Mediation Settlement Agreement Defined
The mediation specific settlement agreement is the starting point. Mediation and the drafting of the settlement agreement in fact, go hand-in-hand. While there may be various terms for a settlement agreement, such as mediation, negotiated, or compromise agreement, they are essentially synonymous. In a mediation, which is a type of negotiation, the parties resolve all, or most, if not all of their differences.
The goal of the mediation is to bring about the resolution of a dispute between the parties, and if necessary in the course of that mediation, specifically by drafting and executing a binding settlement agreement. Whether it simply acts as a ‘frame work’, a type of checklist, or a complete binding document, an agreement entered into in mediation usually has its foundation in the settlement agreement form.
In the mediation of any civil case, be it large or small , the mediation settlement agreement will have its foundation upon the following types of inquiry:
Almost every mediation has at least 10-12 check list points that the parties should review and consider in the course of a mediation. The inquiry is two fold, both on the side of the defense idea and the idea of the plaintiff. In that regard, it is important to look upon the mediation in terms of "dispute resolution" rather than a more concrete idea of settlement.
In that regard, whether it is a release, a waiver, confidentiality or indemnification provision, a stipulated judgment, agreement to arbitrate and the like, the mediation settlement agreement will likely contain some, if not most of, the following clauses:
As indicated above, an agreement entered into in the course of a mediation may be binding, non-binding, a frame work or a complete contract of sorts. As a result, it raises the question about whether the mediation settlement agreement itself is a condition precedent to a complete settlement, a settlement in and of itself, or part of the settlement negotiation process.
Essential Features of a Mediation Settlement Agreement
If both parties agree to the terms of the settlement at the end of a mediation, then the mediation agreement is signed by the parties and their attorneys, if they are represented. The mediation agreement must be drafted in a manner which has the legal binding effect of a settlement or otherwise consent judgment. The terms which should be included in a proper written mediation settlement agreement are as follows: The agreement will typically contain a confidentiality clause which states that both parties understand and agree that all matters addressed including the mediation itself are confidential and will not be used outside the parameters of the mediation to prove or disprove any claim or defense in any subsequent litigation or in any other hearing. In the event of any breach of the confidentiality provision, the non-breaching party will have the right to commence judicial proceedings in the nature of specific performance to seek a disclosure of the mediations in order to seek to have the mediation agreement enforced. In the event that a party refuses to abide by the resulting terms of the agreement, the other party may file a motion for contempt with the court that has jurisdiction over the issues under the terms of the mediation agreement. A motion for contempt may also be filed in Family Court in some circumstances. If the motion is granted, the court will require the breaching party to comply with the mediation agreement or be held in contempt of court. If the mediation agreement provides the basis for a Support Order or Consent Order over children, it could be incorporated into the Judgment of Divorce or Separation as the parties have agreed to the terms set forth in the mediation agreement to determine custody, parenting time and child support; it is recommended that matters relating to custody and parenting time be contained in a Court Order in the future. The parties may also wish to utilize a Parenting Coordinator to assist in the long term evaluation of the dispute and make binding decisions on the parents relating to issues as they arise after the mediation. A Court may appoint a Parenting Coordinator as an alternative form of ADR if both parties cannot agree to voluntarily pick one of their choosing. If the mediation agreement does not provide for the basis of a Support Order in the future, the parties are still required to attend a Court Ordered Support Conference and Review Hearing to determine the terms of child support and health insurance benefits. Child support and health insurance benefits matter cannot be determined unless the Court or the Probation Department has established guidelines and has assigned the support award appropriate to the parties. At this hearing, the parties will be required to fill out a Child Support Guidelines Worksheet; if the parties agree to the terms of same, the terms of the settlement shall be placed in the terms of the Child Support Worksheet. If the parties can agree to the terms of visitation with their children, as agreed to during the mediation, that agreement can also be put in writing and incorporated into the Judgment of Divorce or Separation.
Illustrative Provisions of a Mediation Settlement Agreement
Examples of mediation settlement agreements are as varied as the minds of its participants. For our example, imagine two parties successfully resolved a general commercial dispute. Let us further assume that the parties had the time and resources to negotiate the detailed terms set forth in their mediation settlement agreement. The agreement between the parties could include the following clauses:
SETTLEMENT AND RELEASE OF CLAIMS. In full and complete settlement and satisfaction of the Action and any disputes or claims that the Releasors may have had with the Releasees, the Releasors hereby release and discharge the Releasees from any and all claims (except as expressly preserved herein and/or arising from future conduct of the Releasees). This release, however, shall not apply to actions or omissions of the Releasees arising out of or relating to the performance, non-performance or breach of this Settlement Agreement.
