HOT TOPICS IN MEDIATION

Sponsor: ADR Section and Young Lawyers Division CLE Credit: 1.0

Thursday, May 12, 2016 10:50 a.m. - 11:50 a.m.

Rooms 207-211 Kentucky International Convention Center

Louisville, Kentucky

A NOTE CONCERNING THE PROGRAM MATERIALS

The materials included in this Kentucky Bar Association Continuing Legal Education handbook are intended to provide current and accurate information about the subject matter covered. No representation or warranty is made concerning the application of the legal or other principles discussed by the instructors to any specific fact situation, nor is any prediction made concerning how any particular judge or jury will interpret or apply such principles. The proper interpretation or application of the principles discussed is a matter for the considered judgment of the individual legal practitioner. The faculty and staff of this Kentucky Bar Association CLE program disclaim liability therefore. Attorneys using these materials, or information otherwise conveyed during the program, in dealing with a specific legal matter have a duty to research original and current sources of authority.

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TABLE OF CONTENTS The Presenters ................................................................................................................. i Kentucky Mediation ......................................................................................................... 1 Settlement Progression Sheet ....................................................................................... 17 Settlement Agreement ................................................................................................... 19 Sample Mediation Ground Rules ................................................................................... 21

THE PRESENTERS

Judge Stanley M. Billingsley, Ret. 314 Seventh Street

Carrollton, Kentucky 41008 (502) 732-4617

firstjudge@aol.com JUDGE STANLEY M. BILLINGSLEY, RET., served for nineteen years as a district judge representing Carroll, Owen and Grant counties, and was assigned by the Chief Justice to serve as a senior status circuit judge for four years in Boone and Gallatin counties. Judge Billingsley is currently a mediator with Retired Judges Mediation of Louisville. In addition, he is the senior editor of LawReader.com. Judge Billingsley is the co-author of Kentucky Driving Under the Influence Law, and Catch 202A – Kentucky's License to Kill, Handbook on Small Claims Court. He is a graduate of Western Kentucky University and the University of Kentucky College of Law. Judge Billingsley was the recipient of the Kentucky Bar Association's 1995 Outstanding Judge Award. Judge Thomas J. Knopf, Ret. 7402 Beech Spring Farm Boulevard Louisville, Kentucky 40241 (502) 425-8172 tknopf@twc.com JUDGE THOMAS J. KNOPF, RET., was a judge for over twenty-five years. He served twelve years as a district judge and 15 years as a circuit judge in Louisville. Judge Knopf was chief judge of both the Jefferson District and Circuit Courts. He is currently a partner with Retired Judges & Associates Mediation & Arbitration Services. He is listed in the Best Lawyers in America for 2008 in the field of alternative dispute resolution and has been nominated to be included in the Kentucky Super Lawyers magazine. Judge Knopf is a graduate of Xavier University, magna cum laude, and the Louis D. Brandeis School of Law at the University of Louisville.

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Chief Justice Joseph E. Lambert, Ret. 2637 Flying Ebony Drive

Lexington, Kentucky 40509 (606) 224-3387

joeearllambert@gmail.com CHIEF JUSTICE JOSEPH E. LAMBERT, RET., served as a justice of the Supreme Court of Kentucky for twenty-two years, and as Chief Justice for ten of those years. Upon retirement, he joined the Senior Judge Program and was appointed Chief Senior Judge by the Chief Justice. Thereafter, he became affiliated with Retired Judges & Associates Mediation and Arbitration Services. Chief Justice Lambert is a graduate of Georgetown College and the Louis D. Brandeis School of Law at the University of Louisville. W.R. "Pat" Patterson, Jr. 1330 Navajo Court Louisville, Kentucky 40207 Wrpattersonjr@hotmail.com W.R. "PAT" PATTERSON retired from the active practice of law in December, 2007, to become a full-time mediator with Retired Judges & Associates Mediation and Arbitration Services. Prior to retirement, he was a partner with Landrum Shouse & Patterson in Lexington and Louisville from 1963 to 1988. After a brief partnership with a small plaintiffs' personal injury firm, he established a solo plaintiffs' personal injury practice. In 2001 he became Of Counsel to Greenebaum Doll & McDonald. Mr. Patterson was elected to Fellowship in the American College of Trial Lawyers and the Best Lawyers in America. He has also been certified by the National Board of Trial Advocacy since 1984 as a Civil Trial Advocate. Mr. Patterson received his B.A. from Vanderbilt University and his L.L.B. from the University of Kentucky College of Law.

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Judge Ann O'Malley Shake, Ret. Retired Judges & Associates

Post Office Box 70318 Louisville, Kentucky 40270

(502) 721-9900 annshake@mac.com

JUDGE ANN O'MALLEY SHAKE, RET., is a mediator and arbitrator with Retired Judges & Associates Mediation and Arbitration Services. Judge Shake served as Jefferson District Court judge, 1990-1998, Jefferson Circuit Court judge, 1998-2006, and Jefferson Circuit Drug Court judge, 2004-2006. She received her B.A. from Loretto Heights College and her J.D. from the Louis D. Brandeis School of Law at the University of Louisville. Judge Shake is a member of the Louisville and Kentucky Bar Associations, Women Lawyers Association, and the Louis D. Brandeis American Inn of Court.

