“'For 75 years, the courts have interpreted statutes with an eye toward permitting judicial review, not the opposite,' said Justice Stephen G. Breyer."
Read more on Sackett v. Environmental Protection Agency from Damon W. Root of Reason Magazine here.
"When he took on Dick Heller's case, it likely seemed like a lost cause. A good cause, perhaps, but an uphill fight the whole way. Up the steepest hill you can find. The steepest hill that never ends. Yet Alan Gura took it on, and because he did, the Supreme Court reversed its view of the Second Amendment to the Constitution, restoring it to a fundamental right, in District of Columbia v. Heller.
For his efforts, District Court Judge Emmet Sullivan smacked him."
Continue reading at Simple Justice.
"After a run of more than 50 years, redevelopment and tax increment financing for development in California have come to an end."
(See Sheppard Mullin's "Update On Redevelopment Law: The Supreme Court Makes it Official - Redevelopment Is Dead In California".
“'The very purpose of a Bill of Rights was to withdraw certain subjects from the vicissitudes of political controversy, to place them beyond the reach of majorities and officials, and to establish them as legal principles to be applied by the courts. One’s right to life, liberty, and property, to free speech, a free press, freedom of worship and assembly, and other fundamental rights may not be submitted to vote; they depend on the outcome of no elections.'”
Justice Robert Jackson quoted in Timothy Sandefur's comment on "Liberty and federalism in the Individual Mandate cases".
Learn Liberty.org has released this excellent video of Timothy Sandefur discussing "Property Rights in 21st Century America" or, in other words, property rights as human rights.
Thanks go to Gerald J. Russello, editor of The University Bookman, for this excellent review of Constitutional Originalism: A Debate, by Robert W. Bennett and Lawrence B. Solum, in which Messrs. Bennett and Solum present what Mr. Russello describes as "state-of-the-art cases for the two main schools of constitutional interpretation" - originalism and "living constitutionalism."
The California Association of REALTORS takes us "behind the headlines" with this summary of California Senate Bill 458 recently signed into law by Governor Brown, and other recent real estate news:
New short-sale law: Beyond the Headlines (pdf)
The battle line in originalism is between those who believe that the Constitution means what it says, and those who believe that the Constitution means what they say.
Timothy Sandefur reminds us that property is a human right in his “Cornerstone of Liberty: Property Rights in 21st Century America” which contains the following passage:
Thomas Jefferson rephrased the classic [John] Lockean trinity,
‘life,liberty, and property,’ as ‘life, liberty and the pursuit of happiness’ in the Declaration of Independence. Jefferson was making clear that the fundamental rights of mankind include the right to use one’s liberty in pursuit of one’s own goals and that property rights are a manifestation of the fundamental right of liberty. According to Jefferson, ‘[T]he first principal of association’ is ‘the guarantee to every one of a free exercise of his industry, and the fruits acquired by it.’ Life, liberty, and property are essentially the same idea seen from three different time perspectives: the present tense of self-ownership is the right to life; the future tense is the right to liberty, the right to act in the future; and the past tense of self-ownership is the right to property, the right to keep the fruits of our self-investment. As Madison summed it up, ‘The personal right to acquire property, which is a natural right, gives to property, when acquired, a right to protection, as a social right.’”
Sandefur at 55, footnotes omitted, emphasis added.
Natural rights are rights that predate the formation of any government or citizenship. At the time of drafting the Declaration of Independence “these truths” were deemed to be self-evident that we were endowed by our Creator with certain unalienable rights, including “life, liberty and the pursuit of happiness” – or life, liberty and property as described by John Locke, and in the Virginia Declaration of Rights.
Timothy Sandefur's "Cornerstone of Liberty" is excellent, readable, and a vital reference for everyone interested in the origin and protection of human rights.
Equity is a roguish thing. For Law we have a measure, know what to trust to; Equity is according to the conscience of him that is Chancellor, and as that is larger or narrower, so is Equity. ’T is all one as if they should make the standard for the measure we call a “foot” a Chancellor’s foot; what an uncertain measure would this be! One Chancellor has a long foot, another a short foot, a third an indifferent foot. ’T is the same thing in the Chancellor’s conscience.
John Selden (1584–1654)
Kathryn Fort, the Associate Director for the Indigenous Law and Policy Center and Adjunct Professor at Michigan State University College of Law, has posted a draft of her forthcoming article for the Wyoming Law Review entitled "Disruption and Impossibility: New Laches and the Unfortunate Resolution of the Iroquois Land Claims in Federal Court", which chronicles the creation of a new equity defense standard for dealing with Indian land claims.
The "traditional" defense of "[l]aches requires proof of (1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense." Oneida Indian Nation v. County of Oneida, 617 F. 3d 114, 127 Court of Appeals, 2nd Circuit (2010).
In other words, if you delay in asserting your rights for too long, and the other party is prejudiced by your delay, the prejudiced party may defend your claim on the equitable grounds of "laches".
But, as acknowledged by the Second Circuit Court of Appeals, and pointed out by Professor Fort, "[i]t is true that the district court in [the Oneida] case did not make findings that the Oneidas unreasonably delayed the initiation of this action or that the defendants were prejudiced by this delay—both required elements of a traditional laches defense. . . . This omission, however, is not ultimately important, as the equitable defense recognized in [City of Sherrill v. Oneida Indian Nation of NY, 544 US 197 - Supreme Court 2005] and applied in [Cayuga Indian Nation of NY v. Pataki, 413 F. 3d 266 - Court of Appeals, 2nd Circuit 2005] does not focus on the elements of traditional laches but rather more generally on the length of time at issue between an historical injustice and the present day, on the disruptive nature of claims long delayed, and on the degree to which these claims upset the justifiable expectations of individuals and entities far removed from the events giving rise to the plaintiffs' injury." Oneida at 127, emphasis added; see also Fort (pdf) at 2.
After 37 years of litigation, the property rights claims of the Oneida Indian Nation of New York, the Oneida Tribe of Indians of Wisconsin, and the Oneida of the Thames were simply ushered out of court based upon the court's finding of a new equitable defense that applied only to them.
This "new" equitable defense of laches, which requires neither lack of diligence by the party against whom the defense is asserted, nor prejudice to the party asserting the defense, suggests that equity is indeed measured by the length of the Chancellor's foot.
Thank you, Professor Fort, for this important article (pdf).
