It is not a very frequent occurrence that the New Jersey Supreme Court rules on a case involving mediation. But we have a major one here in NJ from 2013: Willingboro Mall, LTD. v. 240/242 Franklin Avenue, L.L.C. It is a landmark case for mediation and mediated settlements and a well thought out and written opinion. It is guidance that every mediator and mediation participant should be aware.
The Willingboro Mall case started as any other — a run-of-the-mill litigation that was referred to mediation, as many court cases are. There was apparently a resolution in mediation. Court rules state that parties should reduce any agreement to writing. In Willingboro Mall, the agreement was verbal with a written confirmation to follow (along with the usual releases and stipulation). When the defendant sent the written draft to the plaintiff, the plaintiff rejected the settlement terms and refused to sign the documentation. The defendant moved to enforce the settlement. The judge held a hearing to determine whether a settlement was reached and this is where things went off the rails.
The mediator, a retired judge, stated he would only testify if ordered by the judge to do so. He should have asserted the mediator’s privilege and encouraged the parties to return to mediation to resolve the outstanding issues. Neither party objected at the time — the plaintiffs later asserted their mediation privilege and tried to prevent all confidential mediation communications from being admitted. Under the New Jersey Uniform Mediation Act and the harmonized Rule 1:40 and NJRE 519, each party to a mediation and the mediator have a privilege and can prevent others in the mediation from testifying. The court took testimony from the mediator and all relevant parties and determined there was a deal.
The plaintiffs appealed. The appellate court upheld the trial court determination and the case was appealed to the Supreme Court.
The high court made essentially two rulings. First, silence is a waiver of privilege and confidentiality. If a party wants to assert mediation privilege, it must be done timely and not after things appear to be going against them. Second, the court is not going to pierce the confidentiality of mediation to determine whether a deal was reached or not. An exception to confidentiality and privilege in a mediation is a written agreement. ” In the absence of a signed settlement agreement or waiver, it is difficult to imagine any scenario in which a party would be able to prove a settlement was reached during the mediation without running afoul of the mediation-communication privilege.” In fact, the court was quiet blunt:
To be clear, going forward, a settlement that is reached at mediation but not reduced to a signed written agreement will not be enforceable.
Justice Albin, who wrote the unanimous opinion, also took note:
A settlement in mediation should not be the prelude to a new round of litigation over whether the parties reached a settlement.
In fact, this case took 6 years to resolve the appeal. Had the original case simply gone to trial, the time elapsed would have been on the order of 2 years and likely at less expense.
So, if a party is going to enforce privilege, it needs to do so from the start. And if a party wants an enforceable settlement, put it writing and sign it. Otherwise, it never happened.
On a side note, the court cited a document that I wrote and edited:
Although Rule 1:40-4(i) does not state specifically that a written agreement must be signed by the parties, a publication prepared by the Civil Practice Division makes clear that any settlement agreement should be reduced to writing and signed. Civil Practice Div., Mediator’s Tool Box: A Case Management Guide for Presumptive Roster Mediators 11 (Nov. 2011), available at http://www.judiciary.state.nj.us/civil/mediators_toolbox.pdf (“Before the parties leave the mediation, the mediator should insist that a short form settlement agreement (term sheet) be drafted by one of the attorneys and signed by the parties at the mediation table.”).
Mediation, if properly used with a competent mediator, is a strong tool for resolving lawsuits. Contact me to discuss how I can help you resolve your lawsuit.