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KENTUCKY MEDIATION Elaina L. Holmes

Our Kentucky legislature defined mediation in KRS 446.010 as follows: "'Mediation' means a non-adversarial process in which a neutral third party encourages and helps disputing parties reach a mutually acceptable agreement. Recommendations by mediators are not binding on the parties unless the parties enter into a settlement agreement incorporating the recommendations." KRS 446.010 (2012). Indeed, a successful mediation can resolve the parties' dispute more quickly than a jury trial and typically allows the parties to minimize such expenditures as attorney's fees, expert witness fees, and other costs associated with a jury trial. As such, mediation is encouraged by Kentucky's courts and our legislature. KRS 454.011 is titled "Declaration of public policy on encouragement of dispute resolution through negotiation and settlement" and sets forth the following:

It is the policy of this Commonwealth to encourage the peaceable resolution of disputes and the early, voluntary settlement of litigation through negotiation and mediation. To the extent it is consistent with other laws, the courts and state governmental agencies are authorized and encouraged to refer disputing parties to mediation before trial or hearing.

KRS 454.011 (1998). I. THE ORDER TO MEDIATE

Kentucky Circuit Court judges typically require that the parties go to mediation prior to allowing the parties engaged in litigation to have a trial date. This is generally the practice, for example, in Boyd, Greenup, and Carter Counties. This is a useful rule as the majority of cases will settle, if not through earlier negotiation between the parties, then through mediation or shortly thereafter. This allows the Courts to only block their calendars for those cases which did not successfully resolve through mediation.

However, what is the basis for the trial court's authority to order mediation and what are the limits to that authority, if any? Of course, as all litigation counsel are aware, the Court does have the authority to order mediation and does so regularly. See, e.g., CR 16(1)(f); Ky. Farm Bureau Mut. Ins. Co. v. Wright, 136 S.W.3d 455 (Ky. 2004). The Kentucky Supreme Court explained the trial court's authority in the following way:

With respect to the issue of trial court jurisdiction, "it has generally been recognized that courts (even without express authority given by the constitution, statute, or rule of a supreme court of a state) have inherent power to prescribe rules to regulate their proceedings and to facilitate the administration of justice." [Citing Craft v. Commonwealth, 343 S.W.2d 150, 151 (Ky. 1961)]. Additionally, "[t]he control over this inherent judicial power . . . is

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exclusively within the constitutional realm of the courts."[Citing Smothers v. Lewis, 672 S.W.2d 62, 64 (Ky. 1984)]. Moreover, CR 16(1)(f) appears to grant express authority to order mediation. For these reasons, the trial court is well within its jurisdiction to do what it deemed reasonably necessary to "aid in the disposition of the action" [citing CR 16(1)(f)] and to order parties to mediation.

Wright, 136 S.W.3d at 458-59.

However, consider further the case of Kentucky Farm Bureau Mutual Insurance Company v. Wright and the Letcher Circuit Court's mediation order. In that case, the trial court order required (i) written disclosure of the extent of settlement authority prior to mediation and (ii) directed mandatory fines, costs, and penalties if the claims were settled following the conclusion of the mediation. The order is set forth below:

The parties and an adjustor of their insurers, if any, with full authority to settle shall attend a mediation conference. Full authority is defined as Plaintiff's last demand or the extent of coverage, whichever is less. The full authority of any representative of an insurer shall be documented in writing prior to the commencement of the mediation. No telephone calls to seek additional authority are permitted. The mediation shall be held at the convenience of all parties and the mediator. Only the Court or the mediator may alter the terms of the time limits herein. The parties shall use their best efforts to resolve all issues. If a party fails to appear at a duly noticed mediation conference without good cause or fails to comply with this order in any manner, the Court may impose sanctions including, but not limited to, an award of attorneys' fees and other costs against the party failing to comply. … If the case is settled after the conclusion of the mediation then additional costs, fines and penalties will be imposed for the disruption of the courts [sic] schedule and resources due to the parties [sic] failure to give timely or adequate work and consideration to this aspect of the case.

Id. at 457.

On a writ of mandamus, the Kentucky Supreme Court struck the language in the trial court's mediation order which required penalties for settling after mediation, but affirmed the remainder of the order. Id. at 459.

Under the trial court's order, parties who settled after the conclusion of the mediation, despite a belief in their right to do so, would be required to face mandatory fines and penalties, a route most reasonable parties would avoid. We conclude that the post-mediation settlement provision imposing additional costs, fines

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and penalties exceeds trial court discretion and results in irreparable harm without an adequate remedy by appeal. …

[With regard to other portions of the order:] The order merely requires the appearance of parties with "full authority to settle" to prevent the pernicious practice of negotiations by "an agent without authority." If mediation is to accomplish its intended purpose, and if the mediation conference is to be the main event, there must be participation by persons possessed of immediate decision-making authority. The process is irreparably harmed if final settlement authority rests elsewhere.

Id.

So, we know that penalizing the parties for settling after the mediation concludes exceeds the trial court's discretion, but the other provisions were not overturned, including requiring the insurer to document in writing prior to the commencement of the mediation the full amount of their authority, and precluding telephone calls to seek additional authority.

