Under existing law, when a person consults a mediator or mediation service for the purpose of retaining mediation services, or when parties agree to conduct and participate in a mediation for the purpose of compromising, settling, or resolving a civil dispute, anything said in the course of the consultation for mediation services or in the course of mediation is not admissible in evidence nor subject to discovery in any other civil action or proceeding. Existing law provides that evidence that is otherwise admissible is not inadmissible solely because it was introduced or used in a mediation or mediation consultation.

Existing law requires that in marital nullity, dissolution, and legal separation matters, each party serve on the other party a declaration of disclosure that includes a characterization of all assets and liabilities, as specified.

This bill would provide that the above-described declarations of disclosure are admissible as evidence even if they are prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation. The bill would also declare the intent of the Legislature that the bill codify the holding of a specified court case.

Under existing law, when a person consults a mediator or mediation service for the purpose of retaining mediation services, or when parties agree to conduct and participate in a mediation for the purpose of compromising, settling, or resolving a civil dispute, anything said in the course of the consultation for mediation services or in the course of mediation is not admissible in evidence nor subject to discovery in any other civil action or proceeding. Existing law provides that evidence that is otherwise admissible is not inadmissible solely because it was introduced or used in a mediation or mediation consultation.

Existing law requires that in marital nullity, dissolution, and legal separation matters, each party serve on the other party a declaration of disclosure that includes a characterization of all assets and liabilities, as specified.

This bill would provide that the above-described declarations of disclosure are admissible as evidence even if they are prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation. The bill would also declare the intent of the Legislature that the bill codify the holding of a specified court case.

Under existing law, when a person consults a mediator or mediation service for the purpose of retaining mediation services, or when parties agree to conduct and participate in a mediation for the purpose of compromising, settling, or resolving a civil dispute, anything said in the course of the consultation for mediation services or in the course of mediation is not admissible in evidence nor subject to discovery in any other action or proceeding. Existing law provides that evidence that is otherwise admissible is not inadmissible solely because it was introduced or used in a mediation or mediation consultation.

Existing law requires that in marital nullity, dissolution, and legal separation matters, each party serve on the other party a declaration of disclosure that includes a characterization of all assets and liabilities, as specified.

This bill would provide that the above-described declarations of disclosure are admissible as evidence even if they are prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation. The bill would also declare the intent of the Legislature that the bill codify the holding of a specified court case.

Date of Hearing: June 13, 2017

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

SBPCA Bill Id:SB 217

Author:(Wieckowski) – As Introduced Ver:February 1, 2017

PROPOSED CONSENT

SENATE VOTE: 39-0

SUBJECT: EVIDENCE: ADMISSIBILITY

KEY ISSUE: SHOULD THE MEDIATION PRIVILEGE STATUTE BE AMENDED TO EXCLUDE SPECIFIC DECLARATIONS OF DISCOVERY THAT ARE REQUIRED TO BE MADE IN DISSOLUTION PROCEEDINGS SO THE PRIVILEGE IS NOT USED AS A PRETEXT TO SHIELD SUCH DOCUMENTS AND THE STATEMENTS THEREIN FROM DISCOVERY?

SYNOPSIS

This bill seeks to enact a minor change in the mediation privilege, which protects the confidentiality of statements and disclosures made during mediation proceedings. The mediation privilege, codified in Evidence Code Section 1119, provides that except as otherwise provided by law, no evidence of statements or admissions made “for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible or subject to discovery, and disclosure of the evidence shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given.” Current law provides limited exceptions to the mediation privilege that are strictly construed by the courts. This bill would exempt certain disclosures—specifically declarations of disclosure required by Sections 2104 and 2105 of the Family Code—from the privilege, even if the declarations are prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation. In doing so, the bill codifies the holding of Lappe v. Superior Court (2014) 232 Cal.App.4th 774. Although this is a very narrow exception to the privilege, it is nevertheless important because it would ensure that, at least for purposes of those two statutorily mandated declarations of disclosure, the mediation privilege is not used as a pretext to shield disclosures and statements therein from discovery. This bill, sponsored by the California Conference of Bar Associations, is supported by the California Dispute Resolution Council and the Association of Certified Family Law Specialists, and has no opposition.