Thank you, Institute for Justice, for reminding us of the importance of protecting private property rights.
The Witherspoon Institute has selected the occasion of Martin Luther King, Jr. Day to "announce a public preview of a new online academic resource dedicated to natural law and the American tradition."
The new website is Natural Law, Natural Rights and American Constitutionalism.
"The aim of the Witherspoon Institute's project is to create a nonpartisan, educational website on Natural Law, Natural Rights, and American Constitutionalism, which will serve as an online resource center for students, teachers, and educated citizens to learn about the intellectual traditions of natural law and natural rights, particularly within American political and constitutional history."
I encourage you to read their announcement here and bookmark their new site, which looks like an important and necessary contribution to world understanding of our unique American legal system.
Beth Graham's recent post on the "Disputing" blog, entitled "California Supreme Court Holds Attorney-Client Communications Related to Mediation Not Discoverable", reminds us that in matters within the jurisdiction of the California state courts mediated in accordance with California law, confidential means confidential.
Ms. Graham points out that, in its January 13, 2011, Cassel v. Superior Court (PDF) opinion, "[t]he California Supreme Court held Cassel’s private communications with his attorneys related to the mediation were confidential communications protected by California’s Evidence Code and could not be discovered during a legal malpractice lawsuit between the parties."
This extension of California's jurisprudence on mediation confidentiality to attorney-client communications, even in cases of alleged attorney malpractice, is consistent with earlier decisions discussed on this site here (2007) and here (2008).
The Center for the Study of Constitutional Originalism at the University of San Diego School of Law has launched "The Originalism Blog" to be devoted to cataloging and reviewing developments in scholarship and interest in originalism.
"Originalism", in the words of the Center for the Study of Constitutional Originalism, "is the view that the Constitution has a fixed and knowable meaning established at the time of its enactment."
Originalism, in other words, is the idea that the words of our Constitution mean what they say, either what the drafters of the Constitution meant them to say when they wrote them, or what the ratifiers of the Constitution understood them to say when they voted to approve them.
But these are only a few of many possible beginnings to an understanding of the influence of originalism upon Constitutional interpretation.
Hence, the need for "The Originalism Blog."
Connstitutional originalism is the point to which "living constitutionalsim" is the counterpoint, rejected by U.S. Supreme Court Justice Antonin Scalia in the following exchange with Peter Robinson of The Hoover Institution:
"The Constitution that I interpret and apply is not living, but dead."
Is our Constitution living, is it dead, or is it a dead letter?
If I've piqued your interest, I encourage you to take a look at Legal Theory Lexicon 019: Originalism, by Lawrence B. Solum.
And if these questions are as interesting to you as they are to me, you'll want to bookmark The Originalism Blog and return to it often.
"Natural rights [are] the objects for the protection of which society is formed and municipal laws established." --Thomas Jefferson to James Monroe, 1797.
For more information see:
Lawrence B. Solum, Legal Theory Lexicon 065: The Nature of Law; and,
John Finnis, Natural Law Theories (Stanford Encyclopedia of Philosophy).
Memo to North San Diego County Realtors®: The North County Times has just published a report that:
For five years, San Marcos city officials kept from public view a color-coded map showing varying degrees of risk to residents from catastrophic wildfires ---- including two neighborhoods judged to be in "extreme" danger of property loss, death or injury ---- for fear insurance companies would use the information to justify dropping policies or hiking rates, officials have acknowledged.
In 2005, San Marcos commissioned a study to assess wildfire risks for the city's communities. The study rated two communities as having "extreme" and five as having "very high" risks during wildfires.
City officials said in a series of recent interviews that they decided not to publicly release a color-coded map from the study that marked Coronado Hills and neighboring Attebury in a shade of deep red ---- signifying extreme wildfire hazard ---- opting instead to circulate a version showing all wildfire areas in a uniform shade of green.
(EXCLUSIVE: Worried about insurance, San Marcos officials kept fire risk map secret)
Are the properties referred to in this article at risk of wildfire damage? Potentially.
Are Realtors® negotiating purchases and sales of these properties at risk of liability for failing to disclose the information contained in this article? Absolutely.
If you are an agent, broker, or seller involved in any transaction concerning the properties located in any of the areas referred to in this North County Times article, you will want to have a copy of this article in your file initialed by the buyers and sellers. Consider it liability insurance.
Andrew Leonard reminds us, in his Salon magazine article entitled "A foreclosure mess of their own design - How the real estate finance industry wrecked itself: The sorry tale of the Mortgage Electronic Registration System", of the integral role played by the Mortgage Electronic Registration Systerm (MERS) in precipitating the current real estate financial crisis, and other reports predict years being added to the real estate market recovery by foreclosure "paperwork problems".
Is paperwork standing in the way of the real estate market returning to "normalcy"? Yes, and rightfully so.
In the words of a federal bankruptcy judge cited by Christopher L. Peterson, Associate Dean of Academic Affairs and Professor of Law, University of Utah, SJ. Quinney College of Law (and quoted by Mr. Leonard):
Lest one think that the ... Courts have exalted form over substance, it is critical to note several concepts.... [W]e are dealing with interests in Land -- not a security interest in an inventory of plumbing fixtures, in chinchillas, in canned corn, or in a lawn and garden tractor. Land. Land is certainly the asset which people deem to be their most important "possession": There is no other "thing" more important historically in our culture tha[n] an interest in land, whether that interest be in a condominium, in a house, or in farm. Land. The transferring of interests in land has been entrusted to a system of records that allows people to be certain that this single most important asset in their lives is indeed going to be theirs, and that the encumbrances recorded with respect to this asset are in fact accurate and valid. It is therefore absolutely imperative that transactions in land be guaranteed to vest title in the people who invested in those transactions, and that the investors know definitively the interests in the land in which they invest which may affect their interests in this singularly important asset. The record of land transactions in the Recorder's Office provides this critical assurance. Perhaps the most critical aspect of this "chain" of assurance is to guarantee as much as possible on the face of an instrument that a person purported to have signed a document which affects interests in land actually did sign that document.
(See A foreclosure mess of their own design; and Christopher L. Peterson, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System, University of Cincinnati Law Review, Volume 78, Number 4, 1395 - 1396 (2010).)
MERS was a creation of convenience designed to facilitate the recording and re-recording and assignment and transfer of millions or mortgages and deeds of trust during the run up to the current financial crisis. (Its involvement has been reported earlier on this site in the post Security follows the note, but only the note can foreclose.)
