupt end to the joint session –I did not want to appear to be concerned about the questions he was asking. And then he did the same thing to the other side – probing the weaker parts of their case in joint session. I don’t think it even occurred to him that he was encouraging both sides to dig in to their respective positions.

We broke for caucus. Within an hour our mediator told me he felt the parties would shortly be at impasse. No surprise there. He had just spent the last hour in joint session entrenching the parties into their respective positions.

Why would a mediator do such a thing? This mediator came well-recommended. Why would he think such an approach would persuade either party to move off their respective positions? He was a seasoned attorney with decades of experience.

Effective mediators don’t encourage the parties to dig in. They use tools of risk, cost and uncertainty to help the parties see that a negotiated result gives them power over the outcome of a case. Skillful mediators look for hidden values and priorities that serve as powerful tools in helping parties re-evaluate their positions.

Our case didn’t settle. Would it have settled with a mediator who skillfully probed the client values and explored alternative options in caucus? I believe so. The day wasn’t entirely wasted because the parties learned more about each other’s “dig-in” points. But was it an optimal mediation? Not at all. With even a marginal degree of mediator skill, this case should have settled.

The upshot from this experience? We were reminded (once again) that a mediator’s skills are critical to mediation success.


The foregoing article is provided for general information purposes and should not be used in connection with any specific legal matter. Persons with legal issues or matters should consult competent legal counsel.

Robert B. Jacobs is a mediator and arbitrator in the San Francisco Bay Area. He mediates cases throughout California. Reach him at [email protected]

A Bad Deal With Good People

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I recently enlisted the help of a wonderful general contractor to help me out with a construction claim I’ve been dealing with. This contractor provided me with an insightful repair bid that helped me settle the case.

After the case was concluded I contacted this contractor to let him know the case had been settled. He took a moment to share with me an experience that has stayed with him for nearly thirty years. After the 1991 Oakland Hills fire this contractor was hired to repair some fire-damaged property. It wasn’t a big job, but it made a difference to him. After doing the work he approached the owner about getting paid. The owner looked him square in the eye and said, “You know, I just can’t see paying you.” And he didn’t.

It’s not that the contractor’s workmanship was bad or that he did something wrong. Rather, this was simply an opportunity for the owner to stiff the contractor because he knew a claim by the contractor for the unpaid amount would not be worth pursuing.

The contractor was enraged. He consulted an attorney and said he wanted to sue the owner. After listening to the facts, the attorney told him it wasn’t worth pursuing. He said that if this contractor wanted to press the issue then he would have to write the attorney a check up front for most of the unpaid amount. The attorney told the contractor that he couldn’t guarantee the contractor would get anything; he thought the contractor should walk away. This attorney then gave the contractor this sage advice: “It’s better to be in a bad deal with good people than a good deal with bad people.”

The contractor walked away from the money, but not from the advice. He’s used that advice during the past 30 years to turn down jobs that looked perfect in every way except for the vibes he got from some owners. This contractor says that this advice has served him well.

Experienced litigators and mediators know that the personalities of the parties will be key in shaping the eventual settlement and resolution of many disputes. If people are fair-minded, reasonable, and (relatively) willing to listen, then at mediation the risks of trial can be evaluated in the light of the costs of litigation and a settlement can presumably be reached. But if one side is trying to take a bite out of the other or shove them into a corner then a day of mediation can turn into a very long day indeed.

Parties to a business deal or a contract can often control the personalities involved in their transaction by choosing who they do business with. But as mediators we don’t have that luxury. We have to take the parties’ personalities as we find them. Sometimes the personalities match up well with the dispute. Sometimes they don’t. The genius and the magic of mediation rests in a mediator’s ability to size up a difficult situation involving imperfect people and then in short order identify (and to the extent possible to meet) the needs, values and objectives of the parties involved. When this happens, great results are possible. When it doesn’t, the parties’ dispute moves forward to another day of mediation or to a decision at trial or arbitration. But most mediators would agree that it’s easier to settle a difficult case with reasonable, fair-minded people than it is to settle even the most simple case with impossible people. My contractor’s timeless advice applies not only to business or real estate transactions, but also to settlement, mediation, and many, many other life activities.

The foregoing article is provided for general information purposes and should not be used in connection with any specific legal matter. Persons with legal issues or matters should consult competent legal counsel.

Robert B. Jacobs is a mediator and arbitrator in the San Francisco Bay Area. He mediates cases throughout California. Reach him at [email protected]

Who’s the Driver?

