9TH ANNUAL MEDICAL MALPRACTICE CONFERENCE
HOUSTON, TEXAS: SEPTEMBER 17-18, 1998
In the past ten years, mediation has gone from a little-used outlet for courts desiring to unburden themselves of cramped dockets to an integral part of the entire litigation process; both prior to and after suit is filed. This article attempts to assist the practitioner in obtaining the most positive results possible for their clients by addressing not only the legal aspects of mediation, but also some practical guidelines for getting the best possible outcome.
II. TO MEDIATE OR NOT TO MEDIATE . . .
The first question to be asked is whether mediation is desirable or should be avoided.
A. Legal Aspects
The mediation order comes in the mail and all sides and the mediator begin the attempt to come to a meeting of the calenders in order to find a date which will meet the time constraints of the court’s order. But before the parties begin this seemingly ritual courtship, the parties should determine whether to approach the court on the court’s own order. Texas Civ. Prac. & Rem. Code, 154.021 provides that on the motion of any party or on its own motion, the court can order mediation. While the statute also provides that the court “shall confer with the parties in the determination of the most appropriate alternative dispute resolution procedure,” Texas Civ. Prac. & Rem. Code, 154.012(b), courts rarely actually have contact, outside of a scheduling conference, regarding the type of alternative dispute resolution procedure is desired.
The parties are not, however, bound by the mediation order without the opportunity to address the issue before the court. Texas Civ. Prac. & Rem. Code, 154.022(b) provides that a party can file an objection to the mediation order within ten (10) days after receipt of the order. Upon filing such an objection, the court need not have a hearing on the objection, Downey v. Gregory, 757 S.W.2d 524 (Tex. App. – Houston [1st Dist.] 1988), but the court, in its decision, should take into consideration such factors as the nature of the dispute, the complexity of the issues, the extent of past settlement negotiations, the posture of the parties, whether there has been sufficient discovery to enable the parties to make an accurate evaluation of their positions, the status of the case on the docket, and whether referral is proper at the time. Id. All of these factors should be taken into consideration and addressed, if possible, in a party’s objection to the mediation referral.
If, in fact, a court finds that there is a reasonable basis to rescind a mediation referral order, the court cannot subsequently refer the case again. Texas Civ. Prac. & Rem. Code, 154.022(c).
A final point to be addressed is the situation wherein a court refers a case to mediation just before trial. Many times a case is called to trial and on the day of trial, the court finds that there has been no mediation, whereupon the parties are ordered into mediation immediately. As a party has a right to object to mediation within ten days after the referral to mediation has been made, the court lacks the authority to order the parties to mediation within that 10-day period. Keene Corp. v. Gardner, 837 S.W.2d 224 (Tex. App. – Dallas 1988, writ denied) (Court cannot sanction a party for failure to participate in a mediation ordered on 24-hour notice).
B. Practical Considerations
1. What Do You Want From the Mediation
Of course, the bottom line desired in a mediation is for the case to settle; the fact of settlement meaning that your client is at least somewhat satisfied with the outcome. But mediation can be used as so much more than simply a way to resolve a dispute.
a. Send a message to the defendant
A well-prepared mediation can deliver to the opposing party the understanding that the case may not be as sound as they suspected. It can also send the message, especially when done within thirty days of trial, that the opposition is woefully unprepared. In these instances, while the mediation itself may not result in a settlement, the ultimate outcome may be that the case settles shortly thereafter.
b. Send a message to your client
So much care is taken to obtain clients and keep them happy that, when it comes time to identify potential weaknesses to the client, they either turn a deaf ear or become confrontational. Therefore, a mediation is the perfect place to have an intermediary explain weaknesses to your client from an objective prospective wherein the attorney can remain squarely in his client’s camp. The practitioner who uses the mediation in this way needs to be cautious about giving his client excessive pie-in-the-sky expectations about his case. The client, however, may get so overwhelmed by the mediator with problems in his case that he begins to question whether his own attorney is competent to give any meaningful settlement advice.