The MERS chickens have now come home to roost, and the legal process due borrowers, lenders and investors in this international real estate debacle will, indeed, take a very, very long time. Their rights cannot be ignored for the efficiency's sake.
In celebration of Constitution Day, September 17, I commend to you the wisdom of our Founding Fathers:
"It is up to your generation to become the army of liberation."
Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and growth of free institutions and of our civilization.
So begins the preamble to the Code of Ethics and Standards of Practice of the National Association of Realtors®. This preamble, of course, is not a new statement of principle, but a restatement of one of the founding principles of the United States of America.
On June 12, 1776, the Virginia Constitutional Convention adopted the Virginia Declaration of Rights, written by George Mason, which begins with the statement:
That all men are by nature equally free and independent and have certain inherent rights, of which, when they enter into a state of society, they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.
(Emphasis added.) 
The Virginia Declaration of Rights was drawn upon by Thomas Jefferson in his drafting the Declaration of Independence, and by James Madison in his drafting the Constitution and Bill of Rights (the first ten amendments to the Constitution).
The danger of government interference with the free enjoyment of private property rights was, in other words, foreseen from the first moment of the founding of this Nation. And, as I've posted recently on this site, the danger of public infringement of private property rights is growing.
How far is your Supreme Court willing to go in standing up between you and your Government to protect your private property rights? In response to this question, I recommend the excellent article by Ilya Somin, an Associate Professor at George Mason University School of Law, entitled Taking Rights Seriously? the Supreme Court and the "Poor Relation'"of Constitutional Law (PDF), and his more recent blog posting on the Supreme Court's decision in the case of Stop the Beach Renourishment v. Florida Department of Environmental Protection.
Mr. Somin concludes that over the last 25 years, the Supreme Court has begun to take property rights more seriously. The unanswered and unanswerable question is whether this represents an evolution or a fleeting victory in the Court's protection of private property rights. In any case, eternal vigilance is warranted.
Thanks to Real Estate Risk Management Specialist Kathy Mehringer for letting us know about.jpg)
a new California Department of Real Estate Consumer Alert entitled Warning Regarding Residential "Short" Sales (PDF).
Please download, read and save this Consumer Alert (PDF).
In Kathy's words, "you'll be glad you did."
In 1981 the California Supreme Court ruled that beach property owned by beachfront landowners on the California side of Lake Tahoe was subject to the public trust doctrine, and "would henceforth be open to the general public, at least up to the high water mark." (Kim DeVincenzi, CFO of Pacific Legal Foundation, "Property rights wrangling could spark Supreme Court's interest", Special to the Tahoe Daily Tribune, August 15, 2010.)
In 2009, the California State Lands Commission "voted to start enforcing an expanded public trust doctrine on private landowners", thereby setting up a potential challenge to the public trust doctrine. In the words of Jim Burling, director of litigation at Pacific Legal Foundation, and Kim DeVincenzi:
“Redefining people's property rights out of existence.” That's what the California Supreme Court did when it announced — suddenly, jarringly, and, frankly, arrogantly — that Tahoe private beaches aren't private anymore. If bureaucrats now insist on enforcing that judicial decree, look for a lawsuit that could end up at the nation's highest court. And don't be surprised if the state loses — and the state's highest court is declared in violation of the nation's highest law.
(DeVincenzi, above.)
If appears that public vs. private rights may be the order of the day on the U.S. Supreme Court's docket for some years to come.
Open letter to NSDCAR members:
George Santayana famously said that "Those who cannot remember the past are condemned to repeat it."
In the matter of proposing a merger of the San Diego Association of REALTORS with the North San Diego County Association of REALTORS, to create, in the words of San Diego Daily Transcript reporter Jen Lebron Kuhney, "one of the largest REALTOR organizations in the country", the relevant past is remembered, by some, simply as: "Freeman.”
“Freeman” refers to a series of lawsuits filed between 1997 and 2003 against (collectively) the San Diego Association of REALTORS (“SDAR”), the North San Diego County Association of REALTORS (“NSDCAR”), the then other three local Associations of REALTORS, the California Association of REALTORS, and many other individuals and firms.
Let’s take a moment to remember Freeman before casting our merger vote.
The Procedural Past:
Before 1992 there were three separate Multiple Listing Services (MLS’s) in San Diego County. Sandicor, the current MLS, was formed in 1991 to own and operate a single, countywide MLS to list all properties for sale throughout San Diego County. When there were five local Associations in San Diego County, all five were shareholders of Sandicor.
The first Freeman lawsuit was filed April 16, 1997 in San Diego County Superior Court alleging, among other things, that Sandicor, the five Associations, and others, violated California’s antitrust law by charging excessive fees for access to MLS data. This lawsuit was dismissed before trial, “on the pleadings”, when the trial court sustained the defendants’ demurrers to the complaint. This dismissal was upheld on appeal in December 1999, and again in April 2000 when the California Supreme Court declined to review the case.
While all of this was going on, the Freeman plaintiffs filed another suit, this time in Federal Court, against NSDCAR, the other four local Associations, the California Association of REALTORS, the National Association of REALTORS, and many others, alleging that the same actions complained of in their state-court action as having violated state antitrust law, also violated federal antitrust law. The Federal district court, in July 2001, entered summary judgment in the defendants’ favor.
So far, so good, for defendants: two lawsuits resulting in one dismissal and one summary judgment.
Thereafter, however, the Freeman plaintiffs appealed the Federal district court’s summary judgment to the U.S. Court of Appeals for the Ninth Circuit where, on March 10, 2003, the plaintiffs obtained a decision favorable to their cause. Within one month of the Ninth Circuit’s favorable (to the plaintiffs) decision, the Freeman plaintiffs filed yet another lawsuit based upon the same set of facts, again in Federal Court. This - their third - lawsuit was filed as a class action and named as parties most, if not all, of the attorneys who represented parties in the previous Federal district court lawsuit, and the Association Executives of the five local associations, and the California Association of REALTORS. (Many of the parties named in the third Freeman lawsuit were being sued for the second or third time.)
This third Freeman lawsuit sought damages in the approximate amount of $24 million dollars, and treble (punitive) damages of approximately $72 million dollars.
