HOSSAINI V. VAELIZADEH, 2011 WL 3422782 (D. NEB. 2011).
Is an attorney-mediator permitted to represent a party in litigation after serving as the mediator between the two litigants in an earlier mediation? Although this is an uncommon issue, a recent federal court decision in Nebraska found that the issue may be raised if the litigated dispute and mediated dispute are "substantially related." In Hassaini, a divorced couple had been parties to a custody mediation. The mediator met with both parties at one joint mediation session and had two additional sessions with the wife. The parties were unable to reach an agreement on visitation rights, and the mediation was terminated.
After the custody dispute, the parties filed competing lawsuits against each other seeking damages for emotional hardship and items that were unreturned. The mediator from the custody mediation was asked to serve as the woman's attorney to represent her in the later litigation.
The Appellate Court disagreed with the trial court's grant to compel arbitration in regards to all of the claims asserted. The court relied on contractual language for its determination. "According to the contractual language, a claim is subject to arbitration only if it relates to, or arises from, BDO's "performance" of the contract." Id. at 894; see also id. at 897. Most of the plaintiffs' claims, according to the court, fell into categories "expressly excluded from BDO's promised performance." Id. at 894; see also id. at 896-898. The contract stipulated that BDO would not provide "investment advice or services"; BDO would only provide "consulting services" which included "determining the sales price of investments, structuring the sale or making of investments, and negotiating with potential buyers or sellers of investments. Nevertheless, BDO will not provide 'investment advice or services.'" Id. at 898. Those claims that that are part of the excluded category are not subject to the arbitration agreement, while the breach of contract claim would fall within the scope of the arbitration agreement. Id. at 895. The court, therefore, affirmed in part, reversed in part, and remanded the case for further proceedings. Id. at 895.
The husband challenged the representation of the wife by the ex-mediator based on a conflict of interest theory. In order to address the potential conflict of interest arising in this scenario, the court used a balancing test to weigh public policy concerns and the parties' right to select his or her own counsel. The important policy considerations are twofold: (1) if parties to a mediation are aware that the mediator could later serve as an attorney opposing them, they will not freely disclose information; and (2) disqualifying mediators from serving as an attorney will discourage attorneys from mediating.
The court found that, in this case, the husband could not explain how the confidential information he provided to the mediator during the custody mediation could be used against him in this new case; therefore, the disputes were not substantially related. Since the two disputes had little in common, the disputes were neither the same nor substantially related. The mediator, then, could represent the wife in the litigation. Essentially, the case advances the standard that an attorney-mediator is not permanently barred from becoming the attorney of one of the parties after the mediation has ended; however, the attorney may only represent a party to an earlier mediation in affairs not substantially related to the content of that earlier mediation.
* Summary by Whitney Siehl, Moritz class of 2013.