Raymond J. Lucia Companies, Inc. (defendant), appeals from a judgment enforcing a settlement agreement resulting in a binding mediation award in favor of Ryan N. Bowers, Marc Seward, and Jeffrey LaBerge (plaintiffs). Defendant contends we must reverse the judgment as the underlying settlement agreement is unenforceable because (1) defendant never agreed to resolve the parties' dispute through binding mediation; (2) a contract term providing for binding mediation is necessarily too uncertain to be enforceable; and (3) binding mediation is not among the constitutionally and statutorily permissible means of waiving jury trial rights. We conclude there is substantial evidence to support the trial court's determination defendant agreed to the binding mediation procedure utilized in this case. We further conclude that the binding mediation provisions in the parties' settlement agreement were not too uncertain to be enforceable. Finally, we conclude binding mediation is not a constitutionally or statutorily prohibited means of waiving jury trial rights where, as here, the parties have agreed to settle their dispute in a nonjudicial forum. We, therefore, affirm the judgment.
Plaintiffs sued Raymond J. Lucia, Sr. (Lucia), defendant, and other entities for defamation and related business torts. Lucia filed an arbitration proceeding against plaintiffs asserting similar claims.
The trial court subsequently determined plaintiffs were compelled to arbitrate their claims against Lucia. Plaintiffs dismissed Lucia from their lawsuit, allowing their arbitration with him to proceed separately from their lawsuit against defendant. The arbitration proceeding commenced a few months before the scheduled trial in this case. After several days of arbitration, the parties agreed to settle their dispute before the arbitration panel reached a decision. In informing the arbitration panel of the settlement, the following exchanges occurred:
"[DEFENDANT'S COUNSEL]: Through the efforts of the parties today and also the panel being patient, we've been able to resolve this arbitration to the parties' satisfaction. As a consequence, [Lucia] is dismissing all claims
"[CHAIRMAN]: Med/Arb.
"[PLAINTIFFS' COUNSEL]: The mediator has the ability to decide the case at the end of the day.
"[DEFENDANT'S COUNSEL]: Correct.
"[PLAINTIFFS' COUNSEL]:—if the parties don't resolve it.
"[DEFENDANT'S COUNSEL]: So we're resolving this matter here with respect to each other. We are taking the state court case and taking the parties in that matter, agreeing to go mediate with a jointly—a mutually-acceptable mediator. And to the extent we don't resolve it that day, it becomes a mediat[ion]—an arbitration with a range of between $100,000 and $5 million as the range that he will then have the freedom to choose after we present our cases to him or her during mediation.
"[CHAIRMAN]: Understood."
Following a brief discussion about ancillary matters, the chairman summarized, "So your agreement encompasses dismissal with and of the arbitration and the Superior Court case based upon the terms that you've agreed to, to mediate in a Med/Arb, baseball high-low atmosphere with a mediator of your choosing, to be chosen within the next several weeks."
After a brief discussion about allocating forum fees, the chairman asked, "Anything else you want to put on the record . . . [?]" Defendant's counsel responded, "I think that encompasses the essential terms of our agreement." Plaintiffs' counsel agreed, stating, "I believe that's correct. Yes."
Within a week after the arbitration, the parties signed a "Settlement Agreement and Release" (settlement agreement). Paragraph II.2 of the settlement agreement provided this case "shall be placed on the Superior Court dismissal calendar. The Parties shall then proceed to a mediation/binding baseball arbitration with a mutually agreed-upon neutral within sixty days of the execution of this agreement. To wit, the Parties shall participate in a full day mediation. If, at the end of that mediation, the Parties have failed to reach an agreement, the mediator shall be empowered to set the amount of the
Paragraph II.3 of the settlement agreement provided, "Immediately upon execution of this agreement, the Parties shall advise the Court to place the case on the dismissal track. Should the Parties agree upon a voluntary compromise of the San Diego Superior Court case, the case shall be dismissed with prejudice. Should the matter proceed to binding baseball arbitration, the Parties shall enter the arbitrated amount as an enforceable stipulated judgment in the case."
