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Party Cannot Be Compelled to Participate in, Pay for Mediation, California Court Holds
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June 30, 2008
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Howrey LLP
Jeld-Wen, Inc. was uninsured and was a cross-defendant in a multi-party construction defect case involving more than $500,000 in damage claims.
The San Diego County Superior Court deemed the case to be complex under judicial case management standards, issued a case management order, assigned a mediator to conduct up to 100 hours of mediation (which the court styled a mandatory settlement conference) and set deadlines for holding the mediation/settlement conference.
The mediator charged $500 an hour. The court held that no party had established an inability to pay the mediator’s fees and ordered all parties to pay a pro rata share of the mediator’s fees. It also ordered all parties to appear at mediations with insurance claims adjusters or other persons with settlement authority unless excused by the court or mediator.
Jeld-Wen objected. It asserted that the order violated Rule 3.1380 of the California Rules of Court, which allows a court to set only one mandatory settlement conference, and was inconsistent with case law. The trial court disagreed and issued the mediation order.
After that, Jeld-Wen received a settlement demand for $2,799 from the plaintiff developer and notice of two mediation dates. Jeld-Wen rejected the settlement demand on grounds that it had done nothing wrong, there had been no discovery and there was no proof that Jeld-Wen had done anything wrong. Jeld-Wen invited further informal settlement discussions but indicated it would not attend the mediations.
After Jeld-Wen did not attend the first mediation, the trial court granted the plaintiff developer’s motion to require Jeld-Wen to attend the next mediation session and imposed a $200 sanction. The trial court held that no statute or rule precluded its order and that Lu v. Superior Court, 55 Cal.App. 4th 1264 (1997) authorized appointment of mediators to conduct settlement conferences.
Jeld-Wen petitioned the Court of Appeal to direct the trial court to set aside its order. The Court of Appeal granted Jeld-Wen’s petition for a writ of mandate. Jeld-Wen, Inc. v. Superior Court, 146 Cal.App.4th 536, 53 Cal.Rprt.3d 115 (2007).
In opposing the petition, the plaintiff developer relied on Lu to suggest that trial courts have the inherent authority to order parties in complex cases to attend and pay for private mediations. In Lu, the trial court appointed a referee to act as a mediator pursuant to Code of Civil Procedure §639 and required parties to pay a pro rata share of the referee’s costs. The order further provided that all mediation sessions were deemed to be mandatory settlement conferences. The Lu court upheld the trial court’s order.
In Jeld-Wen, the Court of Appeal critiqued the opinion in Lu, finding that it blurred the distinction between mandatory settlement conferences and private mediation and concluding that Lu provided no guidance on whether a trial court can compel participation in a mediation and payment of mediator fees by an unwilling party.
Rather, the Jeld-Wen court emphasized that a central concept of mediation is that the parties are in control of resolving their own dispute. California courts can order mediation of cases with $50,000 or less in dispute after considering the parties’ viewpoints. But, larger cases can be submitted to court-sponsored mediation only if all parties agree.
Even for cases ordered to mediation, the court noted, the California Rules of Court require the mediator to inform the parties that participation in the mediation is completely voluntary and that each party can determine the extent of its participation or can withdraw from the mediation altogether. Parties that voluntarily agreed to mediate can revoke their consent and withdraw at any time.
Accordingly, the Court of Appeal reasoned that even if Jeld-Wen had appeared at the mediation, it could have asked to be excused, and the mediator would have been obligated to comply. The appeals court also concluded the trial court exceeded its authority by requiring Jeld-Wen to attend and pay for a private mediation over its objection. The order also was contrary to the voluntary nature of mediation, the appeals court concluded. Jeld-Wen thus was not obligated to attend the mediations or pay a share of the cost and was not subject to sanctions. The appeals court held that Code of Civil Procedure §639 cannot be used as the basis to appoint a mediator.
While trial courts may “cajole” parties to agree to mediate, they cannot force or coerce a party to attend and pay for mediation with the threat of sanctions, the appeals court held. For example, the appeals court noted that the cost of attorney fees to attend the mediation and the pro rata share of mediator fees could have exceeded the claim against Jeld-Wen.
Although participation cannot be compelled, the appeals court predicted that most parties in complex cases are likely to agree to private mediation. The court forecast that no “apocalyptic consequences” would result from its decision.
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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-848-4996 or at paulberning@howrey.com or contact your Howrey attorney. For more information about Howrey’s Construction Practice Group, click here.
©2008 Howrey LLP
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