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Aviation

Texas Appellate Court Enforces Mediation Privilege, But Notes Limitations

June 2012

Texas, like many jurisdictions, favors mediation. A common statistic used by attorneys throughout the state is that 9 out of 10 cases settle at mediation. A significant contributor to this high settlement rate is the understanding that mediation is cloaked under a veil of confidentiality. As most mediators advise parties in the opening session, comments made by and between parties and the mediator are protected from disclosure by statute. Notwithstanding this veil of secrecy, litigants oftentimes test the boundaries of the "mediation privilege" and a client may be faced with a request to disclose confidential mediation information. 

A Dallas trial court judge recently ordered the production of documents and testimony about statements made by the parties during mediation.1 That case, and the subsequent appellate ruling, provide sound guidance for maintaining the privilege.

In December 2007, Glenn Gunter and Empire Pipeline mediated a breach of contract lawsuit and signed a settlement agreement. Two months later, Gunter moved to vacate the settlement agreement, alleging it was invalid and unenforceable on several grounds, including duress and fraud. Empire responded, and moved to enforce the settlement agreement. The trial court dismissed Gunter's claims and entered an order enforcing the settlement agreement. 

Gunter then filed a separate lawsuit against Empire seeking a declaratory judgment that Empire did not comply with the terms of the settlement agreement. In that lawsuit, Gunter served a notice of deposition with subpoena duces tecum on Empire, requesting, inter alia, documents and information related to discussions and negotiations between the parties and the mediator.  Empire objected based on the "mediation privilege." The court overruled Empire's objection and ordered production of testimony and documents regarding information shared with the mediator. Empire filed a petition for writ of mandamus with the Dallas Court of Appeals.

The appellate court ruled the discovery is barred by the "ADR Privilege" codified in Texas Civil Practice and Remedies Code Section 154.073, which states, in part:

. . . a communication relating to the subject matter of any civil or criminal dispute made by a participant in an alternative dispute resolution procedure .  . . is confidential, is not subject to disclosure, and may not be used as evidence against the participant in any judicial or administrative proceeding.

The court of appeals concluded the trial court abused its discretion by ordering Empire to provide confidential testimony and documents, and granted Empire's petition for writ of mandamus.

Importantly, the court noted the "ADR privilege" is not absolute, and, for example, discovery may be admissible where a claim is based on a new and independent tort committed in the course of the mediation proceedings and that tort encompasses a duty to disclose.

It is important that clients be mindful of the powerful reach of the mediation privilege as they work towards resolution of disputes through candid and forthcoming negotiations at mediation, while, at the same time, understanding the privilege does not absolve them of all actions so long as they occur during mediation.
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1 In re Empire Pipeline Corp., 323 S.W.3d 308 (Tex. App.—Dallas 2010, pet. denied).

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