Let’s assume the mediator sticks his head into your room with a grin at 8pm after an exhaustive day when your client is still upset he made the 8th counteroffer and the Mediator says: “Great news! Counter-offer accepted! We have a deal!” Wonderful, right? Even though your client was pushed way past what he came ready to do that day, you have a deal. So what mistakes are made when it comes to confirming the long sought, hard fought deal?
Number 1: Not Nailing Down the Deal at the Mediation
I have had parties pack up and walk out with this comment: “We will take a shot at a draft settlement agreement and send it to the other side this week.” NO! Most mediators will not allow the parties to get away without in some way reducing the deal to writing and having the representatives sign off. Especially in emotionally charged mediations where both sides are very unhappy, clients can change their minds. Second guessing is even more likely after reporting back to their bosses (“You agreed to what?”). If nothing was written down to commemorate the deal, then there is no deal. The failure to write down even the basic terms can also increase the likelihood of later disputes (whether in good faith or not) about key clauses (e.g., indemnification, scope of the release, who is released, confidentiality, non-disparagement).
So, should you take the time and start working on a fully executed settlement agreement while everyone is still at the mediation? If that is not possible should you at least draft a limited “Term Sheet” that lays out the basic parameters of the deal and is conditioned on counsel working together in good faith to get to a more formal settlement agreement? Most of the time, the best answer is “yes.” If it is very simple deal (money is paid and full and complete releases) there is no reason (with laptops/printers) that a full settlement agreement cannot be drafted and signed at the mediation. To make it even easier, always come to the mediation with a draft settlement agreement with blank terms. If that is simply not possible, Term Sheets can work, especially with complicated multi-party deals, but there is still the issue of later disagreements about clauses. If there are key clauses that are important to the deal, the hope is that counsel have informed the mediator and that there is general agreement on those specific clauses. No matter how tired everyone is, it is normally worth every dollar to keep everyone in the rooms working to…get…it…done.