What is a Mediation Settlement Agreement?
A Mediation Settlement Agreement is a binding legal document that is the result of a mediation, which is an interactive process whereby the parties meet confidentially with a trained third party called the mediator, in an effort to settle the dispute.
A mediation settlement agreement is legal and binding, officially ending the litigation as well as the parties’ rights to pursue any further legal action, whether it is related to this case or any litigation ever filed against each other, up to and including an Article 78 proceeding against the Board of Education of the State of NY that would challenge the Board’s own actions in this matter. This Agreement is the official end of this matter and will be recognized by all state and federal courts. It is enforceable in the same manner as any other contract. It will enable both sides to move forward knowing that they are safe from further litigation, concerning this matter. A Mediation Settlement Agreement is a legally binding contract, and therefore should only be entered into when you know exactly what you want the end result to be. If you have reservations or doubt, you may want to consider other options besides a settlement agreement. The mediator is neutral and listening to all parties , so he has no ulterior motive or bias when drafting a Mediation Settlement Agreement. The mediator’s only goal during mediation is to help lead the parties to an acceptable resolution, allowing everyone to leave confident that their needs and interests have been met. A Mediation Settlement Agreement will only be in effect when all parties agree to sign the Agreement. If no settlement is reached, the parties will go back to their legal representatives and pursue their claims in the court. The Final Promissory Note is delivered by the mediator to the attorneys who will produce it before a notary and exchange copies of the document with the other base attorneys. The Final Promissory Note contains the signatures of all of the parties to the Mediation Settlement Agreement, signifying that it meets with each party’s satisfaction. The parties then receive their copies of the agreement. It is important to know that the mediation agreement is kept totally confidential. All communications that occurred during mediation cannot be used in any future litigation. All that can be used is the mediation settlement agreement itself, as a contract, and the "Final Promissory Note", which is the mediator’s final approval of that settlement agreement.
Elements of a Mediation Settlement Agreement
Whenever a mediation is completed, the mediator creates a written settlement agreement which memorializes the terms and conditions of the agreement. Typically, these settlement agreements are drafted by the mediator which eliminates the need for the parties to employ counsel to draft the agreements. Unless the mediator has an expertise in employment law, most mediators will suggest that an employment attorney be engaged to draft the settlement agreement, unless the parties agree otherwise. The employment attorney will have experience with drafting employment settlement agreements based on the terms and conditions reached during the mediation process. The attorney will ensure that the agreement meets all statutory requirements and addresses any employment law issues. Most importantly, the attorney will ensure that properly draft an enforceable release of claims to be signed by both parties.
A typical settlement agreement will include the following:
A list of the parties who were involved in the mediation session including a disclosing of their contact information. Identification and/or description of the underlying dispute and the date of the mediation. Disputes resolved at mediation. This section should refer to the specific issues that were agreed upon by the parties and any time frames or deadlines. This section is extremely important, because if there is a subsequent breach of the settlement agreement, this particular section will identify what was agreed by the parties and not clouded by issues that were not agreed to at the mediation session. Confidentiality. Most settlement agreements will contain a confidentiality provision with respect to the mediation requiring the parties, the mediator and their attorneys to keep the terms of the mediation confidential. Confidentiality is very important in many employment law disputes particularly when there is a question as to whether or not an employee can request that the underlying complaint filed with the EEOC or DFEH be sealed. The confidentiality section will also prevent the attorney from revealing to other clients or potential clients the terms of the settlement or its potential outcome. Release of claims. The release of claims is extremely important and should be drafted by an employment attorney with significant experience in employment litigation and the drafting of settlement agreements in the employment context. A general release of claims should be comprehensive yet not overreaching. Release language should include federal and state claims, contractual claims, tort and other causes of actions that could potentially arise out of the underlying dispute. This is particularly important if the settlement agreement involves the termination of employment or a severance agreement. Attorneys’ fees. This section will provide the remedies available in the event either party breaches any part of the settlement agreement. In the event of a breach the attorneys’ fee recovery provisions will award attorneys’ fees to the prevailing party. Governing law. It is important to identify which state’s laws will apply to the mediation settlement agreement. Execution in counterparts. In the event one of the parties does not have access to a scanner or email this simple language allows the settlement agreement to be executed in counterparts.
