Mediation Enforceability, Confidentiality and Waiver: A Heady Brew

 Efforts to challenge the enforceability of settlements that are obtained through mediation almost always yield uncomfortable outcomes.  A recent New Jersey Appellate Division decision is no exception.

In Rutigliano v. Rutigliano (Sup. Ct. App. Div. October 15, 2012), two brothers disputed their mother’s modification of her will in favor of one of the brothers’ children.  The court ordered them to mediation pursuant to Court Rule 1:40.  After six and a half hours, the parties were convened by the mediator, who read out terms of a settlement.  The mediator asked if the court should be advised that a settlement had been reached (as required by the Court Rule at 1:40-6(f)), and the parties agreed.  The court docket was marked as settled in accordance with the mediator’s notification.

A week later, plaintiff’s counsel notified defendant’s counsel that plaintiff did not believe there was a meeting of the minds, and offered different terms.  Defendant insisted that the terms read at the mediation were final, and moved to enforce the deal despite there being no written agreement memorializing what had been read aloud by the mediator.

The question then arose whether, pursuant to the New Jersey adoption of the Uniform Mediation Act, the judge considering the motion would accept testimony from the parties or the mediator with respect to what happened at the time of the alleged agreement. 

The judge determined not to consider testimony as to the mediation process itself, but allowed each party, if they wished, to offer limited testimony as to what happened when the settlement was discussed by the parties in the final plenary session.  The judge reasoned that, at that point, the mediation process had been completed and the session was purely informational.

Defendant (the movant) agreed to testify at the hearing but plaintiff did not, on the ground that offering testimony with respect to any aspect of the mediation whatsoever might be construed as a waiver of mediation confidentiality.  Defendant proceeded to testify as to the terms of the agreement as announced in the final session, but not the negotiations leading to them.  Defendant also testified that he affirmatively authorized the mediator to advise the court of the settlement, and plaintiff did not object to the mediator’s doing so.

On appeal, plaintiff argued that the judge erred by permitting defendant to testify as to the terms of the settlement as they were set forth at the conclusion of the mediation.  The Appellate Division affirmed the lower court, holding that, in an action to enforce an agreement reached after mediation, parties who authorize the mediator to advise the court of the existence of a settlement waive mediation confidentiality at least with respect to their actions in acknowledging the existence of that settlement.

“Adopting plaintiff’s contrary view would mean that a party could complete the mediation; agree to all the terms of a settlement; authorize the mediator to notify the court of same; and then use the mediation privilege to prevent enforcement of the settlement.”

Mediation confidentiality has been used as both a sword and a shield in many enforcement actions.  And the distinction that the court here tries to draw — between a mediation process involving negotiation and a non-mediation process involving discussion and approval of settlement terms reached during the mediation — is not one that commands a lot of confidence. 

The best way to avoid actions such as this is in the hands of the skilled mediator.  A mediator should in no instance allow the parties to leave the mediation room without a signed agreement memorializing the essential terms of the settlement and noting an intention to be bound by those terms.  Nor should a mediator (at least in New Jersey) advise the court that a matter has been settled until such a document has been executed.

This used to be recommended as a “best practice”; now it is becoming a minimal mediator skill.  On a yellow pad, the attorneys (not the mediator) set forth in bullet points the essential terms of the deal.  They write on the top of the paper “Memorandum of Understanding,” they write on the bottom of the paper signature blocks.  And the last bullet point on the paper recites something like:  “Although more formal documentation will follow, including releases and a stipulation of settlement, the parties intend to be bound by the terms set forth above.”

Such a simple requirement, so often overlooked, to the sorrow of the parties.  If you have agreed upon terms, say so.  That’s not so hard for a mediator to insist upon, is it?  And, fellow mediators, surely we owe the parties no less than an enforceable outcome?

  1. That New Jersey case is an eye-opener! I agree completely with Mr. Phillips’s recommendations on best practices, and my only additional suggestion is to state in the Memorandum of Understanding that “the parties waive mediation confidentiality as to this Memorandum of Understanding.”

  2. Peter–great post–particularly with your suggesting specifically how to avoid the problem and triggering Ross’s good point on using an “add on” regarding “limited” waiver of mediation confidentiality. If the benefits we espouse by participating in mediation can too easily be undone by folks “reneging” on agreement on basic terms, and use “mediation confidentiality” to defeat the process, then Mediation will never gain respect. I recommend our Mediation groups–Inn of Court, NJSBA DRS and NJAPM– seek a formal agreement on the proper procedure and form to be used and signed–“filled out” and prepared by the attorneys, not the mediator. For example, my first impression would be to suggest for consideration expanding the statements you each suggest a bit as follows: “Although a more formal agreement will follow, including formal releases and a stipulation of settlement, the parties intend to be bound by the terms set forth above in this Memorandum of Understanding. Further, the parties and the mediator waive mediation confidentiality for the purposes of confirming and certifying as needed that in fact an agreement was reached on this date by the undersigned parties, as witnessed by the undersigned Mediator and the parties’ attorneys.” I am thinking we would want to be careful–maybe others can help with refining my thinking here–to limit the mediator’s role to certifying as a “witness” to the signed Memorandum of Understanding, versus being drawn into an “explanation” of the terms agreed to. I thought the parties’ attorneys should also be asked to “witness” as well, frankly to “help them” perhaps with their clients if their clients were to belatedly decide to renege, and also to add to the understanding by all, including the attorneys, that the more formal document to follow for signature is truly intended to be only “perfunctory.” For consideration and further discussion when we next meet? Reactions welcome! Best, Mike

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