ZVI Construction Company, LLC v. Franklin Levy & another
The Appeals Court recently enforced the important policy of honoring the right of contractual and statutory confidentiality in mediation, as provided by M.G.L., ch. 233, §23C. The statute states that:
Any communication made in the course of and relating to the subject matter of any mediation and which is made in the presence of such mediator by any participant, mediator or other person shall be a confidential communication and not subject to disclosure in any judicial or administrative proceeding…
Meaning, that what is said in mediation should stay there, freeing parties of the inhibiting worry that their factual or negotiating concessions may come back to haunt them in court, should their mediation fail to achieve complete resolution.
The plaintiffs in October 6th’s ZVI Construction Company, LLC v. Franklin Levy and another, challenged this important principle by demanding that the court write in a “fraud exception” to confidentiality. The Appeals Court declined, upholding trial court decisions to strike statements made in mediation by counsel from pleadings, and later dismissing all claims based on the defendant’s mediation conduct.
In a case of first impression, the Appeals Court relied on the absence of any fraud exception in the statute and the explicit exclusion of a fraud exception in the Uniform Mediation Act of the Uniform Laws Commission, which is the law in 11 states and the District of Columbia, though not Massachusetts. The court also discussed the celebrated case Facebook, Inc. v. Pacific N.W. Software, Inc., a Ninth Circuit Court of Appeals decision, in which the federal courts declined to relieve the Winklevoss twins of their mediated settlement by reason of Mark Zuckerberg’s alleged overstatement of Facebook’s value.
Unfortunately, we worry that the Appeals Court diluted its message. In discussing the facts of its case, the court observed that:
[W]e would be hard pressed to find that such an exception exists in the circumstances of this case, where there is a confidentiality agreement, negotiated between sophisticated people with the assistance of legal counsel… (Footnote omitted.)
We are equally hard pressed to imagine that the Appeals Court intended to imply that a fraud exception might exist in other circumstances.