Courts

Settlement Agreement Enforceable Through Classic Contract Analysis

In July 2010, the United States District Court for the Southern District of Florida accepted the Report and Recommendation of Magistrate Judge John J. O’Sullivan that a mediation settlement agreement be enforced over the objections of the defendant.  In so doing, the court engaged in an analysis that would be very familiar to my son, who is a 1L in the final throes of his first-term exams.

The decision reminds us that, whatever other peculiarities mediation may bring with it, in the end — as Bertolt Brecht wrote in “The Seven Deadly Sins”“Das Kontrakt, Kontrakt ist.

The parties in this case held a mediation on the wage-hour claim at issue, which culminated with a handwritten document titled “Mediation Settlement Agreement.”  In that document, defendant agreed to an amount of payment in settlement of all claims; the parties agreed to bear their own fees and costs (except that defendant agreed to pay the mediation fee); and plaintiffs agreed to execute general releases and non-disparagement agreements, and not to apply for future employment with defendant.  Plaintiffs would dismiss the claim within 14 days of the court’s approval of the settlement as fair and reasonable.

Two weeks later, counsel could not agree upon additional terms, including a liquidated damages provision in the event of breach of plaintiffs’ various covenants.  Defendant’s counsel declared that a settlement had not been reached and plaintiffs filed a motion to compel enforcement and for attorneys’ fees in connection with the motion.

The Magistrate Judge recommended, and the court concluded, that the settlement agreement was an enforceable contract.  Under Florida law, where terms are sufficiently specific and agreed upon as to every essential element, the agreement may be enforced.  “Uncertainty as to nonessential and ancillary terms will not preclude enforcement of a settlement agreement.”

The court noted that the document in question, agreed to by all parties, was titled “Mediation Settlement Agreement,” described itself as a “complete and final settlement of the dispute,” provided the exact amount defendant would pay, and dictated allocation of fees and costs.  It also provided the method by which the action would be dismissed.  Disagreement on the remedies for future hypothetical breaches of covenants are “mere contingencies” that are not essential to reaching the settlement that was arrived at during the mediation.  None of the disputed terms constitutes a provision by which the parties contemplated continuing the litigation.

The agreement was enforced; the request for fees was denied; and the agreement was deemed fair and reasonable, triggering the exchange of payment and releases pursuant to the document.

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