## Facts

- Heidi Nielsen-Allen was the plaintiff in an employment dispute against Industrial Maintenance Corp. and related entities, including Hovensa.
- In a separate action, *Virginia Moorehead v. Hovensa*, the court ordered the parties to participate in mediation.
- After that mediation session, Hovensa sought sanctions against Nielsen-Allen’s counsel based on what counsel allegedly said during the Moorehead mediation.
- Hovensa asserted that Nielsen-Allen’s counsel disclosed the settlement amount from the Nielsen-Allen case while participating in the Moorehead mediation.
- Hovensa characterized the alleged disclosure as bad-faith conduct and asked the court to impose sanctions on Nielsen-Allen’s counsel.
- Nielsen-Allen’s counsel opposed the request, arguing that statements made during the court-ordered mediation were confidential and could not be used to support a sanctions motion.
- Nielsen-Allen’s counsel further argued that Hovensa’s sanctions motion, which described what occurred in mediation, was itself an improper disclosure of confidential mediation communications and should be stricken (or disregarded).

## Issues

1. Whether the court could consider alleged statements from a court-ordered mediation as the basis for sanctions against counsel.
2. Whether the alleged disclosure of a settlement amount during that mediation justified sanctions for bad-faith conduct.

## Decision

- The court denied Hovensa’s motion for sanctions against Nielsen-Allen’s counsel.
- The court treated the alleged mediation statements as confidential and declined to use them as the evidentiary basis for sanctions.
- The court also rejected the sanctions request because the record, as presented, did not justify the type of sanction sought, particularly where evaluation of the claim would require inquiry into protected mediation communications.

## Legal Principles

- Communications made during a court-ordered mediation are generally confidential under court ADR rules and related confidentiality doctrines.
- Courts commonly refuse to consider mediation communications when a party offers them to obtain litigation relief, including attorney sanctions, absent a recognized exception.
- Allowing sanctions practice to turn on what was said in mediation risks forcing disclosure of protected communications and can interfere with candid settlement discussions.
- Sanctions against counsel usually require a clear showing of improper intent or misconduct; allegations tied to confidential mediation communications are not enough when the court cannot properly examine the underlying mediation exchange.

## Conclusion

In *Nielsen-Allen v. Industrial Maintenance Corp.*, the District Court of the Virgin Islands denied Hovensa’s bid to sanction Nielsen-Allen’s counsel for allegedly revealing a settlement amount during a court-ordered mediation in another case, reasoning that the claimed misconduct was embedded in confidential mediation communications and could not properly be used to support sanctions, and that the showing made did not warrant sanctions in any event.


Nielsen-Allen v. Industrial Maintenance Corp., 2004 WL 502567 (2004)