New Jersey Supreme Court Requires Mediated Settlement to be in Writing

While courts usually use the law to determine who has the right in a case, supreme courts can sometimes use a case as motivation to create new laws or to modify existing laws. In a recent case, the New Jersey Supreme Court did both of these things. The case, Willingboro Mall v. Franklin Avenue, involved a pre-existing law which the court used to rule in the case. However, the court determined that, in future cases, a slightly different set of standards would be used.

The case involved the sale of a mall which was handled in mediation. However, the settlement was never put in writing before the mediation closed. A few weeks after the settlement, Willingboro rejected the settlement and Franklin filed a motion to enforce the settlement. In his filing, Franklin included certifications from its attorney and the mediator. Rather than filing a motion to dismiss the case based on breach of mediation confidentiality, Willingboro filed an opposing motion in which it included certification from its manager regarding the substance of the parties’ discussion during mediation. During discovery, both Franklin and Willingboro agreed to waive any issues of confidentiality concerning the mediation process.

A four-day hearing followed, during which testimony was given from the mediator as well as Willingboro’s manager and attorney. However, halfway through the hearing, Willingboro changed its mind and moved for an order to expunge “all confidential communications” which had been disclosed and to bar any further disclosures regarding the mediation. The court ruled, however, that Willingboro had already waived its right to confidentiality and the hearing proceeded. At the end of the hearing, the trial court determined that the settlement was binding and ruled to enforce it, “[even] though the [settlement] terms were not reduced to formal writing at the mediation session.”

Willingboro appealed the decision until it reached the New Jersey Supreme Court. The Supreme Court upheld the rulings of the lower courts, enforcing the settlement. In determining a breach of confidentiality, the Court considered the rule governing mediation which states that “an agreement evidenced by a record signed by all parties to the agreement is an exception to the mediation-communication privilege.” Although this rule does not specify that the agreement must be made in writing, it does require some sort of documentation of the agreement, whether written or on tape, to be signed by all parties involved in the mediation. Given that there was no such signed record, the court ruled that this exception did not apply in the current case.

Willingboro’s attempt to dismiss the case based on this rule was therefore rejected.
Although the court agreed that the testimony of the mediator was a breach of confidentiality, it found that Willingboro had waited too long before objecting to the breach. The court further rejected Willingboro’s assertions that its own disclosures were permitted, but that Franklin’s disclosures consisted a breach of confidentiality.

However, in order to avoid such confusion from resulting in similar lawsuits in the future, the New Jersey Supreme Court added that, from now on “if the parties to mediation reach an agreement to resolve their dispute, the terms of that settlement must be reduced to writing and signed by the parties before the mediation comes to a close” in order to be enforced.”

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