Violating Mediation Confidentiality: To Sanction Or Not (Adkisson v. Jacobs Engineering)

By Donald L. Swanson

The opinion is Adkisson et al. v. Jacobs Engineering Group, Inc., Case Nos. 13-CV-505 et al., in the U.S. District Court for Eastern Tennessee (decided July 7, 2020, Doc. 561).

The opinion addresses Defendant’s Motion for an order:

1. Enforcing the confidentiality of mediation; and
2. Imposing sanctions against Plaintiffs for mediation confidentiality violations.

Background

The Court had granted Plaintiffs’ Motion to refer the case to mediation, finding that “this litigation is one that could benefit from mediation.”

Months of mediation efforts ensued.  In the end, the Mediator reported that, although an agreement had been reached between the parties, the mediation terminated without settlement because an “insufficient number of plaintiffs have agreed to participate for the settlement to be effective.”

Thereafter, Defendant claims that Plaintiffs and their counsel knowingly violated the Court’s local mediation confidentiality rule at least three times:

1. By disclosing information to the The Knoxville News Sentinel (which resulted in a front page story) on the total amount of Defendant’s mediation offer, the amount of Plaintiffs’ attorney’s fees included in that offer, discussions between the mediator and Plaintiffs, and the mediator’s process with individual plaintiffs;
2. By Plaintiffs’ counsel informing the Judge, at a status conference, that the mediator made a proposal and that counsel for both parties accepted it; and
3. By Plaintiffs including mediation materials (i.e., treating physician and expert declarations regarding causation) in their response to Defendant’s court filings.

Plaintiffs respond as follows:

1. Plaintiffs’ counsel, (i) unequivocally deny disclosing any mediation details to the newspaper and assert that Defendant “has proffered no evidence to the contrary,” (ii) deny knowledge of who the sources might be for the newspaper article, and (iii) point to the article’s acknowledgement that Plaintiffs’ counsel “declined to comment.”  They acknowledge that “someone on their side” must have provided such information to the newspaper but assert that it would be unfair to punish all Plaintiffs for the wrongful actions of some.
2. Informing the Judge, during a status conference, about the status of the mediation is not a confidentiality violation because, (i) the Judge is responsible to oversee the mediation, and (ii) the Judge needed to determine whether additional time for mediation was justified.  Plaintiffs’ counsel also assert their belief that the mediator had already told the Judge that a proposal had been accepted by the parties.
3. Including treating physician and expert declarations regarding causation in their response to Defendant’s brief is not a violation of the local mediation confidentiality rule, because such materials, although used in mediation, were not created solely for mediation.

LEGAL STANDARD

The Court’s local rule on mediation confidentiality provides:

“The Mediation Conference and all proceedings relating thereto, including statements made by any party, attorney, or other participant, are confidential and are inadmissible to the same extent as discussions of compromise and settlement are inadmissible under Federal Rule of Evidence 408. Mediation proceedings may not be reported, recorded, placed into evidence, or made known to the Presiding Judge, or construed for any purpose as an admission against interest. Mediators shall not divulge the details of information imparted to them in confidence in the course of Mediations without the consent of the parties, except as otherwise may be required by law.”

Courts have articulated the following general policies and rules:

• There is a “strong public interest in favor of secrecy of matters discussed by parties during settlement negotiations.”
• Mediation confidentiality serves the purpose of fostering alternative dispute resolution in general by “safeguarding the trust of the parties in the individual case.”
• “Confidentiality is paramount to the success of a mediation program because it encourages candor between the participants.”
• Courts “routinely impose sanctions on attorneys who disclose confidential mediation communications.”
• All attorneys practicing in federal court have “a clear obligation to familiarize [themselves] with a district court’s rules and to follow them.”
• Federal courts have “discretion to sanction a party” for failing to comply with local rules, including “dismissing the party’s case with prejudice or entering judgment against the party.”
• Courts may impose sanctions pursuant to their inherent power “when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.”

ANALYSIS

The Court denies Defendant’s Motion to enforce confidentiality and sanction Plaintiffs.  What follows is a summary of the reasons why.

