Pacific Marine Center, Inc. et al v. Philadelphia Indemnity Insurance Company

Filing 37

ORDER REQUIRING Plaintiffs to Produce Documents. Within 10 days of the date of this order, Plaintiffs shall produce the disputed communications identified in the Privilege Log Nos. 1-10; 12-17; 20-22; 28-29; 31-33; 35-37, and 40-42; Plaint iffs may redact from these documents any communication that directly implicates a confidential communication that was made during the November 2010 mediation; and Privilege Log No. 30 shall NOT be produced as it is duplicative of Privilege Log No. 42. Order signed by Magistrate Judge Sheila K. Oberto on 4/7/2015. (Timken, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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PACIFIC MARINE CENTER, INC., A
California Corporation, and SONA
VARTANIAN, an individual,

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Case No. 1:13-cv-00992-AWI-SKO
ORDER REQUIRING PLAINTIFFS TO
PRODUCE DOCUMENTS

Plaintiffs,
(Doc. No. 23)
v.

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PHILADELPHIA INDEMNITY INSURANCE
COMPANY, a Pennsylvanian Corporation, and
DOES 1 through 10, inclusive,
Defendants.
_____________________________________/
I.

INTRODUCTION

The parties have been engaged in a dispute regarding discovery propounded by Defendant

24 Philadelphia Indemnity Insurance Company ("Philadelphia") on March 11, 2014, and June 16,
25 2014, to Plaintiffs Pacific Marine Center, Inc. ("Pacific Marine") and Sona Vartanian ("Sona")
26 (collectively, "Plaintiffs"). (See Doc. 13-1, p. 7; p. 26.)

The March 2014 discovery included

27 requests for production of documents, interrogatories, and requests for admission, and the June 16,
28 2014, discovery included a second set of requests for production of documents. (See Doc. 13-1, p.

1 7; p. 26.) After several informal discovery dispute conferences and a formal hearing on February
2 11, 2015, the parties informed the Court in March 2015 that they were unable to resolve the last of
3 their discovery disputes, which includes providing documents and communications after a
4 mediation and settlement in a related state-court case.
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The parties were ordered to file a joint statement setting forth their arguments as to the

6 remaining issue by no later than March 10, 2015. On March 19, 2015, having reviewed the
7 parties' joint statement, the Court determined a hearing was unnecessary and indicated a written
8 order would follow. For the reasons set forth below, Plaintiffs are ORDERED to produce the
9 disputed discovery documents.
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II.

FACTUAL BACKGROUND

11 A.

Related State-Court Litigation

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This suit stems from a dispute between siblings, Jack and Sona Vartanian ("Jack" and

13 "Sona," respectively). Jack owned and operated a boat dealership. In 2007, Jack apparently gave
14 Sona a power of attorney so that she could operate Jack's business while he was serving a prison
15 sentence for income tax evasion. In 2008, while her brother was incarcerated, Sona and her
16 company, Pacific Marine, purchased Jack's boat dealership, including its inventory, with Sona
17 signing the purchase agreement as both the purchaser and as the seller on behalf of Jack pursuant
18 to the power of attorney. After his release from prison, Jack repossessed the inventory of boats
19 held by Sona and her business in July 2010. Jack claimed Sona had not been authorized to sign
20 the sales agreement on his behalf in 2008 and that Sona was only operating the dealership only as
21 a caretaker. Sona and Pacific Marine filed suit against Jack in Fresno County Superior Court in an
22 action captioned Vartanian v. Vartanian, Case No. CG03180.
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The parties to that suit engaged in mediation before retired Judge Howard Broadman

24 which resulted in a settlement agreement executed by both Sona and Jack on November 10, 2010.
25 As part of the settlement agreement, Sona and Jack were to provide any financial records
26 requested by the other party and those documents would in turn be provided to each party's
27 accountant. The accountants would "cooperate to reconcile all expenses and income in connection
28 with the two parties and their respective boat business from 2007 to present." (Doc. 34-1, p. 8.)
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1 The settlement agreement provided that, "[i]n the event the accountants cannot reach agreement on
2 such reconciliation, Judge Broadman shall review the information submitted to him and make a
3 determination regarding the reconciliation. Judge Broadman's decision shall be final and may be
4 entered as a judgment. Judge Broadman will retain jurisdiction to resolve all disputed matters
5 between the parties." (Doc. 34-1, p. 8.) The accountants were unable to complete the financial
6 reconciliation, and the issue was presented to Judge Broadman in April 2011 in a recorded and
7 transcribed proceeding. Jack and Sona ultimately abandoned the November 2010 settlement
8 agreement, and neither side sought to enforce whatever decision Judge Broadman ultimately made
9 about the financial reconciliation.

After multiple continuances to complete the contractual

10 arbitration agreed to in the November 2010 settlement, the Vartanian v. Vartanian matter
11 proceeded to trial in April and May 2014.
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Meanwhile, on March 24, 2011, Sona and Pacific Marine submitted a claim to their

13 insurer, Philadelphia, alleging that Jack's repossession of the boat inventory constituted a "theft"
14 under the terms of the policy. Philadelphia denied the claim, and Sona and Pacific Marine filed
15 suit against Philadelphia in Madera County Superior Court on May 8, 2013, for breach of contract
16 and breach of the implied covenant of good faith and fair dealing, among other claims. The suit
17 was removed to this Court on June 27, 2013.
18 B.

