Include “Settlement Document Preparation” in Pre-Mediation Checklist to Avoid Wasteful Litigation

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Wasteland

By: Donald L. Swanson

More than three years of wasted litigation:  that’s what it looks like from the outside.

The parties had been fighting, in 2012 and early 2013, about a management agreement for operating a casino.

But in June of 2013 the fight changes from a dispute over the management agreement to a dispute over the terms of a mediated settlement agreement.

And they’re still fighting

Chronology of the Mediation Dispute:

–June 3, 2013: Mediation results in a signed memorandum of understanding (“MOU”).

Shortly thereafter, the deal falls apart.

–August 5, 2013: One party sues the other to enforce the terms of the MOU.

–April 21, 2015: The U.S. District Court for the Southern District of Iowa determines, on summary judgment, that “the MOU does not constitute a binding and enforceable contract.”

The losing party appeals.

–June 24, 2016: The Eighth Circuit Court of Appeals determines that “summary judgment was not warranted on the grounds stated by the district court” and remands the case for further proceedings.  Clarke County Development Corp. v. Affinity Gaming LLC, Case No. 15-2032 (8th Cir. June 24, 2016).

–September 13, 2016:  Back in the District Court, the parties file their “Joint Statement Regarding Issues Remaining for Pre-Trial Ruling.”

–January 9, 2017:  This is the scheduled date for trial on the MOU’s enforceability.

The MOU Problem:

The MOU discusses a need, after conclusion of the mediation session, to prepare “a formal settlement agreement” and to “present such agreement to the Iowa Racing & Gaming Commission for formal approval.”  The MOU also references future approvals by the City of Osceola, by the Osceola Water Works Board of Trustees, and by “the parties’ respective Boards.”

The U.S. District Court rules on summary judgment that the MOU “is not a binding and enforceable contract” because the parties did not formalize their agreement or obtain any of the required approvals.

The Eighth Circuit reverses and remands:

“We conclude that there are genuine issues of fact concerning whether board approval is a condition precedent that must be satisfied before the parties can enforce the memorandum of understanding.”

“The memorandum at issue here includes no provision stating expressly that ‘no contract shall be effective or binding’ until a particular condition is satisfied.”

Litigation Waste:

There is no shame in a mediated settlement agreement falling apart for lack of subsequent approvals.

The shame and waste is in a multi-year fight over whether the mediated settlement agreement is effective.  During such time, the parties aren’t dealing with the merits of the underlying dispute – at all.

So, what happens on remand, if the District Court rules again (this time after trial, instead of summary judgment) that the MOU is not enforceable?

–Another appeal?  Probably.  And that will create additional waste.

–My prediction is this: it looks like the MOU will not be enforced, leaving the parties back in their 2013 pre-mediation status.  The parties will then, undoubtedly, go back to fighting their underlying disputes from 2012—after a multi-year, litigation-filled hiatus.

The Pre-Mediation Checklist Need:

Here’s the lesson that this case reveals:

–Pre-mediation checklists need to contain an item for advance preparation of settlement agreement language.  This need is especially acute when the expectation is that mediation will consist of a one-and-done session.

–If, for example, one of the parties knows it will need post-settlement approvals and that such approvals are essential to any settlement, then that party ought to prepare in-advance the draft language for such approvals — and have such language in-hand when the mediation session begins.

–Better yet, the parties ought to be exchanging and discussing such draft language long-before the mediation session begins.

–Additionally, the mediator should be providing leadership for including this item in pre-mediation checklists and for assuring that the item is addressed.

 

2 thoughts on “Include “Settlement Document Preparation” in Pre-Mediation Checklist to Avoid Wasteful Litigation

Add yours

  1. I agree in principle. However we are dealing with human beings, some who have more greed than others. There’s nothing to stop a Party appealing all the way to the highest court in the land over a mistake, differences in interpretations etc.. the more that is stated , the more there is to dispute. Sometimes I wonder about all of us.!
    However arbitration solves these problems in Australia.. unless the arbitrator acts in an unethical manner or has made a legally based error, there can be no appeal.

    Liked by 1 person

  2. When asking the parties for confidential pre-mediation statements or memos, the Mediator should also include a request that the parties present what they would consider a good settlement, including any terms which might not be available in a judicial determination. This may give the parties the opportunity to anticipate issues which may not be sufficiently addressed after the mediation is concluded and everyone is anxious to conclude a settlement before it slips away. —Eli Uncyk.

    Liked by 1 person

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