Enforceability of Mediated Settlements Not Immediately Reduced to Writing on the Date of Mediation

Willingboro Mall, Ltd. v. 240/242 Franklin Avenue, L.L.C., 421 NJ Super 445 (2011) (Petition for certification granted on Jan. 10, 2012)

Is a settlement reached at a non-binding mediation in New Jersey conducted pursuant to Rule 1:40-4 enforceable even though the terms of the settlement are not reduced to writing at the mediation and the parties do not affix their signatures to signal their consent? Whether such a “form over substance” argument will hold water in the context of future mediations will be determined by the New Jersey Supreme Court.

In what appears to be a case of “cold feet,” the plaintiff in a commercial real estate dispute attempted to escape the terms of a mediated settlement, despite the fact that the defendants had memorialized the terms of the settlement three days after the mediation and sent additional correspondence two weeks later advising that monies required to resolve the dispute had been placed in an escrow account. After the plaintiff balked, the defendants filed a motion to enforce the settlement. Following discovery, five witnesses, including the mediator, testified at a plenary hearing. The trial court concluded that the parties had in fact arrived at a settlement and the settlement was binding.

In affirming the trial court’s decision, the appellate division held that although Rule 1:40-4(i) requires that settlement terms be reduced to writing and a copy of the writing provided to all parties, it is not necessary that the agreement be reduced to writing during the mediation session or that all parties receive a copy of the agreement before they leave the mediation session.

The Supreme Court’s decision will certainly have an immediate impact on whether a handshake between opposing counsel at the conclusion of a hard fought mediated settlement will be deemed sufficient to protect the fruits of counsels’ labor at the mediation.