Orlofsky ADR Services

Do You Need This Language in Your Mediated Settlement Agreement?

In Choksi v. Choksi (Tex. App. 2020), the Texas court of appeals examined the impact of the following language in a mediated settlement agreement:

“This binding mediated settlement agreement is not subject to revocation and is not appealable.”

The parties no doubt inserted this language in an effort to thwart a “buyer’s remorse” situation where one party tries to back out of a settlement, which is just what eventually happened.  The plaintiff refused to honor the agreement, arguing in response to a motion to enforce that it was entered into under duress and was based on a mutual mistake of fact.  “Buyer’s remorse” is a problem that seems to arise on occasion in mediated settlements, likely because they are often reached at the end of a long and tiring day of negotiation.  So, how did the two concepts in this clause – non-revocability and non-appealability – fare, and should lawyers consider including those in mediated settlements?

Non-revocability:  While the court rejected plaintiff’s arguments that the agreement was based on duress and mutual mistake of fact, the court did not rely in any way on the non-revocability language, nor could it.  If an agreement is based on duress or mutual mistake of fact, no valid agreement was ever formed, so the non-revocability language would fail, along with the rest of the contract.

Non-appealability:  The appeals court pointed out that the particular language at issue made no sense because settlement agreements are not appealable.  What the parties could have done, it held, but had not, was waive the right to appeal a judgment enforcing the settlement agreement.  Thus, at least in theory, a mediated settlement agreement could provide that the parties waive their right to appeal any judgment entered on the settlement agreement, which would shorten the process triggered by a party that tried to challenge the settlement agreement.

My conclusion:  I don’t think either prong of this provision is likely to be of much value in thwarting a case of buyer’s remorse.  A better approach, I think, is to provide that should a party need to go to court to enforce the settlement agreement, the losing party must pay the prevailing party’s attorney’s fees and expenses.