FLYNN: After mediation, get it in writing

Mediation is a process by which a neutral third party (called, cleverly, a “mediator”) facilitates a negotiation between parties to a legal dispute. Occasionally, mediation occurs before a legal dispute ends up in court. More often, however, mediation takes place after a lawsuit has been filed. And, the most common scenario has mediation occurring after a lawsuit has been bumping along for awhile and the parties have a trial date staring them in the face.  

Mediators have no authority to decide a dispute. The tools are largely limited to: (1) reminders to the disputing parties that letting a judge or jury resolve their dispute is an expensive, high-risk form of gambling, and (2) suggestions to the parties as to how they can resolve their dispute in a manner that is more refined and customized than anything a court could come up with.

In large part due to limited resources and docket congestion, the judicial system encourages mediation as a means to resolve disputes. The more disputes that can be resolved through mediation, the more time courts will have to deal with, say, criminals.

One way mediation is encouraged is through a cloak of confidentiality. No one participating in a mediation, including the mediator, is allowed to testify about things that were said, written or done during the mediation. (As you would hope, there’s an exception if someone threatens to commit a felony.) The idea behind the confidentiality cloak is to create an environment where open and frank discussions can occur, without fear that something said, written or done during a mediation will later be used to sink a legal ship.

There is, however, a drawback to the confidentiality cloak. This comes from the fact that, if a settlement agreement is reached during the course of a mediation and the agreement is not reduced to writing and signed by the parties, no one can go into court to enforce the agreement. That’s because, due to the confidentiality cloak, no one can testify about what went on during the mediation.

A situation like this made its way to the Colorado Supreme Court last year. A man named Chotvacs sued his neighbors, the Lishes, claiming an easement across the Lishes property. The parties took their dispute to mediation and, according to Chotvacs, a settlement was reached. Pleased with the outcome, Chotvacs went home and, in keeping with what he thought were the terms of the settlement, removed a barrier that Lishes had placed across the easement. The next morning, Lishes woke up, put the barrier back and told Chotvacs to quit trespassing on their property. Chotvacs went into court to enforce the settlement agreement and lost — because no evidence could be presented as to what went on during the mediation.

In a companion case, the Supreme Court found that an enforceable settlement agreement had been reached because the parties kept negotiating after the mediation was over. Their post-mediation conduct was admissible evidence and rose to the level of an agreement, even though no document containing all the terms of the agreement was ever signed.

The lesson here is that, if a settlement agreement is reached during mediation, the agreement needs to be reduced to writing, right then and there, and signed by the parties.  And, after that, stop talking about it.
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Jim Flynn is a private attorney at Flynn Wright & Fredman LLC in Colorado Springs. The firm primarily represents clients in the real estate, financial services and small-business sectors. Reach him at jtflynn@fwflegal.com.