Consider also the case of Kentucky River Cmty. Care, Inc. v. Stallard, 294 S.W.3d 29 (Ky. App. 2008). In this case, Creeda Stallard was a patient at Kentucky River Community Care, Inc., and "was sexually assaulted by another patient during her stay in the Bailey Center location." Id. at 30. After the suit was filed, and in the course of the litigation, a mediation order was entered by the Breathitt Circuit Court as follows:

The parties or their authorized representatives and the adjustor shall have full authority to settle at the mediation conference…. The full authority of any representative of an insurer shall be documented in writing prior to the commencement of the mediation and shall be filed with the Clerk of Court.

Id.

Kentucky River Community Care, Inc. (KRCC) mailed copies of the trial court's order to its insurer, Kentucky Association of Counties All Lines Fund (KACo) on two separate occasions. The parties' first mediation was scheduled and took place in March 2007, but the defendant did not file the required written certification of authority required by the Court. The parties did not reach a resolution at that first mediation, and the Plaintiff filed a Motion to Compel and requested sanctions against Defendant KRCC for failure to file the ordered certification of authority. On May 1, 2007, the trial court issued a second order regarding mediation, rescheduling mediation for May 8, 2007. The trial court also entered an order imposing sanctions on KRCC, including the total costs of the March mediation, attorney's fees, and a $500 per day fine "until the parties return to mediation." In that case, Kentucky River Community Care, Inc., a health care facility, had sanctions imposed on it of $40,500 plus the cost of mediation and attorney's fees due to its failure to follow the Court's orders regarding mediation.

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KRCC argued that the trial court exceeded its authority because such a provision was not in the Model Mediation Rules. Yet, the Kentucky Court of Appeals indicated the following:

Our Supreme Court has endorsed the full authority requirement as conforming with the rules, citing long-standing precedent in support of a fluid concept of mediation:

…as an aid in the orderly dispatch of litigation, courts are vested with the right to adopt and promulgate reasonable rules for the guidance of litigation and their counsel and which they are as much under duty to observe as if the rules had been created by statutory enactment in the form of a Code of Practice.

Id. at 30-31.

The Court of Appeals in Kentucky River Community Care, Inc. v. Stallard ultimately held that the only objectionable aspect of the order were the fines which essentially amounted to punishment for criminal contempt (thereby requiring a trial).

In the case before us, the sanctions were imposed to punish for conduct already committed rather than to compel future action. The trial court issued an order for a second mediation one week before it issued the order imposing the fine. The fine was calculated on a daily basis up to the date of the second mediation. It was not contingent upon the filing of a certificate of authority but rather as a reprisal for the failure to file it after the fact. The contempt of court was, therefore, criminal rather than civil as it involved punishment for a past act or omission rather than an attempt to compel a future act. Additionally, the failure to file the certification of authority occurred outside the presence of the court. Thus, the order was equivalent to a citation for indirect criminal contempt. In Brockman, a fine of $825 satisfied the threshold of seriousness required to merit a jury trial. In this case, the fine totaled $40,500, plus costs and attorney's fees. Accordingly, due process compelled that KRCC be entitled to a jury trial. See [sic] Phillip Morris USA v. Williams, 549 U.S. 346 127 S.Ct. 1057, 1063, 166 L.Ed.2d 940 (2007).

Id. at 32. The Kentucky Supreme Court vacated the order of the Breathitt Circuit Court which denied KRCC's motion to vacate, and remanded for a trial on the issue of contempt. Clearly, then, the Court has broad discretion to order the parties to mediation, and in the absence of compliance by the parties, broad, though not unlimited, contempt authority in the event that the parties do not abide by the Court's

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directions regarding mediation. Generally, in most cases, the parties are simply ordered to mediation, are expected to mediate in good faith, with a corresponding report to the Court regarding whether or not a settlement agreement was reached.

II. WHAT IS ADEQUATE PREPARATION FOR MEDIATION?

It is axiomatic that being prepared is always preferable to being perfunctory. But the extent of preparation required for each case will depend on the type and nature of the case. Adequate preparation typically requires the development of a mediation statement for the mediator wherein each party outlines the type of case, the issues presented, any dispositive or important documentary evidence, and the nature of any settlement discussions which have occurred prior to the mediation. This mediation statement is typically confidential (your intentions to make it confidential should be displayed on the document presented to the mediator), but may, if the attorney's client is in agreement, be shared with the opposing counsel. Considering that the insurer's representative may be at the mediation (if not appearing by telephone), then counsel may also want to, in some cases, prepare a PowerPoint presentation displaying important documentary evidence such as material affidavits, relevant portions of contracts, pertinent photographs, diagrams, etc. In short, the extent of the attorney's preparation and presentation will depend upon the case.

For example, in a typical automobile collision case, the mediator should be given a confidential statement regarding the facts of the motor vehicle collision, a copy of the police report, an outline of the Plaintiff's compensatory damages (past medical expenses, future medical expenses, lost wages, anticipated loss of earning capacity if applicable), and an outline of the liens against the Plaintiff's settlement. If there are any facts which warrant punitive damages, such as intoxication or driving a vehicle known to have brake problems (etc.), then the attorney should outline the facts supporting the punitive damages claim. It would likewise be useful to outline the progress of negotiations between the parties as well, providing the mediator with the prior settlement offers exchanged between the parties in the case prior to the mediation date.