Many times a mediation is the best place, next to the trial itself, to learn what the other side perceives as strengths and weaknesses of their case and yours. They may, through the mediator, concede points that you thought were weak, or bring up issues you never even considered.
2.Mediation objection considerations
a. Chance for settlement
By the time you have gotten to where meaningful mediation can even be a consideration, the basic issues in the case are generally well known. If the main issue in a case is liability, wherein the defendant is starting with the idea of no offer or no reasonable offer, the parties should agree to a joint objection to the mediation in order to save the parties the time and expense of simply going through the motions. Therefore, when the mediation order is received, the parties should discuss whether a mediation is even necessary.
The converse is where the only true issue is the value of a case, not the liability. When both sides are in agreement that a case should settle, but are only in a disagreement as to the amount, mediation is an excellent way to get a matter resolved.
b. Relations with the court
Remember, courts like to have small dockets, and that’s why they like mediation. If you are telling a court, through an objection to the mediation order, that you will not even make a good faith attempt, this could potentially make for an uncomfortable trial. Sometimes it’s worth the money and time spent to appease the court – especially if an objection to the mediation is not made jointly.
c. Education of the opposition
The converse of the discussion above regarding getting the opposition to show their cards is that they expect you to do the same. If you have a solid case for trial and consider the mediation to not be a useful tool, why show your strengths and weaknesses in order to have the other side prepare for the former and exploit the latter?
d. Failure to object
In the recent case of Texas Dept. of Trans. v. Pirtle, No. 2-97-233-CV, (Tex. App. – Fort Worth June 4, 1998), the Fort Worth Court of Appeals addressed possible ramifications for not filing an objection under Texas Civ. Prac. & Rem. Code, 152.022(c). In Pirtle, the defendant, the Texas Department of Transportation, failed to object to the mediation then, at the mediation, refused to participate. The trial court subsequently sanctioned the defendant for its inactions. The defendant gave, as its reasoning, that the defendant never settles cases as a matter of policy. The court of appeals, in upholding the sanctions award, found that the duty to mediate attaches when a party is served with a mediation order and fails to object. The court drew a distinction between Pirtle and other similar cases wherein the duty to mediate in good faith did not apply. See, Gleason v. Lawson, 850 S.W.2d 714 (Tex. App. – Corpus Christi 1993, no writ) (Court did not order the mediation); Hansen v. Sullivan, 886 S.W.2d 467 (Tex. App. – Houston [1st Dist.] 1994, no writ) (The parties mediated in good faith but the matter could not be resolved); Decker v. Lindsay, 824 S.W.2d 247 (Tex. App.–Houston [1st Dist.] 1992, no writ) (Party objected to the mediation order but the court overruled the objection).
3. Selection of mediator
The order of referral for mediation under the Civil Practice & Remedies Code provides not only for the referral to mediation, but also for the appointment of a mediator. Many times, however, the mediator may not be to your liking due to potential conflicts of interest or personalities. Courts generally want cases mediated by someone rather than having the case never mediated at all. Therefore, if there are no other objections to mediation, the parties should try to obtain a mediator to both of their liking. This can be accomplished in several ways. First is the obvious: simply coming up with a name that both parties can live with. Another approach is to have each party make a list of potential mediators. If there is a duplicate between the lists, the mediator is chosen. If there is no immediate mediator candidate, each side strikes all but one of suggested mediators from their opponent’s list, then draws straws (flips a coin, picks a number . . . ).
