The Writing on the Wall: The Potential Liability of Mediators as Fiduciaries

I. INTRODUCTION The number of potential fiduciary relationships is continuously evolving to adjust to changing economic and social conditions.1 As one scholar noted, "The twentieth century is witnessing an unprecedented expansion and development of the fiduciary law."2 Historically, courts have intentionally refrained from specifically defining the scope of fiduciary duties in an effort to keep the definition of a fiduciary open to new possibilities and situations. Indeed, in 1924 the Oklahoma Supreme Court observed, "Courts of equity have carefully refrained from defining the particular instances of fiduciary relations in such a manner that other and perhaps new cases might be excluded."3 As the Oklahoma Supreme Court further explained, "The expression 'fiduciary relation' is one of broad meaning, including both technical fiduciary relations and those informal relations which exist when one man trusts and relies upon another."4 Over the past few decades in particular, courts have increasingly extended the designation of "informal fiduciary" under certain factual circumstances to individuals-including some clergy,5 educators,6 travel agents,7 and even parents8-who have not traditionally been considered inherent fiduciaries. Although courts, and most scholars, have not yet recognized fiduciary liability for mediators, this paper suggests that certain legal mediation relationships are a likely future addition to this list. This paper further argues that, applied correctly, the law of fiduciary duties can provide an appropriate, effective, and predictable means of defining and regulating obligations owed by mediators to their clients in certain mediation relationships. Part II provides background information on the law of fiduciary duties, particularly the characteristics of both formal and informal fiduciary relationships, and on the characteristics and regulation of the growing mediation profession. Part III details the current trends that will likely lead to a future increase in claims against mediators based on breaches of fiduciary duties. Part IV discusses the consequent likelihood that courts will eventually hold some mediators liable for fiduciary duties. This section includes the academic debate throughout the past two decades and discusses why most scholars and mediators, along with the courts, have dismissed the idea that mediators owe clients fiduciary duties and thus can be held liable for breaches of those duties. Part V discusses the unpredictability of the traditional approach to determining fiduciary liability and describes a new fact-based analytical framework, developed by Professors Brett G. Scharffs and John W. Welch,9 to both identify the factors which likely heighten a mediator's duty and to provide a guide for mediators on how to prevent the attachment of fiduciary duties. This section provides a discussion of recent cases in which courts have declined to hold a mediator to the enhanced duties of a fiduciary. When analyzed under the Scharffs-Welch framework, the language of these rulings indicates the strong possibility of holding mediators liable as fiduciaries under specific factual circumstances when the magnitude of the breach is particularly extreme. Part VI confronts and attempts to overcome, through the use of the Scharffs-Welch framework, several of the concerns voiced by opponents of extending fiduciary duties to mediators. Part VII provides a brief conclusion. It should be emphasized at the outset that the purpose of this paper is not to encourage litigation against a group of professionals who offer society an important alternative to litigation.10 Rather, this paper attempts to consider the potential fiduciary liability of mediators in order to improve the quality of mediation service. Analyzing the nature of mediation relationships under an analytic framework of fiduciary duty can help practitioners not only identify the existence or lack of fiduciary relationships more effectively but also assess individual circumstances to prevent, or at least predict, the attachment of fiduciary liability. …