Continue Reading...Nearly seven years after parties signed a non-form agreement entitled "Real Estate Purchase Agreement", the California Supreme Court has found that sufficient consideration supports this agreement to render it an irrevocable option. (Steiner v. Thexton (March 18, 2010) page 1 (PDF) 48 Cal.4th 411.) This Steiner v. Thexton opinion presents a cautionary tale for those involved in preparing, interpreting or enforcing real estate agreements.
Paul Thexton, who resides on 12.29 acres of land in Sacramento County, California, had already rejected a $750,000 offer to purchase 10 of his 12.29 acres by a buyer who wanted Mr. Thexton to first obtain the necessary parcel split, when he was approached by Martin Steiner who wanted Mr. Thexton to sell him the 10 acres for $500,000. Mr. Steiner, unlike the previous buyer, offered to obtain, at his own expense, all of the permits and authorizations necessary to split the parcel. After the split and the purchase, Mr. Steiner would have approximately 10 acres to develop, and Mr. Thexton would have approximately 2 acres upon which to reside.
Mr. Thexton agreed, and paragraph 7 of the "Contingencies" section of the ensuing Steiner-Thexton Real Estate Purchase Agreement (the "Agreement") reads as follows:
"It is the intent of Buyer that the time period from execution of this contract until the closing of escrow is the time that will be needed in order to be successful in developing this project. It is expressly understood that the Buyer may, at its absolute and sole discretion during this period, elect not to continue in this transaction and this purchase contract will become null and void."
(Steiner, footnote 2, 48 Cal.4th 415, emphasis added.)
The Agreement that was signed on September 4, 2003, gave Mr. Steiner up to September 1, 2006, to complete the parcel split, and specifically obligated Mr. Thexton to keep his offer open for up to three years. (Steiner, 48 Cal.4th 419.)
On its face, the Agreement appeared to place all of the obligations on Mr. Thexton and no obligations at all on Mr. Steiner. The Agreement appeared to give Mr. Steiner the option of either
diligently pursuing the proposed lot split and development project or doing nothing at all for a period of three years, while at the same time requiring Mr. Thexton to remain ready, willing and able to sell at the agreed price and terms.
In October, 2004, however, Mr. Thexton changed his mind. He asked the title company to cancel escrow and told Mr. Steiner he no longer wanted to sell. Steiner then sued for specific performanced and Thexton claimed, among other things, that the Agreement constituted an option unsupported by consideration.
The trial court agreed with Thexton, finding that the unilateral nature of the Agreement (the classic feature of an option) rendered it an option, that the option was not supported by any consideration because Mr. Thexton had received nothing of value in exchange for granting the option, and that the option was, therefore, not enforceable against Mr. Thexton. The Court of Appeal agreed with the trial court, concluding that the Agreement was an "unsuccessful attempt to create an option and was therefore merely a revocable offer." Steiner v. Thexton (2008) 163 Cal.App.4th 359, 375, (superseded by Steiner v. Thexton, March 18, 2010).
The California Supreme Court did not agree that the Agreement was merely a revocable offer.
First, the court pointed out the difference between a unilateral contract and a bilateral contract by using the California Association of REALTORS' explanation that a common "form of real estate contract binds both parties at the outset (rendering the transaction a bilateral contract) while including a contingency, such as a loan or inspection contingency, that allows one or both parties to withdraw should the contingency fail . . . [and] only if the contingency fails. (Steiner, 48 Cal.4th 419.) The Steiner-Thexton Agreement was, the court found, unilateral and an option because it placed no obligation whatsoever upon Steiner.
An option, though, can be either revocable or irrevocable. In order to be irrevocable, an option must be supported by consideration, and the consideration must be bargained-for.
"Civil Code section 1605 defines consideration as 'Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor . . . . '"
(Steiner, 48 Cal.4th 420)
In other words, Mr. Steiner's revocable option could be rendered irrevocable either by an agreed payment by Steiner to Thexton (a "purchase" of Steiner's option from Thexton) or by Steiner's suffering some agreed detriment (some "prejudice") as an inducement to Thexton's promise.
But, in this case, as pointed out by the trial and appellate courts, isn't it true that all we have is Mr. Steiner's promise to buy 10 acres of Mr. Thexton's land after three years and after a lot split, and only if Mr. Steiner doesn't change his mind?
Yes.
On the day the Agreement was signed, the court noted:
It is true that Steiner's promise to undertake the burden and expense of seeking a parcel split may have been illusory at the time the agreement was entered into, given the language of the escape clause.
(Steiner, 48 Cal.4th 422.) Yet the court concluded that, nonetheless, once Martin Steiner incurred costs in pursuance of the lot split, the promise ceased to be illusory and the option became irrevocable.
But, I thought that the "prejudice" to the "promisee" had to be "bargained for"?
Yes; and in this case, it was. The promise that Mr. Steiner would pursue a lot split (if at all) at his own expense was critical to Mr. Thexton's agreement to sell. Mr. Thexton had already demonstrated, by rejecting a higher offer, that he would not sell without a lot split, and that he would himself not pursue a lot split. Therefore Mr. Steiner's promise to suffer the expenses of a lot split was essential to Mr. Thexton's promise to sell the 10 acres. Although Mr. Steiner was not obligated to incur any expense at all (because of the Agreement's "escape clause") once he did incur expenses, Mr. Thexton's unilateral promise to sell became irrevocable.
"Thus, both elements of consideration were present. First, the effort to obtain the parcel split clearly conferred a benefit on Thexton and constituted prejudice suffered by plaintiffs. Second, the promise to pursue the split was plainly bargained-for and induced Thexton to grant the option. Accordingly, plaintiffs' part performance cured the illusory nature of their promise."
(Steiner, 48 Cal.4th 422, emphasis in original.)
(The Supreme Court reversed the Court of Appeal and sent the case back to the Court of Appeal for further proceedings, specifically noting that not all of the available defenses to plaintiffs' claims were considered or resolved in this appeal.)
My Thoughts:
Please note the Supreme Courts' reference to the California Association of REALTORS' explanation that a "common form of real estate contract" (i.e., the California Association of REALTORS ("CAR") standard Residential Purchase Agreement, RPA-CA) binds both the buyer and seller at the outset, rendering the transaction a bilateral contract, not an option.
And the Supreme Court's reminder that an "'. . . option based on consideration contemplates two separate [contracts], i.e., the option contract itself, which for something of value gives the optionee the irrevocable right to buy under specified terms and conditions, and the mutually enforceable agreement to buy and sell into which the option ripens after it is exercised.'" (Steiner, 48 Cal.4th 420, quoting Torlai v. Lee (1969) 270 Cal.App.2d 854, 858, emphasis added.)