III. MEDIATING IN GOOD FAITH
There simply is no such requirement in Texas as mediating in good faith. Under Decker v. Lindsay, 824 S.W.2d 247 (Tex. App.–Houston [1st Dist.] 1992, no writ), the courts have held: “The policy of section 154.002 is consistent with a scheme where a court refers a dispute to ADR procedure, requiring the parties to come together in court-ordered ADR procedures, but no one can compel the parties to negotiate or settle a dispute unless they voluntarily and mutually agree to do so.” Id. at 251. There is one caveat: In interpreting the Fort Worth Court of Appeals in Pirtle, supra, the court’s holding places a duty on a party to timely object to a mediation or risk sanctions for refusing to participate at all in a mediation at a later date.
IV. PRE-SUIT MEDIATION
While some question the reason why, the better question may be, why not? Many of the same reasons for wanting to mediate after suit is filed exist prior to the expense of litigation. These advantages may make settlement more palatable for both the insurance adjuster as well as for your client, including: (1) lower contingency fee split; (2) no cost for defense attorney; (3) no court costs; (4) no expert witness fees; (5) no travel expenses (unless you are actually able to find a local medical malpractice expert). It also provides you with an opportunity to have another attorney examine your case and possibly reign in an out-of-control client.
Needless to say, the strategy in a pre-suit mediation carries with it some pitfalls to be avoided. chief among these is laying out too much information without getting the matter resolved. If you have already played your hand completely prior to suit, there will be nothing further to negotiate with during a future court-ordered mediation.
V. MEDIATION STRATEGY
1. Mediator Preparation
Mediators can and should do more than simply pass along offers and settlement. A good mediator will be influential and effective in helping to assess the case, and plays a different role from that of the trial judge. Educate the mediator before the mediation with a confidential written memorandum which summarizes the facts and law of the case. You should also be candid with the mediator in sharing the strengths and weaknesses. It is usually helpful to include copies of live pleadings, a summary of expert opinions of both sides, and your own personal and candid assessment of the various positions taken by the parties.
Mediation should generally be done fairly close to trial. Unless you are absolutely certain that the case will settle in mediation, prepare for both mediation and trail at the same time. This includes preparing all exhibits which you intend to use at trial. More preparation is always better than less, as you want to not only be able to negotiate with the facts to be presented, but how they will be presented. This may include editing videotaped testimony specifically for the mediation.
For the benefit of your client, prepare a list of expenses already incurred, as well as expected costs should the case not settle. This will give both you and your client a good idea of what additional expenses add up to and how they may off-set any good to come of a trial as opposed to settling at mediation. These would include estimates of all of the costs involved in obtaining additional expert and other witness testimony as well as the projected number of additional hours that may be necessary to prosecute the case through trial. Also, calculate potential pre-judgment interest should you succeed at trial.
4. Client Preparation
While you will have lots of time to sit and meet with your client during the course of the mediation itself, just as you would in preparation for a deposition, prepare your client for what is to come. This may include obtaining input for an opening statement at the mediation as well as your client making her own statement before the parties break into separate areas.
You should also discuss with your client the role of the mediator as being an intermediary between the parties. It generally does not take too long into the deposition before your client begins wondering just whose side the mediator is on when all they keep doing is bringing back bad news and counteroffers from the defendant and asking your client to lower what your client perceives to be a very reasonable demand.
Finally, make sure that your client understands how they are to act at the mediation. Hostility shown at the mediation only tells the defense that they can control your client at trial. On the other hand, a good showing will reflect to the defense that your client will make a good witness, and a good overall presentation, at trial. This should include not only how to act (e.g. don’t react if you hear something you don’t like during the general session), but also how to dress and how to react if there are any questions put to them during the general session. Finally, explain to them that, unlike in football, its not generally the losers that walk, i.e. tell you client not to read into who goes where when the general session breaks.
Make sure that all liens have been accounted for, including statutory hospital, Medicare, Medicaid, and workers’ compensation and insurance subrogation liens. If there are any possibilities for reductions to anyone owed funds from the settlement, agreements should be in place or, at least, you should make sure that they can be contacted on mediation day as settlement negotiations proceed.
