Sign On the Dotted Line! by Hon. Nancy Holtz (Ret.)

“One of the main purposes of mediation is the expeditious resolution of disputes. Mediation will not always be successful, but it should not spawn more litigation . . . .”

So said the New Jersey Supreme Court in the case of WillingboroMall LTD v. 240/242 Franklin Avenue, LLC, 71 A.3d 888 (2013), as it considered a mediation which itself became the controversy. Five depositions, a four-day evidentiary hearing, and two appeals later, the high court set forth a new rule in New Jersey requiring that, to be enforceable, an agreement reached at mediation must be in writing.

The controversy began when a commercial case, arising out of the sale of a mall, was sent to mediation by the trial court. At mediation, the parties reached an agreement. The mediator reviewed the terms of the settlement with the parties, but the settlement terms were not put in writing at the conclusion of the mediation.

Several weeks later, in what may have simply been a bout of buyer’s remorse, Willingboro’s manager balked at the settlement. He complained that his attorney and the mediator had unduly pressured him to settle. In his words, he would have confessed to the Lindbergh kidnapping and the Kennedy assassination if it meant he could have extricated himself from an “incredible uncomfortable, high pressure situation.”

With Willingboro refusing to honor the deal struck at mediation, Franklin brought a motion to enforce the terms of the settlement that included certifications from its own attorney and the mediator disclosing communications made during the mediation. Rather than oppose the motion invoking the mediation communication privilege, Willingboro opposed the motion with its own disclosures of confidential communications.

During the evidentiary hearing conducted by the trial court, Willingboro changed course and moved to strike the confidential communications already disclosed. But the trial court found that Willingboro had waived the privilege and that a binding agreement had been reached between the parties. On appeal, the appellate division affirmed.

Willingboro next appealed to the New Jersey Supreme Court and two issues were certified: (1) whether New Jersey law required that a settlement agreement reached at mediation be reduced to writing at the time of the mediation to be enforceable, and (2) whether Willingboro had waived the privilege that protects communications made during mediation from disclosure.

The New Jersey Supreme Court noted that there is a mediation communication privilege with only two exceptions: (1) the signed writing exception, which allows a written settlement agreement to be admitted into evidence to prove a settlement; and (2) when there is a waiver of the privilege.

The court stated that “[i]n 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.” The court upheld the ruling that Willingboro had waived the privilege and that the settlement was binding.

Recognizing that the court system favors the settlement of disputes by mediation, the court observed that the success of mediation depends on confidentiality. To protect this confidentiality while encouraging the use of mediation to reach binding settlement agreements, the court announced a new rule: “[G]oing forward, a settlement that is reached at mediation but not reduced to a signed written agreement will not be enforced.”

As the courts continue to encourage mediation as a more economical and expeditious means to resolve cases, this new rule in New Jersey will no doubt be adopted in other jurisdictions that have yet to address the issue. A signed writing (or video or audio recording, which the high court suggested as an alternative) may ensure the enforceability of settlements reached at mediations.

A Mediator’s Takeaway

Mediators may wish to provide a standard form that attorneys can utilize to memorialize the key terms of a settlement. In the event the parties are not able to complete a memorandum of understanding before the close of the mediation proceedings, the mediator may want to suggest that the mediation remain open until the settlement is reduced to writing.

Parties choose mediation for expedience and economy. Willingboro should serve as a cautionary tale to mediators: Parties are entitled to rely on the guarantee of confidentiality at mediations. If a dispute arises, a mediator may not divulge privileged communications in order to assist a party in enforcing a settlement reached during mediation. The result in Willingboro speaks volumes about the consequences of disclosing confidential communications.

Hon. Nancy Holtz is a mediator and arbitrator based in Boston, Massachusetts providing neutral services nationwide.

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© 2014 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

A Blueprint for a Successful Construction Mediation, by Judge Nancy Holtz (Ret.)

Division 1 Member, Nancy Holtz, shares with The Dispute Resolver her insight on a blueprint for a successful construction mediation. 