SUMMARY: Exempts certain declarations that are required to be made in a dissolution from the rule that evidence of statements made in the course of a mediation is inadmissible in a civil proceeding. Specifically, this bill:

1. Specifies that declarations of disclosure required by Sections 2104 and 2105 of the Family Code, even if prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation are not subject to the mediation privilege in the Evidence Code.
2. States that it is the intent of the Legislature to codify the holding of Lappe v. Superior Court (2014) 232 Cal.App.4th 774.

EXISTING LAW:

1. Provides that, except as otherwise provided, no evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation is admissible or subject to discovery, and disclosure of the evidence shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given. (Evidence Code Section 1119 (a). All further statutory references are to this code, unless otherwise indicated.)
2. Provides that no writing that is prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation, is admissible or subject to discovery, and disclosure of the writing shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given. (Section 1119 (b).)
3. Requires all communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation to remain confidential. (Section 1119 (c).)
4. Provides that evidence that is otherwise admissible or subject to discovery outside of a mediation or a mediation consultation is not made inadmissible or protected from disclosure solely by reason of its introduction or use in a mediation or a mediation consultation. (Section 1120 (a).)
5. Provides that the confidentiality provision regarding mediation does not affect the following:
6. The admissibility of an agreement to mediate a dispute.
7. The effect of an agreement not to take a default or an agreement to extend the time within which to act or refrain from acting in a pending civil action.
8. Disclosure of the mere fact that a mediator has served, is serving, will serve, or was contacted about serving as a mediator in a dispute. (Section 1120 (b).)
9. Retains the confidential nature of communications and writings produced for purposes of mediation proceedings, even after a mediation ends. (Section 1126.)
10. Pursuant to case law, provides that Section 1120’s mediation confidentiality provision does not apply to bar production of the financial disclosure declarations, even if they are exchanged during mediation, because they are necessarily prepared to comply with the Family Code, not because the parties participated in mediation. (Lappe v. Superior Court (2014) 232 Cal.App.4th 774, 784.)

FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.

COMMENTS: This bill seeks to enact a minor change in the mediation privilege that protects the confidentiality of statements and disclosures made during mediation proceedings. The mediation privilege, codified in Section 1119, provides that except as otherwise provided by law, no evidence of statements or admissions made “for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible or subject to discovery, and disclosure of the evidence shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given.” (Section 1119 (a), emphasis added.) Writings prepared for, or in the course of, mediation are subject to the privilege. (Section 1119 (b).)

Compelling and potentially competing public policy considerations regarding disclosures and confidentiality in dissolution proceedings. California law recognizes the vital importance of “full and accurate disclosure of all assets and liabilities” at the “early stages” of a marital dissolution proceeding to ensure fair and sufficient child and spousal support awards and to achieve a proper division of community and quasi-community assets and liabilities. (Family Code Section 2100 (c).) In order to effectuate the policy of full disclosure, state law places a “continuing duty” on the part of each spouse to “immediately, fully, and accurately update and augment that disclosure” so both will have “full and complete knowledge of the relevant underlying facts.” (Family Code Section 2100 (c).)

At the same time, state law encourages mediation and the confidentiality necessary to facilitate mediation. “[C]onfidentiality is essential to effective mediation … and, in some cases required by, the Legislature. . . . [T]he mediation confidentiality provisions of the Evidence Code were enacted to encourage mediation by permitting the parties to frankly exchange views, without fear that disclosures might be used against them in later proceedings.” (Lappe v. Superior Court, supra, 232 Cal.App.4th at p. 782 [citations omitted].)

The Legislature appears to have attempted to balance these competing interests, at least to some extent, by enacting both Sections 1119 and 1120. Section 1119 protects the confidentiality of statements – both oral and written—made in, or prepared for, mediation proceedings. It provides that except as otherwise provided, no evidence of any oral statement or writing made for the purpose of, in the course of, or pursuant to, a mediation is admissible or subject to discovery in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding. However, Section 1120 sets forth a number of limited exceptions to this rule that allow some facts about mediation, such as the fact that the parties agreed to mediate their dispute, to be admitted in other legal proceedings.

