Vernon v. Acton
| Decision Date | 30 June 2000 |
| Docket Number | No. 49S02-9809-CV-488.,49S02-9809-CV-488. |
| Citation | 732 N.E.2d 805 |
| Parties | Kirk E. VERNON, and Martha Vernon, Appellants (Plaintiff), v. Adam J. ACTON, Appellee (Defendant). |
| Court | Indiana Supreme Court |
Stephen Gerald Gray, Indianapolis, Indiana, Attorney for Appellants.
Bryce H. Bennett, Jr., Michael Patrick Dugan, Riley Bennett & Egloff, Indianapolis, Indiana, Attorneys for Appellee.
The plaintiff-appellants, Kirk and Martha Vernon, are appealing from a judgment granting motions to enforce an oral pre-trial mediation settlement agreement and to impose attorney fees filed by the defendant-appellee, Adam Acton. Denying the existence of any agreement, the plaintiffs raised multiple issues on appeal. The Court of Appeals affirmed. Vernon v. Acton, 693 N.E.2d 1345 (Ind.Ct.App. 1998). We granted transfer and requested additional briefing regarding issues related to the Indiana Rules for Alternative Dispute Resolution (A.D.R.Rules). We now reverse the trial court, concluding that the mediator's testimony regarding the alleged oral settlement agreement was confidential and privileged and that it was not admissible pursuant to the A.D.R. Rules incorporated in the parties' written agreement to mediate.
This case arises from an automobile collision involving vehicles driven by plaintiff Kirk Vernon and defendant Adam Acton. Prior to filing a complaint for damages, the plaintiffs and the defendant engaged in a voluntary pre-suit mediation pursuant to a written agreement establishing the terms and conditions of the mediation process. The defendant contends that the session produced an oral agreement to settle the plaintiffs' claims for $29,500.00. A few days after the mediation session, the defendant's insurance company issued a check and a release form to the plaintiffs. The plaintiffs returned both unsigned and promptly filed a complaint against the defendant alleging negligence and seeking damages for physical injuries and loss of consortium. In his answer, the defendant asserted various affirmative defenses and a counterclaim seeking damages for breach of the settlement agreement and attorney fees. Both parties timely filed demands for jury trial. Two months later, the defendant filed a "Motion to Enforce Settlement Agreement," along with a "Motion for Attorney's Fees."
The trial court heard evidence on the defendant's pre-trial motions and made the following determinations: that the plaintiff had accepted the defendant's settlement offer; that there was an oral agreement that the plaintiffs would execute a release of all claims in exchange for $29,500.00; that the defendant did not breach the confidentiality provisions of the Agreement to Mediate or the A.D.R. Rules by disclosing statements made during the mediation process; and that the defendant was entitled to $8,000.00 in attorney fees from the plaintiffs because the lawsuit was a frivolous, unreasonable, and groundless action in light of the settlement agreement.
The plaintiffs contend that, during the hearing on the defendant's pre-trial motions to enforce settlement agreement and for attorney fees, the trial court erroneously admitted evidence regarding the alleged settlement in contravention of the parties' mediation agreement, A.D.R. Rule 2.12,1 and Indiana Evidence Rule 408. The defendant asserts that only the statements made during the mediation process before settlement were confidential. He argues that neither the parties' agreement, the A.D.R. Rules, nor the Evidence Rules prohibit evidence of an oral settlement agreement reached in mediation.