III. SUBROGATION AND LIEN ISSUES

If the Plaintiff must repay a health care insurer, physician, or other subrogee, then these third-party subrogation claims and liens for reimbursement will likely dramatically affect the settlement process, and may halt it altogether if the lien amounts exceed the settlement offer or drastically reduce that portion of the settlement amount going to your client. You cannot evaluate a settlement offer without considering the subrogation and liens which must be paid from that settlement. Remember too to confirm the lien amount before the mediation, as the original amount you were provided may have changed dramatically. It is also useful to communicate with the subrogees and lien holders, informing them of the date and time of the mediation and requesting that they be available to negotiate the lien in light of the offers made. If you are unsure of the exact subrogation and lien amount, or need approval from the subrogation and/or lien holders for the settlement, but want to steer toward settlement with the approval of your client,

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you will need to make any settlement agreement contingent upon the total subrogation and liens not exceeding a sum certain appropriate for your case.

IV. THE SETTLEMENT STATEMENT, RELEASES, AND THE INDEMNIFICATION CLAUSES

There are a multitude of considerations when drafting the mediation settlement statement. The parties have just successfully concluded what may have been a long mediation process and both the parties and the mediator are ready to wrap the matter up and go home. They want to leave and, likely, so do you. However, do not rush through the mediation settlement agreement in order to accommodate the wishes of those who want to leave quickly. It is critical that the mediation statement, to the extent that it can be, is precise and complete. Consider a cautionary tale told by a Kentucky mediator wherein one of the parties to the mediation did not add the $10,000 language to the end of the lump sum settlement agreement, providing that the lump sum was "exclusive of PIP and MedPay." If it is not exclusive of PIP and MedPay, then typically the Plaintiff has already received that benefit and an argument can be made for an offset. A $25,000 settlement may have just been reduced to $15,000. Likewise, while parties typically do not have their release with them at mediation (though you are strongly encouraged to have a prepared general release with you at the mediation), be clear regarding the inevitable indemnification agreement language in the release which will likely be exceptionally broad if tendered by defense counsel and narrowly crafted if drafted by plaintiff's counsel. Indemnification agreements are designed to require that certain sums be paid back, so make sure that you are clear and precise with regard to what very limited circumstances a potential indemnification agreement will cover. For example, in a dram shop case, a broad indemnification agreement with the drunk driver and his insurance company, whereby you have to pay them back for claims against them, could defeat your claim against the dram shop because of the nature of the cause of action against a dram shop (which requires indemnification from the tortfeasor). In short, the parties will be bound by the mediation settlement agreement and, as such, appropriate time and precision should be afforded the drafting of that agreement.

V. SETTLEMENT AUTHORITY

If the parties participating in and present at the mediation do not have the authority to settle or the ability to immediately reach someone with the authority to settle, then a resolution cannot be reached and everyone's time is wasted. It is best to have the decision-makers at the mediation so that they can assess the Plaintiff's credibility, evaluate and consider the opening statement (if any), as well as the ability of the Plaintiff's counsel to present the matters at issue (which counsel will present to a jury in the event settlement cannot be reached). For these reasons, being present is preferable to a telephone conversation. Consider carefully the request to have the individual with authority to appear by phone. It can be difficult to reach someone by telephone during a mediation, and the mediator and participants may have to wait while someone tracks down the decision-maker, if they can ultimately be reached at all. For these reasons, in court-ordered mediations, the Court often prefers and/or orders that a representative with actual settlement authority be present at the mediation. That

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having been said, there are times when the individual with authority is a great distance from the mediation location. Given today's availability of Skype and other instantaneous means of visual and verbal communications, the individual with authority should be required to participate directly in the mediation and not via the occasional telephone call.

VI. THE UNIFORM MEDIATION ACT vs. THE MODEL MEDIATION RULES

The Model Mediation Rules were adopted by the Kentucky Supreme Court in 2000, and many local courts adopted those rules with little to no variation, though some of the local courts' changes are more extensive than others with substantive variations. After the Model Mediation Rules were adopted in 2000, another model for mediation was created. The Uniform Law Commissioners in collaboration with the American Bar Association's Section on Dispute Resolution came up with the Uniform Mediation Act in 2001, which was subsequently amended in 2003.

The issue is whether Kentucky should make a change to the Uniform Mediation Act from the current Model Mediation Rules. A recent law review article by Henry L. Stephens, Jr., Former Dean and Professor of Law at NKU Chase College of Law, calls for the adoption of the Uniform Mediation Act, noting that "eleven states and the District of Columbia have adopted the UMA, and bills to consider adoption have been introduced in the 2014 sessions of the New York and Massachusetts legislatures." Stephens, Henry L., "Article: Mediation Practice in Kentucky: Adoption of the Uniform Mediation Act Would Help," 42 N. Ky. L. Rev. 1, 1 (2015).