Procedural Background

19

The parties notified the Court of a discovery dispute in a joint status report one week prior

20 to a pre-scheduled mid-discovery status conference, which was held on September 23, 2014.
21 (Docs. 13, 14.) The history of this lengthy dispute is set forth below.
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1.

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In March 2014, Philadelphia propounded on Plaintiffs a request for production of

Discovery Propounded to Plaintiffs in March and June 2014

24 documents ("RFP, set one"), requests for admissions, and interrogatories (collectively "March
25 2014 discovery"). (Doc. 13-1, p. 7.) On June 6, 2014, Plaintiffs responded to the March 2014
26 discovery – responses that consisted mostly of objections. (Doc. 13-1, p. 9-13.) Meet and confer
27 letters were exchanged (Doc. 13-1, p. 15-18, 20-21), and Plaintiffs promised to provide additional
28 responses.
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On June 16, 2014, Philadelphia propounded on Plaintiffs a second set of requests for

2 production ("June 2014 RFPs"). Plaintiffs and Philadelphia held a discovery conference on June
3 30, 2014, and Plaintiffs again promised to provide further responses to the March 2014 discovery.
4 (Doc. 13-2, p. 3.) On July 21, 2014, Plaintiffs responded to only two of the June 2014 RFPs, and
5 those responses consisted only of an objection that the requests were too burdensome because they
6 required production in Los Angeles.

The responses stated that Plaintiffs would produce

7 documents either locally or by making the documents available for inspection or copying near
8 Plaintiffs' counsel's Fresno office. (Doc. 13-1, p. 28-31.)
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Days later, Philadelphia's counsel was notified that Plaintiffs had retained substitute

10 counsel. (Doc. 13, p. 7.) On July 31, 2014, Philadelphia's counsel contacted Plaintiffs' new
11 counsel to determine when the promised production of the March 2014 discovery and June 2014
12 RFP responses would be made. After multiple meet and confer letters to Plaintiffs' counsel (see
13 Doc. 13-2, Exhibits 8-9), the parties' counsel spoke telephonically on August 27, 2014. (Doc. 1314 2, Exhibit 10, p. 20.) Counsel continued to send meet and confer letters regarding the outstanding
15 discovery and spoke telephonically again on September 9, 2014. (Doc. 13-2, p. 24, 22, 29.) On
16 September 15, 2014, Plaintiffs provided supplemental responses to the March 2014 discovery,
17 which Philadelphia found insufficient. (Doc. 13, p. 7.)
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On September 16, 2015, the parties filed a joint statement regarding their discovery

19 dispute. (Doc. 13.) An informal mid-discovery status conference was held and the parties'
20 extensive discovery disputes regarding the March and June 2014 discovery requests were
21 discussed. Due to Plaintiffs' substitution of counsel, Plaintiffs' piecemeal responses to discovery,
22 and because Plaintiffs served more supplemental discovery responses only one day before the
23 mid-discovery status conference which Philadelphia had not yet had the opportunity to fully
24 review, the Court ordered Philadelphia to review Plaintiffs' production and set forth in a letter to
25 Plaintiffs a list of the discovery requests that had not been responded to by Plaintiffs, which
26 included the June 2014 RFPs. (Doc. 15.)
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2.

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Pursuant to the Court's order (Doc. 15), on September 29, 2014, Philadelphia sent an

Dispute Regarding June 2014 RFP No. 16

3 informal letter to Plaintiffs setting forth 17 RFPs to which Plaintiffs had still not responded, which
4 included RFP No. 16 that was originally propounded in the June 2014 RFPs. Philadelphia restated
5 the following document request:
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16.
ALL DOCUMENTS constituting or evidencing COMMUNICATIONS
from Hagop1 Vartanian, his employees, representatives, attorneys or agents, to
Sona Vartanian, her employees, representatives, attorneys or agents, discussing,
mentioning or referencing the settlement agreement entered into on or about
November 10, 2010, or the exchange of information or accounting documents in
connection with any such agreement.

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10 (Doc. 23-1, p. 18-19.) On October 13, 2014, Plaintiffs responded to Philadelphia with a letter
11 setting forth objections to the September 2014 discovery requests:
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Response: Objection. Plaintiffs deny that they entered an enforceable settlement
agreement on or about November 10, 2010. The parties in Vartanian v.
Vartanian went to trial in Fresno Superior Court after agreeing that the document
was not enforceable and would not be enforced.

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15 (Doc. 23-1, p. 18-19.)
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On October 15, 2014, Philadelphia responded to Plaintiffs' objection and indicated that the

17 "objection" did not constitute grounds for refusing to produce the requested documents.
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On October 24, 2014, Plaintiffs responded to Philadelphia's October 15, 2014, letter:

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Response: We have already objected to this request. As stated previously:
Objection. Plaintiffs deny that they entered an enforceable settlement agreement on
or about November 10, 2010. The parties in Vartanian v. Vartanian went to trial
in Fresno Superior Court after agreeing that any purported settlement agreement
was not enforceable and would not be enforced. I note further that under California
law documents and statements made and the process occurring at mediation are not
admissible in evidence. Your request is therefore improper.

