It is not uncommon that after a long day mediating a dispute, the parties finally come to a resolution. It is also not uncommon that the parties’ Memorandum of Settlement expressly provides that the same mediator resolve any lingering issues to finalize the parties’ settlement. A very interesting decision from the Maine Supreme Court illustrates the risks presented by this provision and the unintended consequences when the parties rely upon the mediator to not only forge the settlement, but thereafter, to interpret and to enforce the settlement agreement.
In Eastwick v. Cate St. Capital, Inc. 2017 ME 206 (ME 2017), the parties had submitted their dispute to mediation and had reached a settlement. The parties signed a Memorandum of Settlement at the end of the mediation session, which required: “Any disputes that may arise during the drafting and execution of the settlement shall be submitted to [the same individual who conducted the mediation] for review and resolution.” The terms seemed clear when the Agreement was drafted and made sense to the parties’ when they signed it because after a long day spent speaking with their mediator, the parties grew to trust and to rely upon the mediator.
Unfortunately for the parties the matter did not end here. The parties could not agree on the language of the settlement documents and thus returned to the mediator for “review and resolution.” One party submitted a proposed order to the mediator, which after hearing the parties, was signed by the mediator. One party filed the signed Order in court and sought to confirm the Order as an Arbitration Award. The opposing party filed a countervailing Motion to Vacate arguing that the parties did not agree to arbitrate. The trial court granted the Motion to Confirm and denied the Motion to Vacate.
In a well-reasoned decision, the Maine Supreme Court held that the clear intent of the parties was to submit disputes arising after the “settled” matter to the individual who mediated the case. Quoting from the rules of the American Arbitration Association, the Supreme Court defined arbitration as a “voluntary submission of a dispute to a disinterested person or persons for final and binding determination” and held the words “arbitration” or “arbitrate” are not expressly required to conclude that the parties intended to arbitrate a dispute. Thus what started out as a private mediation resulted in a public decision affirming an Arbitration Award.
The lesson to be learned is that if the parties agree to have a mediator resolve any issues arising from their agreed upon settlement, according to the Maine Supreme Court, such a referral back to the mediator for a final decision converts the mediation to an arbitration and all the rights attached thereto.