However, courts are unwilling to expand existing exceptions, or create additional exceptions to the mediation privilege, even when enforcement of the privilege has dramatic and potentially unfair consequences. In Cassel v. Superior Court (2011) 51 Cal.4th 113, the California Supreme Court held that the plain language of the mediation confidentiality statute applied to all exchanges of information between an attorney and his or her client during a mediation and therefore prevented the admission of any of those statements into evidence in a subsequent malpractice action by the client against the attorney or attorney discipline action.  (Cassel v. Superior Court, supra, 51 Cal.4th at p. 138.) The Court hinted that the Legislature may want to amend the Evidence Code to limit the application of the privilege, but made it clear that it would not go beyond the plain meaning of the statute itself:

We express no view about whether the statutory language, thus applied, ideally balances the competing concerns or represents the soundest public policy. Such is not our responsibility or our province. We simply conclude, as a matter of statutory construction, that application of the statutes' plain terms to the circumstances of this case does not produce absurd results that are clearly contrary to the Legislature's intent. Of course, the Legislature is free to reconsider whether the mediation confidentiality statutes should preclude the use of mediation-related attorney-client discussions to support a client's civil claims of malpractice against his or her attorneys. (Cassel v. Superior Court, supra, 51 Cal.4th at p. 136.)

In his concurring opinion, Justice Ming Chin went further, noting that the holding forced on the court by the current language of the statute “will permit attorneys to commit malpractice without accountability. Interpreting the statute to require confidentiality even when everyone but the attorney has waived it might well result in absurd consequences that the Legislature did not intend.” (Id., at pp. 139-140.)

California Law Revision Commission Study of the Mediation Privilege. In response to the Cassel decision, AB 2025 (Wagner) was introduced in 2012. As introduced, AB 2025 would have addressed the issue of attorney malpractice raised in Cassel by amending Section 1120 to exempt “in an action for legal malpractice, an action for breach of fiduciary duty, or both, or in a State Bar disciplinary action, of communications directly between the client and his or her attorney during mediation if professional negligence or misconduct forms the basis of the client’s allegations against the attorney.” It was later amended to require the California Law Revision Commission to study the issue. While AB 2025 eventually died without a hear in the Senate, the Law Revision Commission was asked to conduct a study of the same issue by ACR 98 (Wagner & Gorrell), Chapter 108, Statutes Res. of 2012. As of June 5, 2017, the Commission has completed its “background work requested by the Legislature and is now in the process of formulating a tentative recommendation. After the Commission approves a tentative recommendation, it will be posted to the Commission's website and widely circulated for comment.” (http://www.clrc.ca.gov/K402.html).  

The Lappe decision. In order to resolve property and support issues in their divorce, Gilda and Murray Lappe agreed to mediation, during which they exchanged certain financial disclosures that are mandated by the Family Code, including Murray’s declaration that a company he founded during the marriage was valued at $10 million. The couple executed a marital settlement agreement that was incorporated into a stipulated judgment. Soon after the entry of judgment, however, Gilda discovered that Murray had sold the company, previously valued at $10 million, for approximately $75 million.

Gilda filed an application to set aside the judgment on grounds of fraud and duress. She served discovery on Murray requesting, among other things, the financial disclosure declarations that the couple exchanged prior to entry of judgment. Murray refused to produce the declarations, asserting they were covered by the mediation confidentiality statutes, insofar as they constituted writings that were “prepared for the purpose of, in the course of, or pursuant to, a mediation.” (Section 1119 (b).) Gilda moved to compel production, but the trial court denied the motion on mediation confidentiality grounds. The appellate court disagreed:

Applying Evidence Code section 1120 “as a ‘limit[]’ on ‘the scope of [s]ection 1119’ that ‘prevent[s] parties from using a mediation as a pretext to shield materials from disclosure’” is “consistent with the construction of similar language in rule 408 of the Federal Rules of Evidence (28 U.S.C.) . . . which prevent[s] one from being able to “immunize from admissibility documents otherwise discoverable merely by offering them in a compromise negotiation.” (Lappe v. Superior Court, supra, 232 Cal.App.4th at p. 783, quoting Rojas v. Superior Court (2004) 33 Cal.4th 407, 417, fn. 5 and Ramada Development Co. v. Rauch (5th Cir. 1981) 644 F.2d 1097, 1107.)

This bill seeks to codify the holding of Lappe. According to the author:

SB 217 will clarify that, notwithstanding current mediation confidentiality statutes, specified mandatory financial disclosures in family law cases are admissible in the family law action, regardless of whether the disclosures were prepared or exchanged in the context of family law mediation. This would codify the appellate court’s decision in Lappe, providing certainty in this one area.