A. The Model Mediation Rules

In Abernathy v. Nicholson, 899 S.W.2d 85 (Ky. 1995), the Kentucky Supreme Court set forth the origin of its authority to establish rules and procedures for the courts:

Under Section 116 of the Constitution, the power to prescribe rules of practice and procedure for the Court of Justice is vested exclusively in the Supreme Court and should not be undertaken by other courts. The authorization to enact local rules pursuant to SCR 1.040(3)(a) is subject to two conditions: first, that no local rule shall contradict any substantive rule of law or any rule of practice and procedure promulgated by this Court, and second, that it shall be effective only upon Supreme Court approval.

For generations it has been widely believed that local rules were a trap for the unwary and disadvantageous for practitioners unfamiliar with a particular venue. It is this Court's intention to standardize practice and procedure in the Court of Justice to the greatest extent possible and permit local rules only to the extent necessary to satisfy a peculiar circumstance of the locality. In general, the rules

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of court adopted pursuant to Section 116 of the Constitution are sufficient and need no adornment in the form of local rules. Kentucky attorneys are licensed to practice law in all courts of this Commonwealth and should be able to practice wherever they choose, east and west, rural and urban, without the burden of superfluous local rules, whatever the form in which they may appear.

Abernathy, 899 S.W.2d at 87-88.

Pursuant to Section 116 of the Kentucky Constitution, then, the Kentucky Supreme Court adopted the Model Mediation Rules in the year 2000. Those rules, and their guidance to the formation of each counties' local rules (which were subject to the approval of the Kentucky Supreme Court), have been successfully utilized by counties around our state for over fifteen years. In fact, the Model Mediation Rules have been adopted without significant modification by multiple counties in Kentucky. Some jurisdictions did make some modifications to the Model Mediation Rules. Some examples are as follows.

1. In Christian Circuit Court (3rd Judicial Circuit), the local rules

provide: "The Christian County Circuit Courts find that under some circumstances the process known as mediation may provide an efficient and cost-effective alternative to traditional litigation, and, further, that the wise and judicious use of mediation may benefit litigants."

The referral of cases to mediation is controlled by Local Rule on Mediation 3 which provides the following:

At any time on its own motion or on motion of any party, the Court may refer a case or portion of a case for mediation. In this decision, the court shall consider:

(a) the stage of the litigation, including the need for discovery, and the extent to which it has been conducted; (b) the nature of the issues to be resolved; (c) the value to the parties of confidentiality, rapid resolution, or the promotion or maintenance of on-going relationships; (d) the willingness of the parties to mutually resolve their dispute; (e) other attempts at dispute resolution; and

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(f) the ability of the parties to participate in the mediation process including the ability of the parties to pay the cost of mediation.

The local rules likewise contain provisions as follows. In Local Rule 5, the parties are given fifteen days following the referral to mediation to agree on a mediator or they can notify the Court and a mediator or mediation service will be selected for them by the Court. In Local Rule 7, once the mediator has been chosen, the mediation needs to be scheduled within thirty days, with the mediation occurring within sixty days thereafter. Local Rule 8 indicates that the parties' attendance at the mediation is mandatory varied only by stipulation of the parties or by order of the Court for good cause shown. Following mediation, the mediator reports to the Court (Local Rule 10). If an agreement is reached, it is reduced to writing (Local Rule 11), but the mediation process is closed and confidential since it involves settlement negotiations for purposes of KRE 408.

2. The Jefferson County Rules of Practice and Procedure for the

Jefferson Circuit Court Family Division provide a well-structured mediation local rule which includes a particularly well drafted "Compensation of Mediator" section on page 10, Local Rule 704(G), with a sliding fee schedule for mediator payments.

B. Another Local Rules Difference

The author's favorite variation in Alternative Dispute Resolution local rules arises in Boone and Gallatin Court, where the local rules for Boone, Campbell, Gallatin and Kenton Counties also have an "Addendum A" wherein the Court sets forth an alternative arbitration procedure for cases, the beginning of which is set forth below.

A. Cases for Arbitration.

1. The Circuit Court may at any time order any

case to be heard and decided by a Board Of Arbitration, consisting of not more than three members of the Northern Kentucky Bar Association, to be selected as hereinafter provided, provided the following conditions are satisfied:

(a) The action must be at least three (3)

months old unless earlier agreed to by all parties.

(b) The amount actually in controversy

(exclusive of interest and costs) as determined by the court does not exceed $50,000.00 per case.

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Arbitration shall be permitted in cases where the amount in controversy exceeds the sum specified in the plan for mandatory arbitration where all parties to the action agree to arbitration.

(c) No party has filed written objection

to an order referring a case to arbitration within ten (10) days of the filing of the referral order.

While variations between the counties and the experiences from those variations can sometimes lead to improvements in our mediation system, a recent article by Henry L. Stephens, Jr. (Former Dean and Professor of Law at NKU Chase College of Law, Northern Kentucky University) advocates that there are too many substantive variations currently and the adoption of a uniform law would be useful in Kentucky. His article is titled "Mediation Practice in Kentucky: Adoption of the Uniform Mediation Act Would Help," 42 N. Ky. L. Rev. 1 (2015), and he calls for the adoption of the Uniform Mediation Act in Kentucky. The article indicates that "To date, eleven states and the District of Columbia have adopted the UMA and bills to consider adoption have been introduced in the 2014 sessions of the New York and Massachusetts legislatures." Id. at 1-2.

