Enforceability of NDAs

Following up on my post on November 27, 2021, regarding mediating Non Disclosure Agreements (NDAs), two scholars have just written an article for mediate.com on the legal enforceability of NDAs. They cite only a few cases, but conclude that courts are signaling “a willingness to rein in the most egregious abuses” of NDAs where they are overly broad. Of particular interest is a recent Federal case from the 1st Circuit, TLS Mgmt. & Mktg. Servs., LLC v. Rodriguez-Toledo, 2020 WL 4187246 (1st Cir. July 21, 2020), where the appellate court refused to enforce the NDA because it was overly broad. In my November post, I lamented the dearth of cases addressing this issue, so I appreciate this article by Colin Rule and Brittany Nunn.

It seems like the better remedy for overly-broad NDAs is for courts to refuse to enforce them, rather than for legislatures to outlaw whole categories of NDAs  (as has happened in several states, as I note in my November post), or for mediators to promise not to facilitate an agreement that contains an NDA (as Professor Julie Macfarlane advocates). Another popular remedy is for organizations to sign a pledge not to use them, as with universities in the UK and Christian organizations in the U.S. At any rate, we will surely be hearing more about NDAs, and mediators’ role in facilitating agreements containing them, in coming months.

Universal Disclosure Protocol for Mediation

Michigan mediators have been wrestling with what they must disclose to potential mediation parties, especially since the Hartman case. That was the divorce case where the mediator did not disclose to the husband or his attorney that she was good friends with the wife’s attorney—such good friends that she flew to Florida to spend a week at wife’s attorney’s condo, with their respective spouses, before the months-long mediation finished. When the husband filed a grievance against the attorney-mediator, the Attorney Discipline Board determined that Michigan’s Standards of Conduct for Mediators were so broad regarding what constitutes a conflict of interest that it was impossible for an attorney to know “what kind of prior relationship will subject the mediator to a charge of an unethical conflict of interest.”

Some of us mediators think that, however broad the standard may be, a mediator should definitely disclose her vacation with one side’s attorney during the pendency of the mediation. A sub-committee of the State Bar’s ADR Section is currently considering an amendment to the Standards of Conduct for Mediators to make this clearer.

Michigan’s Standards of Conduct for Mediators are based on the Model Standards of Conduct for Mediators, which have a lengthy provision on Impartiality followed by another lengthy provision on Conflicts of Interest.

Meanwhile, mediators from around the world have developed what they call the Universal Disclosure Protocol for Mediation. The provision on Conflict of Interest is brief and succinct:

C1.1 The mediator should clarify her or his independence and impartiality and reveal any relevant relationships.

Would that kind of direction have prompted the mediator in the Hartman case to disclose to the husband her friendship with the wife’s attorney? Would she have recognized this as a “relevant relationship,” even if she did not think it amounted to a conflict of interest? Even if it still would not have guided the Hartman mediator, I appreciate the efforts expended by these mediators to distill the essence of mediator disclosure into a principle that any mediator can follow.

 

 

 

https://universaldisclosureprotocolmediation.com/the-protocol/

 

Confidentiality in Mediation: Tyler v Findling

The Michigan Supreme Court upheld the confidentiality of mediation in a case decided last year, Tyler v Findling. The facts were somewhat unusual; the statement in question was made by one attorney (Mr. Findling) to another attorney, outside the presence of the mediator or the other mediation participants, and it did not concern the substance of the mediation, but rather the competence of another attorney. The attorney whose reputation was questioned, Mr. Tyler, sued for defamation, and the defendant claimed mediation confidentiality to protect his statement. The trial court agreed that MCR 2.412, regarding mediation confidentiality, protected the allegedly defamatory statement; the Court of Appeals reversed, determining, among other things, that Mr. Findling was not a party to the mediation. The Supreme Court interpreted MCR 2.412 broadly to cover this situation as well.

My colleague Lee Hornberger has written an excellent detailed summary of this case as well as of the state of mediation confidentiality in Michigan. It was published recently in the Oakland County Legal News. 

Disclose Does Not Mean “Disqualified”

Mediators and arbitrators are required to disclose to potential parties any facts that might make them appear impartial. The arbitration statute in Michigan requires potential arbitrators to disclose “any known facts that a reasonable person would consider likely to affect the impartiality of the arbitrator…” including a financial or personal interest in the outcome of the arbitration, or an existing or past relationship with any party, their counsel, a witness, or another arbitrator. MCL 691.1692. Mediators are required, pursuant to the Michigan Standards of Conduct for Mediators, to disclose conflicts of interest and grounds of bias or partiality reasonably known to the mediator. Standard III.C. A conflict of interest is defined as “a dealing or relationship that could reasonably be viewed as creating an impression of possible bias or as raising a question about the impartiality or self-interest on the part of the mediator.” Standard III.A. Michigan’s Standards of Conduct for Mediators are very similar to the Model Standards.

The paradigm is that the potential neutral discloses sources of possible bias, then the parties decide whether the connection disclosed is so tenuous as to be irrelevant, or so serious as to disqualify the person from serving as their neutral. In sum, the neutral’s job is to disclose; the parties’ job is to decide whether to appoint (or to remove, if the disclosure occurs when the process is already underway).

