Sanctions for Lack of Authority and Other Myths
During mediation, one side sometimes complains to me that the other side did not bring someone with “full authority,” and the ostensibly aggrieved party’s attorney asks me if I will report the other side to the Court or tells me they might seek sanctions. I will not and cannot report any “lack of authority,” and sanctions for allegedly deficient authority are notoriously difficult to achieve for many reasons.
Although some may argue to the contrary, I believe the substantive law and ethics opinions support my contention that no certified mediator operating under Florida law can or should report statements regarding authority to the Court. Florida Rule of Civil Proc. 1.720 was amended a few years ago in a laudable but doctrinally suspect effort to ensure that defendants and their liability carriers in attendance at mediation were prepared to make a deal. The drafters added subsection (e), requiring a certification of authority by each party to identify who will be attending and confirm they have the authority (without further consultation) required by subdivision (b). See the 2011 Committee Notes following Rule 1.720. Attendance with authority under subparagraph (b) requires a carrier representative with authority to settle in an amount equal to the policy limits or Plaintiff’s last demand—whichever is less—without further consultation. The rule only applies by stipulation or to court-ordered mediations.
The purpose of the certification requirement is clear. There is ample literature confirming that in-person attendance by key decision makers produces better agreements and a higher rate of settlement. My own experience as a mediator and as an advocate is consistent. Conversely, having key people on the telephone rather than in person makes it harder to get a deal done because (as psychologists will tell you) there is little or no emotional or psychological “buy in” to the process or “investment” by the remote attendee. Remote attendees don’t work as hard at the end of the day to make a deal, and they feel less commitment to others, so they are more insensitive to the charge that they are scuttling the deal the others worked to achieve. There is a group dynamic and psychological affinity for making a deal that remote attendees do not share.
There are more than a few problems with the authority/certification rule. First, the certification must be from a “party.” Typically, an insured party defendant has no control over whom the insurance company selects as its representative. The literal language of the rule imposing a duty of “certification” upon an insured “party” simply ignores the reality of the tripartite relationship and the carrier’s control over the defense which is contractually mandated by the insurance policy. Why is a party or their lawyer filing a paper vouching for the carrier representative’s authority? That’s the part that is logically suspect.
There is a more fundamental problem. The rules and case law clearly provide that sanctions can be imposed for failing to have someone present with requisite authority. See Rule 1.720(f). What if someone admits they lack authority? If you seek to introduce evidence of a statement tending to prove one lacked the requisite authority, you will likely meet with an objection. Statements made during mediation are privileged under Chapter 44, subject only to the exceptions in Section 44.405(4)(a). The exceptions are for communication used to plan a crime, to prove professional misconduct, and other unrelated grounds.
There is no exception for statements tending to prove the absence of authority. Therefore, if you attempt to introduce an “authority” statement from a mediation participant to seek sanctions, your side is violating the Mediation Confidentiality and Privilege Act and you get sanctioned! The drafters to Rule 1.720 did not have the ability to create a new statutory exception to the confidentiality rules. The court would have to create a non-statutory common law exception to the confidentiality rule to allow testimony regarding authority. To this author’s knowledge, there is no existing authority for a new common law exception, and constructing a new exception is a bad idea because it can be used as a vehicle for harassing parties who are unwilling to settle on another’s terms and would create a host of problems beyond the scope of this article.
There is a solid argument that Rule 1.720 and the attendance and authority rules conflict with mediation principles. The parties should decide who they bring to the table. Self-determination, flexibility, and the needs and interests of the parties are under the certification rules paramount. See Mediator’s Standards of Conduct Rule 10.230 – Mediation Concepts; Rule 10.310 – Self-Determination. If an insurance carrier does not believe the case warrants the involvement of a high-level representative, and someone else is better able to negotiate a deal, so be it. The marketplace ultimately rewards good mediation decisions and punishes inefficient or ill-informed decisions. If a carrier or a party fails to bring a person with sufficient authority, they arguably suffer a higher rate of impasse and the burden of their poor decision-making, if one assumes the impasse is a function of insufficient authority. Maybe the case does not warrant the travel expense to come to mediation, or due to timing of mediation, the carrier has strategic reasons for not settling (e.g., awaiting a ruling on a summary judgment ruling).
One might ask, why should coverage limits or the Plaintiff’s last demand dictate who one brings to mediation? Limits are a function of asset protection, risk management, and premium costs that are wholly unrelated to any particular claim. The demand from the Plaintiff is unilateral and may bear no relation to case settlement value. Each side most certainly should focus on attendance. But to be philosophically consistent with the principles underlying mediation, shouldn’t attendance be self-determined like everything else? The best practice is to communicate with everyone well in advance of the mediation session so that concerns over attendees can be addressed. If you have “authority” problems at mediation, please recognize that the statutory mediation privilege may bar you from introducing evidence to support sanctions. I suggest to attorneys and litigants that they may be better off seeking a second mediation later in the case as opposed to spending the time and effort to file a motion for sanctions that raises privilege issues and alienates the other side. Continued dialogue is likely a better solution than complaining about the authority problems inherent in the dialogue you already had. The best practice is to communicate beforehand and simply ask, “Who are you bringing?” Most authority problems can be eliminated if counsel communicates their proposed attendees and concerns in advance of the mediation session.