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Many years ago I participated in the mediation of a case with many defendants. The Plaintiffs were husband and wife who had sued nearly everybody they could touch. During the course of the litigation (and the mediation) it became clear the plaintiffs were on the war path. All of their claims against all the defendants lacked merit. But the Plaintiffs had filed suit, so we were all at mediation with our clients. We filled a large conference room.

We mediated all day long and came up with a complete settlement package that offered the Plaintiffs more than they were entitled to. The prospective costs of defense were real, and it was worthwhile to offer the plaintiffs a great settlement package so we could wrap the case up.

After the settlement package was presented, the Plaintiffs conferred with their attorney for a long time – and then rejected the offer. They wanted more money. The package had included money and other additional rights the Plaintiffs weren’t entitled to. But in the end they just wanted more money.

So the mediation failed. Everybody went home.

What went wrong? We had all mediated in good faith. Nobody left early. Everybody was cooperative. We had made good progress the entire day, and based on our discussions with the mediator it seemed like our final package was something that would be appealing to the Plaintiffs. But at the last minute they just dug in and refused to accept it. What went wrong?

The driver hadn’t attended the mediation.

Plaintiffs were husband and wife, but only one of them attended mediation. At the end of the day, the spouse who attended made a phone call to the other spouse. The other spouse (apparently) rejected the package. In actuality the non-attending spouse scuttled the mediation.

Who was the driver in that case? Was it the attorney? Or the spouse who attended mediation? No – it was the spouse who didn’t attend. Unfortunately the mediator had little (or no) access to this person – but this non-attending spouse was the single most important party in the entire mediation. They drove the entire process – and it failed because they refused to get on board.

It ultimately turned out fine for my client. We went to trial. We won and received an award of 100% of our attorneys fees. But there was still a time component and an emotional cost to the trial. It would have been better for everybody if had settled the case at mediation. But the driver wouldn’t get on board.

Mediation is about relationships, decisions, ego, emotion and “the moral high ground.” Some people are cooperative. Others are less so. Some people express strong emotions. Others express very little emotion. Sometimes parties won’t settle because they want more. And sometimes they don’t settle because they want the other side to get less. In complex or difficult mediations, an effective mediator must immediately identify the “drivers.” Early buy-in by these drivers is essential. If they don’t buy in, then they may walk out. And when parties or counsel walk out, mediations end quickly.

That’s not to say that the other participants aren’t important – they are. But cases only resolve when there’s full consensus. So at the start – and during the middle – and at the end of the mediation, the mediator must determine who the drivers are, and then must work overtime to find out their agendas, their concerns, their emotional “hot” buttons and what keeps them up at night about their case. Only when the mediator identifies and resolves these critical sub-issues can the mediation move forward to a successful conclusion.

As mediator I regularly work with parties and legal counsel to get cases resolved. Few people tell me up front what the hidden issues might be. I have to uncover them one at a time. Nobody tells me who the drivers are. I have to figure that out – and quickly.

What does that mean about effective mediators? They must be able to listen actively, clearly, and with discernment. They must be able to watch and understand people and what motivates them. Effective mediators are continually watching and evaluating the players: what spins them up, what calms them down, things they value and things they don’t. An effective mediator can turn on a dime (as needed) to get (insofar as possible) these drivers what they need so the case can settle. Sometimes that’s money; oftentimes it’s something other than money. Sometimes it’s what the money represents. People who feel validated and respected are in a far better position to settle a claim than those who feel abused, neglected, oppressed or manipulated. An effective mediator must be an expert at understanding people, putting them at ease, reassuring them and helping them feel like they’ve been recognized, respected, and are getting a good deal. Otherwise, in difficult cases where mediators don’t do this the mediator just spins their wheels like everyone else and the case goes nowhere.

The foregoing article is provided for general information purposes and should not be used in connection with any specific legal matter. Persons with legal issues or matters should consult competent legal counsel.

After litigating for more than 30 years, Robert B. Jacobs now mediates challenging real estate, business, construction, personal injury, trust and probate cases. He served in 2020 as the Chair of the Contra Costa County Bar Association ADR section and as the Co-Chair of the Alameda Count Bar Association ADR section. Since 2017 he has served as one of the update
authors for the CEB treatise Real Property Remedies and Damages; in 2021 he will be rewriting its chapter on ADR. He received his mediator training from Northwestern University in Chicago, Illinois.