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Court of Appeal:
Language Acknowledging Unenforceability Nullifies Confidentiality Clause
Opinion Says Explicit Language Governs in a Collaborative Law Agreement, Notes Lack of Evidentiary Privilege for Such Family Law Process
By a MetNews Staff Writer
Div. Five of the First District Court of Appeal held yesterday that a confidentiality clause in a collaborative law agreement that explicitly states that the entire contract is legally unenforceable may not be used to exclude testimony about statements made in negotiations in a marital dissolution process.
In his opinion affirming the judgment of Mendocino Superior Court Judge Patrick Pekin, Justice Gordon B. Burns wrote:
“We publish this case to highlight the importance of carefully drafting collaborative law agreements. Unlike mediations, our Legislature has not created an evidentiary privilege for collaborative law processes….If parties intend to keep the process confidential, they are responsible for drafting an enforceable contract that so provides.”
Burns noted that collaborative law is a non-judicial alternative dispute resolution process commonly used for marriage dissolutions and that the process is governed by Family Code §2013, which provides in relevant part:
“(a) If a written agreement is entered into by the parties, the parties may utilize a collaborative law process to resolve any matter governed by this code….
“(b) ‘Collaborative law process’ means the process in which the parties and any professionals engaged by the parties to assist them agree in writing to use their best efforts and to make a good faith attempt to resolve disputes related to the family law matters….”
He pointed out that the statute includes no confidentiality protection, saying:
“While the Legislature has enacted an evidentiary privilege for mediations…, Ling concedes that the collaborative law process typically does not qualify as a mediation because, as was the case here, no neutral person conducts the process….Confidentiality is left to the parties to negotiate.”
Presiding Justice Teri L. Jackson and Justice Mark B. Simons joined in the opinion.
Appealing the judgment was Ling Mueller, who initiated divorce proceedings against her husband, Paul Mueller, after an attempt to resolve their marital dissolution through a collaborative law process failed. The couple married in 2009 and separated in 2017.
During their marriage, the Muellers operated a cannabis cultivation business and buried the proceeds from the sales on their property. The parties dispute whether the couple had $400,000 or $600,000 in cash buried.
They signed the agreement in question during their first collaborative meeting. It provides on its first page:
“Each of us understands that this document does not give either of us enforceable legal rights that we did not already have….We are not relying on this Agreement to create legally enforceable rights. However, we both commit to abide by the letter and spirit [of] this Agreement and we each expect that the professionals involved will do the same.”
One clause addresses confidentiality, saying:
“Communications related to collaborative matters made during the collaborative process are confidential and may not be disclosed to third parties. The parties agree that in any court or other proceeding, they will not request, subpoena or summons a collaborative lawyer, a collaborative party, or a nonparty participant in the collaborative process to make disclosure or testify as a witness regarding a communication made during the collaborative process….”
Breakdown in Process
During a second collaborative session focused on community assets, Ling Mueller ended the session abruptly when she was questioned about investments she made using money she obtained by digging up proceeds from the marijuana operation. Two weeks later, she initiated formal divorce proceedings.
At trial, it was disputed how much money Ling Mueller had taken from the ground. She moved to exclude testimony about statements she had made during the collaborative session, asserting that the statements were covered by the confidentiality clause.
Pekin denied the motion and allowed Paul Miller to testify as to her statements at the session, and took judicial notice of the collaborative attorneys’ prior testimony about her statements concerning how much money she had taken and invested. He found that both parties had “significant credibility gaps” but that Paul Mueller’s “testimony and differences in credibility on different days pales in connection to [Ling Mueller], whom I could not believe most of what she said.”
The judge ultimately ordered that she make an equalizing payment of $161,077 to Paul Miller, having concluded that she took more than her share of the community funds.
Contractual Language
Ling Mueller argued on appeal that the confidentiality provision is enforceable separate from, and despite, the overarching statement in the agreement that it creates no enforceable rights or obligations.
Turning to the agreement, Burns said “we must first determine whether the contract language is reasonably susceptible to Ling’s interpretation.” Concluding that “it is not,” he wrote:
“[T]he agreement unequivocally states the parties’ understanding that it does not ‘give either of us enforceable legal rights…’; that ‘these good faith undertakings set out in this document are not legally enforceable contractual obligations;’ and that, while the parties commit to…abide by the agreement’s ‘letter and spirit,’ they ‘are not relying on this Agreement to create legally enforceable rights.’ There is no ambiguity here….We must give effect to its explicit language.”
Finding that it is “not a ‘contract’ in the traditional sense of an agreement,” he remarked that instead “it provided an aspirational and nonbinding framework of a process for…achieving a mutually agreed-upon marital dissolution without resorting to litigation.”
The appellant cited the legal canon that contracts, where possible, must be interpreted to give effect to every part of the agreement, and asserted that the confidentiality provision is enforceable because otherwise it would be a nullity. Unpersuaded, Burns remarked:
“Her approach would leave the unenforceability language a nullity. Ling does not acknowledge, much less resolve, this paradox, and she cannot: if the confidentiality clause is interpreted as a binding obligation, it is impossible to give legal effect to both provisions. In contrast, the two are harmonized if, as the agreement directs, the confidentiality clause is construed consistently with the overarching provision that the parties intend to abide by the agreement’s terms although they are not legally binding.”
Public Policy
The jurist rejected her appeal to public policy, reasoning:
“It may well be true that confidentiality would make most collaborative law negotiations more effective. But Ling cites no authority that permits us to invoke public policy to make a contract term enforceable when the parties expressly agreed that it is unenforceable.”
He continued:
“In any case, the public policy considerations here are not one-sided. Ling is essentially asking us to create an evidentiary privilege that would bar the admission of highly relevant evidence. The Legislature reserves to itself the power to balance the public policies inherent in evidentiary privileges. Courts may not create new privileges unless required by constitutional law…and must enforce existing statutory privileges strictly, even when the results are inequitable.”
Burns declared “Ling’s policy argument should be addressed to the Legislature.”
The case is Mueller v. Mueller, 2024 S.O.S. 1775.
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