By Leslie King O’Neal
If experts review and cite confidential settlement documents in their reports, the court may strike the reports and limit the experts’ testimony. In U.S. v. EES Coke Battery, LLC,[i] two experts reviewed and cited confidential settlement communications in their reports. It was undisputed that the documents were created and shared to further settlement negotiations. The parties disagreed whether they were used for a permissible purpose under FRE 408(a).[ii] That rule provides: “evidence of . . . conduct or statements made in compromise negotiation . . . is not admissible to prove or disprove the validity of or amount of a disputed claim.”
Reports Violated Sixth Circuit’s “Settlement Privilege”
While Rule 408 doesn’t prohibit sharing settlement communications with experts, reports using confidential settlement information may violate the rule. In this case, the court said the expert’s “exposure to inadmissible information is a germ that infects the report.”[iii]
Not All Circuits Recognize “Settlement Privilege”
The EES Coke court found “violating the settlement privilege” was a basis to strike the reports. It’s important to note EES Coke arose in the Sixth Circuit, which recognizes a “settlement privilege;” other circuits don’t recognize this privilege. See post: No “Settlement Privilege” for Expert’s PowerPoint[iv] (noting the 11th Circuit has not recognized a “settlement privilege”).[v]
Discovery and Admissibility are Distinct
The Sixth Circuit and many other courts have found settlement communications to be discoverable with certain limitations.[vi] However, such communications don’t lose their Rule 408 protection from admissibility because they are produced in discovery. As the EE Coke court said, “Discoverability is not the same as admissibility.”
“Mediation Privilege” and “Settlement Privilege” Vary by Jurisdiction
The existence and scope of “settlement privilege” and “mediation privilege” varies from jurisdiction to jurisdiction and court to court. Only the Sixth Circuit recognizes a “settlement privilege.” There is no uniform mediation confidentiality law applicable in all 50 states, nor is there a uniform federal mediation confidentiality statute. See post: Is Mediation Confidential? It Depends! https://theconstructionadrtoolbox.com/2024/10/mediation-confidentiality-varies-by-state/.
Uniform Mediation Act
Twelve states and the District of Columbia have adopted the Uniform Mediation Act[vii] which provides broad confidentiality, making mediation communications privileged and not subject to discovery or admissible in evidence, with some exceptions.
State Confidentiality Laws Differ Widely
Florida and Texas mediation statutes also provide broad confidentiality. Florida’s statute has penalties for violating confidentiality. California cases interpreting its confidentiality statutes almost completely prohibit exceptions to mediation confidentiality. The “no exceptions rule” has created problems with subsequent legal malpractice or other claims where parties requested mediation communications as evidence.[viii]
Massachusetts Statute Doesn’t Cover All Mediation Communication
The Massachusetts Mediation Confidentiality Statute[ix] applies only to statements made “in the presence of the mediator.” Unless appointed by a governmental or judicial body, the mediator must enter into a written agreement with the parties, have at least 30 hours of training and have either four years’ experience as a mediator or who is accountable to a dispute resolution organization in existence for at least three years. If the mediator lacks these qualifications, the mediation may not be confidential.[x]
New York Lacks Statewide Mediation Confidentiality Law
New York has no state-wide mediation confidentiality statute. As noted in a recent report, “New York relies on local rules and optional confidentiality agreements.”[xi] There are no common law or statutory confidentiality protections governing court-mandated mediations in New York. Such mediations are governed by local court rules and parties’ confidentiality agreements.
Federal Mediation Confidentiality & Privilege is Fragmented
Federal courts apply state privilege law where the rule of decision is state substantive law. Several federal district courts have recognized a “common law” mediation privilege for cases with no state law issues. However, the scope of this privilege varies by court and may be limited.[xii] And, there is no “mediation privilege” in FRE 501.