VI. MEDIATION DAY
A. Act Professional
Just as your client wants to make an impression on the defense as being a good party, you want to make and impression as being a worthy adversary. Therefore, act like you’ve been there before. This includes being on time, being prepared and being courteous. In many meditations the mediator puts out food or snacks. Do not act like they have just put out your last supper.
B. The General Session
Most mediations begin in a single room where the parties give a brief description of their case and then split into separate rooms for the remainder of the session. As the plaintiff, during the general session you will generally be asked to present your case first. Depending on the likelihood of settlement, your tact at the general session will be to either be brief or to put on a full presentation with exhibits.
If your case is not likely to settle, there is little good to be done by educating the defense on your trial strategy. Simply explain your grounds for recovery and your damages. If during the later portions of the mediation, you realize that there may be a chance for settlement, you can bring out your previously hidden strategy to push the settlement to a completion.
If your case is more likely to settle and the parties are arguing about valuation, the better tact is to put on a show to make sure the defense (and their adjuster) understands what they’re up against and what they are going to be faced with if they proceed to trial. This includes using any exhibits you intend to introduce at trial as well as deposition videos and graphics.
During the defendant’s presentation, listen and learn. Even in a case where settlement is not likely, the defense is going to give some hint of what they perceive as their strengths and your weaknesses.
C. The Caucuses
After the general session, the parties will generally retire to separate rooms for the remainder of the mediation session. This is also where client control becomes most important. Your client has just been told by another attorney why their case is weak and they need to be revived (or cooled down) without fully rebuilding the unreachable lofty expectations you espoused in your own opening presentation.
Again, when proffering information, keep in mind the possibility that the case might not settle before you give away every nugget of information. Even if you are sure that the case will settle, avoid overflowing the mediator with all of the positive information at hand. When the mediator goes back to the defendant with a counter-offer, he should always leave with some further bit of information which would entice the defendant to raise their offer.
It is always tempting to read into how much time the mediator spends with one party or the other. Generally the amount spent with any given party is absolutely irrelevant and the same should be expressed to your client.
Texas Civ. Prac. & Rem. Code, 154.073 provides that all communications made during the mediation session are confidential, are not subject to disclosure, and may not be used as evidence at any judicial or administrative proceeding. This protection exists whether the mediation is pre-suit or after filing of suit.
The settlement, if reached, should be in writing and complete in terms of where all funds are coming from. The agreement should include the payment of court costs and fees where applicable as well as time limits for when settlement paperwork is to be signed and when settlement funds are to be distributed. In addition, all parties and the mediator should sign the settlement agreement.
Texas Civ. Prac. & Rem. Code, 154.071 provides that the settlement agreement is enforceable as any other contract and the court may incorporate the terms of the settlement agreement into the court’s final decree. Although the settlement agreement arises from the suit, enforcement of a mediation agreement, even if reached through court-ordered mediation, must be determined in a breach-of-contract cause of action under normal rules of pleading and evidence. Cadle Co. v. Castle, 913 S.W.2d 627 (Tex. App. – Dallas 1995, writ denied).
VII. OTHER NEGOTIATION CONSIDERATIONS
The doctrine as established in G.A. Stowers Furniture Co. v. American Indemnity Co., 15 S.W.2d 544 (Tex. Comm’n App. 1929, holding approved) provides, at its essence, that an insurance company which is given the opportunity to settle within its policy limits, and fails to do so, could potentially become responsible not only for any excess judgment, but also liable to their own insured for breach of the duty of good faith and fair dealing, D.T.P.A., claims under the Texas Insurance Code an other claims. The issues in a mediation setting are multifarious.
First, without a judgment, there can be no Stowers cause of action. “A Stowers cause of action does not accrue until the judgment in the underlying case becomes final.” Decker v. Lindsay, 824 S.W.2d 247, 250 (Tex. App. – Houston [1st Dist.] 1992, no writ). Therefore, the collection of an excess judgment as a result of a potential Stowers claim at the time of a pre-judgment mediation is a legal fiction.
