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Bar Journal - December 1, 1999

So You Thought Your Divorce Case Was Settled in Mediation: Challenges to Privately Mediated Divorce Settlements

By:

As a result of a dramatic rise in mediation due to clients' increasing desire to seek alternative dispute resolution as well as various court requirements that parties submit to some form of alternative dispute resolution prior to trial, legal challenges to mediated agreements have increased.1 Some marital matters are privately mediated by the parties prior to filing for divorce in an effort to resolve issues quickly, amicably and without the cost of attorneys. In other cases, matters are settled in "neutral case evaluations" offered by the Court and conducted by trained volunteer attorneys.2 Neutral case evaluations in the family and superior courts are often a hybrid of case evaluation and mediation. Still other cases are privately mediated by the parties and/or their counsel after court ordered negotiations or neutral case evaluation have failed. This article focuses on mediated agreements and their potential legal pitfalls.

A small body of law has begun to develop challenging the validity of mediated divorce settlements.3 What had once been thought to be settled and impenetrable is now subject to attack. Courts typically analyze the enforceability of mediated settlements under traditional contract principles.4 While the New Hampshire Supreme Court has never addressed the enforceability of a mediated divorce settlement, the Court has specifically addressed the enforceability of an oral divorce settlement negotiated between counsel with full authority from the parties.

In Bossi v. Bossi, 131 NH 262 (1988), the defendant appealed the Superior Court's denial of her motion to enforce a divorce settlement.5 Four days prior to trial, the parties, through counsel, conducted extensive telephone negotiations in an effort to settle their case.6 The negotiations eventually led to a final settlement of all terms which was approved by the parties.7 Two days later, the husband expressed his desire to repudiate the agreement.8 At a hearing on the wife's motion to enforce the settlement, husband's counsel opined that the husband felt the settlement had been forced on him by his own counsel and, therefore, the settlement was not entered into "freely and voluntarily."9 The trial court denied wife's motion to enforce the settlement and scheduled the matter for a final contested hearing.10

On appeal, the Supreme Court held that a stipulation is enforceable unless it was signed due to fraud, undue influence, deceit or misrepresentation.11 Because both parties stipulated on appeal that counsel for each side had reached an oral agreement regarding final settlement and that the final settlement had been entered into by counsel with full authority from the husband, it was error for the master to conclude that the husband had not voluntarily entered into the settlement.12

Cases from other various jurisdictions challenging mediated settlements demonstrate the difficult burden a party must meet in order to repudiate a mediated agreement. The wife in In re: Marriage of Banks sought to repudiate a mediated agreement asserting that the agreement was the product of fraud and duress.13 Mrs. Banks alleged that: 1) she was in a highly emotional state at the time she engaged in the mediation proceedings and signed the agreement; 2) her attorney failed to inform her of a specific law; 3) she was manipulated into signing the papers and did not feel she had the right to refuse and believed she was without an ally or advocate; 4) she was told that the judge was a "50/50 Judge"; and 5) the mediator told her attorney it would cost each law firm $50,000.00 to go forward with the case and she felt financially threatened by that amount of fees.14 The court rejected Mrs. Banks' claims that the agreement was the product of fraud and duress finding that the facts alleged were insufficient to support her claims.15

The court noted that Mrs. Banks' attorney's and accountant's failure to inform her of the law and the mediator's statements about the cost to litigate the case could not be attributed to her husband or his attorney.16 Because there were no facts to support that her husband or anyone acting on his behalf had exerted duress or undue influence causing her to enter into the agreement, she could not sustain her claim.17 The court acknowledged that Mrs. Banks was distressed and under a great deal of pressure when she entered into the agreement; however, the court noted that "divorce is not an emotionless proceeding."18

The court commented on the public policy reasons favoring enforcement of mediated agreements noting that "[i]f voluntary agreements reached through mediation were nonbinding, many positive efforts to amicably settle differences would be for naught." 19 "In order to effect the purposes of mediation and other alternative dispute resolution mechanisms, settlement agreements must be treated like other contracts reached after arm's length negotiations."20

