Mediation Settlement Agreements must be Memorialized in a Signed Writing at the Mediation to be Enforceable

By: Charles F. Holmgren, Esq.

In Willingboro Mall, Ltd. v. 240/242 Franklin Ave., LLC., 215 N.J. 242 (2013), the New Jersey Supreme Court had to determine whether a settlement agreement reached at mediation must be reduced to writing and signed at the time of the mediation to be enforceable. Ultimately, the Court found that, going forward, all settlement agreements reached at a mediation must be written and signed during the course of the mediation to be valid.

This case involved dispute between Willingboro Mall, Ltd., (owners of the Willingboro Mall) (“Willingboro”) who sold the mall to 240/242 Franklin Ave., LLC, (“Franklin”). Some time later, Willingboro claimed Franklin failed to pay some of the mortgage of the mall and began a foreclosure action against them. The trial court judge ordered the parties to non-binding mediation. At the mediation, Franklin offered $100,000 in exchange for a settlement of all claims and a discharge of the mall’s mortgage. Willingboro’s representative orally accepted the offer in front of the mediator and gave his attorney authority to enter into the settlement. However, the terms of the settlement were not reduced to writing or signed prior to the conclusion of the mediation.

After the mediation, Franklin advised the judge that the matter had been successfully settled, setting forth the purported terms of the agreement, and advised Willingboro that it would hold $100,000 in its trust account to fund the settlement. It requested Willingboro file a stipulation of dismissal and discharge the mortgage. Willingboro then rejected the settlement terms, refused to dismiss the matter and refused to discharge the mortgage. In the ensuing litigation, the Court found that Willingboro had waived the mediation-communication privilege, permitting the mediator and prior counsel to testify as to the result of the mediation.

Rule 1:40-4(i) states that a settlement reached at mediation is not enforceable unless it is “reduced to writing at the time of mediation and at the time of the mediation signed by the parties.” Willingboro argued that Franklin’s forwarding of the writing a few days after the mediation, which was never signed by all parties, prevents the courts from enforcing it. Franklin argued nothing in the Rule required a written settlement agreement from mediation be created or tendered on the day of mediation or that it be signed by the parties and that the three day gap between the mediation and the memorialization of the settlement was reasonable.

The Court in this matter agreed with Franklin and upheld the oral settlement agreement because it believed a settlement had been reached and Willingboro simply had a case of “buyer’s remorse and by waiving the mediation-communication privilege, Willingboro permitted evidence of the agreement to come before the trial judge.

However, the Court established a bright line rule going forward, requiring all mediation settlements to be memorialized with signed, written settlements in order for the settlement to be enforced. The Court emphasized how public policy favors the settlement of disputes, specifically mediation as a method of reaching such a mutually agreeable settlement, and reasoned that a signed, written agreement will greatly minimize litigation and ensure the parties knowingly and voluntarily entered into the settlement. Based upon this reasoning, parties to a mediation must be careful to enter into a written agreement, before the mediation concludes – or be faced with enforceability issues.

Leave a Reply