This bill provides a very limited exemption to the confidentiality provisions regarding evidence presented in mediation proceedings. This bill codifies the narrow holding of Lappe, providing that the mediation confidentiality provision in Section 1119 does not apply to financial disclosure declarations that are exchanged during mediation which are prepared in compliance with the requirements of Sections 2104 and 2105 of the Family Code. But this narrow exception would not apply to writings that are required to be disclosed by provisions of the law other than those two sections of the Family Code. The reasoning in Lappe—that Section 1119 should not be used as a pretext to shield documents that are prepared for, or in compliance with, provisions of the law and not for mediation proceedings could and should arguably apply to other statutorily mandated disclosures which must be made regardless of whether the parties participate in mediation. The appellate court asked, in its discussion of the mediation privilege, “do the mediation confidentiality statutes apply in the first instance to statutorily mandated disclosures that must be made regardless of whether the parties participate in mediation? We conclude the answer to this question is no.” (Lappe v. Superior Court,, supra, (2014) 232 Cal.App.4th 774, 784 [181 Cal.Rptr.3d 510].) There is no reason to conclude that the appellate court would have reached the same conclusion, and used the same reasoning, if the question had been about statements or writings that were required to be disclosed by other provisions of the law. In light of the fact that the court’s reasoning could easily be applied to other statutorily mandated disclosures, the author may want to consider expanding the scope of the bill to other such disclosures.

REGISTERED SUPPORT / OPPOSITION:

Support

Conference of California Bar Associations (sponsor)

California Dispute Resolution Council

Association of Certified Family Law Specialists

Opposition

None on file

Analysis Prepared by: Alison Merrilees / JUD. / (916) 319-2334

 CONSENT 

Bill No: SB 217

Author: Wieckowski (D)

Introduced: 2/1/17

Vote: 21

SENATE JUDICIARY COMMITTEE: 7-0, 3/28/17

AYES: Jackson, Moorlach, Anderson, Hertzberg, Monning, Stern, Wieckowski

SUBJECT: Evidence: admissibility

SOURCE: Conference of California Bar Associations

DIGEST: This bill provides that the admissibility of financial disclosures mandated by Family Code Sections 2104 and 2105 in relevant family law cases is not limited by the mediation confidentiality provisions of the Evidence Code even if prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation.

ANALYSIS:

Existing law:

1. Provides that when a person consults a mediator or mediation service for the purpose of retaining mediation services, or when parties agree to conduct and participate in a mediation for the purpose of compromising, settling, or resolving a civil dispute, no writing prepared or evidence of anything said in the course of the consultation for mediation services or in the course of mediation is admissible in evidence nor subject to discovery. Disclosure of such writings or evidence shall not be compelled in noncriminal proceedings, including but not limited to arbitration, administrative adjudications, and civil actions. (Evid. Code Sec. 1119.)
2. Provides that evidence that is otherwise admissible is not inadmissible solely because it was introduced or used in a mediation or mediation consultation. (Evid. Code Sec. 1120.)
3. Requires that in order to provide full and accurate disclosure of all assets and liabilities in marital nullity, dissolution, and legal separation matters, each party serve on the other party preliminary and final declarations of disclosure that include the identity, valuation, and characterization of all assets and liabilities, as specified. (Fam. Code Secs. 2103, 2104, and 2105.)

This bill:

1. Provides that the above-described declarations of disclosure are admissible as evidence even if they are prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation.
2. Makes an uncodified statement of the Legislature’s intent that the bill codify the holding of Lappe v. Superior Court (2014) 232 Cal.App.4th 774.

Background

There is a longstanding policy in California to maintain confidentiality in mediation. The purpose of mediation is to foster the early resolution of disputes through candid and informal exchanges between parties. Confidentiality is “essential to effective mediation” as this “frank exchange can be achieved only if the participants know that what is said in the mediation will not be used to their detriment through later proceedings and other adjudicatory processes.” (National Conference of Commissioners on Uniform State Laws, Uniform Mediation Act, Prefatory Notes p. 8 (2003).) The importance of this is exhibited by the codification of mediation confidentiality in Evidence Code Section 1119, which provides in relevant part: “No writing . . . that is prepared for the purpose of, in the course of, or pursuant to, a mediation . . . is admissible or subject to discovery, and disclosure of the writing shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding . . . .” However, evidence that is “otherwise admissible or subject to discovery outside of a mediation” does not become inadmissible solely by reason of its introduction or use in a mediation. (Evid. Code Sec. 1120.)

