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Bar News - September 18, 2009


Alternative Dispute Resolution: Mediation - Documenting the Resolution

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The parties and counsel have spent all day addressing the substantive matters and have arrived at a resolution acceptable to all. It is late, everyone is tired, and it is agreed that there is a resolution: that docket markings and/or a dismissal and mutual releases will be executed. Hands are shaken and everyone departs.

On the way home, while thinking about the day, one of the attorneys wonders whether everyone understands that the release will include mutual confidentiality and mutual non-disparagement provisions with mutual violation language. In the ensuing days, a proposed release is circulated, which includes the mutual confidentiality and non-disparagement provisions with the attendant mutual enforcement provision. Upon receipt, one or more of the parties objects to these provisions, which were not specifically discussed and are not generally considered to be part of a standard release.

The scenario outlined above is all too real and places the parties exactly where they do not want to be - faced with more litigation. US District Court Judge Steven J. McAuliffe was faced with essentially that scenario in Lady Ester Lingerie Corporation v. The Wooden Soldier Ltd., CV-01-07-M; and his Order of July 18, 2003 (Opinion No. 2003 DNH 124), should be reviewed by every civil litigation practitioner contemplating a verbal settlement. Judge McAuliffe first concluded that New Hampshire law unmistakably holds that verbal settlement agreements reached by attorneys are binding on their respective clients if the attorneys are authorized to act on behalf of the clients.

Clearly, in the mediation session there is, at a minimum, apparent authority to act and, to the extent that the client participates in the mediation, it will be extremely difficult for the client to argue that the attorney did not have explicit authority to act. On the more difficult issue of what it means when counsel say, "We will file docket markings and execute mutual releases," Judge McAuliffe concluded that docket markings and mutual releases do not mean that those documents will contain confidentiality and/or non-disparagement agreements. Such agreements impose obligations much broader than a mere simple release. Thus, he concluded, "As a matter of law an agreement to execute docket markings and releases in settlement of pending litigation does not, by itself, include an agreement to execute a confidentiality or non-disparagement agreement, and does not imply a need for additional negotiations."

The scenario presented to Judge McAuliffe in Lady Ester can be avoided by pre-mediation planning and/or appropriate documentation at the end of the mediation.

In a typical two-party mediation where one party is merely going to pay the other party money as a result of the resolution, defense counsel should send in advance to plaintiff’s counsel the release that she expects to be executed. Thus, if there are any confidentiality, non-disparagement, lien repayment, indemnification, or non-compete provisions which are contemplated, they will be shared in advance of the mediation and may, in fact, be part of the negotiation. Obviously, the settlement amount will be left blank.

In the multi-party case, there may be numerous issues to be included in a release and settlement agreement. Thus, a definitive agreement circulated in advance of the mediation may not be feasible; but, there may be crucial issues that should be circulated in a memo outlining what the release and settlement agreement at a minimum must address. Again, this will serve to inform all counsel and parties in advance of the mediation of closure issues and the need to focus on those details.

If a proposed release and settlement agreement minus the settlement amount or other substantive term has not been circulated and agreed upon in advance, it is essential that counsel, during the mediation session, periodically make a written note as to terms that will be included in a release and settlement agreement as each of those terms are agreed upon. At the end of the mediation, when resolution is achieved, either a memorandum of understanding should be signed and executed by counsel and parties or a release and/or settlement agreement should be formally executed by counsel and parties. This will leave no uncertainties for a future day and future litigation with attendant costs.

It may be late, everyone may be tired, but spend the additional minutes necessary to obtain everyone’s signature before departing. If counsel have circulated a proposed release and/or settlement agreement in advance of the mediation session, that document is the template. If not, the notes taken at various points during the process can be quickly turned into a document. A little additional time at the mediation session, a little additional time prior to the mediation session, will potentially save numerous hours and thousands of dollars post the mediation session.

William A. Mulvey, Jr,. of the Mulvey Professional Association in Portsmouth, may be reached at 603-431-1333 or by e-mail at mulveyw@mulveypa.com.

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