Accordingly, practitioners who are preparing an option to purchase or an option to lease should use both the CAR Option Agreement standard form (OA) in combination with a standard form purchase agreement or lease agreement.
Finally, brokers and agents, if your clients wish to venture outside the four corners of CAR's standard forms, please counsel them to seek the advice of an attorney.
Sometimes buyers and sellers agree in real estate purchase and sale contracts that the buyer's deposit will be "nonrefundable." Or a point may be reached in a transaction where the seller's interest in consummating the deal seems to exceed the buyer's interest in completing their "due diligence". In order to persuade the seller that the buyer is committed to the deal, the parties may then agree that some or all of the buyer's deposit will be "passed through" to the seller or retained in escrow on a nonrefundable basis.
Certainly the greater the buyer's "investment" in the deal, as represented by their releasing their deposit to the seller before close of escrow, the greater the likelihood the buyer will actually close the deal?
Perhaps.
But the recent decision by the California 4th District Court of Appeal in Kuish v. Smith (PDF) (February 3, 2010) ---- Cal.Rptr.3d ----, 2010 WL 373225 serves as a reminder of the fact that under California law nonrefundable deposits are not nonrefundable.
The Kuish and Smith Agreement:
In January of 2006, Bradford Kuish agreed to purchase William W. Smith, Jr. and Rhonda Lynn Smith's Laguna Beach residence for the sum of $14 million. Their agreement consisted of an offer, nine counteroffers, and escrow instructions that required Mr. Kuish to make a total of $620,000 in nonrefundable deposits to escrow. (The agreement was not an option contract and contained no liquidated damages provisions.) Escrow was to close on September 15. Mr. Kuish completed his deposits by April 21, and requested escrow cancellation on September 18.
The Smiths agreed to cancel escrow in October, sold their Laguna Beach property for $15 million to a backup buyer in November, refused to return Mr. Kuish's $620,000 nonrefundable deposit ($400,000 of which had already been "passed through" escrow to them in accordance with the parties' agreement), and litigation commenced.
The Kuish v. Smith Decision:
Continue Reading...The California Department of Real Estate initiated over 2000 investigations involving loan modification complaints last year, record numbers of real estate licensees either surrendered their licenses or had their licenses revoked, and the worst part is, most of the people who received "Desist and Refrain" orders from the DRE were not even licensed.
The California State Legislature has, since October of last year, prohibited anyone providing any loan modification services from charging any kind of advance fee, yet the loan modification scams continue.
Borrowers who are in danger of default or foreclosure as a consequence of the public or their own private economic downturn should very carefully evaluate their financial options before seeking out any fee-based or nonprofit loan modification help.
Loan modification step one is, do your own homework. An excellent starting point for your investigation is the DRE's comprehensive Consumer Alert, Fraud Warnings for California Homeowners (PDF) republished in November of last year (after California outlawed advance fees) and its consumer tips for working directly with your lender on loan modification (PDF). These publications are loaded with good information and links to other resources without charge.
On January 21, 2010, the California Supreme Court declined to review the Second District's upholding of a trial court's vacation of an arbitrator's award under Code of Civil Procedure 1286.2. Arbitration decisions, indeed, may have become more appealable in California for reasons discussed earlier on this site.
Much has been written recently on the subject of mortgage foreclosure under the rubric “show me the note,” which suggests that a consequence of the widespread practice of, first, originating and, second, pooling and reselling mortgage obligations, is that many of these mortgages may have become unenforceable. This claim is based, in part, upon the fact that many notes have been “separated” from the mortgages or deeds of trust that secure them, and, in part, upon the fact that many notes have simply been lost.
The suggestion that this current state of confusion will ultimately redound to the benefit of borrowers is, however, overstated.
“A real property loan generally involves two documents, a promissory note and a security instrument. The security instrument secures the promissory note. This instrument ‘entitles the lender to reach some asset of the debtor if the note is not paid. In California, the security instrument is most commonly a deed of trust (with the debtor and creditor known as trustor and beneficiary and a neutral third party known as trustee). The security instrument may also be a mortgage (with mortgagor and mortgagee, as participants). In either case, the creditor is said to have a lien on the property given as security, which is also referred to as collateral.’” Alliance Mortgage Company v. Rothwell (1995) 10 Cal.4th 1226, 1235.
When a loan is sold, the promissory note is assigned to whoever buys the note, together with the note’s security. The security follows the note automatically. (California Civil Code § 2936 (enacted 1872).)
“Similarly, this has long been the law throughout the United States: when a note secured by a mortgage is transferred, ‘transfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter.’ Carpenter v. Longan, 83 U.S. 271, 275 (1872).” In re Vargas (2008) (PDF) 396 B.R. 511, 516, emphasis added.
Under California Civil Code section 2934, assignees of mortgages and deeds of trust can record their assignments, but there is no provision for recording assignments of promissory notes. In a simple transaction, therefore: Lender A makes a loan to Borrower B, and immediately sells and delivers the note, and records an assignment of the trust deed securing the note to Investor C, and tells Borrower B that their note has been sold. If Borrower B stops making payments to Investor C, Investor C (the note holder) instructs the trustee of its trust deed (the neutral third party) to foreclose on Borrower B.
If Investor C would then sell their note to Investor D, and Investor D to Investor E, and so forth and so on, each sale would require the recording of another assignment and the transfer of the original note to its new owner.
Simple, except a problem of keeping track of the note and security arose when the transaction described above was multiplied hundreds of thousands of times. The recording of assignments of hundreds of thousands of deeds of trust over and over again became tedious, and expensive, so a new private entity entitled “Mortgage Electronic Registration Systems, Inc.” (“MERS”) was created to enable mortgages and deeds to trust to be assigned only once (to MERS).
“MERS, Inc., is an entity whose sole purpose is to act as mortgagee of record for mortgage loans that are registered on the MERS System. This system is a national electronic registry of mortgage loans, itself owned and operated by MERS, Inc.’s parent company MERSCORP, Inc.” In re Kang Jin Hwang (2008) 396 B.R. 757, 761, emphasis added.
MERS became the “neutral third party” of choice because the promissory notes secured by the mortgages and deeds of trust assigned to MERS could be re-sold over and over again without the inconvenience of re-recording assignments of the mortgages and deeds of trust.
