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MED-ARB: BE CAREFUL – YOU MAY GET WHAT YOU ASKED FOR (Marx Mediation Memo #4) by Peter J. Marx, Esq.

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January 13, 2015 by AmyN

In certain situations, parties desire the relatively civil, consensual process of mediation, but also seek a definitive result within a limited period of time.  A process which combines mediation and arbitration, commonly known as “med-arb”, may serve both of these objectives, but must be utilized with care.

Simply stated, med-arb begins with a mediation. If, after a specified period of time, the mediation is unsuccessful, the mediator transforms his or her function into that of an arbitrator, and issues an award, based on – and this is critical – information presented at the mediation.

Here it is important to note that this process may yield certain unintended consequences if not anticipated and addressed in the agreement establishing the med-arb. Perhaps most significant, if the mediation is not successful and the mediator then issues an award as an arbitrator, that award will be based exclusively on what he or she heard and viewed at the mediation – all of which is confidential.  While it is generally difficult to have an arbitration award vacated, this is especially true if the evidence and indeed the entire process upon which the arbitration award is based are subject to the very strict requirements of mediation confidentiality.  See Evidence Code § 1119, and Cassel v. Superior Court, 51 Cal.4th 113, 119 Cal.Rptr.3d 437 (2011), discussed in Marx Mediation Memo #2 and in my view essential reading for any attorney who utilizes mediation.

The consequences of mediation confidentiality in this situation were illustrated in Bowers v. Raymond J. Lucia Companies, Inc., 206 Cal.App.4th 724, 142 Cal.Rptr.3d 64 (2012), in which the parties entered into an agreement for a “binding mediation.”  (This is an unfortunate phrase, since by definition mediation is consensual and not necessarily binding, although the parties may agree to judicial enforcement. See Evidence Code § 1123.)  What was actually contemplated in Bowers was “med-arb,” and thus when the mediation was not successful, the mediator, now functioning as an arbitrator, rendered an award. Thereafter, it was contended the award should not be enforced, because the mediator/arbitrator did not conduct an (additional, evidentiary) hearing subsequent to the mediation.  The court rejected this contention, as the agreement clearly provided that the mediator, now serving as an arbitrator, would simply decide the matter – on the basis of what had been presented during the mediation portion of the proceeding. There was no provision for any such post-mediation evidentiary hearing.

The lesson here of course is that if you utilize med-arb, and desire, e.g., that subsequent to an unsuccessful mediation the mediator/arbitrator hold an additional, evidentiary hearing, i.e., an arbitration which would not be subject to mediation confidentiality requirements, this must be specified in the med-arb agreement.

See also, Kurtin v. Elieff, 215 Cal.App.4th 455, 155 Cal.Rptr.3d 573 (2013). While the opinion is a bit lengthy, with forays into grammatical exotica, among other things, it, along with Bowers, supra, is strongly recommended reading before deciding if, and how, to utilize med-arb.

I mediate through ARC.  Feel free to contact my Case Manager, Ms. Nicole Bethurum, (310) 284-8224, nicole@arc4adr.com, if I may be of service in mediating a matter. You may contact me directly at (310) 442-0052 or pmarx@arc4adr.com.


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