Family Code Sections 2100 et seq. manifest another longstanding policy in California in the marital dissolution and nullity context. The legislative findings discussed therein concern the proper division of the community and quasi-community assets and liabilities of parties going through marriage dissolution or nullity, or legal separation. The goal is to ensure fairness and equity while reducing the adversarial nature of the process and the attendant costs. Central to the promotion of this public policy is the “full and accurate disclosure of all assets and liabilities” of the parties. To further this end, Family Code Sections 2103, 2104, and 2105 mandate that each party to such proceedings serve on the other party preliminary and final declarations of disclosure that include the identity, valuation, and characterization of all assets and liabilities, as specified.

The California Court of Appeal, Second Appellate District, Division Three addressed the intersection of these policies in Lappe v. Superior Court (2014) 232 Cal.App.4th 774. There the court found declarations of disclosure that were produced pursuant to the mandates of the Family Code were not subject to mediation confidentiality under Evidence Code Section 1119. The court concluded that the declarations were not prepared and exchanged pursuant to a mediation or to serve a party’s negotiation strategy, but in compliance with the statutory duty imposed by Family Code Sections 2103, 2104, and 2105 and were therefore “otherwise admissible” and subject to discovery outside of mediation pursuant to Evidence Code Section 1120.

This bill seeks to codify the holding in Lappe through amendments to Evidence Code Section 1120 by expressly providing that the admissibility of such declarations of disclosure is not limited by the mediation confidentiality provisions of Evidence Code Sections 1115 et seq.

Comments

1. The author writes:

Under family law, each party to a dissolution or legal separation of marriage is required by law to fully and accurately disclose all assets and liabilities during all judicial proceedings and before entry of any [marital] settlement agreement. Parties who participate in mediation as part of the dissolution or separation process frequently prepare their financial disclosures of assets and liabilities with a mediator’s help, and/or utilize the disclosures in the course of the mediation.

At the same time, Evidence Code [Section] 1119 clearly makes inadmissible in any court proceeding any document that is “prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation.” This raises the question of whether declarations of disclosure mandated by the Family Code, but clearly prepared “in the course of, or pursuant to” a mediation, must be excluded from evidence in a subsequent case directly involving fraudulent information contained in those documents.

In Lappe v. Superior Court (2014) 232 Cal.App.4th 774, the 2nd District Court of Appeal addressed this issue and found that the mediation confidentiality statutes do not apply to statutorily-mandated disclosures that must be made regardless of whether the parties participate in mediation. . . .

Although the California Supreme Court consistently has rejected efforts by the appellate courts to carve exceptions to California’s mediation confidentiality statutes, the Court denied review in Lappe, allowing the decision to stand. However, while the Lappe decision applies statewide, it is not binding on other appellate courts, raising the possibility of a contrary decision from another circuit and a split of authority.

1. Lappe v. Superior Court codification

Lappe v. Superior Court (2014) 232 Cal.App.4th 774 was a writ proceeding involving a previously married couple. The parties had entered into a mediated marital settlement to resolve their property and support issues. During the mediation, the parties signed declarations stating that service of the preliminary and final declarations of disclosure had been made on the other party as required by Family Code Sections 2103, 2104, and 2105. The agreement was later incorporated into a stipulated judgment.

Shortly thereafter, the petitioner wife discovered that her former husband had sold a company he founded during their marriage and personally received $75 million from the sale. The petitioner had relinquished her share of the company for $10 million as part of the settlement. In response, she filed an application to set aside the judgment on the grounds of fraud and duress. In discovery, she sought the financial disclosure declarations previously served by her former husband. Her husband refused to produce the declarations, claiming Evidence Code Section 1119(b) precluded their admissibility as writings “prepared for the purpose of, in the course of, or pursuant to, a mediation.” The petitioner moved to compel the documents, but the trial court denied the motion, finding the mediation confidentiality statutes barred compelled production of the declarations.