Disclosures to Knoxville News Sentinal

Defendant asserts that Plaintiffs disclosed “intimate details of the lengthy mediation” to the newspaper, including the following:

• Plaintiffs’ attorneys fees and expenses would account for approximately $3.5 million of the settlement fund;
• The mediator “repeatedly told workers the offer was the best they would get”;
• The mediator did not provide all Plaintiffs with a copy of the settlement offer to seek legal review by an independent third party;
• The mediator did not explain each term of the settlement to Plaintiffs in detail;
• The mediator told workers that the case could drag on for years; and
• The mediator’s alleged statements about the ability to place a financial value on the life of a worker.

Defendant also claims that Plaintiffs are subject to sanctions because they failed to unequivocally state that the disclosure sources were unrelated to Plaintiffs.

–Ruling on Disclosures to Newspaper

The Court finds that, “Defendant has failed to establish a willful violation or bad faith conduct by Plaintiffs or Plaintiffs’ counsel.”  Here’s why.

• “In this Circuit, ‘bad faith’ is a requirement for the use of the district court’s inherent authority, but this Circuit has also upheld the use of such sanctions for conduct that ‘was tantamount to bad faith.'”
• Defendant correctly states that “courts routinely impose sanctions on attorneys who disclose confidential mediation communications.”  But that applies only when a party violates a rule or acts in bad faith. And since Defendant has failed to establish either a confidentiality rule violation or bad faith conduct, “the Court will decline to impose sanctions against Plaintiffs.”
• An intentional disclosure of the amount of a settlement offer would encompass “the very heart of the mediation proceeding” and hinder the overall effectiveness of the mediation process. But Defendant is unable to prove that Plaintiffs, or Plaintiffs’ counsel, is responsible for the disclosure of such details of the mediation.
• Plaintiffs do not dispute that “someone on their side” violated the local confidentiality rule, but Defendant has failed to establish the intentional disclosure of confidential mediation details by Plaintiffs or Plaintiffs’ counsel.
• Defendant alleges that Plaintiffs’ counsel understood the required confidentiality of the mediation proceedings and were required to make sure that the individual Plaintiffs were aware of their obligations.   
• In order to impose sanctions under the Court’s inherent powers, Defendant “must prove by clear and convincing evidence that the other party’s actions are entirely without color and are motivated by bad faith.”

Since Plaintiffs’ actions do not reveal bad faith or reckless disregard of the rules of the Court at this time, sanctions are not appropriate.

Disclosures to the Court

Defendant claims that Plaintiffs’ counsel impermissibly revealed mediation details to the Court, during a status conference, which included announcing that the mediator had made a proposal that was accepted by counsel for both parties.

Defendant also asserts that Plaintiffs impermissibly referenced and attached materials that were explicitly provided for the purposes of mediation in their response to Defendant’s filings.

–Ruling on Disclosures to the Court

The Court finds that Defendants failed to prove intentional, willful or deliberate actions by Plaintiffs that would warrant sanctions.

• Sanctions are appropriate only when counsel consistently and intentionally acts in bad faith or recklessly disregards the rules or orders of the Court.  The disclosure to in this case do not constitute bad faith or a reckless disregard of the local confidentiality rule.
• Plaintiffs intended to update the Court at the status conference on whether an extended mediation period is justified, since the Court oversees the mediation.  Plaintiffs did not disclose any additional information other than the acceptance.  Plaintiff’s counsel did not disclose, for instance, that Defendants “had rejected a proposal from the mediator at the end of mediation.”
• The disclosure of treating physician and expert declarations provided in mediation does not constitute bad faith or intentional or reckless conduct.
• The declarations in question were not prepared solely for mediation and are part of Plaintiff’s proof for specific causation. The “inclusion of the information was not an attempt to gain an advantage” over Defendant.

Ultimately, Defendant has not presented sufficient evidence for the Court to conclude that Plaintiffs acted in bad faith, or that Plaintiffs’ alleged conduct was intentional or reckless.

Conclusion

 The Adkisson et al. v. Jacobs Engineering opinion provides a helpful glance into, (i) issues and struggles surrounding the confidentiality of mediation information, and (ii) judicial efforts to assure compliance, without sanctioning those who act in good faith.

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