In the Matter of Hodak and Hodak, a case in the Portsmouth Family Division, the husband attempted to void a final divorce decree which incorporated a detailed mediated settlement agreement.21 The husband attacked the validity of the mediated agreement alleging, among other things, that: 1) he was fraudulently induced to enter the agreement; 2) the agreement was patently unfair; 3) one of the mediators engaged in the unauthorized practice of law; 4) he was unrepresented by counsel; and 5) he was misinformed of his legal rights by the mediators.22 The wife objected to the Motion to Void the Final Decree on the basis that: 1) the agreement was executed after several meetings; 2) both parties had consulted with counsel on more than one occasion; 3) the wife had plausible fault grounds which could have affected the outcome of the case; 4) the husband had requested mediation and had selected the mediator and; 5) the husband obtained the advice of an accountant relative to the tax ramifications of the agreement.23 The court never had an opportunity to rule on the Motion to Void the Final Decree because the husband's challenge was eventually withdrawn. The husband's withdrawal of his motion may have been motivated, in part, by the realization that he was on the verge of beginning a new life in a new relationship and had he succeeded in vacating the final decree, he would have been left married to his ex-wife. At any rate, the mediated agreement was left intact.

While there is a high burden to meet in order to repudiate a mediated settlement, there are also evidentiary barriers which impact upon a party's ability to uphold a mediated agreement should a dispute arise regarding the terms or validity of that settlement. Parties and counsel should be aware that communications, oral and written, made during mediation proceedings are confidential, subject to limited statutory exceptions.24 In addition, "[n]othing said by the parties during martial mediation sessions shall be admissible in further divorce proceedings."25 Certified marital mediators cannot be subpoenaed by any court in this state to disclose any information received from any client unless: 1) the privilege is waived by all parties; 2) a party is alleged to have made a material misstatement of fact which would have constituted perjury if made under oath; 3) the mediator received information about abuse or neglect; 4) or the mediator has received information about a felony other than adultery.26

The New Hampshire Supreme Court has never ruled on the scope of the privilege afforded mediators and communications which occur during the mediation process or whether evidence of statements made during mediation may be admitted in court to prove the parties orally settled the dispute. The mediators in the Hodak case, discussed above, were subpoenaed by the wife to testify relative to the communications during the mediation proceedings. The mediators moved to quash the subpoenas on the basis that the parties had entered into a written mediation agreement which provided that the parties acknowledged that N.H.R.S.A. 328-C:9 afforded privileged status to the communications made in the mediation proceedings and prohibited the parties from subpoenaing the mediators. The court denied the Motion to Quash and ruled orally that the mediators were required to testify, since the husband had put their behavior at issue. The family court's ruling is indicative of judicial exceptions to similar statutory privileges being crafted in other jurisdictions.27

In Regents of University of California v. Sumner, the parties attended voluntary mediation in an effort to settle their dispute.28 After completing two days of mediation sessions, the parties announced that they agreed to the terms of a settlement.29 The terms of the settlement were dictated into a tape recorder by one of the attorneys with clarifications from the mediator, the parties and the other party's counsel.30 After the settlement had been dictated, but before releases had been signed, the plaintiffs sought to rescind the settlement.31 The defendant filed a motion to enforce which was granted by the trial court.32 On appeal, the plaintiffs argued that the trial court had erred in considering the transcript of the dictated settlement because it violated the provisions of the Evidence Code which provided that "[e]vidence of anything said or of any admission made during the course of the mediation is not admissible in evidence."33 The appellate court affirmed the trial court on the basis that the parties had concluded their mediation session, and then created a transcript of the settlement they had reached in order to memorialize their agreement.34 The Court reasoned that the tape was not made "in the course of" the mediation since the mediation technically ended once a compromise had been reached by the parties.35 The parties were merely defining the terms of the agreement after the mediation was concluded.36

The New Hampshire mediation privilege protects communications made "in the proceedings."37 While our Supreme Court has never addressed the scope of the privilege, the case of Regents of University of California v. Sumner offers a reasoned argument that the terms of the settlement are admissible if they are discussed or memorialized after an agreement has been reached. In the event that the New Hampshire Supreme Court ultimately rules that the memorialization or discussion of the final terms of a mediated agreement are privileged communications, it will require legislative changes to the statute in order for parties to admit evidence of the final terms of the settlement in enforcement actions. The Wyoming statute regarding confidentiality of mediation sessions is a good example of how to effectively protect the confidentiality of the session but provide common-sense exceptions for enforcement of mediated agreements.38 While communications in mediation sessions are confidential under Wyoming law, the Wyoming statute provides an express exception for communications made during mediation if one of the parties seeks judicial enforcement of the mediated agreement.39

