What to Watch For In 2022
As much as Alternative Dispute Resolution (“ADR”)—including negotiation, mediation, arbitration, and med-arb—is about avoiding court, ultimately, it’s the courts that may decide to hear your case, or some part of it—even though you and/or your opponent agreed otherwise.
So, here are new and noteworthy Ontario and Supreme Court of Canada decisions about making mediation public, avoiding arbitration, settlements that went sideways, and why settlement offers must stay off—not on—the record.
What happens at mediation stays at mediation
In Stronach v. Stronach 2021 ONSC 5758, a judge in this high-profile Succession-style squabble granted a motion to strike out parts of an amended statement of defence (a type of public court document known as a “pleading”, for readers who are not legal professionals) on the grounds they pleaded (referred to) information that is subject to settlement privilege: a form of confidentiality that protects communications at mediation from being disclosed to the public, including in court proceedings. This is due to a public interest in keeping such discussions private in order to promote the settlement of disputes. The matters in question related to documents and communications from a judicial mediation (a mediation that is conducted by a sitting judge who is not permitted to be the trial judge if no settlement occurs).
The court did not agree that the two exceptions to settlement privilege raised by the responding party, Belinda Stronach, applied here: Waiver, which is forgoing one’s right to claim privilege to prevent disclosure of confidential information either expressly or impliedly, and the justice of the case, meaning a compelling or overriding reason that outweighs the public interest in promoting settlement.
The decision turns on its unique facts and is worth a read, especially if you have been following this saga.
However, there are at least two other exceptions to settlement privilege at mediation not raised in the Stronach decision:
- for the purposes of enforcement of a settlement because there is a dispute about interpretation of the settlement terms and/or one party fails to comply with the settlement (unless the parties clearly contracted out of this exception in the mediation agreement). The Supreme Court of Canada recently re-visited this exception in Association de médiation familiale du Québec Bouvier, 2021 SCC 54 after its landmark decision in and Union Carbide Canada Inc. v. Bombardier Inc., 2014 SCC 35.
- for the purposes of Law Society of Ontario (“LSO”) disciplinary proceedings, since counsel can’t simply say or write whatever they wish in a mediation context and assume that they are exempt from the LSO’s Rules of Professional Conduct governing lawyers and paralegals.
4 THINGS TO WATCH FOR IN 2022
1. The courts will likely continue to promote settlement by keeping settlement discussions—whether those discussions led to a settlement or not—away from the public eye. Aside from long-held principles, given the backlogs in cases due to the pandemic and a shortage of judicial resources, promoting settlement is more important than ever.
The enforceability of arbitration agreements in employment contracts remains uncertain post-Uber v. Heller
In Leon v. Delanet Capital Corporation, 2021 ONSC 7192, the Divisional Court dismissed a motion to quash (end) an appeal of the decision of Associate Judge McAfee Leon staying (suspending or postponing) the employee’s lawsuit for unpaid bonuses due to a contractual ADR provision.
The appeal will proceed notwithstanding that s. 7 (6) of the Arbitration Act, 1991 makes it clear that once a court has ruled that a civil proceeding is stayed in favour of an arbitration, all appeals are barred. It is then supposed to left to the arbitral tribunal to decide whether it has jurisdiction under the arbitration agreement.
The provision, found within an employment contract, provided that:
All disputes arising out of or in connection with this contract, or in respect of any legal relationship associated therewith or derived therefrom, will be referred to mediation and, if unsuccessful, finally resolved by arbitration under the statutes of the Province of Ontario.
On the face of it, the parties agreed not to sue in court.
However, and as I noted in my interview with Law Times, the motion might have been successful but for the intervention of Toronto’s Parkdale Community Legal Clinic, “in the interests of vulnerable workers”, which argued that the arbitration clause is void because it is in breach of the Employment Standards Act, 2000 (“ESA”). This was one of the grounds on which the Court of Appeal invalidated Uber’s arbitration agreement with its drivers in 2019 (but the Supreme Court of Canada declined to rule on this particular issue since it relied on the doctrine of unconscionability to reach the same conclusion). Since it appears that the litigation in Leon will likely go on for years – which is ironic considering it is dispute over an ADR clause, which is intended to keep legal disputes shorter, less expensive and potentially more private than court by keeping them out of court—and keeping in mind the Supreme Court’s lessons from Uber v. Heller, I suggested that:
Employers should [for now] reserve ADR clauses for senior employees and clarify within the ADR clause in the contract that the clause does not preclude them from seeking relief under the ESA or other legislation…. they should also pay 100 per cent of mediators’ or arbitrators’ fees to address the issue of unconscionability and prevent a hindrance for moderate and lower-income employees.