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24 (Doc.23-1, p. 19.) In November 2014, the parties again submitted informal letter briefs to the
25 Court regarding this discovery dispute. (Docs. 19, 20.) A follow-up informal conference was held
26 on November 26, 2014. As it related to RFP No. 16, Plaintiffs were ordered to supplement their
27 responses and were informed that if the response included an objection based upon a privilege, a
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Hagop Vartanian is also known as "Jack" Vartanian.

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1 privilege log was to be provided to Philadelphia by no later than December 12, 2014. The parties
2 were ordered to meet and confer regarding the supplemental response, and if disputes remained,
3 they were to submit a joint status report to the Court outlining their respective positions. (Doc. 22,
4 ¶ 6.) A follow-up conference was set for January 22, 2015.
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On December 12, 2014, Plaintiffs served a Privilege Log regarding documents responsive

6 to RFP No. 16, and on December 26, 2014, provided the following supplemental response to RFP
7 No. 16 and refused to produce any documents pursuant to RFP No. 16:
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Responding Party incorporates by reference each of the reservation of rights
and each of the objections set forth in the Preliminary Statement above.
Objection is made to this request in that it seeks evidence of
communications and/or writings made in the course of and pursuant to a mediation
and mediation consultation. The request thus seeks to violate the confidentiality
provided by Rule 408 of the Federal Rules of Evidence and California Evidence
Code Section 1119. A privilege log has been provided to defendant.
In the process of the subject mediation, a report was prepared by accountant
Howard Gastwirth, and a copy of that report was subsequently used and produced
in State Court action, Vartanian v. Vartianian, Fresno County Superior Court Case
No. 10 CECG03180. Defendant has a copy of that report in its possession.

16 (Doc. 23-1, p. 19.)
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On January 10, 2015, Plaintiffs made another supplemental production of documents and

18 provided a supplemental Privilege Log as it pertained to RFP. No. 16. In total, the Privilege Log,
19 with the January supplementation, identified 42 items that Plaintiffs claimed were privileged under
20 California Evidence Code ("CEC") § 1119 and inadmissible under Federal Rule of Evidence 408.
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3.

February 2015 Hearing Regarding Remaining Disputes

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On January 15, 2015, Philadelphia filed a motion to compel, setting a hearing for January

23 22, 2015. The motion included a joint statement from the parties regarding their discovery
24 dispute. Upon review of Philadelphia's motion to compel, the Court converted the informal
25 conference set for January 22, 2015, to a formal hearing on February 11, 2015. (Doc. 24.)
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Plaintiffs then filed an opposition brief on January 28, 2015, and Philadelphia filed a reply

27 brief on February 5, 2015. A hearing was held on February 11, 2015, and an order requiring
28 further production was issued on February 12, 2015. Regarding RFP No. 16 and item Nos. 1
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1 through 42 in the Privilege Log, the Court determined that Plaintiffs' assertion of the mediation
2 privilege under CEC Section 1119 was too broad. At the hearing, the Court explained it was
3 Plaintiffs' burden to establish that the post-mediation communications identified in the Privilege
4 Log were not subject to production under the mediation privilege. To meet this burden, Plaintiffs
5 were required to show a nexus between the mediation itself and the post-mediation/post-settlement
6 communications. The mere fact that communications after the November 2010 mediation and
7 settlement would not have been made but for the mediation and settlement is not enough, standing
8 alone, to establish the communications were made pursuant to the mediation and therefore
9 privileged.
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For example, emails identified in the privilege log discuss underlying vehicle sales
and title certificates. To the extent those documents were not created expressly for
the purposes of mediation and would otherwise be discoverable, they SHALL be
produced to Defendant by no later than February 20, 2015. As noted at the hearing,
any continued assertion of the privilege by Plaintiffs, particularly as it relates to
bank documents or vehicle titles exchanged by the state court parties following
mediation, must establish a link between the materials asserted to be privileged and
what occurred at the mediation.

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15 (Doc. 28, 2:8-13.) The parties were directed to meet and confer once again and contact chambers
16 if they had any remaining disputes following the production Plaintiffs were ordered to perform.
The parties filed a joint statement on March 10, 2015, indicating their only remaining

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18 dispute was the production of some of the communications identified in the Privilege Log.
19 Specifically, the parties dispute whether production is required of Privilege Log Nos. 1-10; 12-17;
20 20-23; 28-29; 30-33; 35-37; and 40-42.
III. DISCUSSION

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22 A.
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The Parties' Remaining Dispute
The parties' remaining dispute is narrow and pertains to whether the communications

24 identified in the Privilege Log served by Plaintiffs in response to RFP No. 16 are covered by the
25 mediation confidentiality provision of CEC § 1119. The Privilege Log communications are
26 grouped as follows, according to Plaintiffs' characterizations of the communications:
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Privilege Log Nos. 1 through 10 include letters and emails between Sona and Jack's
counsel regarding difficulties with the settlement after mediation and discussions of
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attempts to complete the settlement (Doc. 34-1, p. 2-3);
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Privilege Log Nos. 12 through 17 include communications between Sona and Jack's

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counsel and Judge Broadman regarding attempts to “complete” the settlement (Doc. 34-1,

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p. 3);

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Privilege Log Nos. 20 through 22 include emails and letters between Sona and Jack's
counsel regarding attempts to exchange files (Doc. 34-1, p. 3);

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Privilege Log Nos. 28-29 include a letter and an email between Sona and Jack's counsel as

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well as Judge Broadman regarding the status of the settlement, a change of counsel, and

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conference call arrangements (Doc. 34-1, p. 4);

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Privilege Log Nos. 30-33 include an April 2011 audio file of a proceeding before Judge

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Broadman, and letters from Jack and Sona's counsel to Judge Broadman regarding issues at

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an upcoming proceeding before Judge Broadman (Doc. 34-1, p. 4.)

