ORDER REGARDING THE PARTIES' JOINT DISCOVERY DISPUTE LETTER DATED DECEMBER 10, 2014

[Re: ECF No. 48]

LAUREL BEELER, Magistrate Judge.

INTRODUCTION

On December 10, 2014, plaintiffs and counter-defendants Richard Haskins, Arthur Haskins and the Estate of Arthur "Buzz" Haskins, Jr. (collectively, "Plaintiffs") and defendants and counter-claimants Employers Insurance of Wausau and Nationwide Indemnity Company (collectively, "Wausau") filed a joint discovery dispute letter regarding documents and testimony related to mediations held in an underlying lawsuit, Haskins vs. Cherokee Grand Avenue LLC, U.S.D.C., N.D. Cal., Case No. 3:11-cv-05142-JST (the "Underlying Action"). Upon consideration of the parties' joint discovery dispute letter and the arguments of counsel at the January 8, 2015 hearing, the court rules as follows.

STATEMENT

On October 20, 2011, Plaintiffs filed the Underlying Action to address environmental contamination in the vicinity of certain property they own in South San Francisco. The defendants in the Underlying Action (collectively, "Cherokee") filed a counterclaim against Plaintiffs asserting causes of action for cost recovery under 42 U.S.C. § 9607(a) and declaratory relief under 42 U.S.C. § 9613(g)(2). Plaintiffs tendered that counterclaim to Wausau and requested a defense under policies that Wausau had issued to Plaintiffs. Plaintiffs contend that the counterclaim sought damages that were potentially within the coverage of those policies and, thus, that Wausau had a duty to defend Plaintiffs against that counterclaim in the Underlying Action.

In response, Wausau reserved its rights and investigated the counterclaim. Wausau then negotiated a proposed settlement of the counterclaim with Cherokee, pursuant to which it agreed to pay Cherokee $11,894.94 to settle Cherokee's past costs. Plaintiffs, however, objected to the proposed settlement because it did not involve a dismissal with prejudice of any claims for future costs. Wausau then gave Plaintiffs the option of either agreeing to the proposed settlement of the counterclaim, or assuming their defense against it. Plaintiffs refused to agree to the proposed settlement and deny that, by doing so, they assumed responsibility for their own defense.

On June 13, 2012, Cherokee and Plaintiffs participated in a mediation in the Underlying Action before mediator John Skelton. In advance of the mediation, Plaintiffs provided Defendants a copy of their mediation statement. The parties did not reach a settlement at that mediation.

Later, Wausau and Cherokee decided to try to settle the latter's counterclaim over Plaintiffs' objection on the terms that they had previously agreed to. Cherokee filed a motion to dismiss its counterclaim for future costs without prejudice. Plaintiffs opposed that motion.

On March 19, 2013, Cherokee and Plaintiffs participated in a mediation before Judge Alfred Chiantelli (Ret.). Plaintiffs invited Wausau to attend the mediation and provided it a copy of their mediation statement. Plaintiffs also emailed Wausau during the course of the mediation about the amounts Cherokee was demanding in settlement. At the mediation, Cherokee and Plaintiffs reached a settlement, which provides for the following: (1) entry of judgment for Cherokee and against Plaintiffs on Cherokee's counterclaim in the amount of $1.7 million, executable only against Plaintiffs' insurance assets, with such recovery, if any, generally to be deposited in the San Bruno Channel Remediation Trust ("Remediation Trust"); (2) assignment of such judgment to the Remediation Trust; (3) appointment of Plaintiff Richard Haskins as Trustee of the Remediation Trust generally without compensation; (4) dismissal with prejudice of Plaintiffs' First Amended Complaint; (5) deposit by Cherokee of $150,000 into an attorney trust fund; and (6) transfer of that money ($150,000) into the Remediation Trust if, within five years, $1.2 million is deposited into the Remediation Trust from any source. Also on March 19, 2013, Cherokee withdrew its motion to dismiss its counterclaim for future costs without prejudice. On August 28, 2013, the district court entered a Judgment Pursuant to Stipulation consistent with the settlement. Wausau did not agree to the settlement.

On April 10, 2014, Plaintiffs filed this lawsuit, which seeks, inter alia, to recover the amount of that stipulated judgment as well as damages for breach of the contractual duty to defend and of the implied covenant of good faith and fair dealing. On September 10, 2014, Plaintiffs served their initial disclosures, which lists "Hon. Alfred G. Chiantelli (ret.)" under the heading "Witnesses" and identifies the underlying "mediation" and "settlement" as subjects of discoverable information. Plaintiffs' initial disclosures also state that "Plaintiffs reserve their right to assert, and do not waive, the attorney-client privilege, the mediation privilege, the attorney work product protection, or any other protection or privilege that they or their attorneys have in any information, documents, or communications." As part of their Rule 26(a) document production, Plaintiffs produced to Defendants copies of their statements from both the June 13, 2012 and March 19, 2013 mediations. By letter dated October 23, 2014, Plaintiffs requested that Wausau destroy all mediation and/or settlement related documents they produced on the ground that they had just found out that Cherokee had decided not to waive its mediation and settlement privileges.

The following week, Wausau deposed three key witnesses: Stephen McKae (counsel for Cherokee in the Underlying Action), Plaintiff Richard Haskins, and Plaintiff Arthur Haskins. During those depositions, the witnesses were instructed by their attorneys not to answer questions concerning settlement discussions that occurred in connection with the mediations in the Underlying Action.

