Arbitration & Mediation

California Courts May Not Require Parties to "Negotiate in Good Faith"

By Victoria Pynchon

Although a California Court may properly sanction a non-party insurance carrier who possesses the authority to settle litigation for its failure to participate in a mandatory settlement conference, there is no statutory (nor inherent) authority given the Court to sanction the carrier or a party for its purported failure to negotiate in "good faith."  As the Court in Vidrio v. Hernandez (2d DCA) explained today:

In sum, even were we to agree with the trial court's assessment of the conduct of counsel and the [insurance] adjuster, the failure to increase a settlement offer or to otherwise participate meaningfully in settlement negotiations violates no rule of court and is not a proper basis for an award of sanctions.11 (See, e.g., Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 1415, 1424 ['[w]e eschew any notion that a court may effectively force an unwilling party to settle by raising the specter of a post hoc determination that failure to do so will be evidence of failure to participate in good faith']; Sigala v. Anaheim City School Dist., supra, 15 Cal.App.4th at p. 669 ['„[a] court may not compel a litigant to settle a case, but it may direct him to engage personally in settlement negotiations, provided the conditions for such negotiations are otherwise reasonable?'].) [Defendant] filed an appropriate settlement conference statement; her lawyer and Mercury [the insurance carrier] attended the conference and participated in it. While the trial court?s frustration at the parties? lack of movement is understandable, no more was required.
 

In particular, the Court of Appeal, held that the Court was not at liberty to "judge" whether the defendant and its carrier "should have" offered more than had previously been offered at a mediation either because the case was "worth" more or because the offer was so low in light of the attorneys fees and costs that would likely be incurred at trial.

I believe most mediators would approve of this ruling, even though it applies only to settlement conferences and not to mediations, the latter of which is protected from the Court's inquiry by Evidence Code section 1119.  Whether or not a mediator, a settlement judge, a party or a trial judge believes a defendant "should" offer more or a plaintiff "should" accept less by way of settlement, should not form the basis of an award of sanctions.  Not only would such a rule decrease citizens' trust and respect for the Courts, whose job it presumably is to provide a forum in which litigated disputes may be tried, such a rule would impermissibly chill the parties' Constitutional right to a jury trial.  

Full post as published by Settle It Now Negotiation Blog on April 13, 2009 (boomark / email).