I recently served as a neutral in a matter which had been actively litigated for several years. We worked all day and into the evening discussing past wrongs and how they might be made right. Hard feelings on both sides meant emotions ran high. Trial was scheduled less than a month away.
Both sides felt they had not been fairly dealt with by the other. One side in particular was unyielding in their settlement demands. After careful consideration and lengthy discussion, we finally achieved settlement on all points. Rather than memorializing the settlement terms in an abbreviated “term sheet,” the parties spent the time necessary to prepare a final form of settlement agreement, which they signed. One of the parties then left with their counsel.
The other party also packed up and prepared to leave, but before doing so I got the clear impression that if we had not signed the final settlement agreement it was likely that this party would have backed out of the settlement.
Wow.
As a litigator I always favored signing a full settlement agreement on the day of mediation. Sometimes that’s not possible because not everyone is present, or because someone has to obtain additional settlement authority. But when possible, I have always preferred getting signatures on a final settlement document the same day a case settles.
Sometimes mediations run late and counsel have to catch airplanes to other parts of the state. Other times people are just tired after a full day of mediation and want to be done for the day. In such cases the parties may sign only a term sheet and make arrangements to sign the final form of settlement agreement later on. Sometimes this approach proceeds smoothly. The parties finalize a settlement agreement later on and everything is signed in a timely manner.
But sometimes it doesn’t work this way. As a litigator I had a mediation between individuals where the day following mediation one of the individuals wanted to back out of the settlement; the only reason they didn’t was because we had signed the final form of settlement agreement before we concluded the mediation. I’ve seen situations where settlements go off the rails because only a term sheet was signed at mediation and then one of the parties raises what they consider to be a material term that was (in their view) neither discussed nor agreed on at the mediation.
Nobody wants to be rushed into anything. Nobody wants to sign a final settlement agreement on the day of mediation only to later realize that an important material term was omitted. There are only two ways to avoid rushing things this way. The first is to reach a settlement on the day of mediation and then take some additional days to prepare, exchange and sign the final form of settlement agreement. The second is to prepare a form of settlement agreement in advance, taking into account all of the
terms that need to be addressed in the settlement. Between these two approaches, it’s less risky to prepare a settlement agreement in advance whenever possible. If a settlement is to be simple and straightforward then an agreement may not need to be prepared in advance. But in a case that involves any degree of complexity, the secure approach is to come to mediation with a settlement agreement in hand. Since most cases settle, it’s likely that time spent preparing a settlement agreement in advance won’t be wasted. When preparing an agreement in advance is possible, it’s a great way to maximize client satisfaction with the settlement and at the same time avoid disappointment should someone have second thoughts after settling.
Robert Jacobs is a neutral with Judicate West. He has litigated cases throughout California for more than 30 years. He serves as a mediator and arbitrator in Real Estate, Business, Construction, Personal Injury, Employment, Medical and Dental malpractice and Trust Litigation cases.