Terms Reached In Mediation Are Not Enforceable Without A Signed Agreement

by Fox Rothschild LLP
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In the recent unpublished (non-precedential) decision of Mathurin v. Matrhurin, the Appellate Division again confirmed that (1) agreements reached in mediation are not binding unless the terms are reduced to a  writing signed by the parties and, ostensibly, their attorneys if present, and (2) absent such a writing, the court cannot consider discussions, unsigned agreements or memoranda from mediation or other settlement negotiations because such writings/discussions are confidential by virtue of the Rules of Evidence that provide privilege to settlement negotiations.  It therefore follows that such confidential writings and/or oral communications cannot be relied upon to convince a court that an agreement was reached in mediation.

The post-divorce litigation in Mathurin arose when Plaintiff/ex-husband filed a motion to enforce the Marital Settlement Agreement (“MSA”) in order to compel Defendant/ex-wife to accept the offer for sale of the marital residence.  The parties agreed to sell the home within the MSA, but after they received this offer, Defendant proposed to buyout Plaintiff’s interest in the home for the same amount.  Plaintiff did not accept this alternative resolution.  Two other enforcement applications followed – one dismissed for procedural issues and the other denied without prejudice (meaning it can be refiled) pending the parties attending mediation because the MSA had a mediation clause that requires the parties to seek such intervention before filing an application with the Court.  The mediation session that followed gave rise to this appeal.

The mediator prepared and signed a Memorandum of Understanding (MOU) listing the terms reached in mediation and further stating the parties’ agreement that the MOU reflects an enforceable settlement reached between the parties.  Plaintiff reneged on the terms in the MOU because of credits sought by Defendant that he found objectionable, and he refused to sign a formal agreement that his attorney prepared incorporating the terms of the MOU.  Plaintiff fired his attorney and filed another motion to enforce the MSA.  Defendant filed a cross application to enforce the MOU to which she attached the MOU and signed certifications from herself and both parties’ counsel wherein those parties disclosed the contents of mediation. Ultimately, the trial court found that it cannot consider the MOU and/or the certifications because they are confidential settlement documents, and that the MOU was not binding.  The Appellate Division affirmed, finding that the MOU and certifications represent confidential settlement material and that the MOU is not binding because it was not signed by the parties or counsel.

The Appellate Division cited to a New Jersey Supreme Court case, Willingboro Mall, Ltd. v. 240/242 Franklin Ave., LLC, 215 N.J. 242, 245 (2013), confirming that the all agreements reached in mediation must be reduced to a signed written agreement and that mediation discussions cannot be relied upon to prove an agreement was reached unless the parties waive the mediation privilege.  The Appellate Division differentiated this case from a 2017 decision, GMAC Mortg., LLC v. Willoughby, 230 N.J. 172 (2017), because in that case the writing was signed by the parties’ attorneys.  Although those cases are not family law matters, the same principals apply to all settlement discussions.

This issue here is one that attorneys and litigants face in mediation all to often – was an agreement reached just because there seemed to have been a meeting of the minds?  The simple answer is no.  Although we do not suggest, nor would we propose, rushing into signing an agreement, if a party in mediation wishes to make sure that the agreement reached in the session is binding, then the terms must be in writing and signed by both parties, as well as counsel if present.  This does not have to be formal – a piece of paper with handwritten terms will suffice – but there is no question that written terms and signatures are required.  At minimum, terms can be memorialized in an MOU but as we all now know, the MOU is not binding.  What may result then is a Harrington hearing, which you can read about in this post: https://njfamilylaw.foxrothschild.com/2014/03/articles/mediation-arbitration/harrington-is-still-alive/

Oftentimes in mediation, the mediator explains at the outset that nothing reached in their session will represent a final agreement unless the terms are reduced to writing and signed by those present (i.e.: parties/parties and counsel).  This is a common instruction, presumably in an effort to avoid a future Harrington situation, and one that I find beneficial so that everyone in the room is starting out on the same proverbial page.

The takeaway – it’s not over until it’s signed, sealed and delivered!

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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