On appeal by writ petition, the Court of Appeal found the mediation confidentiality statutes did not apply and granted the petition. The court reasoned that the declarations at issue were prepared and exchanged not pursuant to a mediation or to serve a party’s negotiation strategy, but in compliance with the statutory duty imposed by Family Code Sections 2103, 2104, and 2105 to serve such declarations to ensure that spouses have full and accurate information upon which to base an equitable division of assets and liabilities. The court found that even if the declarations of disclosure were “prepared for mediation,” they were nevertheless admissible pursuant to Evidence Code Section 1120, as a writing “otherwise admissible or subject to discovery outside of mediation.”

This bill codifies the holding in Lappe and makes clear that such statutorily mandated financial disclosures are not subject to mediation confidentiality.

1. Carrying out the public policy of the State of California

This bill furthers the policy of the State of California as clearly expressed in the Family Code. Family Code Section 2100 declares:

It is the policy of the State of California (1) to marshal, preserve, and protect community and quasi-community assets and liabilities that exist at the date of separation so as to avoid dissipation of the community estate before distribution, (2) to ensure fair and sufficient child and spousal support awards, and (3) to achieve a division of community and quasi-community assets and liabilities on the dissolution or nullity of marriage or legal separation of the parties as provided under California law.

Section 2100 further states that the adversarial nature of marital dissolution and the attendant costs are properly reduced by “fostering full disclosure and cooperative discovery.” In order to promote these public policy principles, a “full and accurate disclosure of all assets and liabilities” must be made in proceedings for dissolution of marriage or legal separation.

This bill ensures that access to such declarations is not curtailed through application of mediation confidentiality, thereby “fostering full disclosure and cooperative discovery.”

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 3/29/17)

Conference of California Bar Associations (source)

Association of Certified Family Law Specialists

California Dispute Resolution Council

OPPOSITION: (Verified 3/29/17)

None received

ARGUMENTS IN SUPPORT: The California Dispute Resolution Council (CDRC), in support, states that Lappe was properly decided. CDRC indicates that there has “long been a split among family law mediators whether Section [2105] declarations used in marital dissolution mediations were protected by mediation confidentiality.” CDRC states that Evidence Code Section 1120(c) “excludes such declaration[s] from confidentiality” because declarations prepared pursuant to Family Code Section 2105 are “required by law and are not prepared merely for the mediation,” as found by the court in Lappe. CDRC states this bill has “worthy purpose” and should be passed.

Prepared by: Christian Kurpiewski / JUD. /

3/30/17 15:34:05

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2017-2018 Regular Session

Bill No: SB 217 (Author:Wieckowski)

Version: February 1, 2017

Hearing Date: March 28, 2017

Fiscal: No

Urgency: No

Consultant: CK

SUBJECT

Evidence: admissibility

DESCRIPTION

This bill would provide that the admissibility of financial disclosures mandated by Family Code Sections 2104 and 2105 in relevant family law cases is not limited by the mediation confidentiality provisions of the Evidence Code even if prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation.

BACKGROUND

There is a longstanding policy in California to maintain confidentiality in mediation. The purpose of mediation is to foster the early resolution of disputes through candid and informal exchanges between parties. Confidentiality is “essential to effective mediation” as this “frank exchange can be achieved only if the participants know that what is said in the mediation will not be used to their detriment through later proceedings and other adjudicatory processes.” (National Conference of Commissioners on Uniform State Laws, Uniform Mediation Act, Prefatory Notes p. 8 (2003).) The importance of this is exhibited by the codification of mediation confidentiality in Evidence Code Section 1119, which provides in relevant part: “No writing . . . that is prepared for the purpose of, in the course of, or pursuant to, a mediation . . . is admissible or subject to discovery, and disclosure of the writing shall not be compelled, in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding . . . .” However, evidence that is “otherwise admissible or subject to discovery outside of a mediation” does not become inadmissible solely by reason of its introduction or use in a mediation. (Evid. Code Sec. 1120.)

Family Code Sections 2100 et seq. manifest another longstanding policy in California in the marital dissolution and nullity context. The legislative findings discussed therein concern the proper division of the community and quasi-community assets and liabilities of parties going through marriage dissolution or nullity, or legal separation. The goal is to ensure fairness and equity while reducing the adversarial nature of the process and the attendant costs. Central to the promotion of this public policy is the “full and accurate disclosure of all assets and liabilities” of the parties. To further this end, Family Code Sections 2103, 2104, and 2105 mandate that each party to such proceedings serve on the other party preliminary and final declarations of disclosure that include the identity, valuation, and characterization of all assets and liabilities, as specified.

