When Memorializing a Mediated Settlement, Empower the Mediator to Resolve Any Disputes Over Language

To avoid any issue with the enforceability of an agreement in principle signed at the conclusion of a mediation, parties should agree in advance that if negotiations to memorialize the settlement in a more formal agreement break down, the mediator shall resolve any remaining disputes over language or otherwise. This is a “light” form of the med-arb arrangement we discussed in a prior post under which parties agree to let the mediator serve as an arbitrator if the mediation fails. Two recent cases illustrate this approach.

Herbison v. Schwaner

In Herbison v. Schwaner, No. A-1-CA-34997, 2019 WL 1228072 (N.M. Ct. App. Feb. 4, 2019), the parties signed a handwritten settlement memorandum prepared by the mediator after the mediation agreeing to certain terms. The parties then began negotiating a more formal settlement agreement. At the outset of the process, the mediator reminded them that he was available to resolve any disputes over language. Subsequently, negotiations broke down over the form of release and the remedy for breach of the confidentiality provision. The mediator proposed language to resolve the dispute, but also opined that even if the parties did not reach agreement on this issue, they had nevertheless created an enforceable contract when they executed the handwritten settlement after the mediation. The defendant eventually moved to enforce the handwritten settlement while the plaintiff opposed enforcement on the ground that the handwritten settlement was incomplete.

The trial court granted the motion to enforce, finding that the handwritten settlement was binding and enforceable, and that in connection with negotiation of a more formal settlement agreement, both parties had agreed that language disputes would be referred to the mediator. The New Mexico Court of Appeals affirmed, agreeing that the question of what should happen in the event a party breached the confidentiality provision was a secondary matter that did not affect the formation of the settlement agreement, and that the mediator had resolved the issue by proposing appropriate language.

Christensen v. Cox

The second case is Christensen v. Cox, No. SUCV20171635BLS1, 2019 WL 2234598 (Mass. Super. Apr. 25, 2019). In Christensen, after fourteen hours of mediation, the parties reached an agreement embodied in a document titled “Binding Mediation Agreement” that purported to set out the “material terms” of the settlement and to “fully and finally resolve” the underlying dispute. This document also provided that “should the parties have a dispute in memorializing these material terms in a settlement agreement, the parties agree to raise the issue to [the mediator] for resolution.”

After the parties failed to memorialize the settlement, one party moved to enforce the Binding Mediation Agreement. The Court held that, despite being conditional upon execution of further documents, the Binding Mediation Agreement was enforceable because it included all material terms. It further held that the provision agreeing to refer any disputes over memorialization of the settlement to the mediator constituted an enforceable contractual obligation.