The first principle of mediation is that parties work to find a resolution on terms that are mutually acceptable. In mediation, nobody orders the parties what to do: the parties control the outcome. This is referred to as the principle of self-determination, and it is embodied in California Rules of Court, rule 3.853, which states that mediation must be conducted “in a manner that supports the principles of voluntary participation and self-determination by the parties.”

This rule has been around since 2003, with the Advisory Committee Comment explaining that “voluntary participation and self-determination are fundamental principles of mediation that apply both to mediations in which the parties voluntarily elect to mediate and to those in which the parties are required to go to mediation in a mandatory court mediation program or by court order.”

Contrary to this principle, the appellate court in Breslin v. Breslin (April 5, 2021, to be published at _ Cal.App.5th __) held that parties who fail to participate in a court-ordered mediation are bound by an agreement reached by the parties who participated, even when that settlement provides nothing to the non-participating parties.

The dispute in Breslin v. Breslin was handled in probate court. There was disagreement regarding the terms of a decedent’s trust, more particularly, a dispute regarding who was entitled to distribution from the trust.

The trial court ordered the parties to mediation, and that decision was affirmed on appeal. That’s a good holding – the court sitting in probate jurisdiction has the authority to order parties to participate in mediation. (See Prob. Code § 17206 [“The court in its discretion may make any orders and take any other action necessary or proper to dispose of the matters presented by the petition”].)

But in Breslin v. Breslin, the court went further. A lot further. On appeal, the court held the beneficiaries who did not attend “forfeited their interest [in the trust] when they failed to participate in mediation is ordered by the court.”

That is a ground-breaking decision, and does not comport with the rules for mediation. Mediation is fundamentally different from arbitration or trial. In the latter two, binding decisions are made by a third-party, be it the arbitrator, the judge, or a jury. However, in mediation, the only persons who can make decisions are the parties themselves. Which is the beauty of mediation.

Until Breslin v. Breslin, no one would have believed that the sanction for failure to attend a mediation was forfeiture of the entire claim. Clearly, lesser sanctions were available to the court, so the move to the “death penalty” against the non-participating parties was extreme.

Obviously, the circumstances of the case caused substantial heartburn for the court of appeal. The original opinion was issued by the court on January 26, 2021 (published at 60 Cal.App.5th 167). The court conducted a rehearing and issued a second opinion, superseding the original opinion, on April 5, 2021. The same three-judge panel heard both appellate arguments. The original panel voted 3-0; on appeal, one judge dissented, resulting in a two-to-one opinion.

Breslin v. Breslin is wrongly decided. Nobody in mediation has the authority to make binding decisions as against any other party. The only persons whose interests can be decided in mediation are those parties who consent to a voluntary resolution. Breslin v. Breslin should be de-published because it fundamentally misconstrues the purpose of mediation.

The recent decision in Pulte Homes Corporation v. Williams Mechanical, Inc. (Aug. 9, 2016) 2 Cal.App.5th 267 was arose from a claim by Pulte for “$69,576 based on Williams’s allegedly negligent performance of a subcontract for the installation of plumbing in two residential construction projects.”

The advance sheets contained the entire opinion.  When the decision was published in the Official Reports, an important statement by the court was omitted.  Here’s the omitted portion:

“The issue is complicated by the fact that a corporation can be suspended in two ways: It can be suspended by the Franchise Tax Board for failure to pay taxes or failure to file a tax return (Rev. & Tax. Code, §§ 23301, 23301.5), or it can be suspended by the Secretary of State for failure to file an annual statement of information. (Corp. Code, §§ 1502, 2205.)

“The parties have not mentioned Revenue and Taxation Code section 23561, although it has some bearing on the issue.  It provides, as relevant here:

‘No decree of dissolution shall be made and entered by any court, nor shall … the Secretary of State file any such decree, or file any other document by which the term of existence of any taxpayer shall be reduced or terminated … if the corporate powers, rights, and privileges of the corporation have been suspended or forfeited by the Franchise Tax Board for failure to pay the tax, penalties, or interest due under this part.’ Get full service for your legal inquires.

“This appears to mean that, if a corporation is suspended for failure to pay taxes, it cannot dissolve.”

Comment – I’m relieved that this part was not included in the published opinion.  But it is certainly worrisome.

