A recent decision by the Indiana Court of Appeals shows the uneasy balance between the rules of confidentiality in an ADR process, and the rules of evidence in a court trial. In the family law case Horner v. Carter, the Indiana court has interpreted its state rules of ADR and Evidence so that clients may introduce evidence from confidential ADR sessions for a much broader range of reasons than the court had previously allowed. While the case is limited to Indiana, and currently under appeal to the Indiana Supreme Court, other ADR professionals may wish to tune in for two reasons. First, other states beyond Indiana may follow similar rules. Also, the case is an interesting example of the uneasy balance that can exist between the protection and privilege of ADR, and how that veil may be pierced unexpectedly in a court proceeding.
Several years after Mr. and Mrs. Horner’s (now Carter’s) mediated divorce settlement, Mr. Horner objected to the wording of one provision in the written settlement draft, which required him to pay support for his former wife’s housing for the rest of her life. He claimed that this was a mistake, and that like many other provisions the housing support was intended to end once Mrs. Carter remarried. The case went to trial, and Mr. Horner asked to bring confidential communications from the mediation into evidence to show the mistake in the final settlement. When the trial court did not allow the evidence, Mr. Horner appealed. The Indiana Court of Appeals ruled that the trial court should have allowed the evidence because it was not specifically prohibited by the combination of Indiana ADR Rule 2.11, which governs mediation confidentiality, and Indiana Rule of Evidence 408, which governs compromise and offers to compromise.
Indiana ADR Rule 2.11 has two parts. First, it says that mediations are “settlement negotiations” as they are “governed by” Evidence Rule 408. Next, 2.11 has a seemingly robust protection of confidentiality: that mediators’ information is “confidential and privileged,” that neither party can waive confidentiality, and that parties and mediators may object “to the obtaining of testimony or physical evidence.”
In their ruling, the Court of Appeals only discussed the part of Rule 2.11 that quoted Evidence Rule 408. While they did not discuss the latter half of 2.11, this may be because they considered the ADR rule to send them to the Evidence rule, there to treat it as an entirely Evidence decision.
Indiana Rule 408 is similar to the Federal Rule of Evidence 408. The rule is about “offers to compromise.” Heavily simplified, Rule 408 exists to encourage a certain policy: courts want people to try to negotiate and compromise before trial, so they don’t allow information from attempted compromises (whether failed or successful) to serve as evidence that limits either party’s options later on. In other words, the fact that Sarah offered Kenji $500 to settle a fender bender, and Kenji discussed accepting the offer, should not be admitted as evidence to show that Sarah was indeed at fault, or evidence that Kenji’s damages are only worth $500 if he says he actually suffered $3000 in damages. “Evidence of conduct or statements made in compromise negotiations, is likewise not admissible.” Rule 408 then says that when evidence from a compromise “is offered for another purpose” the court does not have to exclude it.
Read broadly, this rule could exclude almost everything discussed in mediation because the entire process is a negotiation deciding on the value of a compromise. However, the Indiana Court of Appeals instead read Rule 408 quite narrowly, saying that Mr. Horner was offering his evidence “for another purpose” than the specific issue prohibited by Rule 408, evidence “to prove liability for or invalidity of the claim or its amount.” The Court said Mr. Horner’s purpose was “to establish that a mistake occurred in the drafting…and to modify the agreement based upon that mistake.” This meant the trial court had erred in excluding the evidence.
The court then said that policy weighed in their decision. While mediation is desirable and confidentiality is important, “strict adherence to confidentiality would produce an undesirable result” because parties could not challenge issues of “the integrity of the mediation process, such as mistake, fraud, and duress.”
Despite winning on this point, Mr. Horner did not win his overall case, and has appealed to the Indiana Supreme Court. This case raises several interesting issues. First: In any state where ADR rules and policies intersect with the rules of evidence, it is a difficult but crucial challenge for neutrals to understand how the boundaries of confidentiality may be interpreted at the trial level, and to explain to parties how confidentiality may or may not be protected in court. This is a challenging task because, as here, state courts’ interpretation of confidentiality may change between decisions or according to new situations. Many states have an equivalent to Evidence Rule 408, and courts may use that rule to make their evidence decisions about confidentiality whether the ADR rules mention the intersection or not.
Second: In this case, there is a profound conceptual difference between the trial court’s interpretation of Rule 408 and the Court of Appeals’. The trial court read Rule 408 to exclude the confidential elements of a mediated settlement from evidence, except for a few specific exceptions. The Court of Appeals’ ruling instead could mean that virtually every confidential element may be brought into evidence, except for evidence serving a narrow and specific purpose. Or, the court may only apply this ruling to cases that present a problem similar to Mr. Horner’s, of proving a mistake (or fraud or duress) in the process. However, it is too early to know whether the Court may continue to open other broad areas where parties may expect to enter confidential information from mediations. ADR advocates both inside and outside Indiana may wish to follow the progress of this decision.