Judge: Mark H. Epstein, Case: 19SMCV01619, Date: 2023-05-16 Tentative Ruling

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Case Number: 19SMCV01619    Hearing Date: May 16, 2023    Dept: R

The motion to compel is GRANTED as to the settlement agreement and GRANTED IN PART as to the documents.  The portion of the motion to compel that is granted is also STAYED to allow defendants to seek writ review.  The request for sanctions is DENIED.

Plaintiffs seek to compel two sorts of documents: (1) the settlement agreement in a case brought by the property’s seller against defendants; and (2) communications in that case.  The former is not protected by the mediation privilege found in Evidence Code section 1119 et seq., but defendants claim it is nonetheless protected because it contains a confidentiality clause.  The latter is not being produced because defendants contend that all of those documents are protected by the mediation privilege.  The court cannot agree with either claim.

As to the settlement agreement itself, defendants raise a privacy concern.  The seminal case in that area is Hill v. NCAA (1994) 7 Cal.4th 1.  There, our Supreme Court set forth a balancing test.  It works this way.  First, the party resisting production must demonstrate that there exists a privacy interest that would be invaded by the request, and must further demonstrate that the invasion is a substantial one.  If that showing is made, then the court must balance the invasion of privacy against the need for the information or document.  (See also, Williams v. Superior Court (2017) 3 Cal.5th 531.)

Plaintiffs first contend that there is a silver bullet here because the settlement agreement has an exception to the confidentiality provision allowing production where ordered by the court.  The court disagrees with plaintiffs.  Those sorts of provisions are often inserted to allow the producing party to avoid the Hobson’s Choice of either being in contempt of court or breach of contract.  If a court orders production, then the party at whom the order is made must either breach the contract (and thereby become vulnerable to a lawsuit) or violate the order (and thereby become vulnerable to contempt).  To avoid that dilemma, most settlement agreements with confidentiality clauses routinely permit a party to produce a document or information if compelled by a court to do so; but that is not the same as agreeing that the information can be compelled.

Turning, then, to the Hill test, the court agrees that defendants have met their initial burden.  The confidentiality provision is inserted to protect some level of privacy that the settling parties expected to maintain over the settlement’s terms.  And the court agrees that producing the document would substantially invade that interest, even with a protective order in place.  After all, that order affords little protection at trial, when the document may be introduced with no protections at all and spread on the public record absent a pretty compelling showing.  Accordingly, defendants have articulated a legitimate privacy interest, and one that has been recognized by California case law.  (Hinshaw, Winkler, Draa, Marsh & Still v. Superior Court (1996) 51 Cal.App.4th 233; Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781.)  But that said, the privacy interest is, in the court’s view, minimal, at least in the context of this case.  Unlike most privacy interests, which go directly to some very obviously private aspect of someone’s life, this one is more removed.  It is not a medical record; it is not even a bank record.  In fact, the principal reason why it is private at all is to further another public policy—that favoring settlement of litigation.  Thus, while defendants have met their part of the test such that the scales are out, this is not a very heavy weight to put on those scales, at least in the court’s view under the facts of this case.  That is bolstered by the notion that the other party to the settlement agreement, Obiang, is not seeking to bar production.  And there is no further evidence from defendants as to why keeping the agreement confidential is critical to them or even how publication of that information could in any way harm them other than in this litigation.  Confidentiality for confidentiality’s sake is a privacy interest due to the policy favoring settlements, but it is not (standing alone) of particular heft.  Plaintiffs suggest that even if there is a privacy interest, this is not a “serious” invasion of it.  The court disagrees.  While the interest is not terribly strong, to the extent that there is such an interest, disclosure will impair it.  The court is aware of the confidentiality stipulation, and that does mitigate the seriousness of the discovery.  But defendants have no guarantee that the information might not come it at trial, and by that point it will be nigh impossible to assert the privacy interest to keep the evidence excluded nor is the court likely to seal that part of the trial given the strong public policy favoring open trials.  Thus, defendants have made a sufficient showing to require the balancing of interests.

Turning to that balance, plaintiffs have a relatively strong (though not overpowering) interest in obtaining the document.  Plaintiffs have reason to believe that the settlement number is tied closely to the difference between what Hakim was willing to pay and what Obiang actually received.  While not conclusive, an inference can certainly be made that the settlement number was based on that difference and not just a strange coincidence.  Plaintiffs also have reason to believe that they are referred to directly in the settlement agreement, strengthening the suggestion that the settlement related to what Obiang could have received from them but did not.  Of course, it is a settlement agreement; the court would be very surprised if the document did not also contain a clause stating that defendants deny any wrongdoing and are not conceding wrongdoing by agreeing to settle.  As such, the document is likely not nearly the smoking gun plaintiffs might believe it is.  However, this information could well prove useful at trial, or at least very useful in the discovery of admissible evidence.  That is especially true given that plaintiffs contend that Umansky told them not to put their offer in writing because the seller (Obiang) was not motivated by money; that is, he did not care what the sale price was because of the nature of his agreement with the DOJ.  The settlement agreement may demonstrate that Umansky’s statement (if he made it—he denies it) was knowingly false when made.  Even if the settlement agreement does not itself come in, it might well lead to the discovery of admissible evidence.  The court believes that its discovery value far and easily outweighs what the court believes to be the relatively minimal privacy interest at stake.  It is to be produced.

Accordingly, as to the settlement agreement, the motion is GRANTED.  However, this order is STAYED for 20 days.  If during that 20 day period defendants petition for writ review, the stay will extend automatically and without further order of this court until the writ petition is resolved.  Once the stay is lifted, the settlement agreement will be produced within 2 court days.