Simple, except someone forgot to keep track of the notes, and many notes got lost, never assigned, assigned and never transferred, or in some other way “separated” from the documents that secured them.
Continue Reading...
Governor Schwarzenegger today signed Senate Bill 94 which could effectively eliminate all fee-based loan modification services provided by real estate licensees, attorneys, or anyone else in the State of California. By its terms (PDF), the Bill prohibits the charging of advance fees as follows:
(a) Notwithstanding any other provision of law, it shall be unlawful for any person who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower, to do any of the following:
(1) Claim, demand, charge, collect, or receive any compensation until after the person has fully performed each and every service the person contracted to perform or represented that he or she would perform.
(2) Take any wage assignment, any lien of any type on real or personal property, or other security to secure the payment of compensation.
(3) Take any power of attorney from the borrower for any purpose.
(Civil Code Section 2944.7, emphasis added.)
In addition to Senate Bill 94's prohibition on charging any advance fee for loan modification services, any person seeking to provide loan modification services for any fee must, before entering into any fee arrangement with a borrower, provide the following statement to the borrower in not less than 14-point bold type:
It is not necessary to pay a third party to arrange for a loan modification or other form of forbearance from your mortgage lender or servicer. You may call your lender directly to ask for a change in your loan terms. Nonprofit housing counseling agencies also offer these and other forms of borrower assistance free of charge. A list of nonprofit housing counseling agencies approved by the United States Department of Housing and Urban Development (HUD) is available from your local HUD office or by visiting www.hud.gov.
(Civil Code Section 2944.6(a) , emphasis added.)
It is important to note that the Governor vetoed the more onerous Assembly Bill 764, that would have conditioned the collection of fees upon the completion of loan modification, with the following veto message:
Although I support the prohibition of individuals charging advance fees for mortgage loan modifications, I do not agree with the provision of this bill that will only allow fees to be collected if a modification is successful. This could adversely affect legitimate businesses that provide loan modification services. As such, I am signing SB 94 that accomplishes this prohibition against advance fees without unnecessarily harming legitimate companies.
The impact upon legitimate loan modification service providers is unknown and unknowable at this time.
Senate Bill 94 was an "urgency" bill that went into effect immediately upon signing. Whether SB 94 will "unnecessarily harm" - to use the Governor's words - legitimate fee-based loan modification service companies currently operating in the marketplace remains to be seen. Because loan-modification negotiations are typically measured in months, not days or weeks, it may be unreasonable to expect a real estate licensee or lawyer or anyone else to work for months on behalf of a borrower without compensation, and without any security for being compensated, until after fully performing each and every service contracted to be performed on behalf of the borrower.
The video press conference promoting this legislation indicates that Senate Bill 94 was a reaction to scammers and con artists taking advantage of borrowers impacted by the current mortgage crisis. The unfortunate side-effect of SB 94 is to paint all real estate licensees and attorneys who happen to provide loan modification services with the same brush as the scammers and con artists. The borrowing public is now left with a choice between:
Non-profits are an important source of help to distressed borrowers, but it remains to be seen whether the public will be well-served by Senate Bill 94.
Private arbitration decisions are not typically appealable in California, except in cases where:
1. The agreement to arbitrate specifically provides a right of appeal.
2. Our Courts of Appeal effectively provide a right of appeal.
The recent decision of the California Second District Court of Appeal, entitled Burlage v. Superior Court (August 31, 2009) (PDF) 177 Cal.App.4th 166, may open the door a bit wider to appeals of private arbitration decisions.
The California rule on private arbitrations is described this way by the California Supreme Court in Cable Connection, Inc. v. DIRECTV, Inc.:
“'Because the decision to arbitrate grievances evinces the parties' intent to bypass the judicial system and thus avoid potential delays at the trial and appellate levels, arbitral finality is a core component of the parties' agreement to submit to arbitration. Thus, an arbitration decision is final and conclusive because the parties have agreed that it be so. By ensuring that an arbitrator's decision is final and binding, courts simply assure that the parties receive the benefit of their bargain.'” Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334 at 1355, quoting Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 at 10.
The Cable Connection court emphasized "that parties seeking to allow judicial review of the merits, and to avoid an additional dispute over the scope of review, would be well advised to provide for that review explicitly and unambiguously." Cable Connection at 1361, emphasis added.
The agreement to arbitrate in Burlage did not provide a right of appeal.
What happened in Burlage v. Superior Court:.jpg)
The Burlage dispute involved an actual encroachment of a house's pool and fence on adjoining property owned by a country club, which encroachment was allegedly known by the seller, but not disclosed to the buyer at time of sale. Before the arbitration, where the purchasers sought damages for the diminution in value of "their property and for the cost of moving the pool and fence that were on the encroaching land they now owned", the purchasers moved to exclude evidence of the fact that a title company had, subsequent to the sale, purchased a lot-line adjustment from the adjoining country club for the sum of $10,950, thereby curing the encroachment.
The arbitrator granted this motion to exclude evidence of the "fix" and, after 12 days of testimony, awarded the purchasers $552,750 in compensatory damages, $250,000 in punitive damages, and $732,570 in attorney's fees and costs. The sellers moved to vacate this award under Code of Civil Procedure section 1286.2(a)(5) on the ground that the sellers were "substantially prejudiced" by the arbitrator's refused to hear "evidence material to the controversy." Both the trial court and the Burlage court of appeal, with one justice dissenting, agreed.
Continue Reading...In the buying and selling real estate, "unconditional" offers to purchase are a rarity. An offer to purchase is nearly always "conditional," in the sense that a buyer's obligation to buy depends upon - is conditioned upon - the occurrence of certain events, such as the buyer obtaining financing, receiving seller disclosures, performing inspections and the like. It would be a mistake, however, to believe that the right to inspect is the same thing as a "free look."
The California Residential Purchase Agreement and Joint Escrow Instructions (Form RPA-CA Revised 11/07) (the "California RPA") sets forth buyers' inspection and investigation rights as follows:
Paragraph 7 states that "[u]nless otherwise agreed . . . the Property is sold . . . subject to Buyer's investigation rights." (Paragraph 7A(i)(b))
And,
Paragraph 9 states that "Buyer's acceptance of the condition of, and any other matter affecting the Property, is a contingency of this Agreement as specified in this paragraph and paragraph 14B. Within the time specified in paragraph 14B(1), Buyer shall have the right at Buyer's expense unless otherwise agreed, to conduct inspections, investigations, tests, surveys and other studies ("Buyer Investigations"), including, but not limited to, the right to: (i) inspect for lead-based paint and other lead-based paint hazards; (ii) inspect for wood destroying pests and organisms; (iii) review the registered sex offender database; (iv) confirm the insurability of Buyer and the Property; and (v) satisfy Buyer as to any matter specified in the attached Buyer's Inspection Advisory (C.A.R. Form BIA)." (Paragraph 9A, emphasis added.)
