By: Joel Reck
At the conclusion of every successful mediation, when the parties, their counsel and certainly the mediator are tired, cranky, late for dinner, emotionally exhausted and just wanting to get out of the conference rooms, it is time to start drafting the settlement agreement. In my role as mediator, I typically draft a very simple agreement and that is an understatement!
Since such an agreement is typically only a page or two in length, I would normally provide that the parties intend to execute a more detailed settlement agreement. Assuming, of course, that the parties want the agreement to be enforceable, it is important to provide explicitly that the parties intend that the Mediation Settlement Agreement is to be enforceable notwithstanding that a more complete written agreement is contemplated.
There is substantial case law in Massachusetts dealing with the enforceability of preliminary agreements which contemplate the execution of more complete agreements. Not surprisingly, the courts have looked to the intention of the parties as to whether they intended to be bound by the earlier agreement and as to whether the earlier agreement contained all of the essential terms for an enforceable contract. Mere agreements to agree will clearly not be enforced, nor will contracts that specifically provide that they are not intended to be enforceable unless and until a more detailed agreement has been executed by all of the parties.
There has not yet been a lot of case law in Massachusetts dealing with the enforceability of settlement agreements executed at the conclusion of mediation. Arguably, the same standards should pertain as for other negotiated agreements, although the circumstances involved in the drafting of these agreements are usually very different from those in other kinds of more carefully crafted agreements that have gone through many drafts. The time pressure of getting a mediation settlement agreement drafted and executed before one or more of the parties leaves to pick up a child or to go to a ball game means, as a practical matter, that these agreements are not only hastily drafted, but are often only first or second drafts and are typically somewhat sketchy.
For me, the most challenging problems in drafting an enforceable settlement agreement involve dealing with issues that require further steps to be taken or issues to be resolved. Last year, the Land Court dealt with such a case in which I had served as the mediator. See Dandreo v. Kornitsky et al, 13 MISC 479144 (AHS). In this decision, the Court found that the Memorandum of Agreement (the “MOA”), which was executed by the parties at the conclusion of the mediation, was “a valid and binding agreement” notwithstanding a variety of “next steps” that needed to be taken by the parties.
This case involved the construction of fifteen townhouse-style condominium residences for persons aged fifty-five and above in Swampscott. The dispute between the developer and an abutter was over the location of construction access, the location and extent of the water and sewer hookup and the amount of reimbursement to the Plaintiff for Plaintiff’s expenses, in constructing a previously installed water and sewer line in the street.
The MOA described certain post-mediation obligations of the parties and next steps, which, when satisfied, would result in termination of the existing litigation and the exchange of mutual releases.
The “next steps” were, in pertinent part, as follows:
1. A hydrant flow test was to be done;
2. The parties were to meet by a certain date to negotiate:
(a) the location of construction access;
(b) reasonable compensation to the Plaintiff to reimburse him for his construction costs in constructing a previously installed water and sewer line in the street; and
(c) utility construction for a water loop, sewer and other utilities in accordance with the approved plan.
3. A request for modification of the Swampscott ZBA’s decision was to be filed seeking construction access over two streets instead of just one street as provided for in the original decision of the ZBA.
Post mediation, significant disputes arose regarding each of these “next steps”.
In divining the intention of the parties as to the enforceability of the MOA, and notwithstanding all of the additional steps to be taken, the Court relied heavily on a provision in the MOA that “[t]his Memorandum of Agreement is intended to be enforceable notwithstanding that a more complete written agreement is contemplated.” Such a provision has been enforced in an established line of Massachusetts cases dealing with the enforceability of agreements that are intended to be superseded by more detailed agreements that memorialize the prior agreement.
In short, the Court found that the MOA “was a valid and binding agreement, and that all that remained to be done in order to trigger the obligation to enter into a final stipulation dismissing this case and issuing mutual releases was the payout to be made to Plaintiff.”
Note: This blog is an abridged and updated version of an article that previously appeared in the September, 2015 edition of REBA News.