Project: Settlement. Construction mediation is no different than any other type of mediation. However, it can present additional challenges since there are frequently a multitude of parties, as well as numerous collateral issues which can impede settlement. Let’s take a look at the critical path to getting the case settled.

The Program. For almost every construction case, the best pathway out of the dispute is through settlement rather than through adjudication by judge, jury or arbitrator. Point out to your client that in choosing mediation over litigation, your client is retaking control of his business – and life. Because as litigation unfolds, your client will quickly and unhappily experience a complete lack of control over what happens. But with mediation, your client will have control over the timing, process and outcome of the dispute. Your client’s business will have no interruption occasioned by assisting in discovery, attending depositions, and, worst of all, attending and testifying at trial. There will be no bad blood between business entities with whom your client wishes to continue to work. Bear in mind, people in the construction industry are used to having a fair amount of control over their part of a construction project. So, the idea of regaining control of their fate regarding the legal dispute is very appealing.

Design-Build. The beauty of mediation is that the parties can create whatever dispute resolution process they feel will be most effective. Formats to consider include mediation, mediation-arbitration, or arbitration-mediation.

Seek Bids for the Job - The Mediator. A construction mediator should possess the characteristics of any good mediator: skill, fairness, and common sense. But, because of the challenges of construction mediation, more is needed. No one wants a mediator who thinks The Eichleay Formula is a Robert Ludlum book; but, to resolve a tough construction dispute, you will want a mediator who has certain traits beyond some level of fluency in construction law. An effective construction mediator must have highly developed interpersonal skills, tenacity, and boundless energy for the marathon sessions which can occur.

A mediator should be flexible and be able to move between approaches – facilitative and evaluative – depending on the circumstances of the mediation and needs of the parties. Specifically, you will want a mediator who can speak to questions of evidence and other legal issues which may arise if the case goes to trial.

Erect the Scaffolding. A candid pre-mediation telephone conversation is crucial to the success of the mediation. Although dubbed a “pre” mediation call, it is in fact the beginning of the mediation because you will begin to describe the case from your perspective during this conversation. This is also the time where you should talk about the trial date, what settlement discussions have already occurred, and any particular challenges you anticipate. For example, are there issues regarding insurance coverage; in multi-defendant cases, is there a question of apportionment among the defendants; what to do about a non-participating defendant; and, whether a defense-only mediation session might be helpful. There may also be personality issues to address. Finally, you should discuss opening statements which, on occasion, can be unduly lengthy, provocative and even counterproductive.

The Project Documents. A good mediation summary should distill the significant information into a format which is persuasive and manageable. An unfiltered data dump of plans, photos, and technical information does not provide the mediator with the most effective tools to question and challenge the other side’s position.

Assembling the Team. The oft cited advice of bringing the people with authority to settle is a good starting point. Beyond that, consider bringing people who are knowledgeable on anticipated areas of controversy. You may want to bring someone at a senior management level who is above the fray of having worked on the project himself. Such a person can bring great knowledge without the protective feelings of ownership regarding the project. You, as advocate, need to move beyond the role of warrior and become a diplomat. As the attorney at a mediation, you should be part of the solution-not part of the problem.

No Hard Positions on Hard Hats. The construction industry is populated by people who take great pride in their work. So, if your opening statement includes claims which might be taken as insulting, such as shoddy workmanship, try to soften your words a bit. A successful mediation needs buy in from all participants. Harsh statements attacking the integrity or competence of a party are sure ways to harden positions.

Loss of Productivity. Be careful if you choose to bring an expert. An expert should attend a mediation to help educate and elucidate - not carry the day for your side. The goal of mediation is to move the parties beyond their positions and focus on their interests. So, do not waste valuable time having the expert expound on why your client’s position is 100% unassailable.

