When parties reach a settlement at a mediation, and memorialize their agreement in writing, the obvious expectation is that both parties will perform their obligations. Of course, it doesn’t always work out that way, and so the writing should also address the remedies for any breach.
There are essentially two choices: if one party fails to perform, is the non-breaching party’s remedy simply to enforce the agreement? Or does a material breach “blow up” the settlement and restore the parties to their pre-settlement positions? This question was recently addressed by a Massachusetts District Court in Pazol v. Tough Mudder Inc., 384 F. Supp. 3d 191 (D. Mass. 2019).
In Pazol, the plaintiffs registered and paid to participate in a Tough Mudder obstacle course event scheduled for September 6, 2014, in Haverhill, Massachusetts. Days before the event, Tough Mudder moved the location. Plaintiffs were unable to attend, but Tough Mudder refused to refund their registration fees. Many registrants were apparently in the same boat and the plaintiffs commenced a class action.
The plaintiffs and Tough Mudder eventually agreed to mediate, resulting in a settlement obligating Tough Mudder to pay $225,000 on or before November 26, 2018, to “completely resolve any claims and disputes regarding the event.” Tough Mudder, however, missed the deadline to make the payment.
Back in court, Tough Mudder conceded that it breached the agreement, but argued that the plaintiffs’ remedy was to enforce the settlement. Tough Mudder further represented that it was now prepared to pay the sum agreed upon with interest.
Plaintiffs responded that Tough Mudder’s breach was material, entitling them to rescind the settlement and continue pursuing their claims as a class action.
The court ruled in favor of Tough Mudder. It noted that there was no “time is of the essence” clause in the settlement, and therefore Tough Mudder’s brief delay in making payment was not a material breach warranting rescission. The plaintiffs’ sole remedy was thus to enforce the agreement.
The written settlement entered into at the conclusion of the mediation was apparently silent concerning the remedy for Tough Mudder’s breach of its payment obligation. The moral of the story is that parties to a mediated settlement should address what happens in the event of a breach because parties may not always be on the same page on that issue.