When Is a Mediation Really Over?

“We have a deal.”

Those may be the four most welcome words at the end of a long mediation and, sometimes, the beginning of a new dispute.

One of the most satisfying moments in mediation occurs when, after hours of negotiations, the parties finally announce that they have reached an agreement. It is also a moment when everyone needs to be particularly careful.

The lawyers are tired. The clients are tired. The mediator is tired. Everyone wants to close the laptops, shake hands, go home, and let the lawyers “paper the deal” the next day.

In my experience, that can be a mistake.

I have participated in mediations that continued until midnight or one o’clock in the morning because important work remained after the parties had reached agreement on the basic terms.

The objective should be simple: before the lawyers, the parties with settlement authority, and the mediator leave, reduce the material terms of the settlement to a writing that is intended to be binding under the applicable law and obtain the appropriate signatures.

There Is No Universal Rule

The first caution is that the law governing mediated settlements varies from jurisdiction to jurisdiction.

Every state has its own statutes, contract law, mediation rules, confidentiality provisions, and judicial decisions. Federal proceedings can present additional questions, and choice-of-law provisions may affect the analysis.

Accordingly, counsel needs to know what law governs the settlement. What state law applies? Is the dispute pending in state or federal court? Are there particular statutory or court-rule requirements governing settlement?

Texas provides one example. Texas law expressly provides that when parties reach a settlement and execute a written agreement disposing of the dispute, the agreement is enforceable in the same manner as another written contract. See Tex. Civ. Prac. & Rem. Code § 154.071.

Colorado provides another. Colorado law establishes a procedure under which an agreement reached through mediation may be reduced to writing, signed, presented to the court and, if approved, enforced as an order of the court. See Colo. Rev. Stat. § 13-22-308.

Colorado cases also demonstrate the potential complications created by mediation confidentiality. See Yaekle v. Andrews, 195 P.3d 1101 (Colo. 2008); Tuscany Custom Homes, LLC v. Westover, 2020 COA 178, 490 P.3d 1039.

These are examples, not universal rules. The applicable law must be examined in each case.

“We Have a Deal” May Not Be Enough

Suppose the parties agree after twelve hours of mediation that the defendant will pay $1 million and the lawsuit will be dismissed. Everyone shakes hands and agrees that formal settlement documents will be prepared the following day.

The settlement may sound complete. But is it?

What about the release? Confidentiality? Indemnification? Liens? The timing and method of payment? Attorney fees and costs? Continuing obligations? Claims against related parties?

The next morning, one lawyer circulates a settlement agreement containing provisions the other side says were never agreed upon. One side responds that those provisions are merely standard terms necessary to implement the settlement. The other side says they are material terms upon which there was never an agreement.

Instead of resolving one dispute, the parties may have created another:

Did we actually settle the case and, if so, what exactly did we agree to?

That problem can be particularly difficult when mediation communications are protected from later disclosure.

Colorado illustrates the point particularly well. In Tuscany Custom Homes, the court explained that forming a contract and proving the existence and terms of that contract are not necessarily the same thing. Mediation confidentiality may prevent a party from using communications from the mediation to establish the existence or terms of an alleged agreement.

The practical lesson is important: do not assume that a later dispute can simply be resolved by going back to what everyone said during the mediation.

Finish the Job Before Everyone Leaves

When the parties believe they have settled, take the additional time necessary to document the material terms before anyone leaves.

The document does not necessarily need to be the final twenty-page settlement agreement. Depending upon the applicable law and circumstances, it might be a settlement memorandum, term sheet, or mediated settlement agreement.

What matters is that the writing identifies the material terms and clearly states whether the parties intend to be presently bound.

The writing should address more than the settlement number. Depending upon the case, that may include:

• Payment terms and deadlines

• Releases

• Dismissal of the action

• Attorney fees and costs

• Confidentiality

• Liens and indemnification

• Continuing obligations

• Nonmonetary terms

• Claims involving related parties

• Any other material terms specific to the dispute

If formal documents will follow, the agreement should also make clear whether those documents merely memorialize an already binding settlement or whether execution of the later documents is a condition to having a settlement at all.

That distinction can be critical.

Get the Right Signatures

As a matter of practice, I prefer to have everyone whose participation helps establish the settlement sign before leaving.

That generally includes each party or decision maker possessing settlement authority and lead counsel for each party. Where appropriate under the governing law and mediation protocol, the mediator can also acknowledge the written settlement.

In a multiparty case, the same principle applies. Before anyone leaves, make certain that every party necessary to the settlement has approved it through someone with actual settlement authority and that the appropriate signatures have been obtained.

This is not simply paperwork.

It is the final step in resolving the dispute.

The Last Hour May Be the Most Important

A recent Texas legal article discussing disputes over the drafting of documents following mediation caused me to revisit this issue. The article addresses the subject under Texas law and through a particular approach to post-mediation drafting disputes.

The broader issue, however, is one lawyers and mediators encounter throughout the country: reaching an apparent settlement is not necessarily the same thing as completing it.

The governing law will differ from state to state and sometimes between state and federal proceedings. Counsel must know the applicable law.

But the practical lesson is much broader.

If the parties intend to settle, finish the job before everyone goes home.

Identify the material terms. Put them in writing. Make clear whether the parties intend to be bound. Obtain the appropriate signatures while the parties with settlement authority, counsel, and the mediator are still present.

Sometimes that means staying until midnight.

Sometimes it means staying until one o’clock in the morning.

I have done both.

That additional hour can seem painfully unnecessary at the end of a long mediation. But it is considerably better than spending the next six months litigating whether the case settled at all.

The objective of mediation is not merely to reach the moment when everyone says, “We have a deal.”

The objective is to make sure that you actually do.

…….

Ralph A. Cantafio is an arbitrator, mediator, and expert witness whose practice focuses on upstream oil and gas disputes, including lease interpretation, mineral title, royalty, operating agreement, surface use, and related commercial and regulatory matters. A member of the American Arbitration Association's arbitration panel, he brings nearly 40 years of experience and a practical, business-oriented approach to resolving complex energy disputes.

Website: www.myralphlaw.com

Email: ralph@myralphlaw.com

Phone: 970.819.2371