Template Language For Mediation Settlement Agreements
The sample mediation settlement agreement from the previous section is representative of the language typically used in these types of agreements. Common clauses and statements, as well as some examples of frequently used provisions, are included below:
- Description of dispute in the context of the mediation session: This portion of the mediation agreement will set out in detail the parties’ respective interests and claims. The following sample clause is illustrative of the often used format in this section:
- The Parties agree to arbitrate all disputes, issues, controversies, and matters relating to the [specify subject matter] which have been raised at the Mediation or that could have been raised at the Mediation.
- Statement regarding the objective of mediation:
The Parties acknowledge that each Party considers the confidentiality of the Mediation session to be an important matter of value.
3. Statement regarding existing agreements:
The Parties acknowledge that although the Parties have executed and/or may execute during the course of the Mediation session this [Agreement], there are no agreements, understandings, promises or inducements, other than those reflected herein.
4. Reference to specific provisions in the agreement:
The Parties acknowledge that each has read, understood, and voluntarily accepted the terms and conditions of Sections I through VII above.
5. General Statement for the governing law:
This Agreement shall be construed and enforced in accordance with the laws of California.
How to Create a Mediation Settlement Agreement
A mediation settlement agreement is generally drafted at the conclusion of a mediation session. It is the document that will dispose of all, or part, of a legal dispute. It resolves the conflict in the case and is signed by all parties who are assuming an obligation of performance under the agreement.
The drafting process for a mediation settlement agreement usually proceeds in three phases: (1) Preparation phase; (2) Negotiation phase; and (3) Finalization phase. During the preparation phase, all parties review a template mediation settlement agreement that was prepared in advance of the mediation session. All open issues in the mediation, for which the parties were unsuccessful in resolving during the mediation, are inserted into the template agreement in the appropriate sections. The negotiation phase consists of the lawyers negotiating the terms of the agreement, including the definitions of all terms used in the agreement. After all details are negotiated, the lawyers proceed to the finalization phase. In the finalization phase, the lawyers finalize all remaining language issues and insert all agreed-upon changes. Once all revisions have been completed, the parties will review the final agreement. Finally, once the parties have no further revisions to the agreement, it is signed.
Procedural Aspects and Enforceability
Although mediation settlement agreements can be the rock-solid foundation on which a dispute is ultimately resolved, the enforceability of those agreements can often be called into play. The strong public policy favoring the finality and enforceability of mediation agreements notwithstanding, courts have not hesitated to unravel them where the consent of all parties was not appropriately given.
Don’t assume that all agreements reached in mediation can simply be finalized once the agreement-in-principal is drafted. Whether the agreement reflects the meeting of the minds of all of the parties is critical. It is imperative that all necessary parties sign off on the terms of the agreement. In J.K. Adams & Associates v. Becker, No. 80960V(1998), the Arkansas Supreme Court affirmed a trial court’s ruling that a mediation agreement was not enforceable because other parties to the action did not agree to the terms reached during the initial mediation session. That mediation agreement was subject to change if two additional parties to the underlying dispute could not agree to the terms. Notwithstanding that caveat, the mediation agreement was immediately incorporated into the parties’ divorce decree unilaterally by one party to the agreement. That party’s unilateral actions before the other parties had consented to the terms of the mediation agreement required the courts to unwind the terms of the mediation agreement and proceed with the dissolution of the contract in order to do what all parties had originally agreed – to do away with any future disputes.
As we all know, however, there are instances where the parties to the mediation do not agree to all of the terms that were discussed in mediation. Where does that leave the parties who were left with unresolved issues? Do they have to return to litigation and incur additional expense or can they simply abandon the settlement agreement and all the benefits of the mediation process? In Dunn v. Dunn, 581 N.E.2d 1056 (Ind.Ct.App.1989), the Indiana Court of Appeals rejected the idea that the mediation process is mandatory upon the parties. In so deciding the Court stated, "We express our disapproval of the suggestion that mediation proceedings are inescapably binding on the parties. To the contrary, such proceedings are founded on the voluntary participation of the parties." Id. at 1058. Although none of us want to find ourselves in a hostile negotiating atmosphere, it is a fact that things sometimes happen that require the divorce mediation to become unsuccessful. In Evans v. Evans, 793 P.2d 1261 (Alaska 1990) , the Alaska Supreme Court reversed a trial court’s decision that found the parties to an unsuccessful divorce mediation were nonetheless bound by the terms of the agreement reached during mediation. The Alaska Supreme Court noted that the mediation agreement was not executed before it was reduced to writing, but rather the mediation agreement was still in draft form when the mediation proceedings came to end.
