SURPRISING OPPONENTS WITH NON-ECONOMIC SETTLEMENT CONDITIONS AT MEDIATION: WHAT COULD GO WRONG?
Two recent emotionally charged mediations have underscored how frustrating first surprising parties with confidentiality/non-disparagement terms at mediation can be. In each case, plaintiffs were enraged when defendants insisted upon a confidentiality clause near the end of mediation. One defendant wanted confidentiality in order to preclude negative new media coverage of the case. In the second case, the parties had an ongoing property relationship and the defense felt that a non-disparagement provision would assist in harmonious relations between the parties going forward. Having long desired confidentiality/non-disparagement, these defendants should have notified plaintiffs’ counsel of these settlement requirements prior to mediation. Among other things, such pre mediation notice would have likely avoided unnecessary counterproductive displays of plaintiff emotion and imperiled settlements.
In complex commercial and intellectual property (IP) disputes, including partnership dissolutions, pre mediation discussion and negotiation of non- economic settlement terms is imperative. For example, the nature and scope of non- disclosure (NDA) and non- compete provisions can be extraordinarily detailed and contentious. So too can negotiations over settlement enforcement terms such as arbitration, claw back or punitive damage provisions. Postponing these important considerations for mediation is at best inattentive and at worst arguable malpractice.
Increasingly, parties at mediation are insistent upon non- economic settlement conditions in cases where such requirements have been historically absent. While confidentiality and non- disparagement provisions have historically been required in employment, commercial, IP and medical negligence disputes, in recent years these terms have been proposed or required in a much wider variety of disputes such as motor vehicle litigation, real estate boundary disputes and disputes between homeowner’s association members. Even some public entities seek confidentiality in litigated cases while knowing that such provisions are unenforceable.
Other traditional non- monetary settlement terms have included indemnity provisions regarding liens and other subrogation interests in personal injury litigation. While common, indemnity provisions vary considerably in scope and substance and should be discussed between opposing counsel prior to mediation.
Regardless of the nature or number of proposed non- economic settlement terms, they should not be first communicated at a mediation event. Party emotions are usually intense at mediation. Often there is also conflict between attorneys and their own clients that must also be managed by the mediator. The initial presentation of detailed, sometimes onerous non- economic settlement obligations only after hours of contentious negotiation can destroy the prospect of settlement.
If one or more non-economic terms is of vital importance to a party, these and other proposed settlement agreement language should be communicated to an opposing party in advance of the mediation with sufficient time for an attorney and her client to adequately review the proposed terms and propose counter provisions. The mediator should be copied on these pre-mediation exchanges in order to efficiently negotiate any lingering disagreements during the mediation itself.