Mediation Confidentiality

Mediation Confidentiality Complaint Cannot be Saved for Later

July 6, 2020

Even where a state mediation confidentiality statute calls for enforcement in state court, a party cannot seek redress for alleged violations of mediation confidentiality in state court where a federal court retains jurisdiction over the legal dispute subject to mediation.

In Cozen O’Connor, PLC v Truppman, an insured homeowner engaged the Truppman law firm to file suit against the insurance carrier to obtain payment for water damage related to a broken pipe.  Representing the carrier, Cozen removed the case to federal court.

The parties settled the homeowner’s claim in mediation and agreed that the amount of the attorney fee award would be decided by the federal district court if the parties could not agree.  The federal court dismissed the case and retained jurisdiction to enforce the terms of the settlement agreement.

After the parties could not agree on the attorney fee issue, Truppman filed a motion in the federal court arguing that the homeowner had been fully successful in mediation, had received payment for 100% of the $125,000 incurred damages in the mediation, and that the appropriate amount of attorney’s fees–including a 2.0 contingency multiplier–was $828,056.

The carrier argued that the mediation resulted in a “partial” settlement, and submitted the homeowner’s pre-mediation demand letter to establish that claimed damages had exceeded $125,000.  After a referral to a magistrate judge, the federal district court approved an attorney fees and costs award in the amount of $259,502 plus interest.

After raising no mediation confidentiality objections in federal court, the homeowner subsequently sued the carrier and Cozen in Florida state court, alleging that the Cozen firm violated Florida’s Mediation Confidentiality and Privilege Act by submitting the pre-mediation demand letter in support of the carrier’s opposition to the attorney fee motion.

After the Florida trial court refused to dismiss the case, the Florida 3rd Circuit Court of Appeal held that the state court lacked subject matter jurisdiction to hear the homeowner’s claims for additional attorney fees due to the alleged violation of mediation confidentiality.

The appellate court noted that, while Truppman’s state court lawsuit was styled as a claim for damages due to alleged violation of the state mediation confidentiality statute, the true “nature” of the claim was an attempt to claim additional fee amounts that had been sought from the federal court but not awarded there.

The appellate court noted that it does not condone the “apparent breach of mediation confidentiality,” but that collateral estoppel principles dictate that any redress for mediation confidentiality violations must be sought and obtained in the federal court with jurisdiction over the dispute.

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