When a party is unsuccessful at repudiating a mediated settlement agreement because there was no fraud, undue influence, deceit or misrepresentation on the part of the other spouse, the court may consider whether there has been some impropriety on the part of the mediator which caused the party to enter into an agreement. Based upon the current status of the law, it is difficult to prevail in a civil action for damages against a mediator. A minority of states have enacted statutory mediator immunity.40 New Hampshire, like the majority of states, has not enacted any such mediator immunity. While court appointed mediators may be shielded from liability for certain acts under common law protection afforded judges, prosecutors, witnesses and government officials, it is unlikely that private mediators will be afforded judicial or other common law immunity.41 If not protected by an existing statutory or common law immunity, it seems unlikely that the courts will recognize a new common law immunity for private mediators.42 Mediators closely resemble counselors, lawyers and other service providers whose primary activities of advising and counseling have not been afforded common law immunity.43

If at some point mediator malpractice is recognized as a tort, a mediator's violation of ethical responsibilities created for the protection of the parties could be used as evidence of negligence.44 Though not negligence per se, ethical violations such as breach of confidentiality, honesty about qualifications, and disclosures of potential conflicts of interests that impact neutrality may be considered the basis of recovery in a malpractice claim if the plaintiff can show that the rule was intended to protect the parties.45 However, one major obstacle to recovery in a mediator malpractice case is the plaintiff's obligation to show damages flowing from the negligent acts or omissions of the mediator.46

Still other cases may arise when the mediator offers legal advice or the lawyer acts as mediator. If a mediator agrees to provide legal services as well, it is more likely that legal malpractice standards will apply in a suit arising out of the negligence of the mediator.47 If hired as a lawyer for one of the parties, the mediator must exercise the care and skill of a reasonably prudent attorney, a standard which cannot be lowered by a disclaimer.48 However, if the mediator is not hired as an attorney, he or she may be relieved of the standard of care.49

Non-attorney mediators who provide clients with legal assistance may be held liable for negligence in that assistance, and may also face a charge of unauthorized practice of law.50 In addition, if a mediator promises the clients to act like an attorney, it is conceivable that the mediator will be held to the standard of care of a reasonably prudent attorney.51

Another issue to be considered by the practitioner (but not explored in this article) is whether the privilege prevents a party from disclosing communications made during the mediation in a suit against the mediator or whether the privilege is waived in a suit against the mediator if the client alleges that the mediator services were defective or improper. This type of case may be analagous to a case in which a client sues his attorney for malpractice. Our Supreme Court has already answered that question in the affirmative, holding that the privilege is waived when a client challenges the attorney's representation.52

In conclusion, with the advent of mediation has come an emerging body of law which has yet to be fully defined. What is clear, however, is that issues such as privilege, confidentiality and enforceability of mediated agreements and the protections afforded to the mediators themselves are not as absolute as once was thought.

ENDNOTES

1.

See Stephen B. Goldberg, et al., Dispute Resolution: Negotiation, Mediation and Other Process (2d Ed. 1992); New Hampshire Superior Court Rule 170 regarding ADR by mediation, arbitration and neutral case evaluation. Family Division Pilot Program Rule 17 requiring attendance at ADR informational seminar.

2.

Superior Court Rule 170; Family Division Pilot Program Rule 17.

3.

Graves v. Graves, 694 So. 2d 284 (Fla. Dist. Ct. App. 1995)(orally announced mediation agreement that was not redued to writing and filed with court was not enforceable agreement since Florida Rules of Civil Procedure requires mediated family matters be reduced to writing and signed by parties and counsel); Stempel v. Stempel, 633 So. 2d 26 (Fla. Dist. Ct. App. 1994)(bare bones mediation agreement which was properly incorporated into final judgment despite the necessity of the court's inserting additional discretionary terms); Moss v. Moss, 463 S.E. 2d 9 (Georgia 1995)(court ordered mediated settlement held unenforceable because settlement lacked substantive term pertaining to method by which real property would be appraised); In re: Marriage of Ames, 860 S.W. 2d 590 (Tex. Ct. App. 1993)(party who reached settlement through Alternative Dispute Resolution may not unilaterally repudiate agreement despite court's insertion of additional terms not found in settlement); Davis v. Wickham, 917 S.W. 2d 414 (Tex. Ct. App. 1996)(because mediated settlement is enforceable under contract law, same procedures used to enforce other contracts should apply); Cary v. Cary, 894 S.W. 2d 111 (Tex. Ct. App. 1995)(if parties reach settlement through alternative dispute resolution and execute written agreement, agreement is enforceable like other contracts); In re: Marriage of Banks, 887 S.W. 2d 160 (Tex. Ct. App. 1994)(mediated settlement agreement enforceable even though wife claimed that mediator had given her estimate of legal fees that had frightened her into signing, action of mediator could not serve as basis for setting aside agreement); Alvarez v. Reiser, 958 S.W. 2d 232 (Tex. Ct. App. 1997)(unilateral withdrawal of consent to mediated settlement does not negate enforceability of agreement).

