Issue: February, 2008
Author: John M. Burman
Printable Version (PDF)
Ethically Speaking - An Attorney's Duties Regarding ADR, Including Mediation and Intermediation
Those of you who attended law school more than a decade or so ago never heard the acronym “ADR” or the word “mediation” until it was suggested as a means of trying to resolve a dispute between our client and another party. The initial reaction of many of us was to hide our ignorance behind an assertion that “this case isn’t appropriate for ADR or mediation.” But the issue kept recurring, with increasing frequency, sometimes from clients and sometimes from judges, and so we had to learn about mediation so that we could advise clients about whether it might be appropriate, and so we could participate competently in the process when it became inevitable.
Alternative Dispute Resolution
Now, mediation, or some other form of alternative dispute resolution (“ADR”), is mandatory in some jurisdictions for some kinds of cases. In addition, advising a client about the possibility of ADR is expressly required in some states, such as in Colorado. Even in states such as Wyoming where there is no express requirement, there may well be an implied requirement because lawyers generally, including those in Wyoming, have the duty to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation:” The reason for discussing ADR given such a rule is simple. A client cannot make an “informed decision” without knowing about his or her options, including the option of trying some form of ADR. And since a “reasonable lawyer” would advise a client of the information necessary to permit the client to make an informed decision, including the option of trying ADR, a Wyoming lawyer has both an ethical and a legal obligation to provide such information.
Until the recent amendments to the Wyoming Rules of Professional Conduct (“the Rules”), they were silent on the ethical duties of a lawyer acting as a mediator between two or more non-clients. As discussed below, the Rules have long addressed a lawyer’s ethical obligations when acting as an intermediary between clients, but that is a fundamentally different role. Now the Rules discuss a lawyer’s duties when serving as a mediator (a “third-party neutral” in the parlance of the Rules).
The acronym “ADR” has crept into the legal lexicon. “ADR” means, of course, “alternative dispute resolution.” The question that the use of ADR logically raises is alternative to what? The answer is all forms of dispute resolution which do not go to trial. One common method of ADR is mediation.
What Is Mediation?
ADR, of course, includes many alternatives other than mediation. They run the gamut from settlement of a case, with the parties often acting through their lawyers, to arbitration, in which one or more third parties make a decision that is generally binding on the participants and may be conducted pursuant to formal rules and procedures, such as those of the American Arbitration Association (AAA), which resemble civil litigation in the judicial system. “Mediation” falls somewhere in the middle:
Mediation is the intervention into a dispute by an acceptable, impartial, and neutral third party who has no authoritative decision-making power to assist disputing parties in voluntarily reaching their own mutually acceptable settlement of issues in dispute.
Since mediation is voluntary, it can be conducted pursuant to whatever rules or procedures the parties choose. Accordingly, “[w]hether a third-party neutral serves primarily as a facilitator, evaluator, or decision-maker depends on the particular process that is selected by the parties or mandated by a court.”
While mediation varies significantly, depending on the desires of the parties, it invariably involves “facilitated negotiation,” in which a person trained as a mediator tries to help parties to a dispute reach an agreement. Because it is, ultimately, based on the agreement of the parties, it is, by definition, non-binding. The parties can take or leave any proposed agreement. Usually, the mediator has been trained in how to get parties to reach agreements, and he or she may be certified by some training or certification body. And while training and certification of mediators are required in some jurisdictions, they are not in Wyoming. Anyone can hold him or herself out as a mediator.
The Non-representational Role of a Mediator or Third-party Neutral
Since their adoption in 1986, and even before, the rules that establish the ethical norms for lawyers have been premised on the notion that a lawyer represents clients. Accordingly, the Preamble to the former Rules described the various representational roles a lawyer might play, including advisor, advocate, negotiator, or evaluator. Perhaps because mediation was virtually unknown 20 years ago, the Rules did not contemplate that a lawyer might act as a mediator, a role in which the lawyer does not represent any of the parties involved in the dispute, and how a lawyer/mediator’s ethical duties change with that different, non-representational role.
For better or worse, the practice of law has changed. Mediation is now not only common, it may even be mandatory. Either party or the judge in a civil case in Wyoming may require that the matter be referred to ADR. The court may, or at the request of any party shall, assign the case to . . . [a] qualified person on limited assignment for the purpose of invoking nonbinding alternative dispute resolution methods . . . .”
The Rules of Professional Conduct also now recognize that a lawyer may fill a non-representational role, and that a lawyer playing that role has different ethical obligations than a lawyer who represents clients. First, the Preamble to the new Rules now includes a non-representational role for lawyers. “In addition to . . . representational functions, a lawyer may serve as a third-party neutral, a non-representational role helping the parties to resolve a dispute . . . .” When a lawyer acts as a third-party neutral, “[s]ome of these Rules apply directly.” Conversely, some do not.
Second, Rule 2.4 has been added to directly address a lawyer’s ethical obligations when acting in a non-representational role. The Rule is entitled “Lawyer Serving as Arbitrator, Mediator, or Third-Party Neutral.” It, and the comments which follow, provide important guidance for lawyers acting in non-representational roles.
