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Saturday, March 19, 2016

Would You Settle a Case in Mediation with a Single Handwritten Paragraph?

Martina Beverly sued her former employer, Abbott Laboratories for employment discrimination and retaliation, raising ADA and national origin claims. The parties agreed to private mediation.

During a private mediation, the parties signed a handwritten agreement stating that Beverly demanded $210,000 and mediation costs in exchange for dismissing the lawsuit. Abbott later accepted Beverly's demand and circulated a more formal settlement proposal. After Beverly refused to execute this draft proposal, Abbott moved to enforce the original handwritten agreement.

Before the mediation, Abbott sent a 6 page typewritten template as a proposed basis for settlement.

The mediation lasted 14 hours. Both sides were represented by counsel. Near the end of the mediation, the parties and counsel signed a HANDWRITTEN agreement which stated:

I Jon Klinghoffer will commit that my client will communicate to its internal business client the fact that Abbott/AbbVie  has offered $200,000 + Abbott/AbbVie pays cost of mediation to resolve this matter and that Martina Beverly has demanded $210,000 + Abbott/AbbVie pays cost of mediation to resolve this matter. Both parties committ [sic] that their offer and demand will remain open until Tuesday, July 22, 2014, 3:00 PM central.

The next day, Abbott's counsel emailed Beverly's counsel stating, "My client has accepted Martina Beverly's demand to resolve her claims in the above referenced matter for $210,000 plus the costs of yesterday's mediation. I have attached a draft settlement agreement for your review."

Finished? No. Beverly declined to sign Abbott's document.

Abbott filed a motion to enforce the one paragraph handwritten agreement. The court The district court granted Abbott's motion, finding that the parties had entered into a binding settlement agreement that included all material terms—specifically, the dismissal of the case in exchange for $210,000 and mediation costs.

Plaintiff Beverly appealed. The 7th Circuit Court of Appeals found that the handwritten agreement was sufficient to define the parties intentions. The absence of other terms from the typewritten proposal (e.g., specifically, provisions relating to indemnification, future cooperation between the parties, Beverly's future employment options with Abbott, the precise allocation of settlement funds, and express language concerning release and waiver) did not undermine the conclusion that the single handwritten paragraph embodied all needed material terms.

So what should one do to avoid such post-mediation disputes? I note that a simple sentence ("This is a partial agreement, not effective until embodied in a final text") would have avoided the dispute. Perhaps the 14 hours of mediation had so tired the participants that they were happy they could agree at least on the dollar amount, and, for the moment, all the rest didn't matter.  Taking a few breaths before leaving the room might have permitted them to reread the handwritten paragraph to be sure it said what they meant.

The court suggests recording communications related to any final agreements.

It bears mentioning that a transcript (or some other recording) of the private mediation session here may have provided important clarity regarding the parties' beliefs and intentions relating to the handwritten agreement and the draft proposal. We encourage future litigants to record any communications that directly relate to final settlement agreements.

Beverly v. Abbott Labs., 2016 U.S. App. LEXIS 4799 (7th Cir., Mar. 16, 2016).

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