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Privilege Log Nos. 35-37 include letters from counsel to Judge Broadman regarding
problems with the settlement agreement; and

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Privilege Log Nos. 40-42 include letters between counsel regarding issues and problems
with the settlement and a transcript of a hearing before Judge Broadman (Doc. 34-1, p. 5).

17 As to Privilege Log Nos. 30-33, 35-37, and 40-42, Plaintiffs' counsel characterizes several
18 communications as referencing a "mediation hearing" before Judge Broadman.

In the joint

19 statement filed January 15, 2015, Philadelphia argued that although Plaintiffs' counsel
20 characterized the April 2011 proceedings as a "mediation" proceeding before Judge Broadman,
21 Sona's counsel's billing records describe that proceeding as an arbitration hearing in Visalia. (Doc.
22 23-1, 21:10-14; Exhibit 12.) Philadelphia's assertion is logical in view of documents Jack and
23 Sona filed on the state court's docket, including a notice of settlement in November 2010, as well
24 as court-issued docket notations that the parties were still awaiting arbitration in September 2011
25 and also had stipulated in March 2012 to continue a case-status review proceeding until July 2012
26 due to pending arbitration proceedings. Plaintiffs responded that these communications are simply
27 references "to the part of the void settlement agreement which agrees to give Judge Broadman the
28 authority to enforce the agreement. This is all part and parcel of the medi[ation] process and
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1 plaintiffs assert the privilege applies." (Doc. 23-1, 27:22-25.) Plaintiffs did not dispute that the
2 proceeding before Judge Broadman in April 2011 was a contractual arbitration proceeding under
3 the terms of the parties' November 2010 settlement agreement.
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It is this discovery dispute regarding Plaintiffs' Privilege Log and responses to RFP No. 16

5 that is now pending before the Court.
6 B.

Applicable Law

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1.

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California Evidence Code Section 1119 provides the following:

Mediation Confidentiality Pursuant to California Evidence Code

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(a) No evidence of anything said or any admission 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.
(b) No writing, as defined in Section 250, that is prepared for the purpose of, in the
course of, or pursuant to, a mediation or 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.
(c) All communications, negotiations, or settlement discussions by and between
parties in the course of a mediation or a mediation consultation shall remain
confidential.

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Although not recognized as a privilege per se, California statutes protect the confidentiality

20 of mediation negotiations and related oral and written materials. Cal. Evid. Code § 1119. The
21 purpose of the confidentiality provision is to protect against disclosure of oral and written
22 communications made during mediation. It is meant to promote "confidence and trust among
23 participants." Folb v. Motion Picture Indus. Pension & Health Plans, 16 F. Supp. 2d 1164, 1176
24 (C.D. Cal. 1998).
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In conjunction with Section 1119, CEC Section 1126 provides that "[a]nything said, any

26 admission made, or any writing that is inadmissible, protected from disclosure, and confidential
27 under this chapter before a mediation ends, shall remain inadmissible, protected from disclosure,
28 and confidential to the same extent after mediation ends.") (emphasis added). CEC § 1125 sets
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1 forth the events that end a mediation for purposes of confidentiality:
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(a) For purposes of confidentiality under this chapter, a mediation ends when any
one of the following conditions is satisfied:
(1) The parties execute a written settlement agreement that fully resolves
the dispute.

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(2) An oral agreement that fully resolves the disputes is reached in
accordance with Section 1118.

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(3) The mediator provides the mediation participants with a writing signed
by the mediator that states that the mediation is terminated, or words to that
effect, which shall be consistent with Section 1121.

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(4) A party provides the mediator and the other mediation participants with
a writing stating that the mediation is terminated, or words to that effect,
which shall be consistent with Section 1121 . . . .

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(5) For 10 calendar days, there is no communication between the mediator
and any of the parties to the mediation relating to the dispute. The mediator
and the parties may shorten or extend this time by agreement.

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(b) For purposes of confidentiality under this chapter, if a mediator partially
resolves a dispute, mediation ends when either of the following conditions is
satisfied:

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(1) The parties execute a written settlement agreement that partially
resolves the dispute.

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(2) An oral agreement that partially resolves the dispute is reached in
accordance with Section 1118.

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(c) This section does not preclude a party from ending a mediation without
reaching an agreement. This section does not otherwise affect the extent to which a
party may terminate a mediation.

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2.

Federal Rule of Evidence 408

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Federal Rule of Evidence 408 provides the following with regard to admissibility of

25 settlement negotiations:

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(a) Prohibited Uses. Evidence of the following is not admissible – on behalf of
any party – either to prove or disprove the validity or amount of a disputed claim or
to impeach a prior inconsistent statement or a contradiction:

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(1) furnishing, promising, or offering – or accepting, promising to accept, or

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offering to accept – a valuable consideration in compromising or attempting
to compromise the claim; and

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(2) conduct or a statement made during compromise negotiations about the
claim . . .