Rule 2.4 begins by defining when a lawyer acts as a “third-party neutral.” “A lawyer acts as a third-party neutral when the lawyer assists two or more persons who are not clients . . . to reach a resolution of a dispute . . . .” A lawyer acting as “an arbitrator [or] a mediator” comes within the Rule.
The Rule then echoes the words of Rule 4.3--the Rule that applies when a lawyer is dealing with an unrepresented party. That is, a lawyer acting as a third-party neutral “shall inform unrepresented parties that the lawyer is not representing them.” If the lawyer “knows or reasonably should know that a party does not understand the lawyer’s role . . . the lawyer shall explain the difference” between the lawyer’s role as a third-party neutral and the traditional role of a lawyer. The mediator must make sure, in other words, that none of the parties to the mediation reasonably believes that the mediator represents that party. Allowing such a belief may result in the formation of an attorney-client relationship between the mediator and the party in question (an attorney-client relationship “‘may be implied from the conduct of the parties, such as the giving of advice or assistance . . .’”.)
As discussed below, a lawyer who acts as a third-party neutral “may be subject to court rules or other law.” In Wyoming, mediation is governed by statute.
Finally, a lawyer who has been involved in a matter as a third–party neutral may not thereafter represent any of the parties in the same matter. “The conflicts of interest that arise for both the individual lawyer and the lawyer’s law firm are addressed in Rule 1.12.”
The Statutory Framework
Nonlawyers, as well as lawyers, may act as mediators in Wyoming. Regardless of their status, they are subject to Wyo. Stat. §§ 1-43-101 through 104. Those provisions generally make mediation a confidential process.
“Mediation” is defined by the statute as “a process in which an impartial third person facilitates communication between two (2) or more parties in conflict to promote reconciliation, settlement, compromise or understanding.” A “mediator,” in turn, is “an impartial third person not involved in the conflict, dispute or situation who engages in mediation.”
The main focus of the statutes is to ensure that any “communication” made as part of a mediation is and remains confidential “if not intended to be disclosed to third persons other than those to whom disclosure is in furtherance of the mediation process or those reasonably necessary for the transmission of the communication.”
The statutory rule of confidentiality is also an evidentiary privilege. “A party to the mediation has a privilege to refuse to disclose and to prevent all mediation participants from disclosing confidential communications.”
Finally, the statute promotes mediation by granting mediators immunity. “Mediators are immune from civil liability for any good faith act or omission within the scope of the performance of their power and duties.”
Since 1986, the Wyoming Rules of Professional Conduct have included a Rule (2.2) which permits a lawyer to act as an intermediary between or among clients. Based on the previous set of Model Rules of Professional Conduct, the Rule allows a lawyer to attempt “to reconcile [the clients’] . . . divergent interests as an advisor and, to a limited extent, as a spokesperson for each client.” Although the Rule was recently deleted by the ABA, it remains a part of the Wyoming Rules.
The ABA eliminated the rule because it was, allegedly, not often used. While it may not be used often, it can be valuable when it is. For example, assume that one party to a business which is not publicly traded wishes to sell to the other owners, who wish to buy. The seller and the buyers are on good terms; they are agreed in principle about the terms of the sale, but they collectively wish to have a lawyer assist them in structuring the deal. Each could hire a lawyer, but doing so would be expensive and may make an amicable implementation of the deal more difficult. In such circumstances, the parties may ask one lawyer to attempt “to resolve [their] potentially conflicting interests by developing the parties' mutual interests.”
One of the advantages of intermediation is that it may take any form to which the parties can agree. Whether intermediation is appropriate “can depend on its form, [f]orms of intermediation range from informal arbitration, where each client's case is presented by the respective client and the lawyer decides the outcome, to mediation, to common representation where the clients' interests are substantially though not entirely compatible.”
By definition, the parties to an intermediation have potentially differing interests. So long as those differences remain potential, however, the parties may greatly benefit from having a lawyer involved. By contrast, if the parties’ interests are not generally congruent, intermediation is not appropriate. “In some situations the risk of failure is so great that intermediation is plainly impossible. For example, a lawyer cannot undertake common representation of clients between whom contentious litigation is imminent or who contemplate contentious negotiation.”
Although the interests of parties who request intermediation are only potentially adverse, a lawyer asked to intermediate between or among them has a conflict of interest, which must be properly waived. The Rule is designed to ensure that appropriate waivers are obtained, that a lawyer acting as an intermediary fulfills his or her obligations to all the clients, and that the lawyer withdraw if it becomes impossible to fulfill those obligations.
The first step in intermediations is that the lawyer asked to act as an intermediary must consult with each client “concerning the implications of the common representation, including the advantages and risks involved, and the effect on the attorney-client privileges, and obtains each client's [consent] . . . to the common representation.”
Among the risks involved is that intermediation may fail. If it does, the lawyer acting as intermediary must withdraw from any involvement in the matter. Accordingly, if the intermediation fails, “the result can be additional cost, embarrassment and recrimination.” That possibility is one of the issues which must be disclosed to, and discussed with, all relevant parties.
