By: Donald L Swanson
Mediation confidentiality is sacrosanct. Or, so we are all taught in mediation training courses.
But in a New Jersey case, from earlier this year, mediation confidentiality is not sacrosanct at all: communications before, during and after mediation sessions are testified to profusely by parties, attorneys and the mediator—and without objection from anyone! There is unlimited access to such information!
How can this be?!
The opinion explaining what happened is Northern International Remail and Express Co., et al. v. Coffey & Associations, P.C., et al., Case No. A-2104-17T4, Superior Court of New Jersey, Appellate Division (decided June 10, 2020).
The opinion is from a legal malpractice action. The action arises out of the settlement of environmental litigation for a commercial property.
The Coffey law firm represents Northern. A conflict of interest concern arises during a mediation session, and Coffey asks an attorney at the McElroy law firm to represent Northern during the mediation sessions and settlement negotiations. A settlement agreement results.
Then, Northern sues both the Coffey and McElroy attorneys for professional malpractice that occurred during the mediation sessions and in reaching a settlement.
Northern settles its malpractice claim against Coffey but tries its malpractice claim against McElroy to a jury. The jury returns a verdict in favor of Northern and against McElroy for $100,000 damages and $66,452.96 attorney fees.
McElroy appeals, and the awards are affirmed.
Evidence from Mediation Sessions
At trial, multiple items of evidence from before, during and after the mediation sessions are offered and received into evidence, without objection.
–Testimony From Northern’s Representative
Testimony from Northern’s representative about communications during mediation includes:
- Coffey advises him that, (i) it is a conflict of interest for Coffey to represent both Northern and another party, (ii) Coffey will get another lawyer for Northern, and (iii) Coffey will pay the new attorney $10,000 for representing Northern;
- He first meets McElroy at a mediation session “when the negotiations were drawing to a conclusion”;
- Coffey says McElroy will participate in the mediation and represent Northern in finalizing the settlement agreement;
- At the mediation, but before the session begins, (i) Coffey explains the litigation strategy to McElroy, and (ii) Coffey and McElroy repeatedly advise him of the importance of settling with Honeywell to successfully pursue the other defendants because “the real money” will come from the other defendants;
- Then, he, Coffey and McElroy enter a conference room where the mediator and counsel for other parties are present, and Coffey introduces McElroy to opposing counsel; and
- He is dissatisfied with Coffey’s advice, during the mediation, that, (i) “Honeywell would pay Coffey $150,000,” and (ii) Honeywell wants to manage the cleanup rather than make a large cash contribution.
Additional testimony from Northern’s representative, about discussions after the mediation session, include:
- He meets with McElroy and Coffey to review terms of the settlement agreement negotiated during mediation; and
- McElroy “repeatedly” advises him that settling with Honeywell will get Honeywell “out of the picture” so he can “successfully proceed against the remaining defendants.”
–Testimony From McElroy Attorney
The McElroy attorney testifies to the following information arising out of the mediation session:
- He and Coffey are long-time friends;
- Coffey calls, saying a mediation is in progress in an environmental lawsuit and a conflict of interest prevents Coffey from continuing, and asking him to meet with the client and attend the next mediation session;
- Then, he attends a mediation session, where he has only “small talk” (“nothing substantive”) with Northern’s representative, and he does not believe the parties reach a settlement;
- He, (i) recalls an in-mediation conversation about Coffey’s contingent fee, which could potentially be one-third of $2 million dollars, (ii) discusses “proposals” as to the amount of Coffey’s fee, (iii) insists that the fee issue is not settled during the mediation, and (iv) does not know if the conflict of interest issue is resolved during the mediation; and
- Once the session concludes, he (i) tells Coffey and Northern’s representative that his “services hadn’t been utilized,” (ii) declines to charge for his time, (iii) wishes them luck in the case and says he isn’t going to have any other involvement in the case; whereupon, Northern’s representative thanks him for attending the mediation and for not charging a fee.
–Testimony from Coffee Attorney
During trial, Coffee testifies to events during the mediation, including:
- Mediation with Honeywell begins in January or February 2008 and continues into 2009 when a settlement is reached—settlement funds are disbursed in July 2009;
- At the first mediation session, Coffey demands >$1 million from Honeywell, asserting that Northern does not want Honeywell to do the remediation and is not interested in any part of the settlement being in kind;
- Once the conflict of interest issue arises, Coffey reaches out to McElroy to represent Northern in the mediation;
- He sits alone for most of the mediation session, while McElroy and Northern’s representative are together in a separate conference room.
- A “framework of a settlement” is worked out in this session: Honeywell (i) maxes out its cash contribution offer at $250, 000, and (ii) agrees to pay 80% of the cleanup costs;
- Northern’s representative is aware, after the mediation session, that (i) Northern will receive $75,000 in the proposed settlement, and (ii) a $150,000 counsel fee will be paid to Coffey;
- When Northern’s representative finally signs the agreement in February 2009, (i) the agreement reflects what had been agreed to at the March 27, 2008 mediation session, and (ii) neither Coffey nor McElroy forces Northern’s representative to sign the agreement; and
- During the March 27, 2008 mediation session, the Mediator speaks with Coffey alone regarding settlement of his counsel fee.
–Testimony From The Mediator
The Mediator’s testimony at trial includes:
- He recalls serving as a mediator in the environmental lawsuit;
- His records reflect mediation sessions taking place on February 11, February 21, March 27, July 16, 2008 and April 20, 2009 at his office in New Brunswick;
- He notes attending a settlement conference outside of New Brunswick on November 26, 2008, and a mediation session on December 4, 2008 at the Union County Courthouse;
- Although his billing notation concerning the third mediation session on March 27, 2008 states that Coffey “and all plaintiffs with separate counsel” attend, he cannot recall whether McElroy is present;
- He remembers meeting with McElroy once during the course of the mediation but cannot recall any specific interaction with him during a mediation session; and
- He does not send McElroy a bill for his mediation services.
New Jersey’s Mediation Confidentiality/Privilege Statutes
As to the question of, “How can this happen?” . . . Here’s the answer.
New Jersey’s Uniform Mediation Act (N.J.S.A. §§ 2A:23C-1 to 13) contains mediation confidentiality/privilege provisions, while § 2A:23C-6 identifies exceptions thereto. Here is a summary of what the exceptions statute provides.
There is no privilege under § 2A:23C-4 for a mediation communication that:
- is in an agreement signed by all parties;
- is made during a mediation session that is open to the public;
- is a threat to inflict bodily injury or commit a crime;
- evidences a plan or attempt to commit or to conceal a crime;
- involves a claim against a mediator arising out of a mediation;
- involves a claim of professional misconduct that occurred during a mediation;
- involves child abuse or neglect; or
- involves otherwise unavailable evidence, the need for which substantially outweighs confidentiality interests, in specified proceedings. (Emphasis added)
The answer to the “How can this be” question is this: because New Jersey’s mediation confidentiality/privilege statute contains an exception that applies, specifically, to the facts of this case.
The theory held by many mediation professionals on how mediation confidentiality ought to work is just that: a theory. In practice, theory and reality are often far, far apart!
This Northern v. Coffey opinion is an Exhibit “A” on this disparity!
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