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4 C.
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California Mediation Confidentiality Governs the Scope of the Privilege
Asserted
Pursuant to Federal Rule of Evidence 501, in civil cases, "state law governs privilege

7 regarding a claim or defense for which state law supplies the rule of decision." Because the Court
8 exercises its diversity jurisdiction to apply California substantive law regarding Plaintiffs' claims
9 for breach of contract and breach of the implied covenant of good faith and fair dealing, Rule 501
10 requires application of CEC Section 1119. Milhouse v. Travelers Com. Ins. Co., 982 F. Supp. 2d
11 1088, 1105 n.10 (C.D. Cal. 2013 (noting California mediation privilege applies in diversity case,
12 but explaining there is an exception when the documents to which the privilege applies are going
13 to be offered for a purpose other than to prove a claim or defense); see also Gonzalez v. T-Mobile,
14 USA, Inc., No. 13-cv-1029-BEN (BLM), 2014 WL 4055365, at *4 (S.D. Cal. Aug. 14, 2014)
15 (citing Cal. Pub. Utilities Com'n, 892 F.2d 778, 781 (9th Cir. 1989) ("In diversity actions,
16 questions of privilege are controlled by state law.")).
17 D.

Plaintiffs Have Failed to Show Withheld Communications Are Confidential Under
Section 1119

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1.

Plaintiffs' Contentions

Plaintiffs contend the documents sought by Philadelphia are not discoverable under the

21 confidentiality provision of CEC Section 1119.

Although the communications sought by

22 Philadelphia occurred after the November 2010 mediation and settlement agreement, Plaintiffs
23 maintain those communications were related to and arose "pursuant to" the mediation. Citing
24 Wimsatt v. Superior Court, 152 Cal. App. 4th 137 (2007) and Lappe v. Superior Court, 232 Cal.
25 App. 4th 774 (2014), Plaintiffs contend that mediation confidentiality is to be applied whether the
26 writing or statement would not have existed but for a mediation communication, negotiation, or
27 settlement discussion.

According to Plaintiffs, none of the post-mediation communications

28 regarding financial reconciliation identified in the Privilege Log would have occurred but-for the
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1 mediation.
2

Further, the non-confidentiality provision in the November 2010 settlement agreement

3 does not state that other documents relating to the mediation are not confidential, but only that the
4 settlement agreement itself may be deemed non-confidential for enforcement purposes. The non5 confidentiality clause in the settlement agreement only applied to proceedings to enforce the
6 settlement agreement – the waiver was not "as to any and every aspect of the mediation." (Doc.
7 34, 3:28-4:2.) Plaintiffs cite Simmons v. Ghaderi, 44 Cal. 4th 570 (2008) for the proposition that
8 any waiver of the mediation privilege must be express and not implied by conduct. Moreover,
9 Plaintiffs note that since Sona and Jack repudiated the settlement agreement in the underlying
10 case, the non-confidentiality clause is not operative in any event.
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2.

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Philadelphia contends that once the settlement agreement was signed by the parties in

Philadelphia's Contentions

13 November 2010, the mediation terminated pursuant to CEC 1125. The settlement agreement
14 completely resolved the dispute between Sona and Jack, and thus any mediation privilege
15 terminated as to the communications after the agreement was signed. Philadelphia contends the
16 post-mediation communications it seeks are relevant to the relationship between Sona and Jack
17 and may also be relevant for credibility purposes. Specifically, witnesses for Sona contend the
18 moving of inventory next door by Jack was a "theft" rather than an ongoing family dispute about
19 their respective interests in the boat dealership. Philadelphia contends that conversations between
20 Sona and Jack's counsel regarding the boat inventory for purposes of the settlement agreement
21 may be relevant to the issue of whether there was a theft or an ongoing family dispute. Even to
22 the extent Federal Rule of Evidence 408 would render the Privilege Log communications
23 inadmissible for purposes of liability or damages, it may still be offered for other purposes such as
24 proving bias or prejudice of a witness.
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3.

26

Rule 26(b) of the Federal Rules of Civil Procedure establishes the scope of discovery and

Discussion

27 provides in pertinent part that any non-privileged material "that is relevant to any party's claim or
28 defense" is within the scope of discovery. Fed. R. Civ. P. 26(b). "The party who resists discovery
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1 has the burden to show that discovery should not be allowed, and has the burden of clarifying,
2 explaining, and supporting its objections." Oakes v. Halvorsen Marine Ltd., 179 F.R.D. 281, 283
3 (C.D. Cal. 1998).
4

"Mediation confidentiality protects communications and writings if they are materially

5 related to, and foster, the mediation." Wimsatt, 152 Cal. App. 4th at 160. To establish whether a
6 communication is protected by mediation confidentiality, the timing, context, and content of the
7 communication must be considered. Id. "Mediation confidentiality is to be applied where the
8 writing, or statement would not have existed but for a mediation communication, negotiation, or
9 settlement discussion." Id.
10

Here, the mere fact that Sona and Jack's counsel communicated about trading financial

11 documents pursuant to the settlement agreement or communicated with Judge Broadman about the
12 settlement agreement more than a month after the mediation and settlement is not sufficient to
13 show these communications were confidential under CEC 1119 or were made "pursuant to"
14 mediation.
15

In Long Beach Memorial Medical Center v. Superior Court, the court determined post-

