Last week, the U.S. Supreme Court held that courts must enforce arbitration agreements even if the plaintiff’s Complaint contains nonarbitrable claims. In KPMG LLP v. Cocchi, 565 U.S. ___ ( 2011) the Fourth District Court of Appeal of the State of Florida upheld a trial court’s refusal to compel arbitration in a lawsuit involving claims brought against the auditing firm KPMG LLP (“KPMG”) by investors owners of a limited partnership (“Respondents”) who were defrauded by Bernie Madoff. Respondents alleged four causes of action: negligent misrepresentation; violation of the Florida Deceptive and Unfair Trade Practices Act; professional malpractice; and aiding and abetting a breach of fiduciary duty. KPMG filed to a motion to compel arbitration based on the audit agreement that existed between itself and the Respondents. That agreement provided that “[a]nydispute or claim arising out of or relating to . . . the services provided [by KPMG] . . . (including any dispute or claim involving any person or entity for whose benefit the services in question are or were provided) shall be resolved” either by mediation or arbitration. The issue was whether the Respondents’ claims were derivative of the partnership, (therefore, arbitrable) or direct (nonarbitrable). The trial court denied KPMG’s motion and the appellate court affirmed, holding that the negligent misrepresentation and consumer fraud claims were direct claims thus, not subject to the arbitration agreement. The Court of Appeal, however, did not address the professional malpractice and the breach of fiduciary duty claims. Citing Dean Witter Reynolds Inc. v. Byrd, 470 U. S. 213, 217 (1985), the Supreme Court stated that “when a complaint contains both arbitrable and nonarbitrable claims, the [Federal Arbitration] Act requires courts to compel arbitration of pendent arbitrable claims when one of the parties files a motion to compel, even where the result would be the possibly inefficient maintenance of separate proceedings in different forums.” The Court further explained that “[a] court may not issue a blanket refusal to compel arbitration under the Federal Arbitration Act merely on the grounds that some of the claims could be resolved by the court without arbitration.” Accordingly, the Supreme Court vacated the decision and remanded for the appellate court to determine whether the other two claims require arbitration. Technorati Tags: law, ADR, arbitration

Last month, the Association for Conflict Resolution (“ACR”) adopted its Model Standards for Mediator Certification Programs. The goal of the Standards is to guide entities which have or wish to institute mediation certification programs. There are twenty-four standards organized into six sections: Foundational Requirements, Transparency, Ethics, Diversity, Program Administration, and Due Process. The appendix provides background and definitions. You may download the Standards here.

In Young Mens Christian Assoc. of Greater El Paso, Texas et al. v. Garcia, No. 08-11-00096-CV (Tex. App. – El Paso Oct. 26, 2011) Jose G. Garcia brought discrimination and retaliatory discharge action against Young Mens Christian Association of Greater El Paso, Texas and Rio Grande Valley, YMCA of Greater El Paso, YMCA of El Paso, and Fred & Maria Loya YMCA (collectively referred to as the “YMCA“), Garcia’s former employer. YMCA moved to compel arbitration pursuant to a dispute resolution provision found in its nearly seventy-page personnel policy manual. Garcia argued in trial court that there was no arbitration agreement because the personnel policy manual stated that it was not a contract and did not alter the terms of employment. The trial court denied YMCA’s motion to compel arbitration and YMCA brought an interlocutory appeal. The El Paso Court of Appeals explained that a party seeking to compel arbitration under the Federal Arbitration Act (“FAA”) must establish: (1) the existence of a valid arbitration agreement, and (2) that the claims asserted are within the scope of the agreement. In determining the validity of agreements to arbitrate, courts generally apply ordinary state law principles governing the formation of contracts. The court further said that Garcia’s argument challenged two of the five elements essential to the formation of a valid contract: (1) a meeting of the minds and (2) each party’s consent to the terms. The court held that arbitration provision contained in employer’s personnel policy manual was not a contract and thus did not establish a valid agreement to arbitrate between YMCA and Garcia. Technorati Tags: law, ADR, arbitration  

We came recently came across “The Path Toward A Federal Mediation Privilege: Approaches Toward Creating Consistency for a Mediation Privilege in Federal Courts,” written by Joseph Lipps and published by the American Journal of Mediation. Here is an excerpt: In commencing a mediation, the mediator provides an opening statement promising confidentiality. This promise however is wrought with a complex legal analysis where federal courts have contradicted one another. The courts’ inconsistent analyses have removed predictability with respect to confidentiality during mediation. Although research has not proven a direct link between success in mediation and confidentiality, judges and scholars have accepted that confidentiality is one of the most crucial components to the mediation process. In order to weigh in favor of excluding mediation communications from discovery and evidence, courts must find that trust and confidentiality are crucial to mediation. In determining whether to adopt a federal mediation privilege, consistency is crucial to the process. The federal courts’ varied and inconsistent interpretations of the existence of a mediation privilege hinder both the progress of mediation, and the movement for consistency with the Uniform Mediation Act. The current jurisprudence surrounding mediation leaves mediators unable to comprehensively ensure a mediation privilege. Attorneys are unable to advise their clients on the future effect of mediation, potentially making clients unwilling to mediate. Similar to the attorney-client relationship, there is an important distinction between confidentiality and privilege; this distinction is often conflated. In professional relationships and in the context of mediation, confidentiality is a promise by the mediator to not voluntarily disclose any information communicated during mediation. Privileges however are meant to avoid involuntary testimony in court concerning communications during mediation. Courts and the legislature cautiously enact privileges, because they exclude crucial information from the discovery process and the courtroom. These exclusions hinder the courts’ ability to reach the most just result. Federal Rule of Evidence 408 and its state law counterparts exclude communications during settlement negotiations from evidence in court if the communications prove liability. A privilege is much broader than this evidentiary exclusion. A mediation privilege prevents parties from obtaining information from mediation in discovery. Privileges infringe on the trier-of-fact’s ability to reach a decision, and the courts’ ultimate goal of reaching the truth. Despite the limitations that a privilege imposes on courts, many states have followed the Uniform Mediation Act’s lead in adopting a mediation privilege. The state legislatures which have adopted the UMA believe the importance of trust in mediation outweighs any evidentiary benefit. Although academics and state legislators have embraced the move toward adopting a mediation privilege, federal courts have been less willingness to implement a mediation privilege, resulting in inconsistencies and a lack of predictability. The federal courts’ development of a mediation privilege and its contours has been gradual and restrained. One study has shown, the reason for this slow development in the law is due to courts and practitioners, who continually ignore and fail to raise the issue of a mediation privilege. In approximately one third of all the decisions in the study’s database, courts admitted evidence from communications during mediation. Surprisingly, in many of the courts’ decisions, the courts admitted evidence without a party raising the issue of a mediation privilege, or the court raising the issue sua sponte. As attorneys and judges neglect to address the issue of the mediation privilege, courts miss opportunities to rule on this complex and contentious area of law. The future of the mediation privilege has substantial implications for the future of mediation. The courts should adopt a mediation privilege to ensure predictability and integrity in the mediation process. You may download the full article (free of charge) here.