No Forced Mediation In California

In the last several years, much of my practice has been in the area of construction defects, sometimes also known as "the dream house that becomes a nightmare."

In California, these cases explode. The owner sues the builder, and owner or builder or both sue every subcontractor they can think of, in hopes of compelling additional insurance companies to contribute to settling the case. Although I've tried them, these cases rarely go to trial, because the defects are usually evident and the cost prohibitive.

Instead, these cases go to mediation. Mediation is a process conducted before a third party, often a lawyer or retired judge. Unlike an arbitrator, a mediator has no power to make a ruling on the merits of a case.

Many hold themselves out as mediators, but relatively few are really good at it. And although it may seem that a mediator has the easy job of sitting around and playing "Let's Make a Deal," effective mediation is quite difficult, requiring legal knowledge, psychological insight, and patience, among other things. Perhaps that's why private mediation can be quite costly, especially in a complex case where several sessions may be needed to achieve a settlement.

The business of private "ADR" ("alternative dispute resolution") has exploded over the last two decades. Firms such as JAMS and Judicate West, as well as the old-line American Arbitration Association, are quite lucrative. Many experienced judges can't fight the temptation to make real money as mediators and arbitrators.

Judges on the bench have also gotten into the habit, especially in complex matters such as construction defect cases, of ordering the parties to mediate a case and to pay for the privilege.

No more, at least in California.

A new case, Jeld-Wen, Inc. v. Superior Court (2007) 2007 DJDAR 233, No. D048782, puts a stop to the practice of forced participation in mediation. Jeld-Wen, apparently a window company, was an uninsured cross-defendant in a construction defect case. This means that another party, probably a defendant builder or general contractor, had brought Jeld-Wen into the case, claiming it was partly responsible and had to contribute to resolving the case.

The trial judge ordered everyone into mediation, and ordered them to share the costs. Jeld-Wen, lacking insurance and claiming it didn't install the subject products, refused to participate or to pay. The court slapped Jeld-Wen with "sanctions" (basically a fine).

Jeld-Wen then "ran a writ," that is, asked the Court of Appeals to order the trial court to stop. Normally Courts of Appeal won't even hear such writs, preferring to wait until a case is completely over. Every now and then the Courts of Appeals do decide to hear an issue, especially if it's an important and new issue of law.

In Jeld-Wen's case, the Court of Appeals in San Diego told the trial court to back off. No statute or court rule, it said, empowered a trial judge to order a party to pay for private mediation over its objection.

This ruling is a good one. One of the basic functions of government is to administer justice, and one of our system's advantages is that in business matters our system of justice is reasonably predictable. Our courts are busy, and understandably are tempted to move cases to resolution however they can, including by using private mediation. Private mediation of construction cases will undoubtedly continue to be popular, because the parties will conclude it's in their best interest. However, it's unfair to require a party that may or may not have the resources, to pay a private mediator against its will. The principle that the courts are open to all is important, and this rule--no one can be forced into mediation--reaffirms that principle. It will also avoid the suspicion that there is a conflict of interests, that judges are ordering parties to hire their former colleagues or future employers. And it will force mediators to be a bit more competitive, in quality if not in price.