C. Advantages of the Uniform Mediation Act (UMA)

In his article, Mr. Henry L. Stephens, Jr., notes that "the need for parties to feel secure concerning the confidentiality of the mediation process and mediation-related communications was a central concern of the UMA drafters." Id. at 3. Having different jurisdictions rule on disclosure of mediation communications in differing ways can undermine the "parties' ability to depend on the confidentiality of the proceeding, and their power to walk away without prejudice if an agreement cannot be voluntarily reached." Id.. at 2.

In the UMA, a "mediation communication" is broadly defined as "a statement, whether oral or in a record or verbal or nonverbal, that occurs during a mediation or is made for purposes of considering, conducting, participating in, initiating, continuing, or reconvening a mediation or retaining a mediator." Id. at 2-3. Under the UMA, a mediation communication is a privileged communication which, according to Mr. Stephens, "strengthens the confidentiality of mediation by creating a privilege for mediators and participants that allows them to refuse to disclose a 'mediation communication' in any discovery or evidentiary proceedings covered by the act." Id. at 4. Section 4(a) of the UMA provides that a court must "exclude privileged communications that are protected, and may not compel discovery of the communications." Id. Additionally, not only may the person with the privilege refuse to disclose a mediation communication, but that individual may block another from disclosing particular mediation communications as well. Id. Additionally,

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the mediator may "refuse to provide evidence, including her own statements or anyone else's, even if the parties consent. This allows the mediator to protect the integrity of the mediation process despite the parties' wishes." Id. at 6.

Therefore, the scope of what is considered a mediation communication is expanded and the construct for protecting those communications is a privilege construct with which the courts and attorneys would be familiar.

However, the protection of the "mediation communication" does not mean that the underlying evidence is off limits to discovery. Mr. Stephens points out that Section 4(c) provides that "it's the communication made in a mediation that is protected by the privilege, not the underlying evidence that gives rise to the communication. Evidence that is disclosed and therefore 'communicated' in a mediation is subject to discovery and does not itself become a 'mediation communication' privileged from disclosure. As such, relevant evidence that is 'communicated' during mediation is just as discoverable as it would be if the mediation had not taken place." Id.

There are likewise exceptions for invoking the privilege:

Pursuant to Section 6, there is no privilege for a mediation communication that is, inter alia, (1) in an agreement evidenced by a record signed by all parties to the agreement; (2) available to the public because of applicable open records or open meetings statutes; (3) involves a threat, a planned crime, or a complaint of professional malpractice filed against the mediator or any mediation participant; or (4) involves abuse, abandonment, or neglect.

Id. at 7.

The Model Rules protect confidentiality by reference to KRE 408. KRE 408 provides the following:

Evidence of:

(1) Furnishing or offering or promising to furnish; or

(2) Accepting or offering or promising to accept a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible, to provide liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations. This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or

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prejudice of a witness, negativing a contention of undue delay or proving an effort to obstruct a criminal investigation or prosecution.

KRE 408.

Mr. Stephen's article indicates that in Kentucky, "lawyers in the local courts face a plethora of local court rules that amend, modify, or in some cases even nullify the discovery provisions of KRE 408." Henry L. Stephens Jr., “Mediation Practice in Kentucky: Adoption of the Uniform Mediation Act Would Help," 42 N. Ky. L. Rev. 1, 10 (2015). He is concerned that many local rules "limit[] discovery of the documents and communications that would be fully discoverable under a direct application of K.R.E. 408 and Model Rule 12" thereby effectively amending KRE 408 and Model Rule 12. Id. at 12. Take the following example set forth in his article:

[M]ediation is ordered in a case pending in the 12th Judicial Circuit, Henry, Trimble and Oldham counties. In such mediation, the plaintiff (not his counsel), knowing that local rules prevent the discovery or utilization of any documents or communications made during the mediation, presents a document knowing the document is false. The case is resolved at mediation. The defendant subsequently discovers that the document, upon which the mediated settlement was urged and based, was fraudulent. The defendant, who resides in Jefferson County, files suit in Jefferson Circuit Court to set aside the mediated settlement agreement and seeks to introduce the allegedly fraudulent document. The plaintiff answers the complaint and seeks to dismiss the fraud claim on the grounds that it is based upon a document that, pursuant to Rule 5.4(A) of the Local Court Rules of the 12th Judicial Circuit, is privileged, confidential, inadmissible, and therefore cannot support the claim of fraud. If the applicability of the local court rules where mediation was conducted control, the 12th Judicial Circuit, plaintiff's motion to dismiss will be sustained and the case will be dismissed. On the other hand, if the local rules of the forum hearing the fraud case control, Jefferson Circuit Court, the defendant would not only be able to introduce the fraudulent document as the basis for his case, but he would also be able to utilize the document to impeach plaintiff's prior inconsistent statements concerning the validity of the document made during the mediation. Pursuant to Jett [v. Commonwealth, 436 S.W.2d 788 (Ky. 1969)], the fraudulent document could be considered by the finder of fact as substantive evidence, in addition to the salutary effect of having impeached the plaintiff.

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Thus, the local court rules on mediation in at least 16 judicial districts are in direct conflict with Model Rule 12, in that they preclude all discovery and all admissibility of mediation communications and documents.

Id. at 15-16.