16 mediation settlement discussions were not subject to the confidentiality provision of CEC Section
17 1119. 172 Cal. App. 4th 865, 875 (2009). This case involved a medical negligence action filed by
18 a minor patient by and through her guardian ad litem (the "plaintiffs") against physicians, a
19 hospital, and hospital staff. After two unsuccessful mediations, a subsequent settlement agreement
20 was made between the plaintiffs, the hospital, and a defendant nurse's employer. Days after this
21 settlement, however, two defendant physicians – who discovered they were not included in the
22 terms of the hospital's settlement with the plaintiffs – offered the plaintiffs $200,000 "as separate,
23 additional, new money" in return for dismissal of the suit against them. Id. at 871. The defendant
24 physicians then sought a good faith determination of their settlement agreement with the plaintiffs,
25 which would prevent the hospital from seeking contribution from the defendant physicians. The
26 question on appeal was whether the trial court abused its discretion in finding the defendant
27 physicians' settlement with the plaintiffs was made in good faith. The court considered evidence
28 and testimony between the parties following the mediation sessions. It concluded that while the
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1 mediation confidentiality statute precluded the introduction of evidence or testimony from the
2 mediations, "the record of negotiations conducted after the mediation concluded indicates here that
3 the physicians' settlement with the plaintiffs was designed to benefit the physicians at the expense
4 of the interests of the hospital and (the defendant nurse's employer)."

Although the

5 communications considered by the court in Long Beach Memorial Medical Center would not have
6 occurred but-for the prior mediations, that did not automatically extend the scope of the mediation
7 confidentiality under CEC Section 1119. The same is true of the post-mediation communications
8 in this case – the mere fact these communications arose as a result of the mediation and settlement
9 does not mean they were made "pursuant to" the mediation and are thus confidential.
10

Further, the mediation in this case terminated pursuant to CEC Section 1125 upon

11 execution of the settlement agreement. The settlement agreement fully resolved the dispute
12 between Jack and Sona even though a financial reconciliation was to be completed after settlement
13 by the parties' accountants. The settlement agreement provided for a method to resolve any
14 disputes about the financial reconciliation by requiring further proceedings before Judge
15 Broadman to finally decide the dispute.

Although the parties to the settlement agreement

16 apparently never sought to enforce it and apparently abandoned it, Plaintiffs present no argument
17 why the limitation to the scope of the confidentiality provision of CEC 1125 does not apply to the
18 post-mediation communications at issue here. Plaintiffs’ contention that the settlement agreement
19 was unenforceable is a legal conclusion. Plaintiffs offer no argument why it was unenforceable, or
20 that the parties formally agreed to rescind the agreement, or that a court found the agreement to be
21 unenforceable.
22

Beyond the temporal-scope limitations to the mediation confidentiality set forth in Section

23 1125, Plaintiffs have failed to establish the necessary nexus between the post-mediation
24 communications sought by Philadelphia and the confidential communications during the course of
25 the mediation. As the Court explained at the hearing on February 11, 2015, the mere fact that Jack
26 and Sona's counsel corresponded by email more than a month after the mediation and settlement
27 agreement does not mean the communications were necessarily made pursuant to the mediation.
28 Plaintiffs were instructed at the February 2015 hearing that any refusal to produce these
14

1 communications must be accompanied by an explanation of the context and general content of the
2 communications that specifically linked the communications to the mediation session. Wimsatt v.
3 Super Ct., 152 Cal. App. 4th at 160-61. Other than asserting the emails and letters would not have
4 been composed and sent but for the mediation – presumably because the parties would not have
5 reached a settlement agreement absent the mediation or agreed to produce financial records –
6 Plaintiffs have failed to meet their burden of establishing the existence of a privilege under CEC
7 Section 1119. Despite numerous instructions to do so, Plaintiffs have not made the necessary link
8 between the post-mediation/post-settlement communications and the mediation itself other than a
9 sweeping generalization that the communications arose pursuant to the mediation.
10

In Wimsatt, the plaintiff ("Kausch") in a legal malpractice action against the law firm of

11 Magana, Cathcart & McCarthy and its attorney William H. Wimsatt (collectively "Magana")
12 alleged among other things that Magana breached its fiduciary duty to Kausch by submitting an
13 unauthorized settlement demand to the opposing party during the course of an underlying personal
14 injury case in which Magana represented Kausch. 152 Cal. App. 4th at 142. Kausch learned of
15 the potentially unauthorized act from a "confidential mediation brief" submitted to a mediator in
16 the underlying personal injury lawsuit. Id. This mediation session was held in January 2006 and
17 the case did not settle; another mediation was scheduled for April 2006. The defense counsel
18 ("Brotzen") prepared a confidential mediation brief for the second mediation which included a
19 statement that Kausch's counsel had purportedly communicated a settlement demand in the
20 amount of $1.5 million. Id. at 143. A second lawyer for Kausch ("Goldstein") responded to
21 Brotzen's mediation brief through email and stated that the $1.5 million dollar settlement demand
22 had not been made to Goldstein's knowledge. Brotzen responded to Goldstein via email stating
23 that he had heard that demand from Wimsatt who made the remark during a telephone conference
24 with Brotzen. Goldstein asked Wimsatt about the demand, and Wimsatt responded that he did
25 have a discussion with Brotzen about a month earlier, but he did not make a demand. Wimsatt
26 stated he told Brotzen he had re-evaluated damages and thought a demand for half of Kausch's
27 original demand was more in order, but he also told Brotzen that he, Wimsatt, had no authority to
28 reduce the original demand. The second mediation followed a day after this email exchange
15