However, the fact that not all of the parties fully executed the agreement at the time of the mediation does not automatically negate the terms of that agreement. In Perry v. Harris, 79 Cal.App.4th 540, 94 Cal.Rptr.2d 521 (2000), the California Court of Appeals considered a dispute which arose over a mediation agreement between the plaintiff and the defendant that resulted in an marriage settlement agreement. The parties’ lawyers prepared the written settlement agreement after the mediation process. That written agreement was not signed by the plaintiff at the time the actions were filed. The plaintiff stated that she did not sign the agreement as a result of her husband’s threats to destroy her home should she fail to sign the agreement. The trial court found that there was no meeting of the minds by the parties to the mediation nor had the parties intended to be legally bound by the terms agreed to in mediation. The California Court of Appeals reversed the trial court’s decision finding that the parties’ statements and conduct manifest the strong desire to be legally bound by the terms of their settlement agreement.
Dissolution mediations also welcome parties who are not signatories to the mediation agreement. For example, in In re Marriage of Abram, 174 Cal.App.4th 37, 94 Cal.Rptr.3d 364 (2009) a party attempted to appeal the terms of the final judgment which incorporated the terms of an agreement reached during divorce mediation. The divorce mediation agreement did not include a signature line for the parties’ child. The California Court of Appeals determined that the child was not of legal age to be bound by the settlement agreement, thus, his lack of consent to the terms envisioned in the mediation agreement did not render the agreement unenforceable.
The moral of the story is, although the same rules of contracts have not precluded mediation settlement agreements from being the bases for the final order in divorce cases, it is important that the parties have a clear understanding of the nature and scope of the mediation process and what constitutes a binding settlement agreement. In doing so, the parties can appreciate the finality of the settlement agreement and the extent to which that agreement will be under its contractually binding terms.
Advantages of Settling Through Mediation
Mediation is an effective way for parties to resolve litigated disputes rather than rely on a judge or jury verdict. There are several reasons why parties may prefer to mediate their differences. From a cost perspective, the cost of court litigation – both in terms of attorney fees and expenses – is almost always greater than the cost of mediation. Mediation also saves parties time and provides flexibility in scheduling. Moreover, preserving a relationship is best done in an environment that is more amicable than what typically occurs during court litigation. While opening lines of communication may be difficult in court proceedings, such often becomes the byproduct of engaging in the mediation process wherein even a simple greeting or handshake at the door creates an opportunity to begin anew and establishes a better environment in which to negotiate.
Obstacles and Solutions in Mediation Settlements
Even with a sample mediation settlement agreement, you may still run into issues while drafting an agreement. In many cases, you may come across problems while trying to agree on various terms of the agreement. If parties cannot mutually agree on all items in an agreement, then they will be forced to continue to additional alternative dispute resolution measures to finalize their divorce.
One common problem that parties may notice is that all three components of the agreement cannot be reached at the time of the mediation. While the parties may be able to agree on aspects of the divorce or child support, they may not be able to settle the entire agreement. This is common in many divorce settlement agreements, as the mediation is only attempting to bring up issues for the parties to discuss with each other.
If each party believes that they have reached an agreement on the financial terms of the divorce, then both parties may need to be willing to take extensive time out to talk to each other about other issues. Even if one party reaches out to the other about small issues, such as parenting time during specific holiday seasons, that issue may be unresolved when the other party is finally reached.
In terms of some sort of break-through during mediation, each party needs to keep in mind that a divorce will not be finalized during mediation , even if a final agreement is not reached. As opposed to proceeding with alternate forms of alternative dispute resolution, one or both parties may feel that it makes the most sense to meet again at a later date to finalize all aspects of the mediation settlement agreement.
It does not make sense to finalize parts of an agreement simply because parties want to finish the process. Instead, each party needs to make sure that they feel comfortable with the agreement to the point of signing the document. Potentially having a ruling by a judge for this or that item, instead of having an actual agreement from both parties, is rarely the right solution. A ruling by a judge is generally only a last resort and not a normal way of handling a divorce issue.
Parties need to remember that the goal for a mediation is to attempt to come up with an agreement that each party is comfortable with. If parties are not comfortable with either major portions of the agreement, or even just a few items, then parties should not rush through the process simply because it is convenient for they. Every issue must be agreed upon simply because the mediation agreement needs to be signed by all parties. The agreement will eventually be sent to the court, and if one party refuses to sign the agreement, the other party might be forced to try to finalize the agreement with the court.