Making Mediation Count
Tips for a solid settlement agreement
Mediation provides a unique opportunity in the lifeline of litigation to sit across the table from your opponent, battle it out, then shake hands in resolution of the dispute. That hard-won feeling of relief and accomplishment can vanish in an instant if you fail to ensure that the terms of your agreement are enforceable. A few practical considerations and drafting suggestions will provide confidence that the terms of your mediated settlement will stand up in court.
The primary hurdle to enforcing agreements reached at mediation is the blanket of privilege and confidentiality protecting the process. Pre-mediation strategy combined with on-the-fly editing can provide you and your client with security through an enforceable settlement agreement.
Piercing the Mediation Privilege
In order to foster productive discussions at mediation and preserve confidentiality, California’s evidence code mandates that writings prepared at mediation are inadmissible. The state legislature recognized the importance of admissible mediated settlement agreements and carved out a specific exception to the mediation privilege, Evidence Code 1123, which provides for admissibility of a written settlement agreement signed by the parties.
An enforceable written settlement agreement must express the intent of the parties to make the agreement admissible. Admissibility requires the agreement to contain a direct statement that the settlement terms are enforceable or binding, per Fair v. Bakhtiari. This is not a time to get cute with your legalese or creative terms. Use plain and simple language to show that the parties intend the terms of the agreement to be binding and enforceable in a court of law.
Signing on the Dotted Line
The agreement also must be signed by the principals of the parties, or representatives duly authorized to sign on behalf of the parties.
Agents, such as attorneys or insurance representatives, are not valid signatories when seeking to enforce a settlement agreement, as noted in Elnekave v. Via Dolce Homeowners Ass’n.
In order to set the stage for an admissible agreement, you should ensure the principals of all parties, or their authorized representatives, intend to be present at mediation. Be wary of requests for principals to be on telephonic standby or “otherwise available” during mediation. Anyone uninterested in attending mediation would have no problem backing out of an unenforceable agreement reached at mediation.
The settlement agreement must be signed by all parties in order for it to be enforceable in court. It is best to accomplish this immediately upon reaching consensus on the terms to maintain momentum. If principals or parties are not physically present at mediation, provide the agreement via fax or email and obtain their signatures before calling it a night.
A partially signed agreement is inadmissible and cannot be enforced against the signing parties. The argument claiming the terms of the agreement are severable as to the parties is creative but nevertheless fails because the document would have to be admissible before determining severability, as seen in Rael v. Davis.
In the unfortunate situation where a party attempts to avoid its obligations agreed to at mediation, a properly drafted and signed settlement agreement can be enforced under C.C.P § 664.6 and the court can enter judgment pursuant to the terms of the agreement.
Of course, the court has to have jurisdiction over the matter, so be sure to carefully draft your agreement to expressly authorize the court to retain jurisdiction to enforce the terms of the settlement, which will save you from breaches after the filing of a dismissal with prejudice, as noted in Hagan Engineering, Inc. v. Mills.
Be Prepared and Be Flexible
As with all settlement negotiations, you must balance your desire for an enforceable agreement at mediation against the potential damage caused by making settlement contingent on technical drafting issues. Sometimes, it’s better to have a deal than an airtight document no one will sign.
At the very least, bring your laptop to mediation loaded with a form agreement ready for editing as informed by settlement discussions, or print out a few forms with sufficient blank lines to handwrite specific terms negotiated at mediation. Finally, remember to bring your optimism and patience, two key ingredients for any successful mediation.