In this case, the chancery court held that post-mediation correspondence between the attorneys for the parties allegedly memorializing the terms of a verbal settlement reached in mediation constituted confidential mediation communications, not subject to disclosure. Partners Pharmacy Services v. Halbert, Docket No. C-72-09 (Chan. Div., Union County, April 16, 2012)

The parties in this case were involved in a lawsuit. Mediation was held before a retired judge. Defendants alleged that that a verbal settlement agreement was reached, but no formal written settlement agreement was prepared at the mediation. Rather, the parties left the mediator with an understanding that a written agreement would be prepared and executed by the parties after the mediation. Thereafter, emails were exchanged which, defendants contended, evidenced the essential terms of the agreement. Moreover, the mediator confirmed his understanding that the parties had reached a settlement.

Relying upon the post-mediation emails and the mediator’s understanding, defendants filed a motion to enforce the parties’ mediated settlement agreement. In opposition, plaintiff replied that the motion must be denied because, among other things, the emails relied upon by defendants are confidential mediation communications. Defendants responded that confidentiality did not extend to post-mediation communications memorializing the terms of the settlement. Rather, defendants claimed that, because the mediation was completed at the time the emails were sent and the attorneys were merely finalizing the details of the settlement for the purpose of drafting an agreement, the emails are outside the scope of confidentiality afforded to mediation communications. Plaintiff then asserted that the emails submitted by defendant indicated that the mediation had not concluded, and the parties were actually engaged in an exchange of offers and counteroffers.

The court found the dispute forced the court to resolve the conflict between “the public policy favoring settlements and the policy respecting the confidentiality of mediation communication.” In analyzing the case, the chancery court reasoned as follows:

In order to consider defendants’ claim that the case is settled not only would this court have to review the emails presented, additional documents would have to be reviewed. Further, it would be likely that a plenary hearing would be needed to determine if a settlement had been reached. Harrington v. Harrington, 281 N.J. Super 39 (App. Div. 1985) Such review would improperly intrude into the mediation process.

Concluding that the expectation of privacy in the mediation process must be protected, the court denied defendants’ motion to enforce the parties’ alleged settlement agreement.

The case is annexed here – Partners Pharmacy Services v. Halbert

I believe the chancery court framed the issue correctly. If the policy favoring settlement trumps the policy protecting mediation privilege, then mediation in NJ as a dispute resolution mechanism will shrivel and die. Counsel, the parties, and the mediator MUST deal with these questions up front, in a written agreement to mediate, signed by all, which provides that no settlement, in part or in full, will be reached unless and until a complete and formal written agreement has been approved by the attorneys and executed by the parties. This is permitted under the Uniform Mediation Act, which allows mediation participants to create the rules to which they will be bound.

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