The effect of joint representation on confidentiality and the attorney-client privilege is a “particularly important factor in determining the appropriateness of intermediation.” It should, therefore, be discussed with clients requesting intermediation. As in any attorney-client relationship, an attorney involved in intermediation has potentially conflicting obligations “to keep each client adequately informed and to maintain confidentiality of information relating to the representation. . . . Complying with both requirements while acting as intermediary requires a delicate balance.” The ethical duty to maintain confidentiality can co-exist with the duty of communication only so long as the clients’ interests are congruent.
The attorney-client privilege generally protects communications between an attorney and a client from third parties. The privilege does not apply, however, as between joint clients. “With regard to the attorney-client privilege, the prevailing rule is that as between commonly represented clients the privilege does not attach. Hence, it must be assumed that if litigation eventuates between the clients, the privilege will not protect any such communications, and the clients should be so advised.”
While the clients’ interests are congruent, the lawyer may both satisfy the duties of communication and confidentiality. Once an actual conflict arises, the lawyer is in an impossible situation.
Before agreeing to act as an intermediary, therefore, a lawyer should advise all affected clients, in writing, of at least the following: (1) the advantages of intermediation (a potentially more efficient process, reduced expenses, and fewer persons involved); (2) the disadvantages (if the parties’ interests diverge, the intermediary will have to withdraw completely, and each party will have to obtain alternative counsel, and the attorney-client privilege will not apply between the formerly joint clients); (3) that each client may revoke his or her consent to the intermediation at any time for any reason, or for no reason; and (4) each party has the right and should be given both the recommendation and opportunity to seek independent legal counsel before agreeing to the intermediation.
Second, assuming the proper consultation has occurred and the proper waivers given, intermediation is appropriate only if the lawyer “reasonably believes that the matter can be resolved on terms compatible with all the clients' best interests, that each client will be able to make adequately informed decisions in the matter and that there is little risk of material prejudice to the interest of any of the clients if the contemplated resolution is unsuccessful.”
Third, the lawyer must reasonably believe that he or she can be impartial. That is, the lawyer must “reasonably believ[e] that the common representation can be undertaken impartially and without improper effect on other responsibilities the lawyer has to any of the clients.” But just as the lawyer’s role changes from advocate to impartial intermediary, the role of the clients change too. “[T]he clients ordinarily must assume greater responsibility for decisions than when each client is independently represented.”
Fourth, the lawyer’s impartiality must continue during the intermediation. Because the lawyer has duties to all clients involved in the intermediation, the lawyer must “consult with each client concerning the decisions to be made and the considerations relevant in making them, so that each client can make adequately informed decisions.” That consultation will, however, differ in one important respect from that normally expected of a lawyer. “The consultation should make clear that the lawyer's role is not that of partisanship normally expected in other circumstances.”
Finally, if it becomes impossible to properly balance the joint duties of confidentiality and communication, the intermediation has failed, and the lawyer must withdraw. “Upon withdrawal, the lawyer shall not continue to represent any of the clients in the matter that was the subject of the intermediation.” The reason is that each of the clients “has the right to loyal and diligent representation, the right to discharge the lawyer as stated in Rule 1.16, and the protection of Rule 1.9 concerning obligations to a former client.”
It doesn’t matter that ADR, including mediation, is “new,” and may represent a departure from traditional law practice. ADR has become an important part of the practice of law. A lawyer may wish to avoid ADR and stick with the more familiar method of dispute resolution–just take the issue to court. Lawyers do not, however, have that option.
Lawyers have both an ethical and legal duty to know about ADR, including mediation, and to advise their clients about the advantages and disadvantages of trying ADR. The ethical obligation is expressed in some states, such as Colorado. In others, such as Wyoming, the question is whether a reasonable lawyer would know about and inform his or her client about various forms of ADR (if so, the duty is implied). That is the same question legally. And the answer, both ethically and legally, is the same. A reasonable lawyer knows and will inform his or her clients about ADR, including mediation. Only with that information can a client make an “informed decision” about the representation. And only by giving clients such information can a lawyer discharge his or her duty to act as a reasonable lawyer.
While a lawyer may never act as a mediator, an arbitrator, or a third-party neutral, the lawyer needs to know how to competently represent a client who chooses to try some form of ADR. Competent representation in ADR is just as important as competent representation in litigation, and a lawyer owes his or her client that duty, regardless of the setting.
Intermediation is fundamentally different; a lawyer remains in a representational role, at least to an extent. And once again, a reasonable lawyer will know about it and advise his or her clients of its availability when appropriate. The reason is that without knowing about the option of intermediation, a client cannot make an informed decision about how to proceed. And that, an informed decision by the client, is the touchstone of the practice of law, the goal for which every lawyer should strive in every case.
John M. Burman teaches professional responsibility at the University of Wyoming College of Law. If there are issues you would like to see addressed in this column, Professor Burman may be reached by e-mail at email@example.com.
The views and opinions expressed and included in "Ethically Speaking" are those of the author only and do not constitute an opinion, finding or viewpoint, official or unofficial, of the Wyoming State Bar or the Board of Professional Responsibility.
Copyright © 2008 – Wyoming State Bar