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The confidential nature of settlement negotiations and mediations are sometimes a bane and sometimes a boon. Learn how to control your own destiny by understanding California's laws of confidentiality.
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Confidentiality in Negotiating Settlement Agreements
Victoria Pynchon, Esq.Settle It Now!!
Dispute Resolution Serviceshttp://negotiationlawblog.com
www.settlenow.com
What Information Subject of Negotiations Can Be
Protected?
Outside the context of litigationFact that Parties
ARE negotiatingTrade Secrets
Trade Secrets Protected by
Law
Technical information Plans, designs and patterns Processes, methods, techniques and
formulas. Computer sofware (programs or source
code) Business Information
Financial information Cost and pricing information Market analyses or forecasts Customer lists Business relationships business opportunities Marketing and advertising plans Personnel information
It’s a trade secret if It derives economic value from
being secret. It took time and money to
develop It is not generally known to the
public its owner exercises reasonable
efforts to keep a secret
Laws Protecting Confidential Proprietary Commercial Information
Constitutional Privacy Protections Uniform Trade Secrets Acts Trade secret is misappropriated if
a person acquires a trade secret
knowing or having reason to know that the trade secret has been acquired by "improper means,"
discloses or uses a trade secret the person has acquired by "improper means" or in violation of a nondisclosure obligation,
discloses or uses a trade secret the person knew or should have known was derived from another who had acquired it by improper means or who had a nondisclosure obligation or
discloses or uses a trade secret after learning that it is a trade secret but before a material change of position.
Why Protect the Confidentiality of
Business Negotiations
Due diligence Freedom to
Brainstorm business opportunities and solutions
Free enterprise Parties’ right to strike
their own deals Parties’ right to be free
from public or other scrutiny
Common Protections for Confidential Settlement
Communications
Evidence of an offer to compromise
and, statements made during an
effort to negotiate a compromise of a disputes claim are
inadmissible in evidence to prove
liability.
Limited Protection for Non-Mediated Settlement Negotiations
• settlement negotiations generally inadmissible to prove liability only – Admissible unless undue prejudice
would outweigh probative value – no guarantee– Rarely restrictions on discovery of
settlement negotiations• Parties often required to file
“confidential” MSC statements • documents filed with Court won’t be
sealed unless the party seeking non-disclosure can prove it would suffer prejudice to legitimate business or proprietary interests.
Enforcing Agreements
Reached During MSC’s
Enforcement by Way of Motion
agreement reached during pending litigation
written stipulation (by the parties) to settle case; or
Oral stipulation (by the parties) to settle in the presence of the court
If parties request, Court may retain jurisdiction to enforce settlement until fully performed.
Confidentiality in Mediation (California)
• Prohibits– Mediator– Participants– From revealing any written
or oral communication made during mediation
• Bars admission in any civil action of– Anything said– Any writing
• Made for the purpose of, in the course of or pursuant to the mediation OR a mediation consultation
• Neither disclose nor subject to discovery
Mediator is Incompetent to
Testify• No mediator “shall be
competent to testify in any subsequent civil proceeding as to any statement, conduct [or] decision occurring at or in conjunction with the proceeding [over which the mediator presided] . . .” with exceptions not relevant here. Evidence Code section 703.5.
Denny Crane Demonstrating the
Meaning of “Incompetence” Under
the Law
Why Confidentiality is So
Important in Mediated
Negotiations
• Fairness– Safeguards present in legal
proceedings (evidentiary and procedural rules) are absent in mediation
– Prevent proceeding from being “gamed”
• “free” discovery• Capitalize on admissions• Catch other side with guard down
• Efficacy– Mediators must be able to draw out
baseline positions and interests– Compromises often require admission
of unprovable facts– Mediators taught to draw out party
feelings of guilt, shame, remorse, etc.
• Mediator Neutrality– If mediator can be a witness, she/he
would have to “turn” on a party whose confidentiality he/she assured & to whom he/she promised to be neutral
• Privacy– Some people are
attracted to mediation BECAUSE it allows them to resolve their disputes in private
– Some are attracted so they can keep proprietary information or trade secrets confidential
Ethics
Deceptive Practices by Parties to Mediation
•Bottom line•Legal positions•Factual support for legal positions•Reasons for negotiation position
•Party interests, needs•Authority given to negotiator•Need to seek greater authority
Deceptive Practices
by Mediator
• separate caucus communications inherently deceptive• mediator “telegraphing” confidential party positions to other side• mediator “predictions” as to:
•Other side’s settlement authority•Other side’s ability to pay•Other side’s evidence or legal positions