COMPENSATION. The Defendant agrees to pay to the Plaintiff as full and final settlement of the Dispute the sum of $XX, payable in four equal installments of $X each. The first installment shall be paid within one (1) business day following the execution of this Agreement by all parties. Thereafter, the three subsequent payments will be paid thirty (30), sixty (60), and ninety (90) days from the date of the initial payment. The Defendant will transfer via wire, funds to be provided by the Plaintiff, to the Plaintiff.
SUBSTANTIVE CHANGE. Defendant acknowledges and agrees that up to the day of the execution of this agreement, the Defendant has been providing services to Plaintiff. However, as a result of Plaintiff’s failure to comply with the terms of this agreement and other material breaches of the agreement, Defendant will cease providing any such services after the date of execution of this agreement.
Mediation Settlement Agreement Drafting Process
Typically, a mediation settlement agreement is drafted after resolution of a mediation by the mediator and/or the parties. The agreement can be drafted by any party or their counsel, but oftentimes the mediator will offer to draft the agreement so that he/she can ensure it adequately memorializes all terms agreed upon in the mediation. Most mediators have certain forms they use that provide a framework for parties to plug in various provisions. Some mediators also have a standard settlement agreement on their websites that they encourage the parties to adapt to their particular circumstances. In either case, the proposed agreement should be modified so that it reflects the agreement of the specific parties, as so often mediations involve "from scratch" settlements that are not based on any prior agreement.
In most cases, the mediator will ask the parties during the mediation whether they want to delay the drafting of the agreement until after the mediation concludes or whether the mediator’s standard agreement will be okay. If the parties agree, they’ll be given some time to negotiate the terms of the settlement agreement, either while another session with the mediator is scheduled or during a brief session that occurs on the last day of the mediation. In some cases, parties continue to negotiate after the mediation has concluded.
Regardless of who drafts the mediation settlement agreement, it should be circulated to opposing counsel for review right away, without any delay in order to minimize the chances of a later dispute about what terms were agreed upon in the underlying mediation. Even if a party refuses to sign the agreement during this process, it at least sets forth a record of the agreement that was reached in the mediation.
At the conclusion of the mediation, the parties may execute an enforceable Memorandum of Understanding (MOU) or Term Sheet, which provides that once the formal settlement agreement is finalized, the parties shall execute a stipulation of dismissal and shall join in any other document that is required to effectuate the agreement. An enforceable MOU or Term Sheet is an enforceable contract, and therefore, the breach of its terms is treated as a breach of contract as opposed to an action for specific performance of an arbitration award. Thus, in some circumstances, this may be the preferred agreement to execute if the parties cannot agree on all terms, i.e., the MOU constitutes an agreement to agree in some respects.
It is important for the parties to recall that, absent a provision in the parties’ agreement that is subject to confidentiality, they cannot shield the MOU or Term Sheet from disclosure to the public.
Advantages of Employing a Mediation Settlement Agreement
The benefits of using a mediation settlement agreement are numerous. Often just the decision to mediate can help parties see things from new perspectives allowing them to settle the dispute without further proceedings. In particularly contentious disputes however, a well thought out mediation settlement agreement can be invaluable. In addition to the certainty of a binding contract, a mediation settlement agreement can be very useful in evidencing an enforceable agreement that is outside of the contested court system. This is particularly important for international disputes. For instance, if the parties are from different countries with different enforcement mechanisms. A mediation settlement agreement signed by both parties outside of the regular court process may be the only process available to submit an enforceable settlement to a country where a party deemed to be in breach of the settlement might hide. Additional benefits include: Depending on the circumstances a mediation settlement agreement might also allow for interim dispute resolution to reduce the likelihood of impasses before the settlement is fully performed. For example, if a settlement agreement provides for monthly payments and the dispute is instead whether such payments were made. A mediation settlement agreement may allow for the mediation process to proceed on a much faster time table than working within the litigated or arbitrated proceedings.
Examples of Successful Mediation Settlements
There are many ways that mediation settlement agreements have resulted in effective solutions to disputes and in an example of this, in 2015 a federal court approved a class action settlement for nearly $30 million involving illegal background checks. The United States District Court for the District of Columbia granted preliminary approval to a settlement reached by the U.S. Department of Housing and Urban Development and USA Properties Fund Inc., pending final approval of the proposed deal.
The settlement came out of a suit filed by the government that accused the company of failing to give employees copies of consumer reports before taking adverse actions against them (i.e. firing them), failing to notify them that adverse actions were about to be taken, failing to give employees copies of their credit report or allowing them time to contest it .