At the trial court evidentiary hearing, David Young, a claims representative for Farmers Insurance, the defendant's insurance company, testified regarding events that occurred on October 23, 1995, at the Indianapolis offices of National Alternative Dispute Resolution Services, Inc. Young; the mediator, Paul S. Petticrew; the plaintiffs; their attorney, Kirk A. Knoll; and his investigator, Clifford Somers, attended the mediation, held pursuant to a signed Agreement to Mediate. The mediation session lasted about three and one-third hours on a single day. Over the plaintiffs' objection, the trial court permitted Young to testify that, at the conclusion of the mediation session and while at the mediator's offices, "We agreed to settle the claim at $29,500." Record at 214. Young stated that he delivered the settlement check and release to Somers a few days after the mediation session. Over repeated objections by plaintiffs' counsel, the mediator, Petticrew, testified that the parties reached agreement in separate rooms, after which he brought them together for the purpose of summarizing the terms of the agreement. Petticrew stated that "[t]he parties had reached an agreement of $29,500 in full and final satisfaction of the claims" and that "the parties agreed that the adjustor was to deliver a check for $29,500 along with a release to the claimants' attorney's office." Record at 305-06. At no time did Petticrew prepare or submit a written version of the agreement to the parties to be signed. However, five months later, on March 18, 1996, in response to a request from Young, Petticrew issued a written report on the mediation, stating in part: "After three and one third hours of negotiation through the pre-litigation mediation process, the parties reached an agreement for a full and final settlement of claimants' claims for twenty-nine thousand five hundred dollars ($29,500.00)." Record at 276.
In response to the trial court overruling the plaintiffs' objections and admitting evidence of the existence of an alleged oral settlement agreement, plaintiff Kirk Vernon testified that, when he left the meeting with the mediator, he did not believe that he had entered into a binding agreement. Sowers, the investigator for the plaintiffs' attorney, testified that, at the time of leaving the mediator's office, an offer had been extended but the plaintiffs had unresolved questions regarding whether they had to pay back their medical insurance carrier. To establish their contention that there was no meeting of the minds, the plaintiffs also attempted to present testimony during the hearing regarding statements and events during the portion of the mediation session that preceded the mediator's summary, but the trial court sustained the defendant's objections to this testimony. The plaintiffs contend that the trial court's decision had the effect of allowing the parties to testify as to the legal conclusion that an agreement had been reached but excluded evidence of the facts relevant to whether the alleged agreement existed.
The trial court ruled that it could hear evidence that an agreement was reached, but that A.D.R. Rule 2.12 prevented it from receiving evidence of "what went on during the mediation process."2 Record at 228. The Court of Appeals upheld the trial court's judgment, based upon Indiana Evidence Rules 402 and 408 and its view that the confidentiality provisions in the parties' written agreement to mediate could not supersede the Rules of Evidence. Vernon, 693 N.E.2d at 1348-50.
This mediation was entered into pursuant to a written Agreement to Mediate.3 The agreement required confidentiality in conformity with state law and Supreme Court Rules.4 Both parties claim that by their Agreement to Mediate they intended to be governed by the A.D.R. Rules. They dispute the scope, but not the applicability, of the A.D.R. mediation confidentiality rule. Each party presented arguments both to the trial court and to the Court of Appeals based on the A.D.R. Rules. The trial court's decision was grounded solely upon the A.D.R. Rules. We note that the A.D.R. Rules would not have otherwise applied to this pre-suit mediation,5see Anderson v. Yorktown Classroom Teachers Ass'n, 677 N.E.2d 540, 542 (Ind.Ct.App.1997). However, because each of the parties intended to be governed by the A.D.R. mediation confidentiality rule, and to guide the bench and bar, we will analyze the mediation in this case as governed by the A.D.R. Rules.
At the time of the mediation in this case, the Indiana A.D.R. Rules provided in pertinent part:
Mediation shall be regarded as settlement negotiations. 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 prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in the course of mediation 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 the mediation process. This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, or negating a contention of undue delay. Mediation meetings shall be closed to all persons other than the parties of record, their legal representatives, and other invited persons. Mediators shall not be subject to process requiring the disclosure of any matter discussed during the mediation, but rather, such matter shall be considered confidential and privileged in nature. The confidentiality requirement may not be waived by the parties, and an objection to the obtaining of testimony or physical evidence from mediation may be made by any party or by the mediators.
A.D.R. 2.12 (1995) (emphasis added).
This rule provides for confidentiality in mediation to the extent provided for in other settlement negotiations. This remained so when we revised and renumbered the rule as A.D.R. Rule 2.11 in December of 1996 (effective March 1, 1997), modifying it to read: "Mediation shall be regarded as settlement negotiations as governed by Ind. Evidence Rule 408," the language of which we specifically set forth in this A.D.R. Rule....
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