In short, Mr. Stephens suggests in his article that adoption of the Uniform Mediation Act would "fill gaps in the Model Rules concerning the areas of confidentiality and privilege, to resolve conflicts between local rules and the Model Rules, and to ensure that all mediators in the Commonwealth operate under a standard set of rules concerning all facets of mediation, irrespective of whether those mediations are conducted under the auspices of a trial court." Id. at 2.

VII. THE ROLE OF MEDIATION IN DOMESTIC RELATIONS CASES IN REGIONS

ACROSS KENTUCKY

Domestic relations cases involve those issues which are typically central to individuals: their family, their children, the place they know (or knew) as "home," the retirement that they plan (or planned) to live on when they become elderly, etc. The decisions in these cases can have an effect magnified exponentially on the parties because the decisions are seen through what can be a crushing overlay of emotions regarding those who the parties' care (or cared) most for in the world. Hearing the person the party married on the witness stand testifying against them can have far-reaching effects on relationships which are already often tenuous and increasingly hostile, but which oftentimes need to be maintained as the parties cooperate regarding their children until those children reach the age of majority. When it is successful, mediation in domestic relations cases can not only allow the parties to reach an agreement created through self-determination, and compromise (a useful tool for coordinating visitations), but it can help the parties maintain civility which will be useful to successfully co-parent.

Likewise, repeated property and custody disputes are costly. It is not unusual for individuals in a divorce situation to have new and challenging financial issues as they look for a new home, try to re-finance an existing home, coordinate new insurance for themselves, etc. If successful, mediation can be much more cost effective than having an attorney prepare motions for them and attend hearings.

Kentucky's Rule 2(6) of the Family Court Rules of Practice and Procedure provides for mediation under case management.

(1) The parties may agree to mediate at any time. After notice and opportunity to be heard and unless prohibited by KRS 403.036 (domestic violence), the parties may be ordered to mediate any issues before further proceedings.

(2) Within 10 days of a final mediation, if the parties have been unable to resolve all issues, the petitioner shall file a motion for a

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case management conference or final hearing date, unless previously scheduled by the court.

In Jefferson Circuit Court Family Division, the local rules for mediation have some additional rules which assist in a successful mediation resolution.

B. Requirements for Property Mediation.

The parties shall exchange and provide to the mediator, in no less than five (5) working days prior to the mediation conference, the following:

1. Supplement to financial disclosure statement

regarding any material change; 2. A short statement including definition of the issue to

be addressed by the mediator and a brief narrative statement of any special problems affecting the case (e.g. closely held corporation, medical problems of any family member, etc.).

a. Copies of all documents supporting

valuation of assets. b. Copies of all documents verifying monthly

payments and outstanding balances on all debts; and

c. All information and copies of all documents

requested by the mediator prior to the mediation conference.

These Jefferson County local Family Court Rules likewise provide a well drafted rule for the compensation of family court mediators which take into consideration, among other issues, the extent of the professional services rendered by the mediator and the resources available to the mediation participants. A Sliding Fee Schedule is listed which takes into consideration the proportional share of the parties' combined annual adjusted Gross Income. See Local Rule 7(G) of the Rules of Practice and Procedure for the Thirtieth Judicial Circuit, Jefferson Circuit Court Family Division. However, not all Kentucky Family Law courts utilize mediation very often. For instance, in one county the local family court rule regarding mediation is that the Court will not order mediation unless all parties agree. Yet, given the nature of the issues involved in domestic relations cases, the trend seems, and should be, toward an increased use of mediation in matters involving the family (with the noted exception of cases involving domestic violence issues – KRS 403.036).

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VIII. ETHICAL ISSUES CONFRONTED IN MEDIATION

The Mediation Guidelines for the Court of Justice Mediators provides ethical guidelines for mediators. They remind mediators that "decision-making authority remains with the parties, not the mediator. The mediator assists the parties in identifying issues, fostering joint problem solving, and exploring settlement alternatives." Section 3(1). Some additional ethical considerations are set forth below, but reference is also made to the Guidelines for a full accounting of all of the ethical guidelines set forth.

a. "The mediator should not coerce a party in any way. A mediator may make suggestions, but the parties make all settlement decisions voluntarily." Section 3(1).

b. "A mediator's duty to protect the integrity and

confidentiality of the mediation process commences with the first communication with a party, is continuous in nature, and does not terminate upon the conclusion of the mediation." Section 3(2).

c. "As early as practicable, and before the mediation session

begins, a mediator should explain all fees and other expenses to be charged for the mediation." Section 3(3).

d. "Prior to commencing the mediation, the mediator should

make full disclosure of any known relationships with the parties or their counsel that may affect, or give the appearance of affecting, the mediator's neutrality." Section 3(4).

e. The mediator should inform the participants that: (i) the

mediation is private and informal (i.e., no court reporters, no court orders or rulings on issues will be made); (ii) the mediation is confidential; (iii) the "outcome rests with the parties"; and (iv) "the mediator does not render legal advice or represent any party." Section 3(6).

f. Mediation is regarded as settlement negotiations (KRE

408). Section 3(8)(b). g. "Mediators should not be subject to process." Section

3(8)(c). h. A mediator should encourage the disclosure of information

and should assist the parties in considering the benefits, risks, and the alternatives available to them." Section 3(11).

i. "A mediator should postpone, recess, or terminate the

mediation process if it is apparent to the mediator that continuation of the process is unproductive." Section 3(14).