2. The Divisional Court will likely hear the appeal in Leon and release its decision, but it will take longer than before we have any degree of certainty from the courts about when ADR clauses – especially those that provide for arbitration – will be enforceable in the employment law context. Compare and contrast this to labour law (which governs unionized workplaces, unlike employment law) where arbitration – with a mediation often conducted by the arbitrator before the arbitration hearing begins – is the rule, not the exception.
Stop. Reading Break.
This might feel like a long blog post (it is) but that’s because it’s been a long year (and we are probably heading for an even long winter.) So, feel free to take a short break. Have a snack, take a walk, play with your dog (real or imaginary), or call somebody (and try to call them something nice, in the spirt of dispute resolution). Of course, please return to read the rest. You’re in the home stretch now, and you need to know how this year turns out.
Don’t plead settlement offers
We all want to appear reasonable in the eyes of the court, but “including settlement discussions in pleadings or otherwise disclosing them to the court is improper”, wrote the Court of Queen’s Bench of Alberta in Kosteckj v. Paramount Resources Ltd. 2021 ABQB 225. The Court applied an Ontario decision from earlier this year, Hamilton v. Hamilton, 2021 ONSC 274 in striking a statement of defence (another type of pleading) that referred to an employer’s severance package offer at termination for the purposes of mitigation. The employer defendant was attempting to show the court that the plaintiff employee should have accepted the employer’s offer to settle made at the time of termination to cut their losses.
Settlement offers and discussions—including those made outside of the mediation process, like in this case—generally have no place in court documents (as noted above in my discussion of Stronach) unless one is attempting to enforce an accepted offer to settle, and the parties did not agree otherwise. The courts are not only saying that “what happens at mediation stays at mediation”, they are saying “you can’t go on-the-record with whatever you discussed off-the-record” during your negotiations no matter where or how those negotiations took place”. Also, “discussions” include email communications.
3. My predictions with respect to “what happens at mediation stays at mediation” (see above) apply equally here. Counsel who still prefer that ultimate decision makers like judges or arbitrators are able to see how reasonable (or unreasonable) their client was in attempting to settle the dispute before them ought to consider mediation-arbitration (‘med-arb”) for their clients, instead of court or traditional arbitration.
In med-arb, a hybrid form of ADR, the mediator becomes the arbitrator (decision maker) if the parties cannot settle during the mediation. When I referred to labour arbitrators acting as mediators above, I was describing a form of med-arb.
Although, in most med-arb scenarios, the mediator who becomes the arbitrator cannot treat settlement offers as evidence, nor can they refer to them in making their award after the arbitration hearing, they have still learned about the offers during mediation. However, in a variation of med-arb called “final offer selection” (sometimes known as “baseball arbitration”), the mediator turned arbitrator doesn’t make their own decision after listening to or reading evidence. Instead, they are presented with each side’s last, best offer to settle. They then choose the one without giving reasons why, and without a right of appeal for the party whose offer was rejected by the arbitrator.
Med-arb—including the baseball variety—will continue to gain popularity in 2022 because it is both time and cost efficient, as well as private, unlike court.
The SCC releases a decision about releases
In Corner Brook (City) v. Bailey, 2021 SCC 29, the Supreme Court of Canada told us how full and final releases should be interpreted. While this decision denied the plaintiff the right to advance a third-party claim following the signing of a release as part of the settlement of a motor vehicle accident claim as against the same party (non-legal professionals: a third-party claim is where someone is sued, and they blame it on someone else who is not already part of the lawsuit). Here, past, present and future claims against that party arising from the accident were mentioned in the release.
However, the decision has an application to a wide variety of situations since settlements of all sorts almost always include the signing of a release (also called a “full and final release”) by the party who is receiving money. Most releases provide that the recipient of settlement funds (often called the plaintiff, or claimant) agrees not to sue the person the recipient sued, but often a large body of potential people who could be sued as a result of the incident in question. Releases often go beyond that though and provide for other features such as the recipient (known in legalese as the “releasor”) such as confidentiality of the settlement terms – and the claims that led to those terms – and non-disparagement of the party that is paying.
In general, the Supreme Court ruled that a release is a contract and should be interpreted in accordance with contract law. When determining if a release bars a particular type of future claim against the same party, the Court will inquire into whether the release covers the type of claim later filed. So, it is important to draft with skill and care, and to be specific about timeframe and subject matter, whether you are at a mediation or you are settling by email. In my view, counsel should avoid relying on boiler plate releases and assuming “one size fits all” and to carefully consider what is being released and what is not. In the end, words matter – and you want a settlement to “stick”.
4. The end of one-size-fits-all releases. Many people (lawyers included) approach releases as “standard form” documents that should not be carefully scrutinized and negotiated before signing. More careful attention will be paid to these potentially powerful legal documents and their possible unintended effects on future legal claims.
That’s it for 2021. See you next year and—if you can avoid it—stay out of court!
For more information about my ADR practice, including mediation and med-arb, click here.
This blog is for educational purposes only and is not intended as legal or other professional advice.