Mediated agreements will not be enforced unless the terms are put in writing and signed by the parties before the mediation comes to a close, the state Supreme Court says.
Where the terms are too complex to be drafted that same day, the mediation should be continued for "a brief but reasonable period of time to allow for the signing of the settlement."
The bright-line rule is meant to prevent litigation over what occurred at mediation because mediation should help resolve disputes expeditiously, "not spawn more litigation," the court held on Thursday in Willingboro Mall LTD v. 240/242 Franklin Ave LLC.
Though there was no signed agreement in the case, the court enforced the oral settlement based on testimony from the parties and the mediator, finding waiver of the mediation privilege. But "going forward, parties that intend to enforce a settlement reached at mediation must execute a signed written agreement," the court said. "Had that simple step been taken, the collateral litigation in this case might have been avoided."
The underlying dispute arose from the sale of the Willingboro Mall in February 2005. Part of the deal was that the buyer, 240/242 Franklin, would pay $2.5 million in fines and penalties imposed on the property by the township of Willingboro, with the obligation secured by a mortgage. A few months later, the seller, Willingboro Mall, brought a foreclosure action, claiming Franklin had defaulted.
Burlington County Superior Court Judge Ronald Bookbinder sent the dispute to mediation. On Nov. 6, 2007, a $100,000 settlement was reached with the aid of Barry Weinberg, a retired judge. He reviewed the terms with the parties but they were not put in writing.
Three days later, Franklin sent a confirming letter to Willingboro and Bookbinder and on Nov. 20, Franklin wrote to Willingboro stating it had placed the money in escrow and would release it when the mortgage was discharged and the foreclosure case was dismissed.
On Nov. 30, Willingboro's lawyer, Michael Iaconelli, informed Franklin attorney Joseph Grimes that his client rejected the settlement. Soon after, Franklin moved to enforce it, backed by certifications from Grimes and Weinberg that the parties had settled on the terms described in Franklin's letter.
Instead of seeking to dismiss the motion or strike the certification based on breach of the mediation privilege, Willingboro asked for discovery and a hearing. In addition, it filed its own certification, from its manager, Scott Plapinger, who participated in the mediation. He asserted he took part reluctantly in the belief it would be nonbinding and that he went along when the mediator summarized the terms at the insistence of his lawyer, Michael Zindler. There was no written agreement and he would not have signed one, Plapinger wrote.
Plapinger, Zindler and Weinberg were deposed, with both sides expressly stating they waived confidentiality for purposes of the enforcement action. Weinberg refused to testify without an order from Bookbinder but did so after a consent order was obtained.
At a hearing before Chancery Division Judge Michael Hogan, Weinberg testified that Plapinger accepted the $100,000 offer but he balked at disclosing his conversations with Plapinger and Zindler, causing Iaconelli to reiterate the waiver.
Later in the hearing, however, Willingboro asserted the privilege, seeking expungement of the testimony and certification concerning the mediation.
Zindler testified that Plapinger assented to the $100,000 deal but when Plapinger came on the stand, he blamed Zindler and Weinberg for pressuring him, saying he would have agreed to anything given the situation.
Hogan held the mediation resulted in a binding settlement, discounting Plapinger's denials as "buyer's remorse." The Appellate Division agreed on Aug. 9, 2011, adding that Willingboro waived confidentiality and rejecting its argument that a signed agreement was needed.
The Supreme Court affirmed but differed on the need for a signed writing.
Justice Barry Albin recognized that confidentiality, required by statute and rule, is essential for effective mediation but said two exceptions were relevant here. One allows admission of a written settlement agreement to prove the validity of the agreement. The other is waiver.
Albin acknowledged that Rule 1:40-4(i), which requires mediation agreements to be written, does not specifically require signatures but said the requirement was clearly stated elsewhere: in the Mediator's Tool Box: A Case Management Guide for Presumptive Roster Mediators, issued by the judiciary in November 2011, and in the state Mediation Act, which allows use of a signed agreement to prove a mediated settlement. Albin said an email exchange in which the parties agree to particular provisions, or a tape recording in which they state what constitutes their agreement, might be sufficient.
Willingboro not only failed to raise the lack of a signed writing in opposing enforcement but it waived the privilege so it could litigate the existence of an oral agreement, Albin said.
Franklin violated the privilege first, in the papers filed in the enforcement action, but Willingboro "returned fire, further shredding the privilege," Albin wrote. It agreed to have Bookbinder instruct Weinberg to testify and Zindler even asked Hogan to order Weinberg to answer his questions. By the time Willingboro invoked the privilege, it had "passed the point of no return."
Grimes, of Grimes & Grimes in Cherry Hill, welcomes the clarity of the bright-line rule.
Glenn Weiner of Klehr Harrison Harvey Branzburg in Philadelphia, who represented Willingboro in its appeals, declines comment. Iaconelli, of the same firm, did not return a call.
Hackensack solo Charles Abut, who is experienced in divorce mediation, calls the case — with its waived privilege and testifying mediator — a "train wreck" and "the antithesis of what mediation is supposed to be." The decision is good news because it replaces a "crazy quilt" of holdings in different cases with a "clear-cut template," he says. •