With that in mind, the question is how to raise that legal fiction to be of use at the time of the mediation. The first thing is that there can be no Stowers cause of action if the case is settled before a Stowers demand is made. Therefore, if a case is settled before the demand is made, there is no valid claim for excess recovery by the insured defendant at the time of the mediation. Likewise, if the Stowers demand has been made, but the time limit for the demand expires after the mediation has occurred, the potential for excess limits is not at issue. Therefore, the Stowers demand should be made before the mediation and well enough in advance for the time limit (as little as 14 days underAllstate Insurance Co. v. Kelly, 680 S.W. 2d 595 (Tex. App. – Tyler 1984, writ ref’d n.r.e.), but it should be longer) to have expired before the mediation occurs, or at the close of the day on which mediation takes place.
Additionally, in order to be a valid Stowers demand, the demand must be of a kind to dispose of all potential claims that an individual has, as well as any potential claims which others might have on his behalf such as a hospital lien. Trinity Universal Ins. Co. v. Bleeker, 966 S.W.2d 489, 491 (Tex. 1998). In Bleeker, the Texas Supreme Court found that the injured party had failed to make a proper Stowers demand because in addition to his own claims were the claims of a hospital under a valid hospital lien. The court noted that the only way in that instance to make a valid Stowers demand would have been to pay the hospital lien, or include the hospital as a party to the demand and include them on the release. Id.
The next issue is the effect of the Stowers demand at the time of the mediation. Any settlement which does not exceed the policy limits would automatically bar any future contractual claim, as a prerequisite is a judgment in excess of the policy limits. Therefore, any settlement which is less than the amount of the policy limits precludes any extra-contractual claims to be possibly made later on behalf of the named insured. As a practical matter, settlement at mediation almost always results in making a Stowersissue moot.
The final issue is the effect of mediation negotiations on the Stowers demand. Put another way, what effect does a demand less than the amount of the policy limits, made during the course of the mediation, have on any future judgment should the matter not settle at mediation. Texas Civ. Prac. & Rem. Code, 154.073, providing for confidentiality within the confines of the mediation, would seem to suggest that a demand at mediation less than the policy limits should not effect any future claims made under a Stowersdemand which expired prior to the mediation.
B. Partial Settlement
Whole papers have been written in the area of settlement and its effect on joint and several liability. There are some concerns that need to be addressed during negotiations. Primarily they deal with the potential for an empty seat at trial and the ability of co-defendants to push the blame onto a settling defendant not there to defend himself. Fortunately, medical malpractice actions provide one of the only potential avenues for avoiding this problem. To avoid this, provide that the defendant has to stay in the case as a term and condition of the settlement. As a general rule, an insurance company will have no part of any such agreement, as the insurance company’s interest is to stop additional expenditures and close their file. But in a medical malpractice action, you can appeal directly to the defendant insured health care provider, making them understand that they have a direct stake in their defense in the action. Specifically, they have a reputation and standing in the community, and if they are not there to protect that reputation for the good, the other defendants will be more than happy to drag the otherwise absent health care provider through the mud to reduce their own liability. In most medical malpractice policies, the defendant’s attorney and insurance company have a duty to pass all offers of settlement to the provider, including why such offers are being made.
The success or failure of mediation is always going to be fact specific, i.e., each case is different. When and how to approach mediation may be different for each matter. Never hesitate to consult others about the facts of your case, the value of your case (based on strengths and weaknesses), the history and/or personalities of the mediator, opposing counsel and/or adjuster before the mediation. Lastly, always remember that it is your client’s case, not yours. Help you client determine the risks that can be tolerated, as well as the risks represented by the facts and law, and advise your client accordingly before the mediation.
– Steven C. Laird, Laird & Cummings, P.C.,
1824 8th Avenue, Fort Worth, Texas 76110, 817-531-3000, www.texlawyers.com