Ethical Issues Arising in Alternative Dispute Resolution

Transcription

1 Ethical Issues Arising in Alternative Dispute Resolution Maxine Aaronson Attorney at Law Dallas, TX David A. Conrad Office of Chief Counsel Denver, CO Paul L.B. McKenney Varnum LLP Novi, MI Hon. Peter Panuthos Chief Special Trial Judge United States Tax Court Washington, DC Do you have a duty to advise your Comments to ABA Model Rule 2.1: Similarly, when a matter is likely to involve litigation, it may be necessary under Rule 1.4 to inform the client of forms of dispute resolution that might constitute reasonable alternatives to litigation Do you have a duty to advise your Some states go further and require an attorney advise clients about the availability of ADR See Comment 1 to Virginia Rule 1.2: a lawyer shall advise the client about the advantages, disadvantages, and availability of dispute resolution processes that might be appropriate. 1

2 Do you have a duty to advise your Some other states that find a duty: Colorado Rules of Professional Conduct 2.1 Hawaii Rules of Professional Conduct, Rule 2.1 Massachusetts Rule 1.4, Comment 5 Michigan Ethics Opinion RI-262 See also New York s proposed changes to Part 1210, which are currently being discussed. Do you have a duty to advise your Cassel v. Superior Ct., 51 Cal. 4th 113 (2011) creates a special problem for California lawyers Sets up a conflict between Calif. Rule (a lawyer cannot limit claim for malpractice prospectively) and the absolute mediation confidentiality of Evidence Code Section 1119(a). See Making Sense of Calif. s Mediation Mess, Law 360 (August 17, 2011) (included in the materials for today s program). Flexibility of ADR Processes Can address both docketed and undocketed years at one time. Can deal with all open issues between the parties and can occur at any time in the litigation process. Example: UPS case mediated after 11 th Circuit remanded to Tax Court; resolved 16 years. 2

3 Choosing a Mediator or Arbitrator Successful ADR requires a neutral with specialized skills and experience. Mediation most common credential is a 40 hour course, offered by many programs nationwide. Arbitration ABA, AAA, FINRA and others offer training. Retired Judges often arbitrate. Desirable Mediator Qualities adapted from R. Gise, J. Melnick, V. Shelanski & J. Wilkerson, Mediation Starts From the First Phone Call Practice Pointers and Helpful Hints for Lawyers Going to Mediation, 11 CARDOZO J. CONFLICT RESOL. 463 (2010.) Is an honest broker trusted by all parties Reads signals and uses information wisely Smooths over bumps and keeps everyone in the game Recognizes when to take a break and designs adequate follow up process Has process expertise and experience Has subject matter expertise Mediator or Arbitrator Conflicts Both mediators and arbitrators should disclose any prior relationships with any parties and their counsel to avoid conflicts. Parties may choose to waive conflicts that are disclosed. Especially critical in arbitration. An award may be set aside for evident partiality where the arbitrator failed to disclose his prior social relationships. Karlseng v. Cooke, 2011 Tex. App. LEXIS 4868 (June 28, 2011.) 3

4 Understanding Confidentiality Source of protection under Federal Question jurisdiction is the Alternative Dispute Resolution Act of 1998, 28 U.S.C. 651 et. seq. (the 1998 ADR Act ). Requires each federal district court to provide for ADR and to adopt local rule providing for confidentiality. Result: 97 different rules. Understanding Confidentiality FRE 501 creates federal common law of privilege. ADR does not have a common law heritage, so no common law privilege. Congress expressly declined to adopt one in the 1998 ADR Act. Understanding Confidentiality Wigmore on Evidence 2196: the public has the right to every man s evidence. Since FRE 501 was adopted, only one new federal privilege has been recognized. Jaffee v. Redmond, 518 U.S. 1 (1996) (patientpsychotherapist.) 4

5 Understanding Confidentiality Local rules run the gamut from only FRE 408 protection to a very high level of protection. FRE 408 addresses admissibility only in the current proceeding, not subsequent cases. Query: What about in disclosure in a different proceeding between the same parties? See Hypothetical #1 Current State of the Law No appellate court has found that a privilege for ADR was created under the 1998 ADR Act. One appellate court has created a settlement privilege applying Jaffee. See Goodyear Tire & Rubber Co. v. Chiles, 332 F.3d 976 (6 th Cir. 2003) (strong public interest in secrecy of settlement discussions; confidential settlement communications are a tradition in this country.) Current State of the Law Recent case of The Facebook, Inc. v. Pacific Northwest Software, Inc., 640 F. 3d 1034 (9 th Cir. 2011), holds that local court rules cannot create a privilege in a federal court case. Appears to overrule Folb v. Motion Picture Indus. Pension & Health Plans, 16 F. Supp. 2d 1164 (C.D. Cal ) 5

6 Current State of the Law Facebook holds that the mediation agreement signed by the parties that conferred the confidentiality contractually, rather than confidentiality conferred by local rule. Facebook also implies there may be differing confidentiality standards for court appointed and private mediators, at least under the Local Rules of the N.D. of California. Current State of the Law Be wary of local rules that attempt to confer confidentiality protection unless ordered by the court. See Datapoint Corp. v Picturetel Corp., 1998 WL (N.D. Tex. Jan. 14, 1998), compelling discovery of mediated settlement agreement in a S.D Tex. case because a judge in the N.D. Tex. reasoned that he was a court, and could order production. Tax Court s Standard Mediation Order All documents to be furnished to the mediator will be sent by the parties directly to the mediator in a double-sealed wrapper, marked PERSONAL AND CONFIDENTIAL. All information and documents will be kept confidential, not be included in the Court s official file in this case, and not be disclosed to any person who is not participating in the mediation process unless a Judge of this Court determines that disclosure of such information and documents is necessary to A. prevent a manifest injustice; B. help establish a violation of law; or C. prevent harm to the public health or safety, of sufficient magnitude to outweigh the integrity of dispute resolution proceedings. 6

7 Disclosure as Result of Grand Jury Subpoena In re Grand Jury Subpoena Dated December 17, 1996, 148 F. 3d 487 (5 th Cir. 1998), cert. denied 526 U.S.1040 (1999) required the mediation provider to provide information about agricultural fraud that was disclosed under a federal program that specifically required incorporation of the Texas mediation privilege. Disclosure as Result of Grand Jury Subpoena In Re Subpoena Issued to Commodities Futures Trading Comm., 370 F. Supp. 2d 201 (D.D.C. 2005) also allowed a subpoena to go forward, discussing Jaffee factors and declining to create a privilege. The Moral of This Story: Confidentiality of mediation and arbitration is not absolute and attorneys should counsel clients accordingly where there may be some criminal exposure. 7