4.

See Davis v. Wickman, supra, note 3; Cary v. Cary, supra note 3.

5.

See also, Durkin v. Durkin, 119 NH 41 (1979)(rule disallowing modification of a property settlement in a divorce case is not applicable if it is shown that stipulation was signed due to fraud, undue influence, deceit or misrepresentations); Shafmaster v. Shafmaster, 138 NH 460 (1994)(the defendant fraudulently induced plaintiff to sign property settlement on which divorce decree was based, where he failed to provide the plaintiff with updated financial statements, allowing plaintiff to rely on information which defendant knew was dated and false).

6.

Bossi at 263

7.

Id.

8.

Id.

9.

Id. at 264.

10.

Id.

11.

Id. at 265.

12.

Id. at 264-265.

13.

In re: Marriage of Banks, supra note 3.

14.

Id. at 163.

15.

Id.

16.

Id. at 163-164.

17.

Id.

18.

Id.

19.

Id. at 163.

20.

Id.

21.

In the Matter of Paul B. Hodak and Cynthia L. Hodak, Docket No. 1998-M-375, Portsmouth Family Division

22.

Id.

23.

Id.

24.

N.H.R.S.A. 328-C:9

25.

N.H.R.S.A. 328-C:9, II

26.

N.H.R.S.A. 328-C:9, II(a)(d)

27.

See Snyder-Falkenham v. Stockburger, 457 S.E. 2d 36 (Va. 1995); Regents of University of California v. Sumner, 42 Cal. App. 4th 1209 (1996).

28.

Regents of University of California v. Sumner, supra note 27. See also Snyder-Falkenham v. Stockburger, 457 S.E. 2d 36 (Va. 1995)(court failed to discuss whether the trial court erred when it admitted evidence of discussions and events which occurred in court ordered mediation proceeding because plaintiff failed to properly preserve issues for appeal).

29.

Id. at 1213.

30.

Id.

31.

Id.

32.

Id.

33.

Id.

34.

Id. at 1213

35.

Id.

36.

Id. But see Ryan v. Garcia, 27 Cal. App. 4th 1006 (1994)(after reaching mediated settlement parties disagreed concerning the terms of settlement and never executed written agreement. Trial court admitted statements made after mediation announced as agreement had been worded reasoning the statements were not made "in the course of" the mediation, the appellate court reversed the trial court on the basis that the court had erred admitting the statements).

37.

N.H.R.S.A. 328-C:9

38.

Christopher H. Macturk, Confidentiality in Mediation: The Best Protection Has Exceptions, 19 AmJur Trial Advoc. 411, 431-32 (Fall, 1995).

39.

Wyo. Stat. S 1-43-13 (Supp. 1995).

40.

Ariz. Stat. Ann. 12-2238; Ark. Code Ann. 16-107; Colo. Rev. Stat. 13-22.507; Fla. Stat. 44.201(6); Iowa Code 13.14, 679.13; Me. Rev. Stat. Ann. 4, 18; Okla. Stat. 12, 1805; Or. Rev. Stat. 36.210; Utah Code Ann. 78-14-15 and 31-b-8; Wash. Rev. Code 7.75.10; Wis. Stat. 93.50; Wyo. Stat. 1-43-104.

41.

See Nancy H. Rogers and Craig A. McEwen, Mediation: Law, Policy, Practice, 11.03 (2d Ed. 1994); Wagshal v. Foster get cite); Meyers v. Contra Costa County Dept. of Social Services, 812 F. 2d 1154 (Ca. 9 1987).

42.

Id.

43.

Id.

44.

Id.

45.

Id. See also Marquay v. Eno, 140 NH 505 (1995)

46.

Id.

47.

See Rogers & McEwan, supra note 41.

48.

Id.

49.

Id.

50.

Id.

51.

Id.

52.

See Petition of Dean, 142 NH 889 (1998)(citing N.H.R. Prof. Conduct 1.6(b)(2) and N.H. R. Ev. 502(d)(3))

The Author

Attorney Patti Blanchette is a partner with the firm of Boynton, Waldron, Doleac, Woodman & Scott, Portsmouth, New Hampshire.

The Author

Attorney Marcia S. Kovalik is an associate with the firm of Boynton, Waldron, Doleac, Woodman & Scott, Portsmouth, New Hampshire.

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