The parties filed the pending joint discovery dispute letter on December 10, 2014. Wausau seeks an order (1) confirming that it is not required to destroy copies of Plaintiffs' mediation statements from the Underlying Action and permitting their use in this litigation, and (2) directing Plaintiffs to provide deposition testimony regarding statements they made during the mediation. The court held a hearing on the matter on January 10, 2015.

ANALYSIS

Plaintiffs contend that Wausau seeks information protected from disclosure by California's so-called "mediation privilege."1 See Cal. Evid. Code § 1119; Cassel v. Superior Court, 51 Cal.4th 113, 130 (2011)). It is true that "[i]n California, certain documents and communications pertaining to mediation are generally inadmissible in civil litigation." Babasa v. LensCrafters, Inc., 498 F.3d 972, 974 (9th Cir. 2007) (citing Cal. Evid. Code § 1119). California Evidence Code § 1119 provides in full:

These provisions are strictly construed, Cassel, 51 Cal.4th at 118, so unless a statement or document falls squarely within an express statutory exception to mediation confidentiality, it will be inadmissible, Foxgate Homeowners' Ass'n v. Bramalea Cal., Inc., 26 Cal.4th 1, 14 (2001).

Wausau points out that California Evidence Code § 1122 provides one such statutory exception. That provision provides that "[a] communication or a writing, as defined in [California Evidence Code §] 250, that is made or prepared for the purpose of, or in the course of, or pursuant to, a mediation or a mediation consultation, is not made inadmissible, or protected from disclosure, by provisions of this chapter" unless (1) "[a]ll persons who conduct or otherwise participate in the mediation expressly agree in writing, or orally in accordance with [California Evidence Code §] 1118, to its disclosure, and the communication, document, or writing does not disclose anything said or done or any admission made in the course of the mediation," or (2) "[t]he communication, document, or writing was prepared by or on behalf of fewer than all the mediation participants, those participants expressly agree in writing, or orally in accordance with [California Evidence Code §] 1118, to its disclosure, and the communication, document, or writing, does not disclose anything said or done or any admission made in the course of the mediation." Cal. Evid. Code § 1122(a) (emphasis added).

So, are the mediation statements protected? Subsection (a)(1) requires all persons who conducted or otherwise participated in the mediation to expressly agree to their disclosure, and there is no evidence that such is the case here, as it is undisputed that Cherokee has refused to waive the mediation privilege.

Wausau thus focuses the court's attention on Subsection (a)(2). Under that subsection, if the communication, document, or writing was prepared by or on behalf of fewer than all the mediation participants, those participants can expressly agree to waive the mediation privilege. Here, the mediation statements were prepared by Plaintiffs only—that is, by fewer than all of the mediation participants—so the court must decide whether Plaintiffs expressly agreed to the mediation statements' disclosure. Wausau argues that Plaintiffs did agree because Plaintiffs did the following: (1) voluntarily produced the mediation statements to Wausau in the Underlying Action and as part of their initial disclosures in this action; (2) identified Judge Chiantelli as a witness and the mediations and settlement as subjects of discoverable information in their initial disclosures in this action; and (3) stated during Richard Haskins's deposition that they were willing to produce the mediation statements to Defendants but could not because Cherokee objected to their doing so; and (4) stated (through their counsel) in a letter that "if the Cherokee parties change their position or is some other accommodation can be reached that would permit the disclosure of [the mediation statements], we will promptly produce them to you anew." (See Martin Decl., Ex. A, ECF No. 55-1 (Plaintiffs' counsel's letter); id., Ex. B, ECF No. 55-2 (Richard Haskins's deposition transcript); id., Ex. C, ECF No. 55-3 (Plaintiffs' initial disclosures).)

Only one of these facts is relevant here. As Plaintiffs note, Subsection (a)(2) requires the mediation statement preparer (i.e., Plaintiffs) to expressly agree in writing, or orally in accordance with California Evidence Code § 1118, to their statements' disclosure. Plaintiffs' previous production of the statements and their inclusion of Judge Chiantelli as a witness and of the mediations and settlement as subjects of discoverable information in their initial disclosures, while strong evidence of an implied waiver, is not an express waiver, and an express waiver is required. See Simmons v. Ghaderi, 44 Cal.4th 570, 585-88 (Cal. 2008). Nor does Plaintiffs' statement during Richard Haskins's deposition help. That statement was made orally, and neither party argues that it is an oral agreement under California Evidence Code § 1118.2 That leaves Plaintiffs' counsel's letter. (See Martin Decl., Ex. A, ECF No. 55-1.) Upon review, the court believes that the letter does demonstrate Plaintiffs' express agreement in writing to the disclosure of their mediation statements. Plaintiffs' counsel mentions Cherokee's objection (by referencing the Wendell Rosen firm's intent to assert the mediation privilege on Cherokee's behalf), but Cherokee's objection is irrelevant under Subsection (a)(2), and Plaintiffs' counsel clearly states that Plaintiffs are otherwise willing to disclose the mediation statements. Thus, the court finds that Plaintiffs' expressly waived the mediation privilege under California Evidence Code § 1122 with respect to their mediation statements.3

CONCLUSION

Accordingly, the court rules that Plaintiffs expressly waived the mediation privilege under California Evidence Code § 1122 with respect to their mediation statements. Wausau does not need to return them to Plaintiffs. Plaintiffs must respond to deposition questions concerning the mediation statements.

IT IS SO ORDERED.