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Keeping Mediations Confidential

The Oregon Court of Appeals has ruled that communications made during mediation proceedings must remain confidential even if a party to the mediation later sues his attorney for malpractice.

In Alfieri v. Solomon, 263 Or. App. 492 (Or. Ct. App. 2014), an attorney represented an employee in mediation proceedings arising from a wrongful discharge claim. Before the mediation began, the attorney informed the employee of his initial assessment of the claim. Although the parties did not agree to a settlement during the mediation conference, the mediator proposed a settlement package for the parties’ consideration. Following the mediation conference, the attorney significantly reduced his valuation of the employee’s claim. The parties eventually signed a settlement agreement that incorporated the mediator’s proposal. When the employee later consulted the attorney about the enforceability of the settlement agreement, the attorney did not report that the employer had failed to comply with certain elements of the settlement or that this failure might put the validity of the settlement into question.

The employee subsequently sued the attorney for malpractice and supported his claim with assertions relating to communications made before, during and after the mediation and settlement of the claim.   The Oregon Court of Appeals concluded that Oregon law protected the communications between the employee and his attorney regarding the terms and the amount of the settlement agreement, as well as their communications during the period prior to its execution. Noting that the mediation process ended when the settlement agreement was executed, however, the Court held that post-signing communications between the employee and the attorney did not take place in connection with the mediation process. As a result, these communications were not protected by Oregon’s mediation laws and, thus, could be disclosed by the employee.

This opinion would be interesting if only for its meticulous parsing of the mediation process. Two more important messages, however, can be found in this decision. First, no party can waive the confidentiality of the mediation proceedings on his own initiative. The employee was, in effect, hoist on his own petard when he tried to override the confidentiality of the mediation process in order to air his dissatisfaction with his attorney. Second, however, is the recognition that the mediation process—along with the related confidentiality obligations—does come to an end. Attorneys who advise parties to mediation would do well to remember this.

HIPAA: Update Your BAAs Now

Right now–in fact, this very minute–would be an excellent time to double-check your group health plan’s business associate agreements for compliance with the latest HIPAA privacy and security regulations. Covered entities that had written agreements with business associates in place prior to January 25, 2013 have enjoyed a grace period of deemed compliance with the most recent regulations concerning documentation of BAAs. September 22, 2014 marks the end of this transitional period. If your group health plan took advantage of this grace period, there’s still time to get your BAAs in order before the deadline runs out!

How Not to Prove an Arbitrator’s Partiality

The Eleventh Circuit has issued a stern reminder to parties who are unhappy with an arbitrator’s rulings:  direct, definite and demonstrable evidence is necessary in order to prove that an arbitrator is biased in favor of an opponent.

In Fowler v. Ritz-Carlton Hotel Co., 2014 U.S. App. LEXIS 15895 (11th Cir. 2014)(unpublished opinion), plaintiffs filed a complaint against their employer, Ritz-Carlton Hotel Company, LLC.  The arbitrator issued a scheduling order that required plaintiffs to submit an amended demand for arbitration by a certain date. Plaintiffs’ attorney did not comply with this deadline.  In fact, the attorney only got around to filing a motion for extension of time four months after the deadline had passed.  Despite this tardiness, the arbitrator granted the motion and set a deadline for discovery that specified that the parties could take up to ten depositions.  Testing their luck (and, likely, the patience of the arbitrator), plaintiffs moved to depose 40 witnesses.  Predictably, the arbitrator denied their request. When plaintiffs gave Ritz-Carlton less than 48 hours’ notice of their intention to depose four witnesses, the arbitrator granted Ritz-Carlton’s request to prevent the depositions.  Even at this stage in the proceedings, the arbitrator took pains to specify that plaintiffs could still take depositions at a later date with reasonable notice.

Plaintiffs then moved to disqualify the arbitrator on the grounds that she was biased in Ritz-Carlton’s favor and  had “utterly thwarted” plaintiffs’ ability to conduct discovery. After more wrangling (including an unsuccessful effort by plaintiffs to remove the case to federal court), the arbitrator ultimately issued an award in Ritz-Carlton’s favor. The arbitrator’s decision was confirmed by a federal magistrate judge, who chastised plaintiffs for filing inaccurate, farfetched and unpersuasive arguments.

Plaintiffs claimed that the arbitration award should be vacated due to the arbitrator’s evident partiality in favor of Ritz-Carlton. In particular, plaintiffs claimed that Ritz-Carlton’s parent company, Marriot, advertised on the website maintained by the arbitrator’s law firm.   In fact, the website listed a number of hotels, including a local Marriot, as possible accommodations for firm visitors.

Under the Federal Arbitration Act, an arbitration award may be vacated if the arbitrator actually has a conflict of interest or knows and fails to disclose information which would lead a reasonable person to believe a conflict existed. Noting that plaintiffs failed to allege, let alone provide evidence, that the arbitrator even knew of the reference to the Marriot hotel, the Eleventh Circuit agreed that plaintiffs’ allegations were “remote, uncertain and speculative.” Moreover, the Court reminded plaintiffs that an arbitrator’s failure to investigate a potential conflict of interest is not sufficient to establish partiality.

This case certainly does not suggest that arbitrators should not investigate potential conflicts of interest. Instead, the Eleventh Circuit reminds us that vacating an arbitrator’s decision on the grounds of evident partiality is a serious act that requires serious proof. In this case, plaintiffs’ allegations were dismissed by the lower courts and the Eleventh Circuit as “distorted,” “frivolous,” “irrelevant,” “meritless” and “omit[ting]…inconvenient facts.” It is difficult to imagine a more strongly worded rebuke or a more clearly worded reminder that federal law favors arbitration.