Orlofsky ADR Services

What Is Bad Faith In A Mediation?

bad faith authority to settle mediation

In Holly v. UPS Supple Chain Solutions, Inc., 2015 WL 4776904 (W.D.Ken. 2015), the parties agreed to mediate a case before a federal magistrate. The court’s Settlement Conference Order stated that “each party must attend through a person who is fully authorized to approve a settlement and has the power to change the party’s settlement posture during the court of the conference.” The court awarded attorneys’ fees to the plaintiff as a sanction for defendant’s bad faith at the ensuing settlement conference because the defendant failed to send an appropriately empowered representative.

Defendant’s representative stated that she had met with a team of people before the mediation and that they determined a maximum value for plaintiff’s claim. She further stated that she had full authority to settle for that maximum value and even had some “wiggle” room to go above it. The court ruled that it was fine to set a value on a case, and also fine to have a settlement amount in mind, but sending a representative who effectively lacked authority to exceed a pre-determined settlement amount violated the requirement to send someone “fully authorized.” The policy concern underlying this is that mediations sometimes change a party’s view of the value of a case, but if the representative is not authorized to go above a pre-determined amount, there is no chance of changing that party’s assessment.

This issue does not arise in private mediations unless the parties agree to a requirement to send someone with full authority. However, most courts have requirements similar to the one at issue here. One Northern District of Illinois Magistrate, for example, requires someone with full settlement authority, defined as “the authority to negotiate and agree to a binding settlement agreement at any level up to the settlement demand of the opposing party.” Parties should therefore be aware that in a mediation under a court’s auspices they should send someone with at least theoretically unlimited authority, even if that person does not intend to go above a certain amount.