And,
The Buyer's Inspection Advisory (made part of the California RPA through Paragraph 9, above) describes a vast array of components, conditions, restrictions, hazards, locations and other matters that the Buyer is advised to inspect or investigate and, effectively, approve before being obligated to buy the property.
And,
Paragraph 14 provides that the Buyer has 17 (or other "fill in the blank" number of) days to complete all Buyer Investigations (Paragraph 14B(1)), and either remove the applicable contingency, or cancel the agreement (Paragraph 14B(3)).
It might appear from the above contract language that a buyer has 17 (or other specified number of) days to "investigate" every conceivable aspect of the property that the buyer has conditionally agreed to buy, and, thereafter, to decide, in the buyer's absolute and unrestricted discretion, to either remove the "Buyer Investigation" contingency, or cancel the agreement. These imagined buyer rights to cancel are commonly, and mistakenly, referred to by agents as the buyer's "17-day free look."
Buyers, however, do not have unrestricted rights to "change their minds" under the California RPA.
Continue Reading...They say in Harlan County
There are no neutrals there.
You'll either be a union man
Or a thug for J.H. Blair.
Which side are you on, boys, which side are you on?
Which Side Are You On? was written by Florence Reece in 1931 and performed by Natalie Merchant in 2003. Hat Tip to Scott H. Greenfield over at Simple Justice.
There are no neutrals in mediation. Mediators, although sometimes referred to as a "neutrals", are, indeed, advocates. We are just not your advocate.
"Which side are you on, boys?"
To the extent that your interests and those of your mediator correspond, the mediator is on your side, but no further. Your mediator's goal and function and interest is in resolving your dispute with any opposing party on terms that you both, or you all, can accept; on that date, at that time, in the mediator's forum, but on your terms. Mediators are not interested in preparing your case for trial. We are interested in preparing your case for settlement. Toward that end, we are advocates for the facts of the matter, and for a just, durable settlement based upon those facts, and for nothing else.
We are advocates for acting reasonably and truthfully and for achieving peace; and we acknowledge that lasting peace is not always achieved through settlement.
We are not advocates for "ties" or for achieving "neutral ground." Mediation is not neutral ground. It is a battleground existing under a white flag of truce, not surrender. It is your last chance to choose to settle your case on your own terms, or not. Mediators are there to help you choose wisely, and for no other reason.
Justice Antonin Scalia and Bryan A. Garner have produced a delightful, and indispensible, guide for practicing attorneys in "Making Your Case, The Art of Persuading Judges"; a text which begins with the following admonishment:
"To lighten the journey, we have adopted a conversational style that includes occasional contractions and remarks more flippant or colloquial than one would normally encounter in legal commentary. The reader who feels that some of these indulgences fall short of the formality and sobriety expected of a jurist should attribute all of them to the other author, and assume that they have been included under protest."
Antonin Scalia and Bryan A. Garner, Making Your Case, The Art of Persuading Judges, at xix - xx (Thomson/West 2008).
The authors' journey with the reader continues in this style through 115 sections in the space of 206 pages, with each section containing a different fact of advocacy that will be ignored by counsel at their peril. The advice contained in this book applies equally at every point in the judicial process, beginning with pre-trial motions and ending with arguments before the Supreme Court of the United States.
Your time with Making Your Case will be time well spent.
UPDATE - March 16 - March 20, 2009
Justice Scalia sits down with Peter Robinson of the Hoover Institution in these 5 short video segments of "uncommon knowledge"
The November 2007 "confidential means confidential" post on this site includes a link to attorney Michael Young's "Mediation Gone Wild" web page, which chronicles the consequences of breaching mediation confidentiality in the Florida case of Doe, et al vs. Joseph R. Francis et al.. "Girls Gone Wild" founder and defendant Joseph Francis has now filed suit in Los Angeles Superior Court to set aside the mediated settlement of that now almost 5-year-old case, and the CPR @ ADR Blog picks up the story with the rhetorical flourish: "Travesty of Justice"?
A study of 2,054 cases that went to trial from 2002 to 2005, concludes that parties in litigation can, and more often due, win without fighting.
“The lesson for plaintiffs is, in the vast majority of cases, they are perceiving the defendant's offer to be half a loaf when in fact it is an entire loaf or more,” said Randall L. Kiser, a co-author of the study and principal analyst at DecisionSet, a consulting firm that advises clients on litigation decisions.
Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial - meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.
The moral of the above study, at least for plaintiffs, may be that the settlement offer you just received from the other side really is the high point of your case.
On July 21, 2008, the California Supreme Court confirmed for the third time that, in matters within the jurisdiction of California state courts, mediated in accordance with California law, confidential means confidential.
Simmons v. Ghaderi (2008) (PDF) 44 Cal.4th 570, concerned mediation of a medical malpractice suit. During mediation, the defendant’s medical malpractice insurance provider arrived at settlement terms with plaintiffs that were placed in a written settlement agreement for the parties to sign. The settlement terms were accepted by the plaintiffs both orally and in writing. The defendant, however, revoked her consent to settle and left mediation without signing the agreement.
Plaintiff moved under Code of Civil Procedure section 664.6 to enforce what they contended was an oral settlement reached in mediation. The defendant argued that no enforceable settlement was reached because she had not signed the written settlement agreement and had withdrawn her consent to settlement. But she did not object to consideration of the evidence of what had occurred in mediation. The trial court denied plaintiffs’ motion to enforce settlement, finding that the requirements of CCP section 664.6 had not been met, and suggested that, alternatively, an enforceable oral contract may have been reached during mediation.
At trial of what was limited to the defendant’s alleged breach of a mediated oral settlement agreement, the defendant did object that California's mediation confidentiality statutes precluded plaintiffs from proving the existence of an oral settlement agreement. But plaintiffs’ evidence of what had occurred at mediation was admitted over the defendant’s objection and the trial court concluded that plaintiffs and defendant’s agent had, indeed, entered into a valid, enforceable oral contract before the defendant withdrew her consent. The Court of Appeal affirmed the trial court’s judgment, finding that the defendant was estopped from asserting mediation confidentiality by her own failure to object and her use in pretrial motions of the evidence of what had occurred during mediation.
