Conflict Resolution|Courts|Mediation

Challenging Mediated Settlement Agreements: Pt. 2

This post continues a discussion of some recent court opinions concerning the enforceability of settlement agreements reached during mediation, but subsequently disowned by one of the parties.

In Williamson v. Boehringer-Ingelheim Pharmaceuticals (N.J. App. Div. A-6291-10T1, March 12, 2012), plaintiff sought damages from her employer for alleged violations of the New Jersey Law Against Discrimination and other related theories.  The parties participated in voluntary, private mediation that lasted nine hours.  At the conclusion of the mediation, a document was signed by plaintiff, the defendants’ attorney and the mediator(!), reciting that plaintiff would dismiss her complaint with prejudice and receive certain payments and other benefits from defendants.

This post-mediation document contained, among other things, language that “The parties . . . have agreed to a settlement in principle.  The terms of the Settlement Agreement, which will be signed by the parties within one week of the date of this document will provide: [and then listed certain terms]”

Ten days afterwards, defendants forwarded to plaintiff’s counsel an 11-page Agreement and Release, and ten days after that defendants were advised that plaintiff was “declining settlement.”  Defendants moved to enforce the settlement.

Plaintiff had released her counsel and appeared pro se.  She alleged, among other things, that material terms had been agreed to that were not in the post-mediation document, and that certain terms in the Agreement and Release that had not been agreed to.  She also said that she had been misled, and had been told that the document she was signing was a “confidentiality agreement.”

At oral argument on the motion to enforce, defense counsel represented that the mediator had typed the one-page post-mediation document, and that it was signed by the plaintiff, a representative of the defendant, and the mediator.  Plaintiff’s former counsel told the court that “we had an agreement at the mediation.”  The court granted the motion to enforce the Agreement and Release, and plaintiff appealed.

Plaintiff claimed error in the trial court’s failing to hold a hearing and make findings of fact as to what was said at the mediation regarding the nature and contents of the post-mediation document.   The Appellate Division affirmed in relevant part.

The court held that settlement of litigation was so important that, as a matter of public policy, “an agreement to settle a lawsuit will be honored and enforced in the absence of fraud or other compelling circumstances.”  Nevertheless, the proponent of a motion to enforce bears the burden of establishing the existence of a settlement agreement in the first place.  Where, as here, there is no material fact in dispute, fact-finding is not necessary, however.

A bare claim that a one-page document was described as a confidentiality agreement is “woefully inadequate to create a viable defense” where the plain language of the document “renders it implausible that plaintiff was unaware that she was agreeing to an enforceable settlement when she signed the document.”  The court did hold, however, that plaintiff was bound by the terms of the one-page post-mediation document, not the 11-page Agreement and Release, to the extent that the substantive terms differed between the two.

LESSONS LEARNED                                  

What is a mediator to do, to try to prevent, or forestall, or truncate, these post-mediation disputes?  We can’t prevent someone from asserting a claim, but it seems to me we are responsible for (a) providing the parties with the best counsel we can to avert one, and (b) ensure that the mediation process itself is not drawn into, or compromised by, this kind of post-mediation dispute.

I suggest that “best practices” in this regard should include:

1.  The parties’ counsel, not the mediator, should paper the deal.  There is no such thing as a neutral drafter, and the first thing a court wants to know about a disputed document is what was intended by the person who wrote it.  Mediators should stay out of court, which means they should let the lawyers do the lawyering.  Drafting and then negotiating and re-drafting a legally binding document is lawyering.

2.  The mediator doesn’t sign the agreement.  Not as a party, not as a witness, not as anything.  No initials, no nothing.  Your name should not appear even in a “Whereas” clause.  Don’t even allow your stationery to be used.  The agreement imposes no obligations on the mediator, and the mediator does not offer to testify as to the veracity or legal sufficiency of the contents.  Indeed, quite the contrary, we refuse to do so.  So butt out.

3.  The mediator, more “up on” these cases than counsel are, should strongly advise both counsel to include some form of the magic words:  “The parties intend to be bound by the terms set forth in this document.”  Notwithstanding that a more detailed agreement will be forthcoming, and acknowledging that the partioes’ counsel may still need to negotiate the final documents including the release, nevertheless, “the parties intend to be bound” by the terms set forth in the MoU or whatever they want to call the document signed that day.

4.  Insist.  Don’t leave the mediation without seeing the signed paper.  (Don’t take the paper — just see the paper!)  Your service to the parties is incomplete until you have rendered the expertise, advice and counsel that all good mediators should possess about the possible land mines that lurk for those less experienced. They don’t mediate every day; we do.  We don’t care what is in the paper, we don’t care who promises what to whom — but we are being paid to care about whether the parties can agree to an enforceable settlement of the claim, and this is a critical part of it.

In brief, “best practices” should aim for two goals:  Getting an enforceable agreement settling the dispute; and preserving the integrity, neutrality, confidentiality and independence of the mediator, on which the utility of the process so critically depends.  I hope these four points can take us closer to both goals.

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