Mediation 401: Ensuring that a Mediated Settlement is Not Lost

Over three prior posts on the subject of mediation, I have discussed what mediation is and is not, explained the process of how mediation works, and most recently, examined under what circumstances it makes sense to mediate.  Here, I will conclude this series of mediation posts by breaking down how, once you reach an agreement in principle, you limit the risk of losing it.

After a very long day of back and forth with your mediator, you authorize one last proposal for the mediator to take to the other side.  The mediator comes back 20 minutes later and tells you that your offer has been accepted.  The mediator then invites all of the parties and their counsel into the same conference room in which you began the mediation process nine hours earlier, to go over the terms.  One by one, he goes through each of the six settlement terms, and each time both sides indicate that they agree.

While you do and should feel a sense of satisfaction (even if the settlement is not exactly what you had hoped it would be), do not think for one minute that the process is over.  Indeed, one of the six settlement terms ticked off by the mediator was that the parties would memorialize the resolution in a formal settlement agreement.  As such, and because many mediations have cratered after the parties appeared to have settled, but before the principles signed on the dotted line, unless you have an extremely inexperienced mediator, you will not be going anywhere for at least a little while longer.

Because most mediators have their own war stories of settlements gone awry, at the very least they will implore the parties to write down the key terms of the settlement and execute that document before anyone leaves.  While this certainly is better than having nothing in writing signed by anyone, the ideal situation is to have a full settlement agreement executed, as this really limits the chances of anyone daring to have “buyer’s remorse” and/or backing out of the settlement for any other reason.

While no one wants to stay at the mediation for another several hours to hammer out all of the details that are commonly inserted into a full blown settlement, you may be able to have your cake and eat it, too, if you plan ahead.

For instance, if you are trying to mediate a dispute where the resolution is likely to be a payment from one party to another, you can have your litigation counsel prepare a settlement agreement in advance of the mediation that essentially leaves a blank for the payment amount and perhaps a few other unknown terms, but still has the vast majority of the document ready for signature.  This will force you to think of a whole range of options in advance, such as whether you want a confidentiality provision, a provision that calls for attorneys fees or interest to be awarded if one party breaches or fails to make payment, as well as a myriad of other terms that often are in a full-blown settlement agreement.  During the large segments of down-time at mediation, when the mediator is in the other room with the other side, you can modify the draft agreement to reflect changes that arise during the day.

If done correctly, you can have the detailed settlement agreement ready for signature at the end of the day.  Not only will this decrease the risk of the settlement falling apart, but you may end up with a more favorable agreement, as you will have thought about all of the nuances in advance while your adversary may not have.