Challenging Mediated Settlement Agreements: Pt. 1

It is uncomfortable for all concerned when a party to a mediation disowns the “settlement” purported to have been reached and challenges the enforceability of the writing made at the mediation session.  A previous post discussed a New Jersey case in which the mediator offered testimony as to whether there had been a meeting of the minds.  (That case has gone on to the New Jersey Supreme Court.)

Two recent cases — while they don’t involve mediator testimony (happily) — shed some light on what might constitute “best practices” in documenting a settlement in mediation.  The first case will be discussed here.  A second post will present the other, as well as some tentative “lessons learned.”

In Beim v. Sawyer (N.J. App. Div. A-2816-10T1, February 29, 2012), the defendant, in her 70s, sought divorce from the plaintiff, in his 80s.  After the filing of the complaint and answer, the parties attended an “Early Settlement Panel,” a “Mandatory Economic Mediation,” an “Intensive Settlement Conference,” and a second “Economic Mediation,” which resulted in a settlement agreement signed by defendant, defense counsel, plaintiff, and plaintiff’s counsel.

The document was drafted in part by the mediator, in part by plaintiff’s attorney, and in part was a photocopy of another document.  It also featured handwritten paragraphs , and certain sections were deleted.  Of most interest to us was the following language:

The undersigned agree that they intend to meet with their attorneys and have a property/marital agreement drafted consistent with the terms of this agreement.  Both parties further agree that this document constitutes a binding settlement agreement.

A year later, when plaintiff moved to enter partial judgment enforcing the agreement, defendant cross-moved that the agreement be deemed unenforceable.  The trial court granted plaintiff’s motion and, in addition to granting final judgement of divorce, awarded plaintiff counsel fees.

Defendant’s claims on appeal of interest to us were (1) that her primary counsel was not present at the mediation and she did not intend to commit herself that day; (2) that she relied on the mediator’s retention agreement, which provided in part that, in the event of an agreement, “I will prepare a memorandum of understanding… This memorandum is not to be signed and not to be regarded as binding….”; and (3) that the mediator exceeded her authority by preparing and asking the parties to sign a binding agreement.

The Appellate Division noted the public policy favoring settlement of litigation, and cited caselaw that “the very purpose of the [mediation] process is to resolve the dispute.”  The court upheld the trial court’s findings that the parties knowingly and voluntarily entered into the settlement negotiations in order to divide the marital property; that they were each represented by counsel and had the opportunity to consult with advisors; and that defendant’s insistence that she did not know the agreement’s binding nature was rendered incredible by the plain and specific language providing that it was.  “A change of heart after accepting a settlement is not a basis to set aside the agreement.”

So far, so good.  But what was the mediator doing telling the parties that she, rather than they, would draft an MoU?  Why did she provide, as a condition of her engagement, that her MoU would not be binding?  And why did the parties’ counsel allow a person who did not represent their clients to assume to all-important task of papering the deal?

The second case will follow, along with some tentative “Lessons Learned.”


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