Each Federal District Court Has Local ADR Rules
The Alternative Dispute Resolution Act of 1998 authorized each federal district court to promulgate local court rules protecting “mediation confidentiality.” All federal district courts have adopted local ADR rules, which counsel should check before any mediation.
Takeaways
- Counsel should avoid having experts review or cite confidential settlement or mediation materials in their reports.
- Because state and federal laws on “mediation privilege” and “settlement privilege” vary widely, it’s good practice to draft a mediation or settlement agreement before any negotiations or discussions take place. All parties and participants should sign the agreement in advance.
- Check local court rules and statutes before any mediation or settlement meeting to be sure the proposed meeting or session comes within their protections.
[i] (Dist. Ct. S.D. Mich. 2024) 2024 WL 4932714; https://www.govinfo.gov/app/details/USCOURTS-mied-2_22-cv-11191/USCOURTS-mied-2_22-cv-11191-4
[ii] FRE 408(a) allows such communications to be used to prove witness bias or prejudice, to negate a contention of undue delay or to prove an effort to obstruct a criminal investigation or prosecution.
[iii] An earlier Michigan district court struck expert reports citing settlement communications for violating the “settlement privilege”: Irwin Seating Co. v. International Business Machines Corp., (Dist. Ct. W. D. Mich. 2007) 2007 WL 518866). (not published in F. Supp.2d)
[iv] https://theconstructionadrtoolbox.com/2024/09/no-settlement-privilege-for-experts-powerpoint/
[v] Other courts have not recognized a settlement privilege. See In re MSTG, Inc., 675 F.3d 1337 (Fed. Cir. 2012)(declining to recognize such a privilege for a patent holder’s settlements with other alleged infringers) https://www.casemine.com/judgement/us/5914f898add7b0493499cdfb/amp;
In re Gen. Motors Corp. Engine Interchange Litig., 594 F.2d 1106 (7th Cir. 1979)(declining to recognize such a privilege) https://www.courtlistener.com/opinion/364689/in-re-general-motors-corporation-engine-interchange-litigation/.
[vi] Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.2d 976 (6th Cir. 2003);https://case-law.vlex.com/vid/goodyear-tire-rubber-v-887121685
U.S. ex.rel. Cleveland Construction, Inc. v. Stellar Group, Inc., (Case No. 4:16-CV-179(CDL) (M.D. Ga. Oct. 23, 2017)https://storage.courtlistener.com/recap/gov.uscourts.gamd.98618/gov.uscourts.gamd.98618.53.0.pdf
[vii] Uniform Law Commission (uniformlaws.org).https://www.uniformlaws.org/viewdocument/final-act-90?CommunityKey=45565a5f-0c57-4bba-bbab-fc7de9a59110&tab=librarydocuments
[viii] Cassel v. Superior Court, 51 Cal. 4th 113 (Cal. 2011) (refusing to allow evidence of mediation communications between attorney and client in subsequent malpractice action). https://case-law.vlex.com/vid/cassel-v-superior-court-886977287
[ix] MGL c. 233, s.23C https://malegislature.gov/Laws/GeneralLaws/PartIII/TitleII/Chapter233/Section23C
[x] Erskine White et al v. Susan A. Holton, dba Gabriel Ames Associates, Superior Court No. 927915E, Oct. 4, 1993, cited in Brian Jerome, Mediation Confidentiality: Who, What, Where, When, How? https://www.mdrs.com/faqs/mdrs-articles/mediation-confidentiality-who-what-where-when-how/
[xi] Sarah Boxer, Lessons on Mediation Confidentiality from New York State (CPR Speaks 7/16/24) https://www.cpradr.org/news/lessons-on-mediation-confidentiality-from-new-york-state, citing, Mediation Confidentiality in New York State, (report to the New York City Bar 6/24/24) https://www.nycbar.org/reports/mediation-confidentiality-in-new-york-state/
[xii] Sheldone v. Pa. Tpk. Comm’n, 104 F. Supp. 2d 511, 513 (W.D. Pa. 2000)