Another example of a successful Mediation Settlement was reached in a suit sought by eight independent bookstores in Illinois seeking to prevent the settlements, which were reached with Borders Group Inc. and Barnes & Noble Inc. over a dispute involving the pricing of e-books. The dispute revealed a bitter battle in the book industry between the "big box" book stores against the smaller "independent" bookstores who are currently facing a struggle for survival. Though the settlement did not mention the "big box" store name, the settlement had the potential to cause a major impact on the industry by establishing strict limits on how retailers can discount, advertise, or otherwise market free or discounted e-book subscriptions.
Potential Issues and Challenges in Mediation Settlement Agreements
Parties may encounter challenges and common pitfalls when crafting mediation settlement agreements. Parties should have a basic understanding of these problems and how to avoid them. A few of the common issues that arise are:
Ambiguities
The problem with ambiguities is, as the name implies, they are vague. Basically, there is something in the mediation settlement agreement that could have more than one meaning. For example, if the agreement requires one party to turnover all of their retirement funds "within ten days" of the date the parties signed the agreement it is unclear whether it is working days or business days until the funds are turned over. For example, if the retirement fund manager does not process transactions on weekends and holidays, providing the funds in ten calendar days is not possible. A far better provision would have stated within ten business days.
Unclear Language
If the language is unclear, a party may not know exactly what they are agreeing to or providing. This can result in either party not doing what they believed they had agreed to or not receiving what they thought they were entitled to. For example, if the settlement agreement calls for an amount to be paid "as of" a specific date, it does not state which date goes where. If the amount is a check payable to the other party, is it in the party’s hands by the "as of" date or was it postmarked by that date? Or, as in the first example, is it a matter of business days or calendar days. If the parties are not certain what the language means there is a good chance that they are not on the same page.
Missing Important Items
This generally occurs if the parties are doing the drafting of the mediation settlement agreement without relying upon a knowledgeable third party. The most common items that go missing are things that should be obvious. For example, there may be a provision in the agreement that one party is to provide insurance proceeds to the other, but if there are no terms regarding whether the proceeds are net or gross proceeds or how to divide responsibility for expenses, the parties are not going know how to treat those proceeds.
Non Disclosures
There may be additional provisions that should be in the agreement but the party did not know to ask for them to be included. For example, several states require disclosure by one party of the other party’s support obligations and untitled marital property, such as assets and income. Another party may want to have updated financial information even though it was provided during the mediation process.
Legal and Enforceable Aspects
Given that there are many people who do not use attorneys to prepare their mediation agreements, it is important to understand the enforceability of those agreements. Certain writing requirements can affect the enforceability of a written agreement pursuant to the statute of frauds. Certain substantive law can also affect the nature of the document required. Additional procedural requirements can also affect the enforceability of the agreement.
For example, under the Uniform Commercial Code, Article 2, a contract for the sale of goods at $500 or more needs to be in writing to be enforceable. Idaho’s Uniform Commercial Code, Article 2, Section 2-201(1) states: Except as otherwise provided in this section, a contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. An agreement to performance may be sufficient to satisfy the statute of frauds even though the moment of its making cannot be determined. Careful consideration should be given to the law applicable to a contract to determine if that contract falls within a statute of frauds. In most cases, agreements prepared during mediation are often enforceable if they comply with the Statute of Frauds if applicable, but also depend on other factors such as the type of matters pending before the mediator, whether the mediator has any authority, such as to enter orders, in his or her field, and whether the mediator is authorized to sign such orders and/or to keep the matter open or continue it. In situations where the parties do not want the mediator to enter an order, you must ensure that the agreement is signed by the relevant parties. This ensures that the agreement at mediation is binding until the entry of a final judgment, unless the judge does not believe that the agreement and/or the signatures of the parties comply with the substantive requirements to finalize the agreement. Courts generally want an attorney to ensure that the agreement complies with the law and that there is a clear understanding by the party about the terms of an agreement and that the party has knowingly entered into the agreement.
Conclusion: The Significance of Mediation Settlement Agreements
In conclusion, mediation settlement agreements continue to be a cornerstone in modern dispute resolution mechanisms. These agreements provide a range of benefits, from promoting a collaborative environment that can preserve relationships and reduce animosity between parties, to offering the opportunity for creative solutions that are often not available in a more rigid adversarial context. They serve as an effective way to bring about closure in a variety of legal disputes quickly and at significantly less cost than traditional litigation.
Throughout this article, we have explored various types of mediation settlement agreements and have provided several examples of their use in community mediations , small claims cases, mediations of family law disputes, and commercial cases, highlighting their versatility and value. It is clear that mediation settlement agreements are an invaluable resource that should be considered by all parties involved in a dispute.
Instead of relying solely on the court system to resolve conflicts, individuals, families, or businesses should explore mediation as a viable alternative while keeping in mind the vast array of mediation settlement agreements discussed in this article. By understanding how a mediation settlement agreement can be tailored to your specific needs, you will harness the true potential of this powerful dispute resolution tool.