Tag: mediation agreement

Extrinsic Evidence to Interpret a Mediated Settlement Agreement?

Mediated Settlement AgreementIn PNC Bank, N.A. v. Springboro Medical Arts (Ohio App. 2015), the parties concluded their mediation by signing a document that contained the “essential terms of the settlement.” The agreement further stated that counsel would later draft a settlement in “formal legal language” with such “additional documents” as were necessary. No formal document was drafted, however, and the defendant later contested the meaning of the mediation agreement.

The question before the court was whether it should consider extrinsic evidence in determining how to interpret the mediation agreement. The court decided that the mediation agreement was “fully integrated” and therefore no extrinsic evidence was permitted. The fact that the parties might later draft a more formal document did not mean the mediation agreement was not a binding contract that embodied a full meeting of the minds on all the essential terms.

What the parties did in this case – sign a written agreement at the end of the mediation, with the intent to later prepare a formal document – is very common, and very good, mediation practice. The court’s decision rightfully protects this practice from subsequent attempts to undermine the document signed at the end of the mediation. Buyer’s remorse, while not uncommon, should not be tolerated.

Mediation Agreement Not Unconscionable

ABA American Bar Association, Section of Litigation, Alternative Dispute ResolutionThis article was also published by the American Bar Association’s Section of Litigation, Alternative Dispute Resolution Committee.

Mediation for home construction home builder suitIn The McCaffrey Group, Inc. v. Superior Court, 2014 WL 1153392 (5th Dist. Cal. 2014), the homeowners sought to sue a builder for alleged construction defects. The construction contract required a number of pre-litigation dispute resolution mechanisms, including mediation, and the parties had to split the costs of the mediation. The homeowners argued that this mediation requirement was unconscionable because the mediation costs could be quite high, and therefore act as a “tax” that had to be paid before they could have access to the courts. The homeowners noted, in this regard, that the mediator had the discretion to conduct the mediation as he or she saw fit, which could lead to a very lengthy, and therefore very expensive, process.

The court rejected the unconscionability argument, finding that it was reasonable to require the parties to split this expense. The court also noted that the homeowner had made no attempt to show that the mediation fees actually, rather than hypothetically, presented an unreasonable burden. The court, therefore, left the door open to a finding of unconscionability if, in a particular case, it could be shown that the mediation fees created an unreasonable financial burden.

Make sure your medition agreement is binding

Signing a binding mediation agreementIt is always recommended that you have signed agreement at the end of a mediation, even if the agreement is only a term sheet, subject to later incorporation of a formal agreement. Having a signed document should prevent parties from having buyer’s remorse the following day. You may even want to consider having language in the term sheet that explicitly states that this is a binding agreement.

In a recent New Jersey Appellate court decision arising out of a nasty divorce (husband in his eighties, wife in her seventies!), the parties reached an agreement after a long mediation, only to have the wife attempt to back out. The court upheld the settlement, and an important consideration was this handwritten statement in the mediation agreement:

[t]he undersigned agree that they intend to meet with their attorneys and have a property/martial settlement agreement drafted consistent with the terms of this agreement. Both parties further agree that this document constitutes a binding settlement agreement.

Beim v. Sawyer, A-2816-10T1, 2012 WL 634638 (N.J. Super. Ct. App. Div. Feb. 29, 2012)