"Binding Mediation"

Mediation, Arbitration & Settlement: “Binding Mediation”


The increasing popularity of mediation is undeniable, but as important as the process itself is the preparation of a settlement document when the parties agree to resolution. If the settlement resolves all issues and leaves nothing but a motion to enter judgement, or a delay for a time certain to implement settlement terms, the case is effectively closed; CCP 664.6. In some cases, the parties resolve part of the case but the settlement agreement may provide for future resolution of the dispute by the mediator; Weddington Productions, Inc. v. Flick, 60 Cal.App.4th 793 (1998).

In Lindsay v. Lewandowski, 139 Cal.App.4th 1618 (2006) the parties did exactly that. In Lindsay, the record established that the parties were unable to resolve all issues in a mediation but agreed to return to the same mediator for a “binding mediation.” Under this rubric, the mediator would continue his efforts to resolve remaining disputes but, if unsuccessful, would unilaterally invoke his power to adopt settlement terms submitted by one side. After the mediator explained this procedure, all parties stipulated to the format.

The parties returned to the mediator for an additional mediation session. On impasse, the mediator exercised his authority pursuant to the stipulation and settled the case. The non- prevailing party to the agreement subsequently objected, alleging this practice resulted in an unenforceable agreement. The trial court entered judgment and an appeal followed.

Despite agreement of the parties in the settlement agreement, the Court of Appeal challenged interpretation of the term “binding mediation” as an oxymoron. Mediation is a voluntary process in which a mediator assists the parties in “reaching a mutually acceptable agreement;” Ev. Code 1115. Mediators emphasize the voluntary dimension of mediation and, if the parties cannot agree, litigation is filed or resumed. In comparison, arbitration is an adversarial process and results in a final and binding decision frequently confirmed by a civil judgement; Sy First Family Ltd. Partnership v. Cheung, 70 Cal.App.4th 1334 (1999).

In the abstract, the term “binding mediation” sounds inherently contradictory. But mediators invoke a variety of tactics in attempting to bring the parties to resolution, e.g., CRC 16207 (g). In the event an initial mediation is unsuccessful, the parties can always recess and return later to continue discussion with the mediator. At that time, parties at impasse can elect to confirm the right of the mediator to settle their intractable dispute in the interest of “closure” or to avoid further costs and fees. The parties want resolution and they impose their collective confidence in the mediator to render a decision, but the Lindsay court refused to validate this “hybrid” process on grounds the two procedures are confusing, mutually exclusive and contradictory.

Unfortunately, the parties used the wrong terminology by labeling the process “binding mediation” despite its familiarity in mediation as attested by a declaration from the mediator in Lindsay. The wrong label made bad law. There is no reason why parties cannot voluntarily stipulate to accept the decision of the mediator if they clearly understand the consequences. Although “finality” is indispensable to arbitration, the parties can agree to “finality” of mediation. Several reasons suggest that “binding mediation” is unacceptable and perverse, but the parties and their counsel should make the decision, not the court. In mediation, the parties can decline to agree to “binding mediation” without adverse consequence.

A stipulation to permit the prevailing party to confirm the award in a judgment should finesse misinterpretation of any resolution imposed by a mediator. Because of Lindsay, if the parties select “binding mediation,” the agreement should include provisions for confidentiality of the communications held during mediation, disclosure of the mediator’s dual role, fees and mechanism for enforcement of the agreement.

The Court of Appeal is correct, of course, in its linguistic analysis. The words “mediation” and “arbitration” connote widely divergent interpretations. But one of the advantages of “alternative dispute resolution” (another term disliked by the concurring Justice) is the ability to flexibly achieve resolution sought by both parties. In Lindsay, the court said nothing about the failure of appellant to understand and agree to “binding mediation.”

Judicial apprehension of “binding mediation” is understandable. But too much “litigization” of alternative dispute resolution is already a concern, and a mutual voluntary and knowledgeable agreement between the parties, including complete mediator disclosure and an explanation of the procedure, ought to be approved without the rigorous interpretation of contract law.

The court briefly notes that after the settlement: “Lindsay... retained new counsel, . . .” In other words, “settler’s remorse.”