Top 5 Construction Mediation Tips and Techniques: Tip #5 – Draft your Settlement Documents in Advance of the Construction Mediation.

Please allow this Blog post to serve as the fifth installment in a five part series entitled “Top 5 Construction Mediation Tips and Techniques.” The previous installments can be found below:

Tip #1 – Ensure you and your client fully understand what mediation is and what its benefits and purpose are.
Tip #2 – Know your case well. Know their case better.
Tip #3 – If there are reasons why your case may not settle at a construction mediation, understand them in advance.
Tip #4 – Take your construction mediator selection, pre-mediation conference, mediation statement and mediation presentation seriously.

        The Blog posts from this series are intended to be cumulative and should be reviewed as a whole in order to fully receive the message of the author. My fifth and final construction mediation tip is to draft your settlement documents in advance of the construction mediation so that you are not racking your brain trying to compose key language for a binding legal document late at night after trudging through a long day of hard-nosed negotiations. It is hard enough to settle a case, so why would you wait until after a deal has been made to craft an enforceable mediated settlement agreement? Do you honestly think that you will be able to put together the best legal document you create on the spot, under pressure of watchful eyes and after your brain is fried from persuasive negotiations?

         Any litigator with a modicum of experience has a war story where they battled long and hard to reach an agreement in principal in settlement, only to have the agreement blow up when the parties could not reduce the agreement to writing. Drafting your mediated settlement agreement before the construction mediation starts will put you one step ahead of the settlement curve and potentially remove unnecessary roadblocks to settlement.

        Early in my legal career, my clients and I mediated a very complex business breakup case. The parties, their attorneys and the mediator worked a long day and into the night to reach a settlement of the parties’ disputes and to avoid an upcoming trial of a lawsuit. Finally, just before 11:00 p.m., the mediator announced that an agreement had been reached. Everyone convened in the large conference room. The mediator produced a sheet of paper and wrote down the terms of the parties’ agreement, announcing each term as he did so. Among other terms, the parties agreed to prepare and sign a final settlement agreement within a week. Once all of the key terms were identified, the mediator made copies of the memorandum and gave one to each of the attorneys. Everyone shook hands, and the mediation adjourned.

        In the week following the mediation, one set of lawyers prepared a draft settlement agreement which reflected the agreed-to terms and added several new and different terms, which the defendants deemed “necessary” to the final agreement. The plaintiffs, however, refused to agree to the additional terms, and the defendants refused to withdraw them. Thus, the parties never signed a final written settlement agreement. Frustrated, but hoping to salvage the deal, the defendants filed a motion asking the court to enforce the terms of the settlement agreed to at the mediation. Thankfully the matter was resolved without court intervention, but in reviewing case law on the subject, I was confident that the court would rule that a mediated settlement agreement had not been reached. Then and there I swore that I would never leave a mediation again without having the mediated settlement agreement reduced to a final written document. I don’t care how many Red Bulls it takes, you have to stay to get the deal done. Having a fill in the blank document to take with you to mediation will make finalizing a settlement agreement much easier than drafting one from scratch, or signing a deficient document that fails to address all material issues to the litigation. It may also allow you to vet language issues and form of agreement with the opposing party in advance of mediation.

         If my client is the plaintiff in a case and there is a substantial degree of likelihood that the defendant will require installment payments as part of the mediation agreement, I recommend that the parties execute a stay-stipulation with very specific terms providing for an administrative closure of the case pending final payment and dismissal, with an ability to petition the court for rendering of a stipulated final judgment in the event of payment default. I come prepared with this document in hand and send it to the other party when I am making my last round of offers. Good litigators leave nothing to chance, and that includes relying on the mediator, or worse, the opposing party to draft your settlement documents. In the stay stipulation context, controlling the documents and the language of the settlement has enabled my clients to avoid the time and expense of reopening an action that was closed as settled, or prompting record activity on a case that has an extended payment plan in order to avoid lack of prosecution dismissals. In the final mediated settlement agreement context, drafting documents beforehand has allowed my clients the opportunity to get key language and creative clauses into the agreement which may not have otherwise been part of a standard barebones agreement that a mediator would offer at the conclusion of the mediation. The evolving “best practice” is to bring the form of the mediated settlement agreement to the mediation, both in hard copy and electronic form.  As the negotiation unfolds, as early as possible (possibly even in advance of the mediation), share the agreement form with the other side and use it as the basis to conduct and conclude the negotiation.  Because virtually all offices have word processing capability, the mediated settlement agreement can be completed and signed at the mediation, saving all parties the extended drafting and revision loop, and the perils associated with losing a deal reached in principle.

        One last document to consider bringing to depositions with you is a Proposal For Settlement in accordance with Florida Rule of Civ. Pro. 1.442. In the event you are litigating a case where fees are not at issue, or there is otherwise an opportunity to create a fee shifting mechanism, it may be prudent to complete the form and hand serve it upon opposing counsel in the event that an impasse has occurred at the mediation. Doing so will enable the parties to continue the litigation with the knowledge that an actionable offer is still on the table for acceptance. In the event you are a prevailing party and able to invoke the attorneys fee mechanism created by FRCP 1.442, you will be able capture the fees associated with the mediation as the Proposal For Settlement was served at the mediation and thus fee calculation shall relate back to that date. Be careful about serving a Proposal for Settlement at mediation though, for you may just get what you are asking for in acceptance. Careful consideration should be given to the numbers and terms utilized in the Proposal.

Sources:

Robert J. McPherson, Building Resolutions, News from the AAA Construction Division, Issue #1, March 2010

Gregory S. Martin, Mediating the Construction Dispute- Are You Ready to Mediate, RPPTL Action Line, Volume XXXII, No. 2, Fall 2010

Larry R. Leiby, Florida Construction Law Manual, Volume 8, 2011-12 edition