Wednesday, August 10, 2011

New Jersey Court Upholds Enforceability of Mediated Agreements

On August 9, 2011, the New Jersey Superior Court, Appellate Division, released an opinion in the case of WILLINGBORO MALL, LTD. v. 240/242 FRANKLIN AVENUE, L.L.C., upholding the enforceability of agreements reached through mediation.  While not the official reporter, a copy of the opinion is available on the Leagle website:

The case involved a commercial real estate dispute that was referred to mediation by the trial court.  After several hours of mediation, the parties reached an oral agreement.  Three days later, counsel for one of the defendants circulated a letter to all counsel and the trial court outlining the terms of the settlement.  A few days after that, the defendant notified all parties and the court that the settlement funds had been escrowed.  The plaintiff refused to go forward with the settlement, asserting no agreement had been reached.  The defendants filed a motion to enforce the settlement, including a certification from the mediator, who was later deposed and testified at trial.

The trial court enforced the settlement and the plaintiff appealed, arguing that any settlement not reduced to writing and signed at the mediation was unenforceable and that enforcement of a settlement reached at mediation was contrary to the non-binding nature of the mediation process.

The Superior Court affirmed the trial court, finding that the Uniform Mediation Act, as enacted in New Jersey, did not require an agreement to be reduced to writing and signed before the parties left the mediation session.  As the Court stated, “To be sure, preparation of a writing memorializing the agreement at the mediation session may be the preferable and advisable course.  We must recognize, however, that some disputes may be complicated and the writing memorializing the agreement may require some time to produce.”  The Court found the letter drafted three days after the session was sufficient for enforcement under the circumstances of the case.

The Court also pointed out the plaintiff’s misinterpretation of the non-binding nature of mediation:

Plaintiff’s position also ignores the reason for referring a matter to mediation.  The process 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. (Internal citation omitted) In contrast to arbitration, the mediation process is non-binding only in the sense that the process is not designed or intended to impose a result on any party.  Indeed, such a result is the antithesis of the mediation process.  Mediation is also not intended or designed as a meaningless and impotent detour on the way to judgment.  The very purpose of the process is to resolve the dispute.

Finally, the Court noted that enforcing a verbal agreement reached at mediation would be difficult due to the confidentiality of the process.  However, the parties had breached that confidentiality and the trial court had ruled on that waiver of confidentiality.  The plaintiff did not contest the trial court’s rulings on the waiver on appeal.

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