1 between Wimsatt and Goldstein, and the underlying case settled.
2

A few months later, Kausch filed a malpractice action against Magana alleging that

3 Magana had lowered the settlement demand by more than one half and impaired Kausch's ability
4 to achieve the desired result in mediation – which concluded with a settlement much less than he
5 would have received had Magana not reduced his settlement demand. At deposition in the
6 malpractice action, Wimsett repeatedly denied that he ever lowered the settlement demand and he
7 objected to all questions relating to the mediations based upon mediation confidentiality. Kausch's
8 attorney informed Wimsatt that he intended to depose Brotzen on the conversation prior to the
9 second mediation wherein Kausch's settlement demand was reduced to $1.5 million. Magana
10 moved the court for a protective order to prevent Kausch from obtaining this and other discovery
11 arguing that, in relevant part, the conversation between Wimsatt and Brotzen in which Wimsatt
12 allegedly lowered the settlement demand on the eve of mediation was covered by the mediation
13 privilege. The trial court denied the protective order and refused to seal the discovery documents
14 pursuant to the mediation privilege. Magana filed a petition for writ of mandate.
15

The appellate court determined the mediation privilege was not established as it related to

16 the telephone conversation between Wimsatt and Brotzen the month before the second mediation:

21

Magana has not shown that the purported conversation was made for the purpose
of, or pursuant to, the mediation. Rather, there is evidence that it was made during
a telephone call "scheduling the expert depos and touching on whether a second
mediation conf[erence] would be worthwhile." This evidence suggests the
conversation occurred during a "discovery conversation. . . and the statement could
have been made, even if there was to be no mediation. If so, the statements were
communications, negotiations, and settlements made in the regular course of the
litigation, not for the purpose of, in the course of, or pursuant to a mediation."

22

The same reasoning is analogously applicable here. The post-settlement emails and letter

17
18
19
20

23 conversations regarding the parties' positions with respect to the financial reconciliation were
24 conducted more than a month after the mediation terminated and the settlement agreement was
25 signed, just as Brotzen and Wimsatt's conversation occurred over a month before the second
26 mediation. The financial reconciliation discussions here do not appear different from those the
27 parties would generally have engaged in when setting forth their arguments about the financial
28 evidence during the course of litigation – indeed they contemplated disputes over this financial
16

1 reconciliation. These conversations relate to completing the financial reconciliation portion of the
2 settlement agreement and are not negotiations during the course of or pursuant to a mediation.2
3

Moreover, the Court notes Plaintiffs' significant delay in asserting the mediation privilege

4 and providing a privilege log. Pursuant to Federal Rule of Civil Procedure 34, a party has 30 days
5 to respond to a request for production that either states that inspection and related activities will be
6 permitted as requested or state an objection, including the reasons. Fed. R. Civ. P. 34(b)(2)(A)7 (B). Under Rule 26(b)(5)(A), when claiming a privilege, a party must expressly make the claim
8 and then describe the nature of the documents, communications, or other tangible things not
9 produced or disclosed without revealing the information itself but yet enabling the other party to
10 assess the privilege claim. Fed. R. Civ. P. 26(b)(5)(A).
11

In Burlington Northern & Santa Fe Ry. Co. v. United States, 408 F.3d 1142, 1149 (9th Cir.

12 2005), the court analyzed the notice requirement under Rule 26(b)(5) in conjunction with Rule
13 34's 30-day deadline. The court held that inserting a "boilerplate" objection into a response is
14 insufficient, but with regard to privilege objections within the 30-day period, the court rejected a
15 per se rule that would deem a privilege automatically waived if not asserted within the 30-day
16 period. The court clarified that detailed objections within a privilege log provided outside the 3017 day limit may be sufficient, depending on various factors weighed as part of a "holistic" case-by18 case analysis. Burlington Northern, 408 F.3d at 1149-50. The factors to be considered include the
19 degree to which the objection or assertion of privilege enables the litigant seeking discovery and
20 the court to evaluate whether the withheld documents are privileged; the timeliness of the
21 objection and the accompanying information about the withheld documents; and the magnitude of
22 the document production and other particular circumstances that make responding to discovery
23 unusually easy or unusually difficult.
24

As it pertains to RFP No. 16, the original document request was served by Philadelphia in

25 June 2014. No response to RFP No. 16 was made within 30 days of that request, and no objection
26
27
28

2

With respect to Federal Rule of Evidence 408, even to the extent the evidence arose out of a settlement negotiation,
Philadelphia maintains the evidence may be admissible for a purpose other than liability or damages. This is
sufficient for purposes of discovery, but nothing in this order should be construed as a decision as to the admissibility
of any evidence under Federal Rule of Evidence 408.

