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Los Angeles Real Estate/Financial Services Mediation: Does the Settlement Agreement have to be Executed at the Mediation?

In my over-twenty-year litigation practice I was always wary of having my client sign a binding settlement agreement at mediation.  I feared that there may be provisions that I wanted to include in the settlement agreement that may skip my mind when documenting the settlement on the spot.  I also feared “buyer’s remorse” and wanted to guard against the risk that my client may change its mind later about whether it wanted to settle. Thankfully, in most of my cases, my fears were overblown and the later executed formal binding settlement agreement mirrored what the parties agreed to do at the mediation.

Now that I am a full-time mediator my views regarding the parties executing a binding settlement agreement at mediation have changed.  While I respect and appreciate when attorneys and parties elect to document the formal settlement agreement after the mediation, I always encourage the parties to enter into a binding written settlement agreement at the mediation.  The obvious reason is that if the settlement agreement is not made binding at the mediation it may never ultimately get done.

While in most cases the parties do, in fact, enter into the binding formal settlement agreement after mediation, there are some cases that will never get settled unless the parties enter into a binding settlement agreement while the mediator is still present.

I recently mediated a case involving five siblings who litigated for more than a decade the distribution of an estate.  Yes, they have been fighting for more than ten years. Quite amazingly, at the mediation the parties reached an agreement in principle to resolve the dispute.  I recognized that absent having the parties sign a binding formal written settlement agreement at the mediation at least one of the siblings would ultimately change his mind and later elect not to execute the agreement.  As a result, I requested that the parties stay late to allow counsel to draft the binding settlement agreement at the mediation.  The formal settlement agreement was executed by all parties at about midnight.  It ended over ten years of litigation and was well worth staying the extra few hours necessary to get the settlement documented and, more importantly, executed.

Lesson learned:  While in most cases there is negligible risk in the parties electing to enter into the formal settlement agreement after reaching the deal terms at mediation, there are some cases that will only settle if the binding settlement agreement is signed at the mediation with the parties, counsel and the mediator present.

 


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