At the mediator's request, the parties later modified the portion of paragraph II.2 of the settlement agreement beginning with "To wit" to provide, "To wit, the Parties shall participate in a full day mediation. If, at the end of that mediation, the Parties have failed to reach an agreement, the Plaintiffs (Bowers, Seward, and LaBerge) shall provide to the mediator their last and final demand, which demand shall be some amount between $100,000 and $5,000,000, and the Defendants (Companies, Wealth Management, and Enterprises) shall provide to the mediator their last and final offer which offer shall be some amount between $100,000 and $5,000,000. The mediator shall then be empowered to set the amount of the judgment in favor of Plaintiffs against Raymond J. Lucia Companies, Inc. by choosing either Plaintiffs' demand or Defendants' offer, such binding mediator judgment to then be entered as a legally enforceable judgment in San Diego Superior Court without objection of any Party." The amendment further provided, "This amendment shall not impact any section of the Settlement Agreement not referenced above."
The parties participated in a full-day mediation with the mediator. At the end of the day, the parties had not reached an agreement. The mediator asked plaintiffs for their final demand and defendant for its final offer. Plaintiffs demanded $5 million and defendant offered $100,000. The mediator did not reach an immediate decision, but allowed the parties to continue to submit information for his consideration. He also met with defendant and defendant's counsel. The mediator ultimately selected the $5 million number.
Defendant obtained new counsel, who wrote the mediator a letter requesting that the mediator either reopen the proceeding to allow for further information exchanges and interaction, or reconsider his decision. Nothing in the record indicates defendant or defendant's counsel ever requested the mediator conduct a traditional arbitration proceeding or objected to the mediator's failure to move from the mediation into a traditional arbitration proceeding.
The trial court explained, "Despite their use of undefined legal terms such as `mediation with a binding arbitration component' and `mediation/binding baseball arbitration', the parties clearly agreed in writing that the mediator would decide the amount of the judgment with the `binding mediator judgment to then be entered as a legally enforceable judgment in San Diego Superior Court without objection of any Party.' The parties agreed to a day long mediation whereby if they did not resolve the case, the mediator would determine the amount of the judgment. Nowhere in the settlement agreement does it contain any procedure for a formal arbitration where each side would present witnesses and evidence as defendant now maintains. It appears the use of the term `binding baseball arbitration' was meant to allow the mediator to pick the amount. Further, any ambiguity in that term was resolved by the amendment requiring the mediator to pick either plaintiffs' demand or defendant's offer.
"This interpretation is further bolstered by the representations made in a transcript dated July 20, 2010 prior to the formalized settlement agreement. There clearly is some confusion about what to call the procedure they would use. Nonetheless, counsel for defendant agreed that the mediator had the ability to decide the case at the end of the day if the parties did not resolve it. Counsel for defendant further stated that the mediator would have the freedom to choose between a range of $100,000 and $5 million `after we present our cases to him or her during mediation.' There is no reference to an arbitrator choosing the number after a presentation of evidence apart from the mediation. The court notes that this case involves sophisticated parties and knowledgeable counsel who could have explicitly provided for a separate arbitration had that been what they intended." Consistent with its ruling, the trial court subsequently entered a $5 million judgment for plaintiffs.
Defendant contends we must reverse the trial court's judgment because the settlement agreement is unenforceable due to lack of mutual consent. More particularly, defendant contends it did not agree to settle the parties' dispute through binding mediation. Rather, it agreed to settle the dispute with a mediation proceeding which, if unsuccessful, would be followed by a binding arbitration proceeding that included an evidentiary hearing.
Here, the trial court found that, notwithstanding any labeling, the parties mutually agreed to a full-day mediation and, if there was no resolution at the end of the day, the mediator could make a binding award by selecting from either plaintiffs' final demand or defendant's final offer. We review the trial court's finding for substantial evidence. (In re Marriage of Assemi (1994) 7 Cal.4th 896, 911 [30 Cal.Rptr.2d 265, 872 P.2d 1190].)