The California Court of Appeal, Second Appellate District, Division Three addressed the intersection of these policies in Lappe v. Superior Court (2014) 232 Cal.App.4th 774. There the court found declarations of disclosure that were produced pursuant to the mandates of the Family Code were not subject to mediation confidentiality under Evidence Code Section 1119. The court concluded that the declarations were not prepared and exchanged pursuant to a mediation or to serve a party’s negotiation strategy, but in compliance with the statutory duty imposed by Family Code Sections 2103, 2104, and 2105 and were therefore “otherwise admissible” and subject to discovery outside of mediation pursuant to Evidence Code Section 1120.

This bill seeks to codify the holding in Lappe through amendments to Evidence Code Section 1120 by expressly providing that the admissibility of such declarations of disclosure is not limited by the mediation confidentiality provisions of Evidence Code Sections 1115 et seq.

CHANGES TO EXISTING LAW

Existing law provides that when a person consults a mediator or mediation service for the purpose of retaining mediation services, or when parties agree to conduct and participate in a mediation for the purpose of compromising, settling, or resolving a civil dispute, no writing prepared or evidence of anything said in the course of the consultation for mediation services or in the course of mediation is admissible in evidence nor subject to discovery. Disclosure of such writings or evidence shall not be compelled in noncriminal proceedings, including but not limited to arbitration, administrative adjudications, and civil actions. (Evid. Code Sec. 1119.)

Existing law provides that evidence that is otherwise admissible is not inadmissible solely because it was introduced or used in a mediation or mediation consultation. (Evid. Code Sec. 1120.)

Existing law requires that in order to provide full and accurate disclosure of all assets and liabilities in marital nullity, dissolution, and legal separation matters, each party serve on the other party preliminary and final declarations of disclosure that include the identity, valuation, and characterization of all assets and liabilities, as specified. (Fam. Code Secs. 2103, 2104, and 2105.)

This bill would provide that the above-described declarations of disclosure are admissible as evidence even if they are prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation.

This bill would make an uncodified statement of the Legislature’s intent that the bill codify the holding of Lappe v. Superior Court (2014) 232 Cal.App.4th 774.

COMMENT

1. Stated need for the bill

According to the author:

Under family law, each party to a dissolution or legal separation of marriage is required by law to fully and accurately disclose all assets and liabilities during all judicial proceedings and before entry of any [marital] settlement agreement. Parties who participate in mediation as part of the dissolution or separation process frequently prepare their financial disclosures of assets and liabilities with a mediator’s help, and/or utilize the disclosures in the course of the mediation.

At the same time, Evidence Code [Section] 1119 clearly makes inadmissible in any court proceeding any document that is “prepared for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation.” This raises the question of whether declarations of disclosure mandated by the Family Code, but clearly prepared “in the course of, or pursuant to” a mediation, must be excluded from evidence in a subsequent case directly involving fraudulent information contained in those documents.

In Lappe v. Superior Court (2014) 232 Cal.App.4th 774, the 2nd District Court of Appeal addressed this issue and found that the mediation confidentiality statutes do not apply to statutorily-mandated disclosures that must be made regardless of whether the parties participate in mediation. . . .

Although the California Supreme Court consistently has rejected efforts by the appellate courts to carve exceptions to California’s mediation confidentiality statutes, the Court denied review in Lappe, allowing the decision to stand. However, while the Lappe decision applies statewide, it is not binding on other appellate courts, raising the possibility of a contrary decision from another circuit and a split of authority.

2. Lappe v. Superior Court codification

Lappe v. Superior Court (2014) 232 Cal.App.4th 774 was a writ proceeding involving a previously married couple. The parties had entered into a mediated marital settlement to resolve their property and support issues. During the mediation, the parties signed declarations stating that service of the preliminary and final declarations of disclosure had been made on the other party as required by Family Code Sections 2103, 2104, and 2105. The agreement was later incorporated into a stipulated judgment.