Also, sometimes even powerful evidence presented at mediation can be a waste of time. Such evidence is not particularly valuable if it is so technical that it will never be understood by a fact finder or, worse still, will never pass evidentiary muster. Never forget that this is a legal dispute headed for court if it cannot be resolved. To make the session productive, focus on those items which will be admissible and persuasive to the ultimate fact finder. That is what will elicit movement on the other side.

Delay Damages (Don’t). Do not spend the whole session trying to jam a week’s worth of evidence into a single day in order to prove the liability part of your case. Regardless of the strength of your case, your interest now is to get it settled. So, like it or not, you simply must move to the numbers and - working with the mediator - find the number that everyone can live with.

Be Ready for Change Orders. Come to the mediation with a settlement range in mind, but, be prepared to be flexible. Those last moves beyond your hoped for end point may be tough but will be worth it when the case settles.

Terminations for Convenience. It can be tempting to take the easy route and walk out on a mediation when it is not going well. But remember, rarely is your client better served by a trial. The brief moment of righteousness upon walking out will soon be eclipsed by the specter of a lengthy expensive trial looming in your client’s future.

Concurrent Delays. As the parties near resolution, there are some obstacles which tend to crop up all at once. You may have some terms which you consider minor but which the other side might balk at. Do not wait until the very end of negotiations to raise these terms. When you present additional terms after the other side thinks they have struck a deal, it can derail the process. In fact, you may be providing the other side with new leverage. So, raise these issues earlier rather than later in the negotiations.

Another cause for delay at the end is the task of reducing the settlement to writing. Even when everyone is exhausted and content with a handshake, do not leave until the basic terms of the settlement are memorialized in a binding agreement. Your mediator should provide the parties with a Memorandum of Understanding to use once a settlement is reached. But, you should come to the mediation with any particular language which you want to be included in the Memorandum of Understanding already prepared. You will want to address any liens and logistics of releases of those liens. Consider the collateral effect of this settlement. Do you want language relating to any warranties or on any ongoing insurance litigation. These are all items which can be anticipated and you should have language ready to include in the Memorandum of Understanding if at all possible. It is much wiser to have an enforceable Memorandum of Understanding when the mediation breaks than hope the necessary terms will all be included in a later drafted settlement agreement and release.

Punch List. If the case does not settle at mediation, the project is still not over. Construction mediations can take more than one session – in person or by phone. Keep working with your mediator. With the right plan you can complete Project: Settlement within an acceptable budget and your client will thank you for it.

One minute practice pointer: Dispute Avoidance – It works in Court too!

     by Judge Nancy Holtz (Ret.), Mediator/Arbitrator Available Nationally, (617) 720-0501, nancy@holtzadr.com    

It is the pretrial conference right before trial.  You have filed your Motion in Limine.  The issue is one of great importance to you. There is a very damaging piece of evidence which you know opposing counsel is going to seek to introduce.  You want it excluded and have so moved, in limine.

Your motion is well researched, well reasoned and well written.  You are now before the trial judge arguing the motion.   Despite a strong argument and making all your points, it is clear by the judge’s questions or comments that the judge is not persuaded and is about to rule against you. This is the moment when a lot of inexperienced lawyers will double down and argue even more vociferously to win the day.  But the seasoned lawyer knows there is another way to win:  avoid the dispute for the moment. Do not let the judge say “no”.  Instead, when you can see that you are probably not going to prevail, it is far better to offer an alternative to receiving a negative ruling:  Avoid this dispute for now.

“Your honor, may I ask that the Court reserve on this motion.   I would ask that you instruct opposing counsel not to mention it in his opening and approach sidebar before asking any questions about it.  I believe that once you have heard some evidence, my position will be more clear and it might be easier to rule then.  There will be no prejudice to the other side in holding off until you have a chance to see the issue in the context of the evidence.”

Needless to say, this same advice applies when you are opposing a motion in limine.  Suggest to the judge that you will not mention the particular piece of evidence in your opening but that you believe that when the judge hears more evidence, the relevance of that evidence will be more clear.

You live to fight another day and once the judge is a little more “educated” about your position, in the context of the evidence, you may well prevail.