The transcript of the arbitration proceeding at which the parties described the terms of their settlement agreement for the record indicates the parties agreed to a full-day mediation, at the end of which the mediator could make a binding award between $100,000 and $5 million if the mediation was not successful. Nothing in the transcript indicates the parties ever contemplated a failed mediation would be followed by an arbitration that included an evidentiary hearing. Moreover, such an agreement would be inconsistent with the fact the parties were in the midst of a lengthy arbitration proceeding when they made the agreement. It would also be inconsistent with plaintiffs' unwavering desire for a jury to decide their claims against defendant and the existence of a trial date just a few months away.
The parties' settlement agreement mirrors their remarks at the arbitration proceeding and also indicates the parties agreed to a full-day mediation, at the end of which the mediator could make a binding award between $100,000 and $5 million if the mediation was not successful. The amendment to the settlement agreement allowing the mediator to choose between plaintiffs' final demand and defendant's final offer bolsters this conclusion. The reference to binding baseball arbitration in paragraph II.3 of the agreement does not undermine this conclusion as this terminology is reasonably interpreted as a description of the type of binding mediation to which the parties agreed. (See Beck, Is `binding mediation' a new solution? (Feb. 2, 2009) Virginia Lawyers Weekly <http://valawyersweekly.com/2009/02/02/is-`binding-mediation'-a-new-solution/> [as of May 30, 2012] [Binding mediation or mediated arbitration is a hybrid of mediation and arbitration. Essentially, the parties attempt to resolve their dispute with the assistance of a mediator as they would in a standard mediation. If they are unable to resolve their dispute, the mediator issues a final, binding decision at the end, just as an
To further complicate matters, one of the provisions of the agreement initially provided for some of the parties to resolve their dispute by binding mediation, but the word "mediation" had a line drawn through it and the word "arbitration" was typed directly above it. (Lindsay, supra, 139 Cal.App.4th at p. 1620.) Yet another provision required the appellants to pay the respondents a specific amount of money, subject to terms to be mutually agreed upon, or determined by binding mediation if they could not be mutually agreed upon. (Ibid.)
Over their objection, the appellants participated in a binding mediation proceeding to determine the terms of their payment to the respondents. The mediator issued an award in favor of the respondents, which the trial court subsequently confirmed. (Lindsay, supra, 139 Cal.App.4th at p. 1622.)
On appeal, the appellants argued the stipulated settlement agreement was unenforceable because, among other reasons, the parties never agreed on a specific procedure to resolve their payment terms dispute. The appellate court concurred. (Lindsay, supra, 139 Cal.App.4th at p. 1622.)
The appellate court concluded from the provision in the contract striking out "mediation" and replacing it with "arbitration" that the parties regarded binding mediation as something different from arbitration. (Lindsay, supra, 139 Cal.App.4th at p. 1623.) The appellate court also concluded the provision requiring binding mediation of payment terms conflicted with the provision in the version of the agreement some of the parties signed requiring binding arbitration of any disputes over settlement terms. (Ibid.) Because the various discrepancies prevented the appellate court from ascertaining what the parties actually meant when they used the term "binding mediation," the appellate court concluded the parties' agreement was too uncertain to be enforceable.
Lastly, defendant contends the settlement agreement is unenforceable because binding mediation is not among the constitutionally and statutorily permissible means of waiving jury trial rights. We review claims concerning the construction and application of statutes de novo. (Critzer v. Enos (2010) 187 Cal.App.4th 1242, 1253 [115 Cal.Rptr.3d 203].)
In this case, the parties agreed to settle their dispute through binding mediation in a nonjudicial forum. Thus, section 631 does not apply and any failure to comply with it does not render their agreement unconstitutional and unenforceable.
The absence of a statute expressly authorizing the type of dispute resolution process to which the parties agreed also does not alter our conclusion. Nothing in Madden or Grafton requires the existence of such a statute to avoid the application of section 631. Instead, whether a jury trial waiver must comport with section 631 depends on whether the parties have selected a judicial or a nonjudicial forum. (Grafton, supra, 36 Cal.4th at p. 955; Madden, supra, 17 Cal.3d at p. 713.) As the parties in this case selected a nonjudicial forum, section 631 has no bearing on the enforceability of their agreement.
The stay issued May 5, 2011, is vacated. The judgment is affirmed. Respondents are awarded their costs on appeal.
Benke, J., and Huffman, J., concurred.