Shortly thereafter, the petitioner wife discovered that her former husband had sold a company he founded during their marriage and personally received $75 million from the sale. The petitioner had relinquished her share of the company for $10 million as part of the settlement. In response, she filed an application to set aside the judgment on the grounds of fraud and duress. In discovery, she sought the financial disclosure declarations previously served by her former husband. Her husband refused to produce the declarations, claiming Evidence Code Section 1119(b) precluded their admissibility as writings “prepared for the purpose of, in the course of, or pursuant to, a mediation.” The petitioner moved to compel the documents, but the trial court denied the motion, finding the mediation confidentiality statutes barred compelled production of the declarations.

On appeal by writ petition, the Court of Appeal found the mediation confidentiality statutes did not apply and granted the petition. The court reasoned that the declarations at issue were prepared and exchanged not pursuant to a mediation or to serve a party’s negotiation strategy, but in compliance with the statutory duty imposed by Family Code Sections 2103, 2104, and 2105 to serve such declarations to ensure that spouses have full and accurate information upon which to base an equitable division of assets and liabilities. The court found that even if the declarations of disclosure were “prepared for mediation,” they were nevertheless admissible pursuant to Evidence Code Section 1120, as a writing “otherwise admissible or subject to discovery outside of mediation.”

This bill would codify the holding in Lappe, making clear that such statutorily mandated financial disclosures are not subject to mediation confidentiality.

The California Dispute Resolution Council (CDRC), in support, states that Lappe was properly decided. CDRC indicates that there has “long been a split among family law mediators whether Section [2105] declarations used in marital dissolution mediations were protected by mediation confidentiality.” CDRC states that Evidence Code Section 1120(c) “excludes such declaration[s] from confidentiality” because declarations prepared pursuant to Family Code Section 2105 are “required by law and are not prepared merely for the mediation,” as found by the court in Lappe. CDRC states this bill has “worthy purpose” and should be passed.

3. Carrying out the public policy of the State of California as expressed in the Family Code

This bill would further the policy of the State of California as clearly expressed in the Family Code. Family Code Section 2100 declares:

It is the policy of the State of California (1) to marshal, preserve, and protect community and quasi-community assets and liabilities that exist at the date of separation so as to avoid dissipation of the community estate before distribution, (2) to ensure fair and sufficient child and spousal support awards, and (3) to achieve a division of community and quasi-community assets and liabilities on the dissolution or nullity of marriage or legal separation of the parties as provided under California law.

Section 2100 further states that the adversarial nature of marital dissolution and the attendant costs are properly reduced by “fostering full disclosure and cooperative discovery.” In order to promote these public policy principles, a “full and accurate disclosure of all assets and liabilities” must be made in proceedings for dissolution of marriage or legal separation.

This bill would ensure that access to such declarations is not curtailed through application of mediation confidentiality, thereby “fostering full disclosure and cooperative discovery.”

4. Previous attempts to address these issues by the California Conference of Bar Associations

In 2015, the Bar Association of San Francisco proposed a resolution (Resolution 09-03-2015) to the California Conference of Bar Associations (CCBA) to address the issue dealt with in Lappe. The proposed amendment sought to add an exception to the mediation privilege when a breach of fiduciary duty that rises to a fraud occurs in family law mediation allowing the injured party to present evidence of the breach to the court. The CCBA disapproved the resolution because it would “contravene well established public policy.” (See California Conference of Bar Associations, 2015 Resolutions, Series 09-Family Law <http://calconference.org/html/wp-content/Resolutions/2015/Series% 2009%20-%20Family%20UPDATED%2008-23-2015.pdf> [as of Mar. 3, 2017].)

In 2016, another resolution (Resolution 03-01-2016) in the wake of the Lappe decision was proposed to the California Conference of Bar Associations. This time, the amendments more carefully tracked the holding in Lappe and narrowly targeted declarations of disclosure required by Family Code Sections 2104 and 2105. The resolution’s language is extremely similar to that being proposed by this bill. It was approved by the Conference’s Resolutions Committee. (See California Conference of Bar Associations, 2016 Resolutions, Series 3-Family Law <http://calconference.org/html /wp-content/uploads/2016/08/Series-3-Family-Law.pdf> [as of Mar. 3, 2017].)

Support: Association of Certified Family Law Specialists; California Dispute Resolution Council

Opposition: None Known

HISTORY

Source: Conference of California Bar Associations

Related Pending Legislation: None Known

Prior Legislation: None Known

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