The communications are harder.  Apparently, the contract of sale between Obiang and defendants had a provision that any dispute would be mediated in the first instance.  When suit was filed, that provision was invoked.  What followed was two years of communications leading up to the eventual settlement.  Defendants contend that all, or virtually all, of the communications between the parties were for purposes of the mediation.  Evidence Code section 1119 provides that no evidence of anything said for the purpose of or pursuant to a mediation is admissible or subject to discovery.  It goes on to say that no writing that is prepared for the purpose of or in the course of the mediation is admissible or subject to discovery.  That is a pretty broad protection and our Supreme Court has been vigilant in repelling arguments to find exceptions or construe it narrowly.  (See Cassel v. Superior Court (2011) 51 Cal.4th 113.)  But broad as it is, it is not infinite.  The court does not believe that this section was designed to allow two years of communications to be shielded, or at least not without more of a showing.  The following not-so-unlikely hypothetical illustrates the point.  Suppose that the parties agree that they will mediate their dispute.  But before they take any actions toward the mediation, they agree to an informal exchange of documents and further agree to have discussions between just the parties’ respective counsel in an effort to attempt to resolve the dispute (which, if successful, would save the cost of mediation).  While the parties have agreed to mediate, they have not hired a mediator, they have taken no affirmative steps toward mediation, they are not preparing mediation briefs, or anything of the sort.  The discussions prove successful and the case settles.  Are those discussions within section 1119?  The court thinks not.

A few things are clear.  The party claiming the privilege has the burden to show that the documents are protected by the privilege.  To make that showing, “the timing, context, and content of the communication all must be considered.”  (Wimsatt v. Superior Court (2007) 152 Cal.App.4th 137, 160.)  Often, the showing is made where the “writing or statement would not have existed but for a mediation communication, negotiation, or settlement discussion.”  (Ibid.)  Accordingly, mere general settlement talks will not be subject to the privilege—that is just the kind of negotiation that exists in all civil litigation.  (Id., at pp. 160-161.)  The fact that there is a potential mediation in the future does not shield all talks.  So, in the foregoing hypothetical, there would be no privilege.  The touchstone would be to link the discussion to the upcoming mediation, not to general settlement discussions.  And, at least in this court’s view, the longer the time period between the communication and the mediation, the less likely it is that the discussion would be privileged.  Thus, a discussion the night before mediation concerning whether to agree to a floor and ceiling during the mediation or other mediation procedures and parameters for the mediation the next day is almost certainly protected.  But a call 18 months before the mediation is scheduled where the case’s facts are discussed or general settlement ranges are discussed is more like the sort of general discussions that are not really tied to the mediation and would likely occur whether or not a mediation was coming down the pike.

In other words, the court simply does not buy defendants’ argument that once the parties agree that there will a potential mediation at some point in the future, everything they discuss from that point forward regarding a potential settlement is subject to section 1119.  It is up to defendants to link the particular communication to the mediation.  Put another way, the privilege protects communications and writings “if they are materially related to, and foster, the mediation.”  (Wimsatt, supra, 152 Cal.App.4th at pp. 160-161.)  Here, there was no effort made to articulate that link.  The privilege log does not really get one anywhere.  Simply putting “Mediation” in the subject line no more makes a document privileged than putting “Privileged” in the subject line.  It is the body of the document that will determine whether it is privileged, not the heading.  That is the problem with the log here; it is insufficient to make the privilege out.  In particular, “a privilege log typically should provide the identity and capacity of all individuals who authored, sent, or received each allegedly privileged document, the document's date, a brief description of the document and its contents or subject matter sufficient to determine whether the privilege applies, and the precise privilege or protection asserted.”  (Catalina Island Yacht Club v. Superior Court (2015) 242 Cal.App.4th 1116, 1130, citations omitted.)

On the other hand, the court is well aware that it is not proper for the court to require so much to be disclosed that the substance must be disclosed to shield the substance.  What the court would want to see is the following.  First, a procedural timeline: when did the parties first agree to the mediation?  When was the mediator appointed?  What were the dates of any communications with the mediator or the mediation entity?  When did the actual mediation take place?  The court does not believe that any of that information is protected by section 1119.  Then the burden is on the defendants to establish that the communication on the log is one that materially related to or fostered the upcoming mediation—that it, the document was “prepared for the purpose of, in the course of, or pursuant to, a mediation.”  That means some specific tie to the mediation as opposed to a general discussion between the parties.  The easiest example of a protected document would be a mediation brief—even if exchanged with the other side.  But a letter written 18 months before the mediation was to occur discussing a party’s settlement position or view of the case is less likely to make the cut as being closely tied to the mediation and would seem more like a typical document written in the course of litigation.

The court’s view is that the foregoing is not well fleshed out in the case law.  The court will, therefore, not hold defendants to have waived the privilege due to the inadequate log.  Defendants will have 15 days to submit a revised log and include the timeline discussed above.  Plaintiffs can then bring a motion to compel with the 45 day clock starting anew.  Defendants will not be able to provide any information in opposition beyond that which is in the log or the accompanying timeline.  Thus, the motion is GRANTED as to these documents, but only to the extent of requiring a supplemental log and timeline.  Whether the documents need to be produced after that will have to await a different motion.  That said, the court notes that it is unlikely that the court will agree to the extremely broad view that defendants seem to have.

Because both aspects of the motion were not without substantial justification, the request for sanctions is DENIED.

The upcoming hearing is the mirror image of this one and the court’s order will be the same.  The court believes that the next hearing should therefore be vacated, but will discuss that with the parties.