Pulte Homes Corporation v. Williams Mechanical, Inc. (Aug. 9, 2016) 2 Cal.App.5th 267

The law of payment systems has interested this writer for many years.  It is an area of law filled with arcane and technical rules, most of which are never encountered in day-to-day transactions, and that’s why is important to have professionals to help you with this, Legal Riordan Lawyer Canberra has proven excellence in legal representation for individuals in matters involving: divorce & separation, wills & probate, conveyancing, family law and administrative law, within the Weston Creek – Canberra ACT region. When speaking of divorce proceedings in Tucson, Arizona, it is always wiser to partake in negotiations to come to a compromise that satisfies both parties. divorce lawyer in Tucson and their trusted team lawyers will guide you every step of the way through the process of divorce.

Think of it.  Millions of checks are processed each day, yet it is a rare occurrence when a legal issue arises involving a check.  The law of payment systems, then, operates smoothly and mostly invisibly.

But when a legal issue does arrive, the customer often learns of some harsh rules that favor the bank.  Such is the case in Taylor Anderson, LLP v. U.S. Bank N.A., 2014 U.S. Dist. LEXIS 43667 (D. Colo. Mar. 31, 2014), where the customer learned that the phrase “the check has cleared” does not also mean “the bank cannot charge this item back to you at a later time.”

Here are the facts.  Plaintiff Taylor Anderson fell prey to some version of the Nigerian scam.  In September 2012, plaintiff deposited a $191,000 cashier’s check into its client trust account.  On October 1, after deducting a $2,000 fee, plaintiff informed the bank that it planned to wire the remaining $189,000 in check proceeds to its “client” in Japan.

By email, a firm employee asked whether the check “had cleared.”  A bank employee followed up an hour later in an email stating that the check “was drawn on Chase, and has cleared.”  Based thereon, plaintiff initiated the wire transfer to Japan.

Several days later, Chase Bank determined that the check was fraudulent.

Note: This really shouldn’t happen under payment system law.  It should be difficult for a fraudulent cashier’s check to enter the system, particularly in this amount.  Plaintiff would have been better served to obtain payment directly from Chase Bank as an “on us” item.

Thereafter, U.S. Bank (the holder of the trust account) charged-back the $189,000 against Taylor Anderson.  The law firm filed an action sounding in theories of breach of contract, negligent misrepresentation, fraud, and negligence.

This quote tells you where the court is going with the case.  Buried in the customer account agreement, the court found a provision which “explicitly states a second time the just because a deposit has ‘cleared,’ it does not follow that the funds are definitively in the account or that the crediting of those funds is not subject to reversal.”

Note: That’s certainly not the analysis that most bank customers were expect.  According to the court, you need to confirm that the check (i) “has cleared” and that (ii) there is no continuing “right of reversal.”

The court held that there was no misrepresentation, finding that:

“This Court sees no representation from U.S. Bank establishing that the check had both cleared and that the credit in the account was not subject to reversal. Rather, all the representations in the record demonstrate that U.S. Bank stated only that the check had ‘cleared’ …

“Contrary to Taylor Anderson’s contentions, U.S. Bank did not provide false information to Taylor Anderson – it merely provided information that was accurate and faithful to the Agreement, but which Taylor Anderson did not fully appreciate.”

Note: There are your magic words.  If you ask the bank whether the check has “cleared,” you also need to confirm that the check “is not subject to reversal.”  Otherwise, you will be exposed to a chargeback.

Having found for the bank on the breach of contract theory, the court ruled against plaintiff on all three remaining counts by application of the “economic loss” rule, another technical “rule” that can sneak up on an unsuspecting plaintiff.

Explained the court,

“Next, Taylor Anderson advances negligence, negligent misrepresentation, and fraud claims against Defendants.  All three of these claims are predicated on Taylor Anderson’s allegation that the Defendants’ ‘voluntarily investigated the origins and validity of the check in question and either fraudulently or negligently reported what they had determined to Defendants.’

“These claims are all barred by the Economic Loss Rule … Broadly speaking, the economic loss rule is intended to maintain the boundary between contract law and tort law …

“The rule prohibits a party suffering only economic loss from the breach of an express or implied contractual duty to assert a tort claim for such a breach absent an independent duty of care under tort law …

“Taylor Anderson attempts to argue around the force of the Economic Loss Rule by suggesting that defendants incurred allegedly ‘independent duties’ by allegedly agreeing to investigate the validity of the check.  But that is just another way of saying that the defendants were performing their contractual duty.”

That’s tough sledding for plaintiff – a pair of gotchas did in the law firm.

Taylor Anderson, LLP v. U.S. Bank N.A., 2014 WL1292804, 2014 U.S. Dist. LEXIS 43667 (D. Colo. Mar. 31, 2014).