Massachusetts Dispute Resolution Services

Avoiding Pitfalls During Mediation Settlement

It’s 6 PM after a long mediation and all the participants are cranky and tired…but an agreement on a monetary amount has been reached! The moment the parties heard “yes”, they began packing up their files, but the mediator insists that they stay long enough for him or her to prepare a mediation settlement agreement. The responses are varied but sound like this: “Jim and I can work out the release details later this week”, or, “A handshake has always been good enough for me”. A good mediator, however, wears suspenders and a belt for the parties and does not want their hard work (or his or hers) to be lost because fifteen more minutes of attention are needed. Don’t leave now, because all of your efforts could unravel unless a written mediation settlement agreement, containing all the necessary terms of the agreement, is signed by all needed parties. This agreement need not be long and most often, the settlement agreement contemplates that a further more detailed release will be signed by theparties. I can’t stress enough that it is the best practice – and in the best interests of you and your client – to contemplate and deal with all potential issues that may arise in agreeing on the terms and specific wording of this more formal release, since the devil, as they say, is in the details. Remember: a mediation settlement agreement in and of itself is a binding, enforceable contract as long as it contains all the material terms of the agreement, even without a later, more detailed release being executed.

Here are some examples, based upon my experiences, of what may come up (too) late in the mediation process that can jeopardize the finalizing of agreements reached at a mediation session:

Let’s take, for example, a personal injury case where Bill Smith, now 68 years old, was injured four years ago while working in the course of his employment, suffering serious and allegedly permanent injuries at on off-site location. There is an issue as to whether all of his injuries were causally related to this accident as opposed to pre-existing conditions he suffered from. His workers compensation case was lump-summed, and reflected contested issues of medical causation. Some of Bill’s initial medical bills were paid by workers’ compensation, while other contested medical bills were paid by his personal health insurer. He turned 65 after the injury and now qualifies for Medicare, who has paid some of his more recent bills. The case is in suit against multiple high profile defendants who don’t want furtherpublicity, and multiple insurers are involved. Though none of the insurers had been named as defendants, Bill’s lawyer had sent MGL c. 93A and 176D demand letters to some of the insurers. Bill will need future medical care or perhaps rehab or nursing home care that may well involve further Medicare and/or Medicaid payments.

Now it’s the end of a long day of negotiation, and a final joint settlement offer made on behalf of all of the defendants has been found acceptable by Bill and his lawyer. The mediator insists upon drafting a mediation settlement agreement to be signed by all involved parties. The mediator sharpens his pencil and consults with the parties as to the terms of this mediation settlement agreement, which is to be followed by a more detailed release to be prepared by the defendants within a scheduled period of days. Here we highlight a selection of issues which may or may not have been dealt with by the parties earlier during the session…which could potentially torpedo the hard fought agreements reached:

* The mediator may be told that the defendants need a strict confidentiality clause and a non disparagement clause in the release applying to Bill, his wife, and his attorney, and to the benefit of all defendants and their insurers, and a liquidated damages clause in the event of breach. Bill’s attorney may say, “I don’t agree to confidentiality clauses, period…”, “This issue was never raised or negotiated”, “If you need that clause, you’ll need to pay us $50,000 more”, ” I intended to put this case in Lawyer’s Weekly or the Boston Globe”, “What specific language are you looking for?”, or, “I can’t agree to that, haven’t you read the Dennis Rodman case?” (Amos v. Commissioner, T.C. Memo. Docket No. 13391-01, 2003-329, December 1, 2003 Tax Court rules that portion of personal injury settlement attributable to secure a confidentiality clause is taxable).

* The mediator may be told that the defendants need a defense and hold harmless agreement as to any and all claims brought by anyone arising out of this litigation. The plaintiff may be unwilling to agree, defend, or indemnify the defendants against claims brought by others outside of their control.

* The mediator may be told that the defendants, in addition to agreeing to defending and holding harmless the defendants and insurers as to any and all liens, also need lien discharge letters from all lien holders in hand before making any payment. Plaintiff’s counsel may say, “Bill or I will hold you harmless personally, but it takes too long to get lien discharge letters and Bill needs the money now.”

* The mediator may be told that the workers compensation lien holder won’t agree to a reasonable compromise, and Bill’s lawyer needs to file a Curry motion with the Court to have a judge decide the lien amount.

* The mediator may be told that the defendants need extensive and detailed Medicare language included in the release. Because Bill will need long term medical care and perhaps nursing home care involving Medicare and/or Medicaid, the defendants may respond, “We also need to set up a Medicare Trust and set aside, to protect the defendants and their insurers from potential further Medicare/Medicaid claims.” Bill’s lawyer may demand the defendant’s counsel to “Show me the specific language you need in the release”, or ask, “Why is this being brought up now?”, or indicate that they
“don’t agree that a Medicare set aside is needed in these circumstances.”

* Some of the defendants may insist on adding Medicare or Medicaid or other large lien holders on the settlement check and not allow Bill’s attorney time to negotiate these liens and provide discharge letters after which separate checks can be issued. Bill’s attorney may say, “If you put the lien holders on the settlement check I lose all leverage and will never be able to negotiate a fair compromise of these liens”, or, “It will take forever to get endorsements from the lien holders and Bill needs his money now.”

* The defendants may say, “We want Bill and his wife, individually, to sign the release, and because Bill’s late-in-life son is a minor, we need a minor’s settlement approval by the Court.” Bill’s lawyer may respond that, “These requests were never raised during our mediation”, “They are not parties to this lawsuit”, “If you want these other releases you need to increase the settlement”, or, “I’m not going to court for approval of a $1.00 payment to Bill’s son”.

* The defendant may say, “Our release must include all potential claims from the beginning of time until the date the release is signed”. Bill lawyer may respond, “No way. Our claim is confined to a specific date of injury.”

* Defense counsel may say, “The release must discharge all claims against all insurers for claims of violation of MGL. 93A or 176D claims”. Bill’s attorney may respond, “No suit was brought on these claims”, “Defense counsel does not represent these insurers”, or, “We never negotiated settlement of these claims, so you need to increase the settlement amount to discharge these claims”.

Discussing the merits of the issues raised above, or methods by which these issues can be resolved, is beyond the scope of this article. The good news is that with time, all of these issues can usually be negotiated and resolved with the help of an experienced mediator. My purpose in this article is to highlight the problems that can occur if these issues are not raised earlier in the mediation session, but rather, are left to the end. To avoid this problem, may I suggest these thoughts for your consideration:

– Parties and their counsel should understand and appreciate the importance of embodying agreements reached at a mediation session into a detailed and signed Mediation Settlement Agreement;

– All material terms of the agreement should be included in the Mediation Settlement Agreement so as to make it an enforceable contract;

– Parties and their counsel should anticipate any and all potential issues that may arise when formalizing and embodying the material terms of the agreement in a Mediation Settlement Agreement and/or, should it be followed by a further release, all anticipated and needed terms of the release, including, but not limited to, such issues as discussed above;

– Parties and their counsel should not wait until the end of a mediation session to raise and discuss all material terms required in both a Mediation Settlement Agreement and the specific terms of any further release required;

– Anticipating that specific terms and language will be needed in a release, parties and/or their counsel may wish to bring a release with them that could be executed at the end of the mediation session and/or at least shown to the other parties when discussing specific terms required in the final release.

A skilled and experienced mediator will likely anticipate the issues that will need to be agreed upon before final settlement can be reached, and will raise these issues during the mediation at an earlier time and in an appropriate manner, such as in private caucuses first, to help you avoid pitfalls at the end of the session that could jeopardize the overall settlement.