17

1 was stated. In September 2014, the Court ordered Philadelphia to review and determine what
2 discovery requests were still outstanding and to reassert any requests for production that had not
3 been properly responded to by Plaintiffs. Thus, on September 29, 2014, Philadelphia re-asserted
4 RFP No. 16. Plaintiffs' response on October 13, 2014, stated only an unspecified "objection" and
5 then stated Plaintiffs denied they entered into an enforceable settlement agreement on November
6 10, 2010. This was not an assertion of the mediation privilege under CEC Section 1119. Even if
7 it were, it identified no documents withheld pursuant to a privilege. When the parties appeared
8 again for an informal conference in November 2014, Plaintiffs argued the documents were
9 privileged under CEC Section 1119. The Court required Plaintiff to produce documents pursuant
10 to RFP. No. 16 and indicated that if Plaintiff had a privilege objection, it was to be made
11 specifically and accompanied by a privilege log by no later than December 12, 2014. The
12 privilege log was provided on December 12, 2014, but it was later supplemented – out of
13 compliance with the Court's November 26, 2014, order – in January 2015 with communications
14 Plaintiffs' counsel belatedly uncovered.
15

At the hearing in February 2015, the Court explained that because the description of the

16 documents in the Privilege Log did not provide any link between the disputed post17 mediation/post-settlement communications and confidential communications at the mediation
18 itself, Plaintiffs had not adequately established the withheld communications were covered by the
19 privilege. The parties were ordered to meet and confer again and Plaintiffs were instructed that
20 any reassertion of the privilege with regard to these documents must describe the link between the
21 communications and the mediation itself beyond just a temporal relationship. Plaintiffs were
22 unable to articulate a sufficient link in their joint statement filed on March 9, 2015; rather, they
23 simply reasserted that, but for the mediation and settlement, the parties would not have been
24 discussing the financial reconciliation and thus those post-settlement communications were made
25 "pursuant to" the mediation.
26

Conversations about financial-reconciliation evidence post-settlement that were subject to

27 contractual arbitration appear attenuated from confidential communications made during the
28 mediation itself. As the financial reconciliation was not completed at the mediation, and the
18

1 parties had not yet traded all documentation regarding the reconciliation, what connection post2 settlement discussions about that financial reconciliation had to confidential mediation
3 communications is not obvious on the face of the Privilege Log descriptions. Moreover, the fact
4 that the mediation had terminated pursuant to CEC Section 1125 after the settlement agreement
5 was signed creates another hurdle to establishing a nexus between post-settlement
6 communications and the mediation for purposes of confidentiality. Finally, Plaintiffs have not
7 established that the November 2010 settlement agreement was unenforceable; rather, it appears the
8 settlement was simply abandoned by the parties.
9

Privilege Log Nos. 30-33, 35-37, 40-42 refer to communications about a "mediation" in

10 April 2011 before Judge Broadman, but Philadelphia has established, pursuant to state court
11 records and attorney billing records, that what took place before Judge Broadman in April 2011
12 was a contractual arbitration proceeding pursuant to the parties' November 2010 settlement
13 agreement. Plaintiffs have not rebutted this evidence or offered another explanation as to why this
14 proceeding was described as a "mediation" proceeding in the Privilege Log – Plaintiffs simply
15 reassert that this series of communications arose out of the settlement agreement that provided for
16 a financial reconciliation proceeding before Judge Broadman and thus these communications all
17 arose out of the mediation where the settlement was formed.
18

Finally, in light of the factors identified by Burlington Northern, the Court has given

19 Plaintiffs significant latitude to assert a mediation privilege in the first place and the record is
20 sufficient to permit the Court to find the privilege waived. The initial RFP was propounded in
21 June 2014 and a privilege log was not served on Philadelphia until December 2014, and then
22 supplemented without explanation in January 2015. Not only was the mediation privilege not
23 asserted until November 2014, nearly 5 months after the initial RFP was served, but a complete
24 privilege log was not served until January 2015 – out of compliance with the Court's order.
25 Additionally, the Court has offered Plaintiffs repeated opportunities both in briefing and at the
26 February 2015 hearing (as well as in two informal conferences in September and November 2014)
27 to establish a link between the post-settlement communications about financial reconciliation and
28 the mediation itself, but Plaintiffs have been unable to set forth a sufficient nexus. In sum, the
19

1 Court has provided Plaintiffs abundant opportunities to meet their burden to establish the
2 mediation privilege applies to the withheld communications, and they have failed to do so.
3

For these reasons, the disputed communications in Privilege Log Nos. 1-10; 12-17; 20-22;

4 28-29; 31-33; 35-37; and 40-42 shall be produced by Plaintiffs; Privilege Log No. 30 shall NOT
5 be produced. Out of an abundance of caution, Plaintiffs may redact from these communications
6 any statement that directly implicates a confidential communication made during the November
7 2010 mediation – to the extent any such statement exists. The audio tape of the arbitration
8 proceeding before Judge Broadman in April 2011 shall NOT be produced as a transcript of this
9 proceeding is listed at Privilege Log No. 42, and the audio tape is repetitive of that transcript.
10 Moreover, the transcript is easily redactable while the audio recording is not.
11

IV. CONCLUSION AND ORDER

12

For the reasons set forth above, IT IS HEREBY ORDERED that:

13

1.

Within 10 days of the date of this order, Plaintiffs shall produce the disputed

14

communications identified in the Privilege Log Nos. 1-10; 12-17; 20-22; 28-29; 31-

15

33; 35-37, and 40-42;

16

2.

Plaintiffs may redact from these documents any communication that directly

17

implicates a confidential communication that was made during the November 2010

18

mediation; and

19

3.

20

Privilege Log No. 30 shall NOT be produced as it is duplicative of Privilege Log
No. 42.

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22
23

IT IS SO ORDERED.
Dated:

April 7, 2015

/s/ Sheila K. Oberto
UNITED STATES MAGISTRATE JUDGE

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