In reversing this decision, the California Supreme Court unanimously found that the Court of Appeal had improperly relied on the doctrine of estoppel to create a judicial exception to the statutory requirements of confidentiality in mediation proceedings. Agreeing with the Court of Appeal’s dissenting opinion that this case is more accurately described as an implied waiver by conduct case, than an estoppel case, and finding that implied waiver does not apply to mediation confidentiality, the Supreme Court held, unambiguously, that:
"Here, the mediation confidentially statutes made inadmissible all evidence of an oral contract between plaintiffs and defendant during mediation."
Simmons v. Ghaderi (PDF) 44 Cal.4th at 588, emphasis added.
In California, confidential means confidential.
Copyright © 2008 by Kevin K. Forrester. All rights reserved.
The plaintiff in the case of Jay Lange v. Roxanne Schilling, et al. (2008) (PDF) 163 Cal.App.4th 1412, 78 Cal.Rptr.3d 356, ultimately spent over $113,000 in attorney fees to recover a $13,000 judgment, but failed to recover his attorney’s fees because he did not attempt to mediate his dispute before commencing litigation.
Paragraph 22 of the California Association of REALTORS (CAR) form purchase and sale agreement, used in this and the majority of California residential real estate transactions, provides the following attorney’s fees language:
In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller, except as provided in paragraph 17A.
17A, however, is the critical paragraph of the CAR Agreement for the purposes of Mr. Lange and this post. 17A states, in pertinent part, that:
Buyer and Seller agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action.... If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action.
(See Lange at 1414, emphasis added.)
The California Third District Court of Appeal, citing Frei v. Davey (2004) 124 Cal.App.4th 1506, 22 Cal.Rptr.3d 429, and other California cases held, bluntly, that “the agreement means what it says: plaintiff's failure to seek mediation precludes an award of attorney fees.” (Lange at 1414.)
(The Lange v. Schilling decision (PDF) was recently certified for publication, thanks to the efforts of the California Association of REALTORS.)
Copyright © 2008 by Kevin K. Forrester. All rights reserved.
A case in which real property buyers alleged that the $1.2 million purchase price they paid for a Carlsbad, California house in 2005 was too high, and blamed their agent, has been decided in favor of the agent:
Buyers vs. Agent, April 1, 2008;
Jury Says REALTOR Not to Blame for Purchase Price, April 11, 2008.
"With an enthusiastic and unanimous response, the jury found that [Mike] Little had executed a reasonable standard of care when he showed his clients, Vern and Marty Ummel, more than 80 homes in a house hunt that began in May 2005, ultimately leaving them to their decision to pay $1.2 million for their house two months later."
Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fees, and expenses, and waste of time. As a peace-maker the lawyer has a superior opertunity of being a good man. There will still be business enough.
Abraham Lincoln (1809-1865)
Abraham Lincoln, Speeches and Writings 1832-1858, “Notes on the Practice of Law” (1850?), pp. 245-246, emphasis in original. Edited by Don E. Fehrenbacher (The Library of America, 1989).
To win without fighting is best.
Sun Tzu (544-496 BC)
Sun Tzu, The Art of War, chapter 3, pp. 66-72, translated by Thomas Cleary (Shambhala Publications, Inc., 1988).
In matters within the jurisdiction of California state courts, mediated in accordance with California law, confidential means confidential.
California mediation confidentiality is defined by contract law, statutory law, and common law.
Contract law, because most mediators require parties, their attorneys and others in mediation to sign an agreement before mediation commences that includes words to the effect that:
All statements made in preparation of or during the course of this mediation are privileged settlement discussions, are made without prejudice to any party's legal position, and are undiscoverable and inadmissible for any purpose in any legal, administrative, or other proceeding.
Statutory law, because section 1119 of the California Evidence Code states that:
Except as otherwise provided in this chapter:
(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 a 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 participants in the course of a mediation or a mediation consultation shall remain confidential.
(See also Evidence Code Sections 1115 - 1128.)
And common law, because California appellate courts have held that the California Evidence Code means what it says.
Foxgate Homeowners’ Association, Inc. vs. Bramalea California, Inc. (2001) 26 Cal.4th 1, and Genoveva Rojas vs. Superior Court (2004) 33 Cal.4th 407, for example, are both early California Supreme Court opinions supporting the Legislature’s definition of mediation confidentiality. In the words of the court:
One of the fundamental ways the Legislature has sought to encourage mediation is by enacting several mediation confidentiality provisions. (Foxgate at 14.) As we have explained, confidentiality is essential to effective mediation because it promotes a candid and informal exchange regarding events in the past. This frank exchange is achieved only if participants know that what is said in the mediation will not be used to their detriment through later court proceedings and other adjudicatory processes. To carry out the purpose of encouraging mediation by ensuring confidentiality, our statutory scheme . . . unqualifiedly bars disclosure of specified communications and writings associated with a mediation absent an express statutory exception. (Foxgate at 15.) Rojas at 415-416 (internal quotation marks omitted, emphasis added).
There are, however, and will continue to be, efforts to define, or redefine, or construe, or limit mediation confidentiality. In the recent case of William Wimsatt vs. Superior Court (2007) (PDF) 152 Cal.App.4th 137, the Court of Appeal upheld the broad standards of mediation confidentiality enacted by the California Legislature and protected by the California Supreme Court even though doing so, the court believed, may have prevented a party to the mediation from pursuing a legal malpractice lawsuit against his own attorneys. Accordingly, the Wimsatt opinion includes this comment by the Court of Appeal:
Given the number of cases in which the fair and equitable administration of justice has been thwarted, perhaps it is time for the legislature to reconsider California’s broad and expansive mediation confidentiality statutes and to craft ones that would permit countervailing public policies be considered.
Until that day comes, or until the California Supreme Court permits the crafting of judicial exceptions to California’s statutory mediation confidentiality scheme, confidential means confidential.
(I commend to you the fine article by attorney Michael Young entitled "Mediation Gone Wild" chronicling the consequences of breaching mediation confidentiality in another jurisdiction.)
Copyright © 2007 by Kevin K. Forrester. All rights reserved.
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