Mediation Pro Tip: Settlement Agreements

Just about every successful mediation ends with a settlement agreement.  (Sometimes, a mediation can be considered a success even if it concludes without a settlement, but that’s a topic for a future blog post.)  Here are some general guidelines on settlement agreements to keep in mind:

1.     Get It In Writing

Many jurisdictions require parties to reduce their mediation settlement agreement to writing, but even when there’s no legal requirement it’s always a very good idea.  Having a written record of what was agreed during mediation can help ensure everyone is on the same page and that the settlement terms are actually implemented.  Occasionally, the process of writing a settlement agreement identifies miscommunications during the negotiation, and it is important to get those items sorted out.  If a party fails to comply with the terms of the settlement, having a written document can be essential to enforcing the settlement and ensuring it is implemented as intended.  As a neutral, mediators should not draft the settlement agreement (and are prohibited from doing so in some jurisdictions), but can provide guidance to help resolve any disagreements that arise during the drafting process.

2.     Get It Signed

All parties and counsel, as well as representatives of any relevant insurer, should sign the settlement document to indicate their assent to its terms.  Depending on the jurisdiction and the nature of the issues addressed, some agreements may only be enforceable if everyone involved actually signs a written document.  For example, Florida Rule of Civil Procedure 1.730(b) requires that any settlement reached in a court-ordered mediation must be signed by all parties and their counsel.  In some situations, it may also make sense (or be legally required) to have the signatures notarized.  Generally, the mediator does not sign the settlement agreement, although signature by the mediator may be required or prohibited in certain jurisdictions.

3.     Prepare It In Advance

Just like some trial lawyers prepare jury instructions when they draft a complaint, it can be an excellent idea to draft a settlement agreement before mediation and circulate it to the other side.  Going through that process in advance helps ensure a more successful mediation by identifying any issues where the parties agree and highlighting the items that need to be resolved.  In cases where a party is considering proposing creative settlement terms, such as offering some sort of future business arrangement or other in-kind remuneration, it can be important to give the other side an opportunity to evaluate the idea and obtain any necessary internal approval prior to the mediation.

4.     Make it Detailed and Thorough

Whenever possible, I recommend that parties sign a comprehensive written settlement agreement before leaving the mediation session.  Term sheets, bullet-points, handshakes, or other “agreements to agree” can leave ambiguities about what the parties actually agreed at mediation, making enforcement difficult.  It’s not uncommon for parties to have second thoughts or “buyer’s remorse” after a mediation is over, and failing to lock down all of the terms of the agreement can sometimes undermine the effort and expense that was invested in reaching the settlement.  There are many horror stories about litigation that dragged on for months or even years after parties thought they had reached a settlement, most of which could have been avoided if everyone signed a comprehensive written agreement at the end of mediation.

However, signing a full-blown comprehensive settlement agreement at the end of mediation is not always feasible - whether because of timing issues, obtaining approvals from superiors, complexity of the case or the settlement terms, or other practical or logistical concerns.  In those situations, it is still essential to ensure that everyone leaves the mediation with some signed document memorializing the agreed upon key terms in as much detail as possible, ideally also including a commitment to follow up with a more complete agreement within a specified time.

5.     Be The Drafter

As with most legal documents, there is often an advantage to being the side that drafts the settlement agreement.  Countless decisions, large and small, must be made during the process of writing an agreement, from the structure of the document to the particular language used, all of which can impact the settlement.  Going through the drafting process and figuring out how to word specific provisions often requires thinking through the consequences of aspects of the settlement in ways that may not occur to your opponent who simply reviews and comments on the finished product.  Drafting a proposed agreement and sharing it with the other side before the mediation (see recommendation #3 above), can also help secure your role as the drafter.

Of course, every case presents its own unique issues and challenges, and as a mediator I help guide the parties to reach a sensible settlement of their particular case and then document it appropriately.  Having participated in hundreds of mediations, and drafted hundreds of settlement agreements, I can assist parties in coming up with the right structure and verbiage for complex or thorny settlement terms. 

If you have questions or are ready to schedule a mediation, please reach out to me at jim@baldingermediation.com or 561.805.1545.  Or you can always check our online scheduling calendar at www.baldingermediation.com/availability.