Mediation Agreements Are Binding in NJ.

In the case of Willingboro Mall v. 240/242 Franklin Avenue, et al., the plaintiff appealed from an order enforcing a settlement reached during a mediation session conducted pursuant to Rule 1:40-4. Plaintiff argued that the rule precludes enforcement of an oral settlement reached at a nonbinding mediation session. It also contended the alleged settlement was the product of coercion by the mediator. The facts giving rise to the appeal are as follows.

Plaintiff and defendants were commercial real estate entities who were involved in a default and foreclosure dispute. The parties were referred to mediation by the General Equity judge. The parties selected a retired Superior Court Judge as mediator, and attended a mediation session with their attorneys at the office of defendants’ attorney. After several hours, the parties agreed to a settlement. Counsel for defendants then wrote a letter to the General Equity judge to inform him that the parties had reached a settlement. The letter also stated the terms of the settlement.

Plaintiff refused to consummate the settlement and instead asserted that a final, binding settlement agreement had not been reached at the mediation session. Defendants then filed a motion to enforce the mediated settlement agreement, and supported the motion with a certification of their attorney and the mediator. A plenary hearing was conducted and a written opinion was issued, which found that the parties did in fact arrive at a settlement of the underlying case, and that the settlement was therefore binding.

On appeal, plaintiff argued that Rule 1:40-4(i) prevented enforcement of an oral settlement because the terms of the settlement were not reduced to writing at the mediation session, a copy of the writing was not provided to each party, and the parties did not affix their signatures to the writing at the mediation session. In addition, plaintiff argued that enforcement of a settlement reached at a mediation session is contrary to the non-binding nature of the mediation process.

The Appellate Division agreed with the trial court. It ruled that mediation is utilized to afford the parties an opportunity to present their position before an experienced professional with the goal of resolving some or all of the differences between the parties. Rule 1:40-4 (i) does not prohibit the mediator or one of the parties from reducing the terms of the agreement to writing shortly after conclusion of the mediation session as occurred in this case. Specifically, the court noted that in this case, three days after the mediation session, defendants’ attorney prepared and sent a letter stating the terms of the agreement reached by the parties. Two weeks later, he sent another letter informing plaintiff that he had placed the sum required to resolve the dispute in an escrow account. The Appellate Court held that these writings, the first memorializing the terms of the settlement and the second notifying plaintiff of defendants’ action to consummate the settlement, were within the intention of the rule requiring the agreement to be reduced to writing.

Two important points bear mention here. First, sometimes attorneys (and litigants) are held to their word and bound by their verbal actions. Second, and perhaps more importantly, know your case and the attorneys. If the attorneys on the other side seem like the kind of folks who will try to weasel their way out of an agreement, don’t leave the mediation until a written agreement is finalized and signed by all parties. It might take a little bit longer, but it’s certainly worth the effort – in fact, we just did this on a case on Wednesday where a post mediation “agreement on written terms” seemed like it might be hard to come by. But that’s a story for a different day…

Special thanks to Sheila Osei for her contributions to this post. For more information about it, or WCM’s NJ practice, please contact Bob Cosgrove at rcosgrove@wcmlaw.com.