North Carolina Business Litigation Report

Be Careful With The Memorandum Of Mediated Settlement

A successful mediation session ends with a signed document reflecting the settlement, usually the AOC Form "Memorandum of Mediated Settlement," but is often accompanied by an agreement to draft a more comprehensive settlement agreement. 

The unpublished Court of Appeals decision this week in Santoni v. Sundown Cove, LLC is a reminder to be careful that the Memorandum accurately sets out the terms of the deal.  That's especially so if the settlement applies to only some of the defendants or potential defendants.

In Santoni, the plaintiffs had originally sued multiple defendants, but had taken voluntary dismissals without prejudice as to two of them.  Those dismissals were taken before the mediation session.

At the mediation, the plaintiffs settled up with the remaining defendants. They executed a Memorandum of Mediated Settlement which contained the form language that they would "execute such releases as required by Defendants in a form accceptable to Defendants."  The Memorandum included handwritten language saying that they would "execute mutual releases of all existing claims."

When defendants' counsel presented a release that specifically included the previously dismissed defendants, the plaintiffs refused to sign.  They argued that the claims against those parties were not "existing claims."  The trial court disagreed and ordered the plaintiffs to sign the settlement agreement as presented, and the Court of Appeals affirmed.  It held:

In the case at bar, the terms of the parties' settlement, as set out in the memorandum of mediated settlement agreement, are clear and unambiguous, and the agreement must be given effect. Plaintiffs agreed to execute releases of “all existing claims” and to “execute such releases as required by Defendants in a form acceptable to Defendants[.]” A claim is defined as “[t]he aggregate of operative facts giving rise to a right enforceable by a court[,]” and “[t]he assertion of an existing right[.]” Black's Law Dictionary 264 (8th ed. 2004). The facts giving rise to Plaintiffs' claims were “existing” at the time the parties reached the agreement, and Plaintiffs had the right, at the time the parties reached the agreement, to assert claims against the [dismissed defendants]. That Plaintiffs had not re-filed an action against the [dismissed defendants], or instituted an action against any other person or entity, is of no moment. Plaintiffs are required to execute the proposed settlement agreement which, as Defendants drafted it, was in a form acceptable to Defendants.

You can see the full Memorandum of Settlement by clicking on the image at the top.

 

 

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Mack Sperling
Brooks Pierce, LLP
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