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Spruce Environmental Technologies, Inc. v. Festa Radon Technologies, Co.

United States District Court, D. Massachusetts

March 30, 2019

Spruce Environmental Technologies, Inc., Plaintiff,
Festa Radon Technologies, Co., Defendant.


          Nathaniel M. Gorton United States District Judge.

         This suit arises from a dispute as to the validity of an arbitration award. While Spruce Environmental Technologies, Inc. (“Spruce” or “plaintiff”) moves to confirm the award, Festa Radon Technologies, Co. (“Festa” or “defendant”) moves to vacate it on grounds that 1) the arbitration was improperly conducted and 2) the award was not justified.

         I. Background

         The parties to this suit have engaged in protracted litigation over crossclaims that 1) Festa perpetuated a false advertisement campaign about Spruce and its products and 2) Spruce engaged in commercial disparagement pursuant to the Lanham Act, 15 U.S.C. § 1125(a), and M.G.L. c. 93A. In October, 2015, the parties agreed to mediation before retired Massachusetts Superior Court Judge Nancy Holtz (“Judge Holtz” or “the arbitrator”) of Judicial Arbitration and Mediation Services, Inc. (“JAMS”).

         Attempts to mediate were unsuccessful and the parties entered into an Arbitration Agreement in April, 2017. That agreement specifically named Judge Holtz, who had attempted to mediate the dispute, as the arbitrator. In May, 2017, eight months before the arbitration commenced, the parties entered into a stipulation, which among other things, required counsel to affirm that upon informed consent, the parties agreed to the mediation-arbitration (“med-arb”) process whereby the mediator (Judge Holtz) was authorized to serve as the arbitrator.

         Judge Holtz conducted a four-day arbitration hearing during January and February of 2018, without objection from counsel as to any of the med-arb proceedings. Shortly after the end of the hearing, Judge Holtz issued an Interim Award which found for Spruce on all federal and state claims and counterclaims. Following the Interim Award, Judge Holtz allowed the parties to submit supplemental briefing in light of her finding that Spruce was entitled to attorneys' fees and costs under the Lanham Act. She then issued a Final Award with respect to fees and costs.

         Spruce moved for this Court to confirm the Final Award. Festa did not oppose that motion but, instead, filed a motion to vacate the award. Those conflicting motions are pending.

         II. Legal Analysis

         A. Valid Arbitration Agreement

         1. Applicable Law

         Festa argues that the stipulation entered into by the parties violates Massachusetts public policy because of the Commonwealth's applicable mediation privilege statute, M.G.L. c. 233, § 23C. That argument presumes that the mediation privilege represents a general policy concern that cannot be waived. Beacon Hill Civic Ass'n v. Ristorante Toscano, Inc., 662 N.E.2d 1015, 1018-19 (Mass. 1996) (finding that certain general policy concerns protected by the legislature are not waivable).

         This Court does not doubt Festa's contention that the mediation privilege embodies important policies of confidentiality and neutrality but none of its cited cases supports its claim that the mediation privilege, as codified by § 23C, represents a non-waivable right. Cf. Leary v. Geoghan, No. 2002-J-0435, 2002 WL 32140255, at *3 (Mass. App. Ct. Aug. 5, 2002) (precluding the mediator from testifying about the mediation even with party consent because it conflicts with the “plain intent” of the statute to preserve neutrality); Town of Clinton v. Geological Servs. Corp., No. 04-0462A, 2006 WL 3246464, at *3 (Mass. Super. Nov. 8, 2006) (denying the production of mediation documents in a valid med-arb proceeding).

         In fact, some Massachusetts courts have suggested that the privilege is waivable. See Bobick v. United States Fid. & Guar., Co., 790 N.E.2d 653, 658 n.11 (Mass. 2003) (noting that the party “implicitly” waived the mediation privilege under § 23C by accusing the defendant of failing to make a reasonable settlement offer); ZVI Const. Co., LLC v. Levy, 60 N.E.3d 368, 375 (Mass. App. Ct. 2016) (rejecting a fraud exception to the mediation privilege on the grounds that counsel specifically negotiated a confidentiality agreement that was broader than the Massachusetts mediation statute). Given the paucity of case law on this issue, Festa's claim that § 23C confers a non-waivable “absolute privilege” is dubious.

         Notwithstanding the dearth of Massachusetts case law on this issue, this Court agrees with Spruce that in a case arising out of a federal question, as alleged here, federal common law controls the existence and application of evidentiary privilege. Fed.R.Evid. 501; In re Admin. Subpoena Blue Cross Blue Shield of Massachusetts, Inc., 400 F.Supp.2d 386, 391 (D. Mass. 2005). Recently, another session of this Court and several district courts elsewhere have recognized the federal mediation privilege, consistent with the holding of the Supreme Court in Jaffree v. Redmond, 518 U.S. 1 (1996). See ACQIS, LLC v. EMC Corp., 2017 U.S. Dist. ...

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