The Court of Appeals seems to have gotten this confused in an arbitration case, Wilson v Builders, unpublished per curiam opinion of the Michigan Court of Appeals, issued November 19, 2020 (Docket No. 351560). The case involved a construction dispute; each side was represented by counsel, and each side selected an arbitrator, then the local judge appointed the “neutral” arbitrator. The neutral arbitrator, Mr. Darbee, had a long-standing friendship with defendant builder’s attorney, Mr. Sheppard, which Mr. Darbee apparently failed to disclose. Over the previous ten years, they had frequently engaged in group lunches and occasional social events through the local bar association. They had gone together with a local orthodontist to a couple of college basketball games. Their paths had crossed when Darbee was on the municipal zoning board of appeals and Shepherd was city attorney. When Darbee had a dispute with his water bill, his attorney selected Shepherd as their neutral case evaluator. The two were rumored to have lunch together in local restaurants, and indeed, they lunched together during the arbitration proceedings.

The plaintiff evidently did not learn of any of this until after the award (he won, but he received less than a quarter what he had demanded). Plaintiff asked the trial court to vacate the award due to the arbitrator’s bias. He said he never would have agreed to Mr. Darbee had he known all this. The trial court refused, noting that Bay City was “a small community” where “lawyers rub shoulders and change sides on a daily basis,” concluding that Darbee was impartial. (Recall that the trial judge is the one who appointed Mr. Darbee to this panel.) The plaintiff appealed.

The Court of Appeals affirmed. The Court agreed that Arbitrator Darbee had a “relationship” with Attorney Sheppard, but determined that the “the type of relationship contemplated by the statute is one implicating a personal or financial interest, rather than the loose professional association between Darbee and Sheppard.” The court opined that interpreting the statute broadly to include professional relationships “would prohibit most attorneys from acting as arbitrators and would discourage attorneys from participating in bar events.”

No, it wouldn’t. All the statute requires is disclosure, not disqualification. Neutral discloses, parties decide. The plaintiff here might well have determined that, all things being equal, Mr. Darbee was still the best candidate for the job. But the plaintiff was deprived of the opportunity to make that decision.

In a twist of logic, the Court of Appeals says that the fact that the arbitrator had lunch with defense counsel during the proceedings is evidence that their association did not affect the arbitrator’s impartiality, because neither party objected. Impartiality is not proven by whether a party objected. If plaintiff’s counsel knew at the time the extent of their friendship, perhaps he would have objected. Lacking context, he may have decided to overlook this one incident to avoid jettisoning the arbitration. Far from being evidence of impartiality, it’s further evidence that there was a friendship here that should have been disclosed at the outset.

The Court of Appeals’ comments about how a broad interpretation of “relationship” would mean that no one in the bar could serve as a neutral are similar to the concerns expressed by the Attorney Discipline Board (ADB) in a case regarding a mediator’s failure to disclose a close friendship with one side’s attorney. The ADB worried that, “In the legal profession, an ‘appearance of conflict of interest’ can be found wherever anybody looks,” so requiring neutrals to disclose every connection would discourage the collegial relationships that enable attorneys to resolve their differences amiably.

The ADB, like the Court of Appeals, confuses disclosure with disqualification. In fact, following this logic, if all attorneys disclosed their relationships, they would all have the same “disadvantage” and the playing field would be leveled. The Court of Appeals almost sounds patronizing when it quotes the trial judge’s observation that “lawyers are able to separate themselves and act professionally and make professional decisions without being affected by personal relationships.” Both courts sound like they’re saying that attorneys don’t need to disclose friendships because they can be trusted to do the right thing.

No, they can’t, and that’s why we have rules compelling disclosure. Neutral discloses, parties decide.

Good advice on how to say sorry

I often blog about public apologies–the Washington Post’s list of top ten celebrity apologies for 2021 is a treasure trove–, but what we really all need help with are private apologies, the ones we need to make to friends and colleagues as we go through life. A podcast on NPR, “Life Kit: How to say sorry,” succinctly summarizes both what to say, and what not to say.

The advice comes from Harriet Lerner, a clinical psychologist who has written a book about apologies. First, some things not to do: no apology should contain the word “but,” an observation I learned from Peacemaker Ministries decades ago that bears repeating. She also discourages “over-apologizing,” making too big of a deal over a small offense. She reminds us not to make the apology about ourselves, and to listen deeply to the hurt party’s anger and pain so we can express how we understand the impact of what we’ve done.

“Understand that, for something serious, an apology is a long-distance run.” This a wonderful metaphor for the time it may take for an apology to take root. Indeed, this is why Peacemaker Ministries recommends that the final step of our apology is to “allow time.”

Indeed, the celebrity apologies fall short for some of the reasons Lerner identifies: the offender fails to acknowledge the offensive behavior, and/or the apology is addressed to “anyone I may have offended,” making the apology seem to blame the offended party/parties.

The main point is that it is difficult to do apologies well, and it’s worth it to take some time to think ahead about what to say, and what not to say.

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