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SETTLEMENT PROGRESSION SHEET

Mediator: _____________________________________________ Plaintiff: _________________________ v. Defendant: ___________________________

_____________________CIRCUIT CT. – Case No _______

Mediation time and date:___________ – ___________, 201___

Location of Mediation:_________________________________

Plaintiff – Offers Defendant – Offers

Attorneys: 1.

2.

3.

4.

5.

6.

7.

8.

Final Offer: Final Offer:

Subrogation Claim:

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MEDIATION SETTLEMENT AGREEMENT This settlement of a civil action, is executed this ___ day of _____________________, 201__, by and between the Plaintiff(s) and Defendant(s), hereinafter identified, in a certain civil action 13-CI-XXXXX pending in the ______________________ Circuit Court. WHEREAS Plaintiff(s) ________________________ holds claims or may hold claims against Defendant ________________________ which are more particularly described in the aforementioned Civil Action, NOW THEREFORE the parties hereto acknowledge that they have entered into an agreement settling all issues between the parties arising out of said civil action. The Plaintiff(s) does hereby agree to release, cancel, forgive and forever discharge the Defendant(s) from all actions, claims, demands, damages, obligations, liabilities, controversies and executions, of any kind or nature whatsoever, whether known or unknown, whether suspected or not, which have arisen, or may have arisen, or shall arise by reason of the incident described in the pleadings of the above mentioned civil action, does specifically agree to waive any claim or right to assert any cause of action or alleged case of action or claim or demand which has, through oversight or error intentionally or unintentionally or through a mutual mistake, been omitted from this Release. The Defendant(s) hereby release, cancel, forgive and forever discharge the Plaintiff(s), from all actions, claims, demands, damages, obligations, liabilities, controversies and executions, of any kind or nature whatsoever, whether known or unknown, whether suspected or not, which have arisen, or may have arisen, or shall arise by reason of the incident described above does specifically waive any claim or right to assert any cause of action or alleged case of action or claim or demand which has, through oversight or error intentionally or unintentionally or through a mutual mistake, been omitted from this Release. In addition, to said mutual release of all claims, the Defendant(s) agree to pay to the Plaintiff(s), the sum of $______________. Said sum shall be paid within ______________days of the date of this settlement agreement. Additional payment terms (if any): __________________________________________ ______________________________________________________________________ The Plaintiff(s) shall cause the pending civil action to be dismissed forthwith upon payment of the settlement amount. Each party hereto shall be responsible for their own attorney fees and court costs. In the event there is a subrogation claim by any third party arising out of the aforementioned civil action or for any services or treatment incurred by Plaintiff(s), the Plaintiff(s) shall hold the Defendant(s) harmless from the entirety of said claim. It is mutually agreed by all parties hereto, this settlement agreement shall be confidential, and shall not be disclosed to any parties other than the parties hereto and

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their officers and authorized agents. Said officers and agents shall be bound by this obligation of confidentiality. The terms of any settlement shall not be made a part of the court record, and shall not be disclosed to any court personnel, unless ordered by the court, and in any action to enforce the terms of this settlement agreement. The provisions of this Agreement must be read as a whole and are not severable and/or separately enforceable by either party hereto. This form has been reviewed by all parties signing this settlement, and they acknowledge they have had an opportunity to read this document, and to make any amendments, deletions, or changes at their discretion, but as long as all parties sign this settlement agreement it shall be binding upon all parties signing. The mediator is relieved of any liability regarding the format or language of this settlement form. IN WITNESS WHEREOF, the undersigned have executed this Release in duplicate originals as of the date first set forth above. Party Authorized to make this Settlement in behalf of the Plaintiff(s) __________________ _____________________________________________________________________ Signature Date: ______________________ Party Authorized to make this settlement in behalf of the Defendant(s) ________________ _____________________________________________________________________ Signature Date: _______________________

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SAMPLE MEDIATION GROUND RULES James Melamed, August 1998

1. We agree to take turns speaking and not interrupt each other. 2. We agree to call each other by our first names, not "he" or "she." 3. We agree to not blame, attack, or engage in put-downs and will ask questions of

each other for the purposes of gaining clarity and understanding. 4. We agree to stay away from establishing hard positions and express ourselves in

terms of our personal needs and interests and the outcomes that we wish to realize.

5. We agree to listen respectfully and sincerely try to understand the other person's

needs and interests. 6. We recognize that, even if we do not agree with it, each of us is entitled to our

own perspective. 7. We will not dwell on things that did not work in the past, but instead will focus on

the future we would like to create. 8. We agree to make a conscious, sincere effort to refrain from unproductive

arguing, venting, or narration, and agree to use our time in mediation to work toward what we perceive to be our fairest and most constructive agreement possible.

9. We will speak up if something is not working for us in mediation. 10. We will request a break when we need to. 11. While in mediation, we will refrain from adversarial legal proceedings (except in

the case of an emergency necessitating such action). 12. We will point out if we feel the mediator is not being impartial as to person and

neutral as to result.

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NOTES

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