Mediation discussions not always confidential.
On May 8, 2014 the Supreme Court of Canada carved out an important exception to the promise to keep mediation discussions confidential.
Companies and their insurers rely on private mediators to settle lawsuits partly because what is discussed at mediation stays confidential. This ensures that business strategy stays under wraps and public scandal for mistakes is avoided.
In 2011, Bombardier and Union Carbide tried to settle a decade-long $32,000,000 court battle through mediation. In 1997, 1998 and 2003, Bombardier bought gas tanks from Union Carbide to use in Sea-Doo personal watercraft. In several cases the gas tanks exploded, hurting passengers on the Sea-Doos. Bombardier sued Union Carbide for costs arising from the exploding tanks.
At mediation, Union Carbide agreed to pay Bombardier $7,000,000 to end the suit. Bombardier asked Union Carbide to hold the offer for 30 days, and accepted it 20 days later. Unfortunately, Bombardier and Union Carbide had different recollections of what was promised. Union Carbide believed Bombardier would protect Union Carbide against all future law suits worldwide. Bombardier believed the $7,000,000 was paid only to end this lawsuit.
Bombardier wanted the courts to sort out what Union Carbide agreed to and wanted to rely on confidential discussions. Union Carbide opposed this, claiming that settlement discussions were privileged.
After Quebec’s Superior Court and Court of Appeal each ruled on this, the Supreme Court of Canada said that while settlement discussions are ordinarily private, here, Bombardier was entitled to use the discussions to prove in court what Union Carbide agreed to in mediation.
The three take away lessons for those considering confidential mediation are as follows:
- Enforceability: Standard mediation agreements do not explicitly prevent either party from going to court to enforce a settlement by using private discussions as evidence. This makes mediated agreements generally enforceable.
- Absolute Confidentiality: If you require absolute confidentiality over details discussed at mediation, this is only possible if you explicitly contract out of this exception thereby preventing the court from reviewing what was said if the deal goes sour.
- Written Agreements: Immediately putting mediated agreements (including tentative ones) into writing will help to avoid disputes over what was agreed to at mediation.
Read the whole of Bombardier Inc. v Union Carbide Canada Inc., 2014 SCC 35, 239 ACWS (3d) 941 here.
