No Writing, No Settlement

From the Business Conflict Blog of Peter Phillips.

Recently this blog featured a post about a mediated settlement agreement that was enforced because it was memorialized in a written document containing the agreement’s essential terms. Here we have the obverse: A case that was decided in the same month – July 2010 – in which a mediated settlement agreement was held unenforceable because it did not subsist in a writing.

In Williams v. Kansas City Title Loan Co., plaintiff participated in a court-ordered mediation that resulted in what the mediator and the defendants thought was an agreement. Plaintiff Williams and his attorney left the mediation room prior to signing the agreement, advising that they would be right back. An hour later, counsel for the defendants as well as the mediator realized that they were “waiting for Godot” and gave up hope that Williams would return. The defendants, their counsel, and the mediator (!!) then signed the agreement and left.

In the course of subsequent phone conversations, Williams’ counsel continued to “quibble” about the proposed wording of the settlement, and the defendants eventually filed a motion for enforcement of the settlement. The Missouri trial court granted the motion, declaring the agreement to consist of the terms set forth in the document that the defendants, their counsel, and the mediator (but not the plaintiff) had signed.

The Missouri Court of Appeals reversed. Noting that the mediation was held pursuant to court order, the appellate court referred to the enabling statute, which provided in part that settlement in court-ordered mediations “shall be by a written document setting out the essential terms of the agreement executed after the termination of the [mediation].”

“Given the absence of a written settlement agreement executed by [plaintiff],” held the court, ” the mediation process in which the parties engaged was ‘non-binding’ under the express direction of [the statute].”

The court further noted that, while the back-and-forth of settlement discussions were inadmissible and confidential, the written settlement agreement contemplated by the statute was to be executed “after the termination” of the process, and thus both admissible and enforceable. Though oral agreements may be enforceable in other contexts, reasoned the court, the requirement of a writing in court-mandated mediations served the “rational policy” of avoiding “just the sort of ‘he said, she said’ disputes that have occurred in this case, costing the parties and the courts both time and money.”

The moral of the story? As the famed Hollywood producer Sam Goldwyn is supposed to have said, at least when it comes to mediated settlement agreements in Missouri,

“A verbal contract isn’t worth the paper it’s written on.”

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F. Peter Phillips

F. Peter Phillips is a commercial arbitrator and mediator with substantial experience providing consultation on the management of business disputes to companies around the globe. A cum laude graduate of Dartmouth College and a magna cum laude graduate of New York Law School, Mr. Phillips served for nearly ten years… MORE >

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